IMAGE RESOURCES NL - Interim / Quarterly Report 2010

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QUARTERLY REPORT - for the Quarter Ended 31 December 2010

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Image Resources NL ABN 57 063 977 579

HIGHLIGHTS

ASX Code: IMA

Level 2, 16 Ord Street West Perth WA 6005

T +61 8 9485 2410 F +61 8 9485 2840 E [email protected] PO Box 644 West Perth WA 6872

Issued Capital : Shares - Quoted: 86,313,958 fully paid ordinary shares Options - Unquoted: 2,500,000 options exercisable at $1.80 by 16.11.2011 2,200,000 options exercisable at $2.12 by 20.11.2012 2,500,000 options exercisable at $1.50 by 19.11.2011 2,150,000 options exercisable at $1.12 by 18.12.2014

COMMODITY PRICES

Significant increases in all commodity prices due to supply shortfalls. Zircon predicted to reach $1200 per tonne by 2014 (up from $850/t in 2009), Rutile $750/t up from $550 and Ilmenite $190/t from $130/t.

NORTH PERTH BASIN

Rhea drill-out completed resource estimation in progress.
Metallurgical testing of Atlas composite samples completed showing approximately 65% of ilmenite product likely to be of synthetic rutile feedstock quality.
New ground acquisition covering the Atlas extension, with potential to significantly increase the size of this resource.
Drilling commenced on the Chandala HM targets.

Cash : $4.2 million

Directors:

Peter Thomson Chairman George Sakalidis Managing Director Roger Thomson Executive Director

EUCLA BASIN

Planning and permitting in progress for further drilling to test extensions to Cyclone Extended.

COMMODITY PRICES

Commodity analysts specialising in mineral sands, as well as major producer Iluka Resources, are consistently forecasting significant price increases all products over the next five years, due to increased demand from China and India and reduced supply, especially in the zircon market. The pricing outlook is shown below in Table 1.

Table 1 Forecast Product Pricing 2009– 2014	Table 1 Forecast Product Pricing 2009– 2014	Table 1 Forecast Product Pricing 2009– 2014	($US/t)
Product	2009	2011	2014
Zircon	850	1000	1200
Rutile	550	600	750
Chloride Ilmenite	120	160	190

NORTH PERTH BASIN

Cooljarloo (Image 70%)

As previously foreshadowed, Image Resources has completed a drill out of its Rhea prospect at Cooljarloo designed to define a resource to Measured status and to test potential channel mineralisation indicated by the previous ground magnetic surveys. A 401-hole, 11,154m aircore drilling program was completed during the quarter bringing the drilling pattern across the Rhea and Middle Strands to an average spacing of 100m x 20m as shown in Figure 1.

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Figure 1 Rhea Resource Drilling

Within this program 40 drill holes were targeted at channel targets lying to the east of the main Rhea target, whilst the remaining 361 holes tested a mixture of channel and strand targets within the Rhea and Main Strand targets (Figure 1).

The drilling confirmed the presence of shallow high grade deposits with a more extensive sheet like deposit forming a central layer close to the basement. The channel mineralisation underlies the higher level mineralisation and where they overlap the middle layer is often enriched. A total of 8,664 samples have been submitted to heavy minerals specialist laboratory Western Geolabs and to date 3,105 results have been received. Significant intersections are summarised in Table 3 and a typical cross-section is attached in Figure 2.

Table 2

High Grade Rhea Drill Results

Hole Number	MGA East	MGA North	From m	To m	Interval m	% HM
RH179	340002	6617683	12	15.0	3	4.98
RH115	339787	6617874	10	14.0	4	5.00
RH056	339645	6618144	14	16.0	2	5.16
RH032	339609	6618249	0	4.0	4	5.18
RH051	339709	6618198	11	16.0	5	5.36
RH034	339593	6618239	14	17.0	3	5.50
RH072	339757	6618109	10	15.0	5	5.50
RH081	339619	6618003	13	17.0	4	5.71
RH059	339597	6618120	12	15.0	3	5.73
RH178	340020	6617690	15	17.0	2	5.82
RH014	339553	6618324	0	8.0	8	6.24
RH044	339622	6618259	0	3.0	3	6.27
RH187	339883	6617606	12	16.0	4	6.79
RH155	340034	6617804	1	5.0	4	7.41
RH054	339671	6618167	3	5.0	2	7.49

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

Visual estimates suggest a similar mineral assemblage to other deposits in the area and mineralogy composites will be submitted for analysis during the March 2011 quarter.

Estimation of a Measured Resource at Rhea will commence once all assays have been received with an updated estimate expected to be available in the June quarter.

The results of the Atlas metallurgical test program were finalised during the quarter with the major results being an average HM recovery of 95% and production of two ilmenite products, one suitable for sulphate feed and the other, representing approximately 65% of the ilmenite production, for chloride or synthetic rutile (SR) feed. The ilmenite has low U+Th content with the SR ilmenite ranging from 114ppm to 185ppm, well below market thresholds. Overall the test work produced sufficient definition to be able to determine a flowsheet for production.

A total of 48 composite samples from the Atlas deposit have been submitted for mineralogical analysis using QEMSCAN in order to upgrade the Atlas mineral assemblage to Measured status, matching the heavy mineral resource status. This work is now expected to be completed by mid-February 2011, with an updated resource estimate to be undertaken shortly thereafter.

Significantly, Image has increased its landholding at the Cooljarloo project to 150sq km by application for a 62sq km tenement (Image 100%) covering the southern extension of the Atlas deposit. The Atlas deposit remains open to the south and reviews of topographical (DEM) and other technical data have identified a target area approximately 5km long, as shown in Figure 3. Magnetic mapping and drilling will be a high priority once this tenement is granted. It is considered that this new target has the potential to significantly increase the size of the existing Atlas resource (895,000 tonnes of contained heavy minerals).

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Figure 2 Rhea Cross-Section showing three levels of mineralisation

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Figure 3 New Tenement Application South of Atlas (Topographic Image)

Gingin (Image 100%) and Chandala (Image earning up to 80%)

The drilling foreshadowed in the previous quarterly was delayed by the extensive program at Rhea. All permits were received during the quarter for a 10,000m air core program spread across four target areas as shown on Figure 4. Drilling of the first target on the Chandala tenement has commenced and preliminary results are encouraging. Further information will be reported as it becomes available.