IMAGE RESOURCES NL — Interim / Quarterly Report 2009

Mar 14, 2010

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HALF-YEAR FINANCIAL REPORT

31 DECEMBER 2009

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ABN 57 063 977 579

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CONTENTS

HALF-YEAR FINANCIAL REPORT

	Page No.
Directors’ Report	3
Auditor’s Independence Declaration	17
Statement of Comprehensive Income	18
Statement of Financial Position	19
Statement of Changes in Equity	20
Statement of Cash Flows	21
Notes to and forming part of the Financial Statements	22
Directors' Declaration	27
Independent Review Report	28

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DIRECTORS’ REPORT

Your directors submit the financial report of the Company for the half-year ended 31 December 2009.

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 George Sakalidis, Mr Roger Thomson

REVIEW OF OPERATIONS

The comprehensive loss for the half-year ended 31 December 2009 was $525,945 (2008 – $2,290,327). This includes an amount of $365,500 (2008 - $169,250) which has been expensed as a share-based payment (see note 2). The net comprehensive loss excluding this share-based payment amounts to $160,445 (2008 - $2,121,077).

The Company’s activities during the six month period are summarised as follows:.

COOLJARLOO (Image 70%)

During the period Image Resources updated the resource at the Atlas heavy mineral (HM) deposit resulting in a significant upgrade summarised as follows:

• Change in resource category of heavy minerals and mineralisation to indicated from a mix of inferred and indicated.

• Over 120% increase in tonnes of zircon from 46,000 tonnes to 102,000 tonnes.

• 40% Increase in heavy mineral tonnes from 650,000 to 910,000 tonnes.

• 11% increase in grade from 5.8% to 6.2%

The following tables compare the updated resource with that announced in May 2008.

Table 1 Atlas: Resource Estimate Heavy Minerals and Mineralisation

Category	HM Cut Off	Tonnes	HM %	Slimes %	t HM
		August 2009
Indicated	2.5	14,600,000	6.2	15.6	910,000
		May 2008
Indicated	2.5	1,900,000	4.7	13.5	90,000
Inferred	2.5	9,700,000	5.8	13.8	560,000
Ind + Inf	2.5	11,600,000	5.6	13.7	650,000

Table 2

Atlas: Resource Estimate Heavy Mineral Suite

Category	Ilmenite	Leucoxene + Rutile	Zircon	Other
		August 2009
Inferred	555,000	66,000	102,000	186,000
Inferred	61.0%	7.3%	11.2%	20.4%
		May 2008
Inferred	350,000	61,000	46,000	70,000
Inferred	53.8%	9.4%	7.1%	10.8%

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DIRECTORS’ REPORT

These changes represent a significant upgrade to the Atlas resource, which is expected to markedly increase the net present value of the project. Atlas is 7km long and up to 400m wide and is one of our better high grade resources.

The sample density is sufficient to support an indicated resource category for the tonnes of heavy mineral and mineralised material. However, there is limited mineral assemblage data available, and therefore the tonnes of ilmenite, rutile, zircon et al are classified as inferred. Many more samples will be analysed, allowing the resource category for the mineralogy to be upgraded to indicated. Also, the analysis of the suitability of the ilmenite for synthetic rutile feed will be addressed.

Whilst the Atlas resource represents the company’s most advanced resource, it is only a tiny portion of its resource base which is targeted to expand by at least 2 times after the company drills out the remaining 300km of targets identified to date.

Following additional detailed ground magnetic surveys in the south eastern part of the Cooljarloo heavy mineral project (Image 70%) a revised interpretation has more clearly defined drilling targets along strike from existing defined resources. The potential to increase these resources is substantial because the total length of the target strand lines is now 6.8km compared to the 1.1km strike length of the known mineralisation within the existing resources as shown in Figure 1.

This major target (previously referred to as the “new high grade strand” in ASX release 12 April 2007) is now called Rhea. The adjacent targets to the west of Rhea are the northwest extension of Tiwest’s Middle Strand resource and will retain that name. The drill hole results from this area are summarised in the 12 April 2007 ASX release.

A 6,000m drilling programme on 100m line spacings is proposed on those parts of the target strands currently accessible, as shown in Figure 1. Permitting for this drilling is in progress. This drill density should be adequate to define measured resources within the mineralised strands. In addition, four new channel targets are planned to be tested in the proposed programme, following up previous drilling on known channels where thick intersections up to 72m @1.6% heavy minerals occur.

The strand targets form part of the group of interpreted strand lines that have been magnetically mapped in detail and which have associated mineralisation indicated from previous drilling by Image Resources or other explorers.

