IMAGE RESOURCES NL — Interim / Quarterly Report 2014

Feb 27, 2014

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HALF-YEAR FINANCIAL REPORT

31 DECEMBER 2013

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ABN 57 063 977 579

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Annual Report for the year ended 30 June 2013 and any public announcements made by Image Resources NL during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

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CONTENTS

HALF-YEAR FINANCIAL REPORT

	Page No.
Directors’ Report	3
Auditor’s Independence Declaration	6
Statement of Profit or Loss and Other Comprehensive
Income	7
Statement of Financial Position	8
Statement of Changes in Equity	9
Statement of Cash Flows	10
Notes to and forming part of the Financial Statements	11
Directors' Declaration	14
Independent Auditor’s Review Report	15

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DIRECTORS’ REPORT

Your directors submit the financial report of the Company for the half-year ended 31 December 2013.

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 Peter Davies Mr George Sakalidis

REVIEW OF OPERATIONS

The total loss from continuing operations for the half-year ended 31 December 2013 was $477,786 (2012: $2,368,521).

The Company’s activities during the six month period are summarised in this report which unless otherwise stated, should be read as if dated 31 December 2013.

The Company has continued to focus its efforts on advancing its 100% owned North Perth Basin Project. Progress made during the period includes the following:

• Optimisation studies for the NPB Project released in November 2013 demonstrate the potential for an independent project delivering post-tax IRR over 80% and payback in less than 16 months. This work followed the release of the base case feasibility study (BCFS) results in July 2013.

• Project is resilient to low product prices due to very high in ground ore values.

• The Public Environmental Review process commenced on 8th January 2014. The schedule for the project environmental approvals process is targeting all primary and secondary appprovals being in place by the end of September 2014.

• Testwork has confirmed that the zircon produced can be cleaned to produce high quality products.

• Ground magnetic surveys have shown potential for northern extensions to the resources at Boonanarring.

During the period the Company’s cash position was strengthened following the receipt of $1.2 million through cancellation of environmental bonds from relinquished tenements and receipt of the 2012/13 financial year R&D rebate. In addition, Image’s head office was relocated from West Perth to Balcatta and staffing numbers reduced to conserve cash.

Discussions with interested parties for project finance and off-take for the NPB Project are continuing, with the aim of progressing towards first production in early 2015.

COMPETENT PERSON’S STATEMENT – RESOURCE ESTIMATES

The information in this report that relates to mineral Resources is based on information compiled by Lynn Widenbar BSc, MSc, DIC MAusIMM MAIG 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 2012 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 report.

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DIRECTORS’ REPORT

COMPETENT PERSON’S STATEMENT – TECHNICALSTUDIES

The information in this report that relates to technical studies is based on information compiled by Peter Davies BSc Eng (Hons) ARSM, C.Eng. MIMMM, MAICD, 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 2012 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.

COMPETENT PERSON’S STATEMENT – PROJECT EVALUATION

The information in this report that relates to project evaluation and financial analysis is based on information compiled by Mr Ray Cary, BSc., who is a Fellow of the Australasian Institute of Mining and Metallurgy and a Fellow of the Australian Institute of Geoscientists. Ray Cary is the Director and Principal of Northwind Resources Pty Ltd, a Perth, Western Australia based minerals industry consultancy. Ray Cary has sufficient experience in the technical and economic evaluation of minerals development projects and mining operations which is relevant to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Ray Cary 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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DIRECTORS’ REPORT

INDEPENDENCE DECLARATION BY AUDITOR

The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is set out on page 6 for the half-year ended 31 December 2013.

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

SIGNED: PJ DAVIES

Managing Director

Perth 28 February 2014

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AUDITOR’S INDEPENDENCE DECLARATION

To those charged with governance of Image Resources NL

As auditor for the review of Image Resources NL for the period ended 31 December 2013, I declare that, to the best of my knowledge and belief, there have been:

• a) No contraventions of the independence requirements of the Corporations Act 2001 in relation to the review; and

• b) No contraventions of any applicable code of professional conduct in relation to the review.

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Somes Cooke

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Nicholas Hollens

Perth

28 February 2014

Liability Limited by a Scheme approved under Professional Standards Legislation

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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2013

Notes Revenue: Interest and dividends income Other revenue 3 Expenses: Depreciation expense Exploration and tenement expenses 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 4 Other comprehensive income for the period, net of tax Total comprehensive income for the period attributable to members of the Company Basic loss per share (cents per share) Diluted loss per share (cents per share) The accompanying notes form part of these financial statements.	Half Year Ended 31 Dec 2013 ($) 44,671 1,045,192 (13,001) (954,436) (600,212) (477,786) - (477,786) (8,675) (8,675) (486,461) (0.341) (0.341)	Half Year Ended 31 Dec 2012 ($) 44,863 157,215 (10,289) (1,606,042) (954,268) (2,368,521) - (2,368,521) (83,862) (83,862) (2,452,383) (2.167) (2.167)

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STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

Notes Current Assets Cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Property, plant and equipment Other financial assets 4 Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Provisions Total Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity 5 Reserves 5 Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements.	31 Dec 2013 ($) 2,622,531 10,181 87,677 2,720,389 127,042 176,959 304,001 3,024,390 227,638 4,219 231,857 231,857 2,792,533 36,756,352 1,103,815 (35,067,634) 2,792,533	30 June 2013 ($) 3,176,042 180,943 264,626
		3,621,611
		94,117 185,633
		279,750
		3,901,361
		573,858 48,509
		622,367
		622,367
		3,278,994
		36,756,352 1,112,490 (34,589,848)
		3,278,994

