IMAGE RESOURCES NL — Interim / Quarterly Report 2013

Apr 29, 2013

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QUARTERLY REPORT - for the Quarter Ended 31 March 2013

HIGHLIGHTS

Image Resources NL ABN 57 063 977 579

ASX Code: IMA

Level 2, 16 Ord Street West Perth WA 6005 T +61 8 9485 2410 F +61 8 9485 2840 E info@imageres.com.au PO Box 644 West Perth WA 6872 Issued Capital : Shares - Quoted: 140,156,193 fully paid ordinary shares Options - Unquoted: 8.8 Million total Cash at end of quarter : $5.31M Directors:

Peter Thomas

Non-executive Chairman

Peter Davies

Managing Director

George Sakalidis Executive Director – Exploration

Investment Highlights

• Image is a ‘pure play’ mineral sands company with tenements only in WA

• The Company is actively progressing the high grade North Perth Basin Project

• Experienced mineral sands project team established

• Feasibility Study is due for completion in mid 2013

• Start of mining planned for late 2014

• Projected production of 200kt per year high quality Ilmenite and 45 kt per year Premium and Standard grade Zircon

• Low estimated capital cost of entry and rapid payback.

NORTH PERTH BASIN PROJECT

 New JORC resources have been announced for Blocks A and C, confirming the high HM and very high Zircon grades over 9.7km strike length at Boonanarring  All resource drilling completed and JORC resources over the tested 12 km strike length to be announced in May  Mine planning and economic modelling commenced  A Mining Lease granted for the northern extension of the Boonanarring mineralisation  Wet process testwork was completed for Boonanarring and Atlas  Ilmenite samples dispatched for customer evaluation  Ilmenite from both Atlas and Boonanarring suitable for most major downstream applications  Environmental field work completed  Production water supply (adjacent to the proposed plant site) established (subject to grant of licences) CORPORATE  Discussions have commenced with potential off-take partners  Steps being taken to broaden and strengthen the composition of the Board  Graeme Scott has been appointed CFO  Board focused on cash conservation to the maximum extent possible whilst still maintaining the overall project development schedule

Quarterly Activities Report 30 April 2013

OVERVIEW

1. The Company retained cash at bank of $5.31M at 31 March 2013. This is adequate to fund all planned activities through to completion of the Feasibility Study and to cover corporate and administrative costs beyond September 2013.

2. In addition the Company retains investments in other companies marked to market at $1.18M.

3. Forecast costs to completion of the internal Feasibility Study and supporting activities are below budget and fully funded.

4. Several non-core tenements have been surrendered during the quarter. Whilst no assets have been sold or joint ventured, the Company has the potential to reduce costs and to raise additional funds through the rationalisation or divestment of tenements outside the North Perth Basin.

5. All stated targets were met for the quarter and the Feasibility Study remains on track for completion in July 2013.

NORTH PERTH BASIN

Feasibility Study

Image’s North Perth Basin Project represents one of the largest undeveloped highgrade HM resources in Australia, with excellent infrastructure and upside exploration potential.

Resource definition work carried out during the Quarter continues to confirm the high grade of the resources. Work during the Quarter demonstrated that the Ilmenite products will be suitable for most major downstream applications.

Image is implementing the strategy of initially developing the high grade Boonanarring resources to produce HMC for sale or toll treatment. This option is not only attractive in terms of project economics, but will provide a quicker path to production at lower risk, with a significantly lower up-front capital requirement than would be the case if a Dry Mill is constructed initially. This initial low estimated capital cost project would then provide the operating platform and cash flow for the staged development of parallel mining operations at Atlas and the other projects, together with the possible construction of a Dry Mill.

Development schedules are dependent on the environmental approvals processes, but work to date has shown that, subject to funding, commencement of mining operations at Boonanarring in late 2014 remains achievable.

The Company aims to bring Atlas on line as a second high grade operation.

During the March quarter the work successfully carried out included:

• A new Mining Lease (M70/1311) was granted covering the full extent of the Boonanarring mineralisation north of Mining Lease 70/1194 (refer Figure 2);

• Process testwork on the representative bulk sample from Atlas was completed;

• Product samples of Ilmenite and Rutile from Boonanarring and Ilmenite samples from Atlas were dispatched to potential customers;

• Drilling all areas of mineralisation from Block A to Block E (12km strike length) at the required spacing to support JORC Indicated Resources has been completed;

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Quarterly Activities Report 30 April 2013

• Maiden JORC Indicated Resources for Block A and C were released;

• Discussion continued on land access agreements;

• The hydrological field programmes were completed;

• The environmental field and desk studies were completed;

• Development of the full project economic model was completed ready for data input as this becomes available.