Figure 1 Cooljarloo, South East Target Areas

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DIRECTORS’ REPORT

Infill drilling has commenced at Image’s high grade Atlas deposit at Cooljarloo. The drilling is designed to upgrade the resource to measured status by increasing the drillhole density from 200m by 20m to 100m by 20m. Approximately 400 holes will be drilled, as shown in Figure 2, with completion of drilling expected by mid February.

==> picture [333 x 595] intentionally omitted <==

Figure 2

Proposed Atlas Resource Drilling

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DIRECTORS’ REPORT

The drilling is focussed on the high grade mineralisation, including high grades of zircon of up to 20.8% of the heavy minerals, within unallocated crown land in the southern part of the deposit. The identification of this high grade zone has resulted in a significant resource upgrade of 260,000t of heavy minerals, increasing the contained zircon to 102,000t (ASX release 10 August 2009). Given the current price of zircon of US$900/t and the good zircon grades, any further resource upgrades have the potential to add significant value to Atlas.

Mineralogical composite samples from Atlas have been prepared and sent to parties who have signed memoranda of understanding for analysis. In addition, Image is conducting its own mineralogical analyses. These tests will complement the work completed to date (ASX release 27 May 2009). When complete, this data will be used to update the resource estimate (see Table 3) and to further the studies Image is undertaking on the commercialisation of its North Perth Basin resources.

Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation	Table 3 Atlas Resource Estimate Heavy Minerals and Mineralisation
Category	Cut Off Grade %HM		Tonnes	Grade %HM		Slimes %		t HM
Indicated	2.5		14,600,000	6.2		15.6		910,000
	Atlas Resource		Estimate Heavy Mineral Suite
Category	Ilmenite		Leucoxene + Rutile		Zircon			Other
Inferred	555,000t		66,000t		102,000t			186,000t
Inferred	61.0%		7.3%		11.2%			20.4%

GINGIN

A 52-hole, 1,525m aircore drilling programme was completed during the period. The holes tested magnetic targets along strike from Iluka’s Gingin mine. 298 samples were submitted for laboratory processing. The better intersections are summarised in Table 4.

	Table 4 Gingin Aircore Drilling Results	Table 4 Gingin Aircore Drilling Results	Table 4 Gingin Aircore Drilling Results	Table 4 Gingin Aircore Drilling Results	Table 4 Gingin Aircore Drilling Results
Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
GG166	393887	6532420	18	20	2	2.1
GG168	393814	6532398	6	10	4	2.9
GG173	393602	6532702	6	8	2	3.6
GG178	393838	6531957	18	20	2	2.3
GG183	394214	6531821	14	16	2	2.2
GG195	393558	6531604	20	24	4	2.2
GG196	393523	6531599	18	24	6	3.1
GG197	393484	6531602	18	20	2	2.3
GG201	393597	6531360	22	24	2	2.1
GG202	393667	6531324	22	26	4	3.0
GG211	394294	6531076	12	14	2	2.9
GG217	393554	6531599	20	24	4	3.3

2m samples, HM grade determined by TBE heavy liquid separation

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DIRECTORS’ REPORT

During the period Image appointed a team of experienced management consultants and engineers to assist in advancing the commercialisation of Image’s heavy mineral assets in the North Perth Basin. Image’s current key objective is to build the value of its North Perth Basin assets through expansion of its resource base and the determination of the optimal path for the development and mining of these resources in order for Image to liberate that value to its shareholders, whether by mining the resources itself or through some other transaction.

EUCLA BASIN (Image 100%)

During the period Image Resources completed a 402-hole, 16,308m aircore drilling programme at Serpentine Lakes in the Eucla Basin, following up its previous drilling which intersected significant thicknesses of zircon-rich heavy minerals (HM). Zircon comprises up to 45% of the HM assemblage (ASX releases of 30 October 2008 and 11 February 2009) and is of great significance because it is the highest value mineral normally found in HM deposits (approximately 10 times the value of ilmenite). In addition, the material has very low slime values (range1.8-7.6%, average 4.2%), Low slime content is important because the material is easier to treat and operating costs of mining are reduced.