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STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 31 DECEMBER 2013

	Contributed Equity (Net of Costs) ($)	Available for Sale Financial Asset Reserve ($)	Employee Benefit Reserve ($)	Accumulated Losses ($)	Total ($)
Balance at 1.7.2012	28,524,839	-	3,080,490	(29,999,326)	1,606,003
Operating (loss)for theperiod	-	-	-	(2,368,521)	(2,368,521)
Other comprehensive income	-	(83,862)	-	-	(83,862)
Sharesissued	8,641,112	-	-	-	8,641,112
Shareissue expenses	(409,800)	-	-	-	(409,800)
Balance at 31.12.2012	36,756,151	(83,862)	3,080,490	(32,367,847)	7,384,932
Balance at 1.7.2013	36,756,352	(10,000)	1,122,490	(34,589,848)	3,278,994
Operating (loss)forthe period	-	-	-	(477,786)	(477,786)
Other comprehensive income	-	(8,675)	-	-	(8,675)
Shares issued	-	-	-	-	-
Share issue expenses	-	-	-	-	-
Balance at 31.12.2013	36,756,352	(18,675)	1,122,490	(35,067,634)	2,792,533

The accompanying notes form part of these financial statements.

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STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2013

Note CASH FLOWS FROM OPERATING ACTIVITIES Cash payments to suppliers and contractors Research and development tax incentives received Interest received Dividends received Net cash generated 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 Release of restricted cash – term deposits for bank guarantees Purchase of new prospects Proceeds from sale of investments Net cash (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Share issue expenses Net cash provided by financing activities Net (decrease) / increase in cash held Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period The accompanying notes form part of these financial statements.	Half Year Ended 31 Dec 2013 ($) (475,440) 999,061 43,431 1,707 568,759 (45,926) (1,248,237) - 179,313 (7,420) - (1,122,270) - - - (553,511) 3,176,042 2,622,531	Half Year Ended 31 Dec 2012 ($) (416,529) - 43,298 1,565
		(371,666)
		(85,823) (1,949,217) 23,400 - (16,931) 81,609
		(1,946,962)
		8,641,113 (409,800)
		8,231,313
		5,912,685 902,826
		6,815,511

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2013

NOTE 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of Preparation

These general purpose financial statements for the interim half-year reporting period ended 31 December 2013 have been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standard 134: Interim Financial Reporting .

These financial statements were approved by the Board of Directors on the date of the Directors Declaration.

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 2013, 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.

These financial statements have been prepared on an accruals and historical cost basis, except where indicated, and on the going concern basis that contemplates normal business activities and the realisation of assets and extinguishment of liabilities in the ordinary course of business.

Accounting Policies

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.

The Company has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current reporting period. The adoption of these Accounting standards and Interpretations did not have any significant impact on the financial performance or position of the Company.

Any new, revised or amending Accounting Standards of Interpretations that are not yet mandatory have not been adopted early.

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 is a mineral sands exploration and evaluation company. Currently all the Company’s mineral sands tenements, reserves and resources are located in Western Australia.

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.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2013

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Half Year Ended Half Year Ended
31.12.2013 31.12.2012
NOTE 3 REVENUE ($) ($)
OTHER INCOME:
Expense recoveries 46,131 135,000
Research and development tax incentive (net of
costs) 999,061 -
Profit on sale of fixed assets - 22,215
1,045,192 157,215
Half Year Ended
31.12.2013
NOTE 4 OTHER FINANCIAL ASSETS ($)
Available-for-sale financial assets
Balance at beginning of period 185,634
Changes in the fair value during the period (8,675)
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Net disposals during the period
Closing balance 176,959
NOTE 5 CONTRIBUTED EQUITY Number ($)
Contributed Equity – Ordinary Shares:
At the beginning and end of the period 140,156,193 36,756,352
Reserves
Available-for-sale financial assets reserve (18,675)
Employee benefits reserve 1,122,490
Closing balance 1,103,815
Options
The Company had the following options over un-issued
fully paid ordinary shares at the end of the period
Exercisable at $1.1162 on or before 18 December 2014 2,345,000
Exercisable at $0.50 on or before 1 June 2015 1,250,000
Exercisable at $0.6995 on or before 21 December 2015 95,000
Exercisable at $0.70 on or before 1 June 2016 1,250,000
Exercisable at $1.00 on or before 1 June 2016 1,250,000
Exercisable at $0.3908 on or before 27 December 2016 2,600,000
Total Options 8,790,000
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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2013

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 $1,587,334. Of this amount, $379,500 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 2013 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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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 2013 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:

ORIGINAL SIGNED BY PETER DAVIES

Managing Director

Perth Dated this 28th day of February 2014

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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 2013, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ Responsibility for the Half-year Financial Report

The directors of Image Resources NL are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

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 a 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 Image Resources NL's financial position as at 31 December 2013 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.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

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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 Image Resources NL’s financial position as at 31 December 2013 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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Somes Cooke

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Nicholas Hollens

28 February 2014

Perth

Western Australia

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