• Ongoing work on mine and process design and project infrastructure and logistics requirements;

• Progressive parallel review of the key resource, mining and process inputs by the selected independent experts to ensure “no surprises” during the final FS review process;

• Ongoing work to inform the market and to provide information to potential investors and customers.

All activities were conducted without a reportable safety or environmental incident.

All indications are that the project is robust, both technically and financially, even at moderate product pricing and at current exchange rates.

The work completed continues to reduce the risk profile of the project.

Boonanarring Project (Image 100%)

New JORC resources released during the Quarter have resulted in a significant increase in both resource tonnes and contained HM and VHM.

The current resource base is shown in Table 1. This only covers 9.7km of the full 12 km strike length. Maiden resources for Block E and upgrades to the resources in the other blocks will be released during the June Quarter.

Table 1 Overall Boonanarring HM Resource dated 12 April 2013. Blocks A,B,C and D only.

CLASSIFICATION	HM	Volume	Tonnage	HM	VHM	Slimes	HM
	CUTOFF	(million cubic	(Mt)*	(%)	(%)	(%)	(kt)
	(%)	metre)
MEASURED	2.5	1.7	3.1	7.2	4.8	9.9	220
INDICATED	2.5	6.7	13.6	9.1	8.3	17.3	1,240
INFERRED	2.5	2.1	4.2	6.5	5.8	17.4	270
TOTAL	2.5	10.5	20.9	8.3	6.6	16.2	1,730

Work planned for the June Quarter

Work is progressing well on all fronts concerning the completion of the internal Feasibility Study and the environmental review submissions by June 2013.

Key milestones for the next Quarter are:

• Release of an updated JORC Indicated Resource for Blocks D and E;

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Quarterly Activities Report 30 April 2013

• Completion and submission of the Public Environmental Review (PER) documents;

• Complete the work on mine and process plant design, infrastructure and logistics requirements;

• Complete the project capital and operating cost estimates;

• Release information on the updated overall project economics;

• Write the internal Feasibility Study report;

• Ongoing work to inform the market and to provide information to potential investors and customers.

It is expected that the increased resource base at Boonanarring, coupled with the availability of a more sophisticated economic model, will enable Image to provide revised guidance on overall project economics during the Quarter. Previous information released in 2011 related to a different development concept involving the start of operations at Atlas rather than Boonanarring as now planned.

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Quarterly Activities Report 30 April 2013

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Figure 1 Boonanarring Project Area Drilling and Resource Blocks

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Quarterly Activities Report 30 April 2013

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Figure 2 Boonanarring North Granted M70/1311 Boundary

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Quarterly Activities Report 30 April 2013

DIVESTMENT OF NON-CORE ASSETS

During the quarter, the Company continued a comprehensive rationalisation of noncore assets, including surrender or reduction in area of some tenements and conversion of other tenements to retention licences.

CORPORATE

No funds were raised during the quarter. Image now has 140,156,193 fully paid shares on issue.

The Board has continued enquiries as to suitable candidates for a new NED position to broaden and strengthen the composition of the Board.

Graeme Scott was appointed CFO commencing 1 April. Graeme previously held senior finance positions within the resources sector and was most recently CFO with Magma Metals Limited.

All expenditure has been reviewed and deferred to the maximum extent possible whilst maintaining the overall project development schedule.

The Board will continue to monitor expenditure in the light of market sentiment and conditions.

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

Please direct enquiries to: Peter Davies Managing Director Phone (08) 9485 2410 Mob: 0409 296 676

George Sakalidis Executive Director Phone (08) 9485 2410 Mob: 0411 640 337

COMPETENT PERSON’S STATEMENT – EXPLORATION RESULTS

The information in this presentation is based on information compiled by Paul Leandri BAppSc who is a member of the Australasian Institute of Mining and Metallurgy. Paul Leandri is an employee of Image Resources NL. He 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 for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Paul Leandri consents to the inclusion of this information in the form and context in which it appears in this presentation.

COMPETENT PERSON’S STATEMENT – RESOURCE ESTIMATES

The information in this presentation that relates to mineral resources is based on information compiled by Lynn Widenbar BSc, MSc, DIC, MAIG, MAusIMM employed by Widenbar & Associates who is a consultant to the Company. Lynn Widenbar 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’. Lynn Widenbar consents to the inclusion of this information in the form and context in which it appears in this presentation.

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Quarterly Activities Report 30 April 2013

COMPETENT PERSON’S STATEMENT – PROJECT EVALUATION

The information in this presentation that relates to project evaluation is based on information compiled by Peter Davies BSc Eng (Hons) ARSM, C.Eng. MIMMM, FAusIMM FRSA, who is a Fellow of the Australasian Institute of Mining and Metallurgy. Peter Davies is Managing Director/Project Manager of Image Resources NL. Peter Davies 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 for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Peter Davies consents to the inclusion of this information in the form and context in which it appears in this report.