Results of 2,066 of 4,304 samples (1 or 2m intervals) selected for laboratory processing are summarised in, with Table 4 showing those intersections exceeding 1.0% HM. Significant results include:

• Hole SL249; 16m @ 4.4% HM from 12m, including 3m @ 10.1% HM from 24m

• Hole SL301; 8m @ 5.0 % HM from 26m, including 2m @ 12.4% HM from 28m

• Hole SL350; 12m @ 3.9% HM from 20m, including 3m @ 8.4% HM from 25m

• • Hole SL373; 17m @ 4.4% HM from 13m, including 3m @ 10.7%HM from 18m

• • Hole SL390; 10m @ 5.3% HM from 12m, including 2m @ 10.2%HM from 19m

Two distinct zones of mineralisation are recognised within the Cyclone Extended HM prospect which abuts Diatreme Resources’ Cyclone resource to the north as shown in Figure1. Based on the drilling completed to date, the western zone of Cyclone Extended has been closed off to the south. The main body of this zone is 2km long and 800m wide, and there is a ~200m wide extension to the south for a further 750m. However the eastern zone, about 800m wide, remains open to the south and probably extends up to 4.5km within the Image tenements as shown in Figure 1.

The drillholes shown in Figures 3 and 6 and are coloured by metal factor (intersected thickness x grade in m%HM). The metal factors are based on a mix of laboratory and visual estimates at this stage. Metal factors greater than 40m% are shown in magenta, 20-40m% in red, 7-20m% in orange, 2-7m% in green, and less than 2m% in blue.

The cross sections in Figure 4 show the mineralisation along three new traverses at Cyclone Extended. Some of the more significant intersections are annotated and thicknesses between 9m and 17m are shown.

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DIRECTORS’ REPORT

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Figure 3 Cyclone Extended HM Prospect Showing Mineralisation and Drill Holes Coloured by Metal Factor

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DIRECTORS’ REPORT

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Figure 4 Cyclone Extended Drill Sections

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DIRECTORS’ REPORT

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Figure 5 Cyclone Extended and Monsoon Prospects

Additional mineralisation has been identified about 1.5 km east of Cyclone Extended that requires more drilling to define its extent. Some 20km east of Cyclone Extended further HM mineralisation has been identified at the Monsoon prospect as shown in Figure 5. The area between Cyclone Extended and Monsoon remains prospective for additional mineralisation. Wide spaced stratigraphic holes to the south of Cyclone Extended intersected significant thicknesses of the sediment that hosts the mineralisation at Cyclone Extended. Interpretation of the drilling in the centre of the tenements indicates the palaeo-shorelines trend across the scout drill profiles, although no significant mineralisation was intersected in the wide spaced holes. This area will be investigated further in the next phase of exploration.

Figure 6 shows the Monsoon prospect in more detail. The mineralisation at Monsoon has been traced for over 2.5km and is open to the south-east, but for approximately 2km to the north-west the beach sediments appear to have been eroded by the drainage system that today forms the Serpentine Lakes. The strandlines are interpreted to extend across the state border with South Australia, and into a conservation park.

Results for all the remaining samples selected for laboratory processing are summarised in Table 5, are from areas above and adjacent to the higher grade core of the mineralisation. As a result, most of the new intersections are from holes that were reported previously, but which now have greater thicknesses. Within the Cyclone Extended area shown in Figure 3, the average thickness of mineralisation has increased from 8m to 10m representing an overall increase in mineralisation thickness of 25%. As most of the increased thickness is in the upper part of the mineralisation, it is likely that the overburden ratio will reduce.

These new results continue to highlight that Cyclone Extended is a potentially economic zircon discovery, particularly when considered with Diatreme’s contiguous Cyclone deposit. The strike length of the two deposits extends for some 10km, which is a significant size in a global context and which compares favourably with Iluka’s Jacinth-Ambrosia deposits further east in the Eucla Basin.

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DIRECTORS’ REPORT

==> picture [399 x 307] intentionally omitted <==

Figure 6 Monsoon Prospect Showing Mineralisation and Drillholes Coloured by Metal Factor

	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results
Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
SL213	476487	6809064	23	27	4	3.0
SL214	476397	6809033	23	28	5	1.7
SL215	476340	6809017	26	27	1	1.6
SL216	476293	6809004	21	26	5	2.7
SL218	476132	6808985	20	27	7	1.6
SL219	476081	6808980	16	26	10	2.9
SL220	476032	6808980	18	27	9	3.2
SL221	475825	6809018	21	28	7	1.7
SL222	475779	6809033	23	29	6	1.2
SL223	475737	6809042	22	23	1	1.2
SL224	475694	6809030	25	28	3	1.6
SL234	475196	6808837	38	40	2	3.7
SL236	475101	6808813	20	21	1	1.1
SL237	474848	6808792	9	22	13	2.5
SL238	474808	6808781	10	22	12	2.5
SL239	474769	6808769	9	22	13	3.3
SL240	474726	6808757	9	22	13	2.7
SL241	474348	6808666	25	26	1	2.5
SL242	474301	6808651	22	32	10	1.4

