IMAGE RESOURCES NL — Interim / Quarterly Report 2012

Jan 29, 2013

==> picture [549 x 75] intentionally omitted <==

QUARTERLY REPORT - for the Quarter Ended 31 December 2012

HIGHLIGHTS

Image Resources NL ABN 57 063 977 579

NORTH PERTH BASIN

ASX Code: IMA

• Assay work commenced on the drilling in Block C at Boonanarring. Work is on schedule to release the next resource upgrade in February 2013

• The new Block C resource and drilling on Blocks A, D and E planned for January and February 2013 are expected to increase the strike length of the mineralisation at Boonanarring from the current 4.6km to over 10km, with proportionate increases in resources

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 : $6.82M Directors:

Cash at end of quarter: $6.82M 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  First production 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.

 A Mining Lease Application was submitted in December for the full northern extension of the Boonanarring mineralisation  Environmental field work is in progress  Wet process testwork was completed for Boonanarring. A bulk sample for Atlas was collected ready for testwork in January 2013  Ilmenite product quality even higher than previous indications CORPORATE  $6.288 million (net of costs) raised through a placement at $0.20  Sufficient funds are now at hand to complete the North Perth Basin Project Feasibility Studies  Discussions with potential investors in relation to divestment of non-core assets continue  Steps being taken to broaden and strengthen the composition of the Board.

Quarterly Activities Report 30 January 2013

OVERVIEW

1. The Company’s cash position was sound at the end of the Quarter. Working capital as at 31 December 2012 of $6.82M is adequate to fund all planned activities through to completion of the Feasibility Study.

2. Costs for the Feasibility Study and supporting activities continue to be in line with projections.

3. Whilst no assets have been sold, joint ventured or mothballed, 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.

4. 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.

Exploration and evaluation work carried out during the Quarter, adopting conservative parameters, continues to confirm robust economic returns for the project.

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 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 operations at Boonanarring in late 2014 remains achievable.

The Company aims to bring Atlas on line as a parallel mine with a separate wet plant as soon as possible in order to increase annual production and cashflow and further improve the overall project economics.

Feasibility Study work in progress includes:

• Drilling of the remaining northern sections at Boonanarring;

• Associated resource modelling and mine planning;

• Bulk sample testing for process flowsheet design and preparation of Ilmenite and Zircon samples for customer acceptance testing;

• Detailed planning for project infrastructure;

• Consideration of project logistics options;

• Discussions with potential downstream customers;

• Completion of the hydrological studies and field testwork;

• Continuation of the environmental studies and project approvals activities;

• Completion of land access negotiations at Boonanarring;

• Informal meetings with local residents, local government representatives and local interest groups;

2

Quarterly Activities Report 30 January 2013

• Resolution of Native Title interest at Atlas;

• Consideration of project finance options.

During the December quarter the work successfully completed included:

• Application for a Mining Lease to cover the full extent of the Boonanarring mineralisation north of Mining Lease 70/1194;

• Heritage “Site Avoidance” surveys related to the planned hydrological drilling programme;

• Flora and fauna surveys at Boonanarring;

• Planning for noise, dust, soil characterisation, dieback and other studies related to the environment approval programme;

• All required licences and permits for the hydrological testing programme were obtained;

• Collection of representative bulk samples from Boonanarring and Atlas;

• Wet process testwork on the Boonanarring bulk sample;

• Selection and engagement of independent experts to review all components of the Feasibility Study;

• Initial review by CSA Global, as independent expert, of the resource estimation processes and associated QA/QC procedures;

• Detailed mine planning for Block B to provide the basis for review of mining concepts and costs ahead of the next round of pit optimisation work;

• Commencement of assaying for the Block C drill samples;

• Referral of the Boonanarring Project to the OEPA and confirmation that the project would be assessed at the level of PER;

• Initial meeting with the traditional owners and the representative body regarding native title at Atlas. Formal documentation of the agreement is in progress;

• Site visits with a number of existing shareholders, analysts and potential customers;

• Breakaway Research issued an update of their research document on Image.

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

All results indicate the robustness of the project, both technically and financially, even at moderate product pricing and at adverse exchange rates.

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

Boonanarring Project (Image 100%)

During the quarter a bulk sample was compiled from drill holes samples to represent the mineralisation within the potential mining outlines at Boonanarring Blocks B & C. This sample was delivered to AML laboratories in Osborne Park where wet processing and Ilmenite separation testwork were undertaken to characterise the mineralisation and provide data for process flowsheet and plant design work. MSP Engineers have been engaged to carry out this work. A “basis of design” has been confirmed and the processing design work is scheduled to commence in January 2013.

Equally importantly, the process testwork will also provide test samples of Ilmenite, Rutile, and Zircon products to be sent to potential customers for acceptance testing. Preliminary indications from the testwork are that two high quality Ilmenite fractions can be produced, one suitable for sulphate pigment plant feed (at approximately 55%

3

Quarterly Activities Report 30 January 2013

TiO2) and the second suitable for SR plant or feed to certain chloride pigment plants (at approximately 59% TiO2).