FORWARD LOOKING STATEMENTS

Certain statements made during or in connection with this communication, including, without limitation, those concerning the economic outlook for the mining industry, expectations regarding prices, exploration or development costs and other operating results, growth prospects and the outlook of Image’s operations contain or comprise certain forward looking statements regarding Image’s operations, economic performance and financial condition. Although Image believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

Accordingly, results could differ materially from those set out in the forward looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes that could result from future acquisitions of new exploration properties, the risks and hazards inherent in the mining business (including industrial accidents, environmental hazards or geologically related conditions), changes in the regulatory environment and other government actions, risks inherent in the ownership, exploration and operation of or investment in mining properties, fluctuations in prices and exchange rates and business and operations risks management, as well as generally those additional factors set forth in our periodic filings with ASX. Image undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today’s date or to reflect the occurrence of unanticipated events.

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Appendix 5B Mining exploration entity quarterly report

Rule 5.3

Appendix 5B

Mining exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10

Name of entity

IMAGE RESOURCES NL

	ABN 57 063 977 579 Consolidated statement of cash flows		Quarter ended (“current quarter”) 31/3/2013	Quarter ended (“current quarter”) 31/3/2013
			31/3/2013
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 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		Current quarter $A’000		Year to date (9.months) $A’000
		36 (1,036) (499) 56		311 (2,932) (1,300) 101
		(1,443)		(3,820)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments –security deposits (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (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 1.13 Total operating and investing cash flows (carried forward)		(7) (85) - 23		(18) (94) 82 23
		(69)		(7)
		(1,512)		(3,827)

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(1,512)	(3,827)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) – share issue expenses Net financing cash flows	90 (90)	8,641 (410)
	-	8,231
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	(1,512) 6,819	4,404 903
	5,307	5,307

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

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		132
1.25	Explanation necessaryfor an understandingof the transactions

Non-cash financing and investing activities

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

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

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities 3.2 Credit standby arrangements – bankguarantees	Amount available $A’000	Amount used $A’000
	-	-
	293	293

• See chapter 19 for defined terms.

Appendix 5B Page 2

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Appendix 5B Mining exploration entity quarterly report

Estimated cash outflows for next quarter

Estimated cash outflows for next quarter
4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	2,034
	-
	-
	292
Total	2,326

Reconciliation of cash

Reconciliation of cash
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 follows.	Current quarter $A’000	Previous quarter $A’000
5.1 Cash on hand and at bank 5.2 Deposits at call 5.3 Bank overdraft 5.4 Other (provide details) –Short term deposits	238	746
	5,069	6,073
Total: cash at end of quarter(item 1.22)	5,307	6,819

Changes in interests in mining tenements

6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter
	E69/2826 E69/2827 E69/2828 E70/3612 E70/3894 E70/4306	Relinquished Relinquished Relinquished Relinquished Relinquished Relinquished	100% 100% 100% 100% 100% 100%	0% 0% 0% 0% 0% 0%
	G70/250 M70/1311 E70/4472	Granted Granted Application	0% 0% 0%	100% 100% 100%

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

Issued and quoted securities at end of current quarter

Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (see note 3)	Amount paid up per security (see note 3)
7.1 Preference+securities (description) 7.2 Changes during quarter:	N/A
(a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions 7.3 +Ordinary securities Fully paid 7.4 Changes during quarter:
	140,156,193	140,156,193
(a) Increases through issues	1,000	1,000
(b) Decreases through returns of capital, buy- backs
7.5 +Convertible debt securities(description) 7.6 Changes during quarter:	N/A
(a) Increases through issues
(b) Decreases through securities matured, converted
7.7 Options (description and conversion factor) Over fully paid shares Over fully paid shares Over fully paid shares Over fully paid shares Over fully paid shares Over fully paid shares 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter			Exercise price	Expiry date
	2,345,000	Notquoted	$1.1162	18/12/2014
	95,000	Notquoted	$0.6995	21/12/2015
	2,600,000	Notquoted	$0.3908	27/12/2016
	1,250,000	Notquoted	$0.50	1/6/2015
	1,250,000	Notquoted	$0.70	1/6/2016
	1,250,000	Notquoted	$1.00	1/6/2016
	N/A
	N/A
	N/A
7.11 Debentures (totals only)	N/A
7.12 Unsecured notes(totals only)	N/A

• See chapter 19 for defined terms.

Appendix 5B Page 4

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Appendix 5B Mining exploration entity quarterly report

Compliance statement

1. This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

2. This statement does give a true and fair view of the matters disclosed.

Sign here: Print name:

..................... ....................................... Date: 30 April 2013 Dennis Wilkins (Company Secretary)

Notes:

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2. The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

3. Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

4. The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

5. Accounting Standards

ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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• See chapter 19 for defined terms.

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