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DIRECTORS’ REPORT

	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results
Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
SL243	474252	6808638	18	25	7	2.9
SL245	474207	6808624	23	24	1	1.6
SL246	474155	6808602	22	23	1	2.8
SL247	474102	6808584	30	32	2	1.1
SL248	474447	6808695	20	26	6	2.8
SL249	475880	6809016	12	28	16	4.4
SL250	475928	6808996	12	26	14	2.7
SL251	475976	6808972	14	27	13	3.1
SL252	476133	6808985	19	27	8	1.6
SL255	481920	6805228	20	22	2	2.7
SL256	481887	6805268	22	24	2	1.5
SL257	481850	6805301	24	26	2	1.1
SL260	481817	6805503	30	32	2	1.3
SL262	481866	6805620	22	28	6	1.6
SL270	481539	6805771	16	24	8	1.5
SL301	486923	6806525	26	36	8	5.0
SL303	487871	6806896	22	24	2	2.6
SL312	489999	6804935	46	54	8	1.4
SL320	477589	6810641	10	14	4	1.1
SL321	477423	6810598	52	54	2	1.4
SL322	477211	6810571	10	54	12	1.6
SL323	476959	6810575	48	50	2	1.0
SL324	476767	6810594	2	4	2	1.1
SL326	476410	6810423	32	46	4	1.3
SL328	476003	6810393	42	44	2	1.6
SL329	475821	6810414	38	40	2	1.4
SL330	475462	6810391	24	27	3	1.4
SL331	475353	6810373	24	28	4	1.8
SL332	475301	6810371	22	30	8	2.7
SL333	475251	6810358	22	28	6	1.7
SL336	474858	6810343	32	38	6	0.9
SL337	474747	6810345	22	24	2	1.1
SL338	474083	6810090	16	28	7	1.7
SL339	474007	6809579	18	30	6	1.4
SL340	476791	6810093	42	55	7	1.1
SL341	476695	6810113	48	50	2	1.4
SL342	476597	6810089	30	32	2	1.1
SL343	476502	6810073	24	48	4	1.2
SL344	476406	6810057	44	48	4	1.4

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DIRECTORS’ REPORT

	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results
Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
SL346	476201	6810033	40	44	4	1.3
SL349	475915	6809963	20	32	12	2.9
SL350	475866	6809941	20	32	12	3.9
SL352	475765	6809890	22	29	7	1.0
SL353	475714	6809875	25	26	1	1.1
SL354	475661	6809874	23	25	2	1.2
SL355	475609	6809844	23	24	1	1.1
SL356	475558	6809773	16	28	12	2.2
SL357	475461	6809732	24	28	4	1.9
SL358	475369	6809733	26	28	2	1.1
SL363	474891	6809717	20	24	4	1.5
SL364	474843	6809712	19	24	5	1.7
SL365	474791	6809703	14	24	10	2.9
SL366	474741	6809706	22	23	1	2.8
SL367	474693	6809712	22	33	2	1.3
SL368	474644	6809710	17	22	5	1.5
SL369	474593	6809706	12	26	14	4.3
SL370	474545	6809716	12	21	9	4.4
SL371	474489	6809720	14	21	7	4.1
SL372	474438	6809712	13	28	10	4.4
SL373	474389	6809696	13	30	17	4.4
SL374	474341	6809685	15	30	14	3.0
SL375	474294	6809654	14	30	16	2.9
SL376	474246	6809627	16	21	5	2.7
SL377	474192	6809614	18	21	3	1.7
SL378	474145	6809600	14	21	7	1.9
SL379	474100	6809590	18	21	3	3.3
SL380	474018	6809118	22	26	4	1.3
SL381	474114	6809149	18	20	2	1.4
SL382	474219	6809176	18	24	6	1.5
SL384	474311	6809221	18	20	2	2.0
SL385	474358	6809247	16	20	4	2.5
SL386	474401	6809266	15	21	6	3.1
SL387	474454	6809275	16	21	5	2.3
SL388	474500	6809280	15	24	9	4.5
SL389	474544	6809295	14	19	5	3.5
SL390	474591	6809308	12	22	10	5.3
SL391	474642	6809312	16	24	8	2.8
SL392	474688	6809306	15	22	7	4.0