This is seen as a significant achievement, as it exceeds the previous expectation of only being able to make one Ilmenite grade suitable for sulphate pigment plant feed. This positive development has the potential to broaden the customer base and lift the profitability of the project.

Assaying of drill samples from the Block C drilling (see Figure 1) began during December. Results will be compiled during January. Image is on track to produce a new resource estimate for Block C in February, thereby adding to the total inventory and robustness of the project.

A Mining Lease Application (M 70/1311) for the whole of the northern extent of the Boonanarring mineralisation was lodged on 20 December 28[th ] 2012 (see Figure 2).

Work planned for the March Quarter

Work is progressing well on all fronts concerning the completion of the Feasibility Study (including independent expert review) by July 2013 and the environmental approvals process.

Key milestones for the next Quarter are:

• Complete process testwork on the representative bulk sample from Atlas;

• Dispatch of product samples of Ilmenite, Rutile and Zircon from Boonanarring and Ilmenite samples from Atlas to potential customers;

• Completion of drilling all areas from Block A to Block E (12km strike length) at spacing adequate to support JORC Indicated Resources;

• Release of a maiden JORC Indicated Resource for Block C;

• Release of a maiden JORC Indicated Resource for Block A;

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

• Finalisation of the more important land access agreements;

• Completion of the hydrological field programmes;

• Completion of the environmental field and desk studies;

• Development of the full project economic model and release information on the updated overall project economics;

• Complete the work on the new Image website;

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

• Progressive parallel review 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.

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 concept involving the start of operations at Atlas rather than Boonanarring as now planned.

4

Quarterly Activities Report 30 January 2013

==> picture [454 x 671] intentionally omitted <==

Figure 1 Boonanarring Project Area Drilling and Resource Blocks

5

Quarterly Activities Report 30 January 2013

==> picture [372 x 538] intentionally omitted <==

Figure 2 Boonanarring North Mining Lease Application Boundary

6

Quarterly Activities Report 30 January 2013

DIVESTMENT OF NON-CORE ASSETS

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

The Company announced its intention to divest the Cyclone extended deposit in the Eucla basin, subject to obtaining an adequate return on historical expenditure but does not intend to pursue the divestment of this asset for the time being.

Discussions have been entered with other resource companies regarding transfer or joint venture of assets outside the North Perth Basin.

Funds received from such divestments will be directed towards expansion of regional exploration activities in the North Perth Basin.

CORPORATE

$6.288M (net of costs) for Feasibility Study work and general working capital was raised during the quarter by issuing shares, to a combination of sophisticated and professional investors, at 20 cents each. Image now has 140,156,193 fully paid shares on issue.

The AGM was held on 30 November 2012. All motions were resolved in accordance with the recommendations of the Board.

An EGM was held on 6 December 2012 to obtain approvals required in association with the raising. Again, all motions were resolved in accordance with the recommendations of the Board.

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

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.

7

Quarterly Activities Report 30 January 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.

8

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	Name of entity	NL Quarter ended (“current quarter”) 31/12/2012	NL Quarter ended (“current quarter”) 31/12/2012
	IMAGE RESOURCES		NL
	ABN 57 063 977 579 Consolidated statement of cash flows
			31/12/2012
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 (6.months) $A’000
		133 (770) (262) 27		275 (1,896) (801) 45
		(872)		(2,377)
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)		(3) (4) 2		(11) (9) 82
		(5)		62
		(877)		(2,315)

• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 1

Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(877)	(2,315)
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	6,610 (320)	8,551 (320)
	6,290	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	5,413 1,406	5,916 903
	6,819	6,819

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
		137
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	Amount available $A’000	Amount used $A’000

• See chapter 19 for defined terms.

Appendix 5B Page 2

17/12/2010

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
	3,291
	-
	-
	279
Total	3,570

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.

• 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 Total: cash at end of quarter (item 1.22)

	Current quarter		Previous quarter
	$A’000		$A’000
		746		143
		6,073		1,263
		6,819		1,406

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
	E69/2035 E28/2072 E70/4075 E70/3889 E77/1850 E77/2049 E28/2148 E69/2434 P70/1594 P70/1595	Relinquished Relinquished Relinquished Relinquished Relinquished Relinquished Relinquished Relinquished Relinquished Relinquished	100% 100% 100% 100% 100% 100% 100% 100% 100% 100%	0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
	G70/250 M70/1311 E70/3892 E70/4077 E70/4310	Application Application Granted Granted Granted	0% 0% 100% 100% 100%	100% 100% 100% 100% 100%

• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 3

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:
	140,155,193	140,155,193
(a) Increases through issues	33,500,000	33,500,000
(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
	2,200,000	Notquoted	$2.12	20/11/2012
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

17/12/2010

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: ..................... ....................................... Date: 30 January 2013 Print name: 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.

== == == == ==

• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 5