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DIRECTORS’ REPORT

	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results	Table 5 Cyclone Extended Aircore Drilling Results
Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
SL393	474740	6809304	15	22	7	4.0
SL394	474792	6809314	21	22	1	2.0
SL395	474844	6809325	21	22	1	1.0
SL396	474891	6809335	20	22	2	3.2
SL397	474949	6809346	18	21	3	1.9
SL403	475504	6809469	22	26	4	1.7
SL404	475564	6809476	22	28	6	1.5
SL405	475616	6809481	18	27	9	3.1
SL406	475662	6809496	16	28	12	2.8
SL407	475713	6809511	18	29	11	3.3
SL408	475757	6809525	22	28	6	1.1
SL409	475805	6809541	23	25	2	1.5
SL485	476884	6808346	32	36	4	3.1
SL486	476842	6808330	34	36	2	6.3
SL487	476930	6808357	32	36	4	2.3
SL488	476975	6808370	14	16	2	1.6
SL493	477307	6806884	24	26	2	1.6
SL494	477209	6806851	28	36	8	2.2
SL496	477019	6806864	30	38	8	2.3
SL497	476934	6806849	34	38	4	1.6
SL500	475236	6807592	28	30	2	2.2
SL541	498177	6804044	19	20	1	2.2
SL542	498226	6804044	18	20	2	3.1
SL543	498136	6804049	19	20	1	1.9
SL544	498093	6804057	19	20	1	2.2
SL545	497993	6804068	16	22	6	3.1
SL546	498041	6804068	18	21	3	3.0
SL547	497942	6804064	20	23	3	2.3
SL551	498495	6803682	21	26	5	2.2

1m or 2m samples, HM grade determined by TBE heavy liquid separation

Table 5

Cyclone Extended Aircore Drilling Results (phase 2)

Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
SL098	474571	6808730	16	24	8	2.1
SL102	474047	6810081	8	23	15	1.9
SL108	474478	6810246	8	23	15	1.1
SL110	474547	6810332	8	23	15	2.2
SL218	476132	6808985	19	27	8	1.5

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DIRECTORS’ REPORT

Table 5 Cyclone Extended Aircore Drilling Results (phase 2)

Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
SL219	476081	6808980	12	26	14	2.5
SL220	476032	6808980	12	27	15	2.6
SL251	475976	6808972	12	27	15	2.9
SL322	477211	6810571	8	16	8	1.8
SL332	475301	6810371	16	30	14	2.0
SL338	474083	6810090	10	21	11	1.5
SL349	475915	6809963	14	32	18	2.4
SL350	475866	6809941	18	32	14	3.4
SL356	475558	6809773	14	28	14	2.1
SL364	474843	6809712	18	24	6	1.6
SL365	474791	6809703	13	24	11	2.7
SL368	474644	6809710	10	22	12	1.4
SL369	474593	6809706	6	26	20	3.9
SL370	474545	6809716	6	21	15	3.8
SL371	474489	6809720	6	21	15	3.3
SL372	474438	6809712	4	21	17	3.8
SL373	474389	6809696	6	22	16	5.0
SL374	474341	6809685	8	21	13	3.3
SL375	474294	6809654	8	23	15	3.0
SL376	474246	6809627	10	21	11	1.9
SL378	474145	6809600	13	21	8	1.8
SL379	474100	6809590	14	21	7	2.0
SL382	474219	6809176	16	24	8	1.4
SL385	474358	6809247	12	20	8	1.9
SL386	474401	6809266	12	21	9	2.5
SL387	474454	6809275	12	21	9	1.9
SL388	474500	6809280	8	24	16	3.6
SL389	474544	6809295	8	24	16	2.7
SL390	474591	6809308	6	22	16	4.5
SL391	474642	6809312	12	24	12	2.6
SL392	474688	6809306	8	22	14	3.0
SL393	474740	6809304	8	22	14	3.1
SL405	475616	6809481	14	27	13	2.7
SL406	475662	6809496	14	28	14	2.6
SL407	475713	6809511	14	29	15	3.0
SL423	474815	6808355	16	25	9	2.5
SL425	474912	6808332	12	23	11	2.0
SL426	474955	6808317	17	22	5	1.4
SL447	476312	6808514	19	30	11	2.7
SL448	476356	6808525	16	30	14	2.5

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DIRECTORS’ REPORT

Table 5 Cyclone Extended Aircore Drilling Results (phase 2)

Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
SL449	476398	6808537	22	29	7	1.6
SL452	476544	6808549	25	30	5	3.0
SL477	476474	6808245	18	36	18	2.8
SL486	476842	6808330	32	36	4	3.9
SL487	476930	6808357	22	36	14	1.1

1m or 2m samples, HM grade determined by TBE heavy liquid separation

The information in this report that relates to exploration results is based on information compiled by Scott Carruthers BSc, MSc who is a Member of the Australasian Institute of Mining and Metallurgy. Scott Carruthers is a full time employee of Image Resources NL. Scott Carruthers has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the ‘Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Scott Carruthers consents to the inclusion of this information in the form and context in which it appears in this report.

INDEPENDENCE DECLARATION BY AUDITOR

The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is set out on page 17 for the half-year ended 31 December 2009.

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

G SAKALIDIS

Managing Director 12 March 2010

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AUDITOR’S INDEPENDENCE DECLARATION

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Auditors Independence Declaration

As lead auditor for the review of Image Resources NL for the half year ended 31 December 2009, I declare under Section 307C of the Corporations Act 2001 , 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 review and

• no contraventions of any applicable code of professional conduct in relation to the review.

Somes and Cooke

Jennifer Talbot Engagement Partner

1304 Hay Street West Perth WA 6005 Date: 15 March 2010

Liability Limited by a Scheme approved under Professional Standards Legislation

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STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

Notes Revenue: Interest and dividend income Other revenue Expenses: Depreciation expense Exploration and tenement expenses written off Share based payments 3 Other expenses (Loss) before income tax expense Income tax expense (Loss) from continuing operations Other comprehensive income: Changes in the fair value of available for sale financial assets Income tax relating to other comprehensive income Other comprehensive income/(loss) for the period, net of tax Total comprehensive income/(loss) for the period Total (Loss) and Comprehensive income/(loss) for period attributable to members of Image Resources NL Basic loss per share (cents per share) Diluted loss per share (cents per share)	Half Year Ended 31 Dec 2009 ($) 146,385 116,315 (21,805) (1,156,923) (365,500) (488,640) (1,770,168) - (1,770,168) 1,244,223 - 1,244,223 1,244,223 (525,945) (0.6165) (0.6165)	Half Year Ended 31 Dec 2008 ($) 231,225 64,200 (21,043) (1,357,862) (169,250) (410,805)
		(1,663,535) - (1,663,535)
		(626,792) -
		(626,792)
		(626,792)
		(2,290,327)
		(2.8757) (2.8757)

The accompanying notes form part of these financial statements.

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STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009

Notes Current Assets Cash assets Receivables Prepayments Total Current Assets Non-Current Assets Plant and equipment Mineral interests Other financial assets 4 Total Non-Current Assets TOTAL ASSETS Current Liabilities Payables Total Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity 5 Reserves Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements.	31 Dec 2009 ($) 5,380,419 80,228 58,922 5,519,569 93,023 - 2,833,202 2,926,225 8,445,795 132,532 132,532 132,532 8,313,262 23,098,968 5,338,114 (20,123,820) 8,313,262	30 June 2009 ($) 6,417,934 343,269 21,937
		6,783,140
		83,189 - 1,362,449
		1,445,638
		8,228,778
		228,766
		228,766
		228,766
		8,000,012
		22,625,273 3,728,391 (18,353,652)
		8,000,012

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STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

	Share Capital (Net of Costs) ($)	Available for Sale Financial Assets Reserve Capital ($)	Employee Benefit Reserve ($)	Accumulated Losses ($)	Total ($)
Balance at 1.7.2008	19,801,026	108,870	3,152,009	(15,641,907)	7,419,998
Share basedpayments			169,250		169,250
Total comprehensive income/(loss)forperiod		(626,792)		(1,6631,535)	(2,290,327)
Transfer of Available for Sale AssetReserve		517,922		(517,922)	-
Balance at 31.12.2008	19,801,026	-	3,321,259	(17,823,364)	5,298,921
Balance at 1.7.2009	22,625,273	407,132	3,321,259	(18,353,652)	8,000,012
Options exercised	473,695				473,695
Share basedpayment			365,500		365,500
Total comprehensive income/(loss)forperiod		1,244,223		(1,770,168)	(525,945)
Balance at 31.12.2009	23,098,968	1,651,355	3,686,759	(20,123,820)	8,313,262

The accompanying notes form part of these financial statements.

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STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

CASH FLOWS FROM OPERATING ACTIVITIES GST refunds received Payments to suppliers and contractors Interest and dividends received Net cash provided by / (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment Payments for exploration and evaluation Proceeds on sale of plant Purchase of investments Purchase of new prospects Proceeds from sale of investments Net cash provided by / (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of options Net cash provided by financing activities Net (decrease) / increase in cash held Cash at the beginning of the financial period Cash at the end of the financial period	Half Year Ended 31 Dec 2009 ($) 297,166 (664,058) 146,385 (220,507) (33,638) (1,062,718) 2,000 (491,378) (3,631) 298,662 (1,290,703) 473,695 473,695 (1,037,515) 6,417,934 5,380,419	Half Year Ended 31 Dec 2008 ($) 51,487 (592,584) 231,225
		(309,872)
		(20,530) (1,111,252) - (47,606) (9,956) -
		(1,189,344)
		-
		-
		(1,499,216) 6,431,257
		4,932,041

The accompanying notes form part of these financial statements.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

NOTE 1 BASIS OF PREPARATION

These general purpose financial statements for the interim half-year reporting period ended 31 December 2009 have been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards including AASB 134: Interim Financial Reporting. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards.

This interim financial report is intended to provide users with an update on the latest annual financial statements of the Company. As such, it does not contain information that represents relatively insignificant changes occurring during the half-year. It is therefore recommended that this financial report be read in conjunction with the annual financial statements for the year ended 30 June 2009, together with any public announcements made by the Company during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statements except for the adoption of the following new and revised Accounting Standards.

Accounting Standards not previously applied

The Company has adopted the following new and revised Australian Accounting Standards issued by the AASB which are mandatory to apply to the current interim period. Disclosures required by these Standards that are deemed material have been included in this financial report on the basis that they represent a significant change in information from that previously made available.

Presentation of Financial Statements

AASB 101 prescribes the contents and structure of the financial statements. Changes reflected in this financial report include:

• the replacement of Income Statement with Statement of Comprehensive Income. Items of income and expense not recognised in profit or loss are now disclosed as components of "other comprehensive income". In this regard, such items are no longer reflected as equity movements in the Statement of Changes in Equity;

• the adoption of the single statement approach to the presentation of the Statement of Comprehensive Income;

• other financial statements are renamed in accordance with the Standard.

Operating Segments

From 1 January 2009, operating segments are identified and segment information, if required, disclosed on the basis of internal reports that are regularly provided to, or reviewed by, the Company's chief operating decision maker which, for the Company, is the board of directors.

NOTE 2 OPERATING SEGMENTS

Segment Information

Identification of reportable segments

The Company has identified that it operates in only one segment based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Company's principal activity is mineral exploration.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

NOTE 2 OPERATING SEGMENTS (Continued)

Revenue and assets by geographical region

The Company's revenue is received from sources and assets located wholly within Australia.

Major customers

Due to the nature of its current operations, the Company does not provide products and services.

NOTE 3 SHARE BASED PAYMENTS

Half Year Ended 31.12.2009 ($)

2,150,000 unlisted options were issued to the directors and company secretary following shareholder approval at the Company’s 2009 Annual General Meeting.

These options have been expensed fully at the independent valuation obtained (to satisfy the legal requirement that a value be placed on the Options and disclosed to shareholders using recognised valuation methodology). The directors believe that the amount which could have been obtained upon a sale of the options at the date of their grant would have been significantly less.

365,500

NOTE 4 OTHER FINANCIAL ASSETS

NOTE 4 OTHER FINANCIAL ASSETS Half Year Ended 31.12.2009 ($) Available for sale assets Balance 1 July 2009 1,362,449 Purchases – at cost 491,378 Sales at carrying value (264,848) Increase/(Decrease) in fair value 1,244,223 Balance 31 December 2009 2,833,202

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

NOTE 5 CONTRIBUTED EQUITY Ordinary Shares Balance 1 July 2009 Options exercised at $0.39 each Total Shares Issued at 31 December 2009 Unlisted Options exercisable at $1.1162 on or before 18 December 2014 Balance 1 July 2009 Options granted to directors pursuant to shareholders’ resolution 30 November 2009 Options granted to company secretary pursuant to employee share option plan Other Unlisted Options Exercisable at $0.37 on or before 21 November 2010 Exercisable at $1.80 on or before 16 November 2011 Exercisable at $1.50 on or before 19 November 2011 Exercisable at $2.38 on or before 26 March 2012 Exercisable at $2.12 on or before 20 November 2012 Total Options issued at 31 December 2009

Number

Total Options issued at 31 December 2009

NOTE 6 TENEMENT EXPENDITURES COMMITMENTS

The Company has entered into certain obligations to perform minimum exploration work on tenements held. These obligations vary from time to time in accordance with contracts signed. Tenement rentals and minimum expenditure obligations which may be varied or deferred on application, are expected to be met in the normal course of business.

The minimum statutory expenditure requirement on the granted tenements for the next twelve months amounts to $953,120. Of this amount, $110,436 is expected to be met by JV participants as a result of various joint ventures.

The tenements are subject to legislative requirements with respect to the processes for application, grant, conversion and renewal. Tenements are also subject to the payment of annual rent and the meeting of minimum annual expenditure commitments. There is no guarantee that any applications, conversions or renewals for the Company’s tenements will be granted.

NOTE 7 EVENTS SUBSEQUENT TO REPORTING DATE

There have been no matters or circumstances that have arisen since 31 December 2008 which have 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.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

NOTE 8 CONTINGENT LIABILITIES

Native Title

The Company’s activities in Australia are subject to the Native Title Act and its interpretation.

The Native Title Act recognises the title rights of indigenous Australians over areas where those rights have not been extinguished. State and Commonwealth native title legislation regulates the recognition, application and protection of native title. Native title may affect the status, renewal and conversion of existing tenements and the granting of new tenements. Indigenous land use agreements, including terms of compensation, heritage survey and protection agreements or other agreement types may need to be negotiated with affected parties.

The Native Title Act prescribes procedures applicable to the grant of tenements which apply even in the case of, for instance, a granted exploration licence being “converted” to, say, a mining lease. Compensation may become payable in respect of any impact which the grant of any tenements or other activities have on native title. A tenement holder may be liable for the payment of compensation for the affect of mining and exploration activities on any native title rights and interests that exist in the area covered by a tenement. Compensation may be payable in forms other than money, including the transfer of property and the provision of goods and services.

It is not currently possible to assess whether compensation will be payable by the Company to native title holders in relation to any of the tenements but such compensation could be significant.

There may be sites and objects of significance to indigenous Australians located on the land relating to the Company’s tenements. State and Commonwealth Aboriginal heritage legislation aims to preserve and protect these sites and objects from use in a manner inconsistent with Aboriginal tradition. The Company proposes carrying out ‘clearance surveys’ if it considers this to be appropriate before conducting any exploration work that would disturb the surface of the land. The Company’s tenements may contain some such sites of significance, which would need to be avoided or cause delays. It is possible that areas containing mineralisation or an economic resource may also contain sacred sites, in which case they may remain unexploited. Access agreements will need to be negotiated with affected parties.

Native title, Aboriginal heritage or other indigenous matters are matters of substantial risk (giving rise to the threat that certain tenements may not be granted, access to certain tenements may be denied or delayed in addition to potentially significant cost exposure in respect of things such as negotiations, surveys, incentive payments and compensation to name but a few) as the legislative frame works provide torturous and frequently uncertain routes to the endeavour by both stakeholders (that is explorers/miners and indigenous peoples) to attain certainty.

It is not possible to quantify the financial or other impact native title and Aboriginal heritage will have upon the Company as, amongst other things, the processes involved with:

(a) identifying all and only the indigenous peoples with a relevant interest;

• (b) registering an indigenous land use agreement;

(c) obtaining access to land without infringing the provisions of the Aboriginal Heritage Act; are open ended, can involve substantial delay and cost and there can be no certainty as to the outcome with it being possible for projects to be entirely frustrated.

This could be the case, for instance, even in circumstances where:

(a) a native title party consents to the grant of an exploration licence and assists the exploration endeavour thereon (and the discovery of an otherwise economic deposit);

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2009

(b) the Company, in order to exploit that discovery, applies for a mining lease (or other required approval, consent, authority etc.) but such grant, approval, consent or authority is not forthcoming by reason of an objection by the same or another native title party.

Freehold Access

The interests of holders of freehold land encroached by tenements are given special recognition by the Mining Act (WA). As a general proposition, a tenement holder must obtain the consent of the owner of freehold before conducting operations on the freehold land. There can be no assurance that the Company will secure rights to access those portions of the tenements encroaching freehold land either at all or for all purposes but, importantly, the grant of freehold extinguished native title so wherever the tenements encroach freehold the Company is in the position of not having to abide by the Native Title Act albeit aboriginal heritage matters will still be of concern.

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DIRECTORS' DECLARATION

The directors of the Company declare that:

1. the accompanying financial statements and notes:

2. (a) comply with Accounting Standard AASB 134 : Interim Financial Reporting and the Corporations Regulations 2001; and

3. (b) give a true and fair view of the financial position of the Company as at 31 December 2009 and its performance for the half-year ended on that date.

4. 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 Managing Director

Dated this 15th day of March 2010

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Independent Auditor’s Review Report

To the members of Image Resources NL

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Image Resources NL, which comprises the statement of financial position as at 31 December 2009, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, 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-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal controls 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 2009 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 Image Resources NL, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, 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.

Liability Limited by a Scheme approved under Professional Standards Legislation

• Page 28 -

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 and we can confirm that the independence declaration required by the Corporations Act 2001 has been provided to the directors of Image Resources NL on the date of this 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-year financial report of Image Resources NL is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the entity’s financial position as at 31 December 2009 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 and Cooke Chartered Accountants

Jennifer Talbot Engagement Partner

• 15 March 2010

• Page 29 -