IMAGE RESOURCES NL — Interim / Quarterly Report 2013

Jan 30, 2014

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QUARTERLY REPORT - for the Quarter Ended 31 December 2013

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Image Resources NL ABN 57 063 977 579 ASX Code: IMA Suite 4a, 5 Mumford Place Balcatta WA 6021 T +61 8 9485 2410 F +61 8 9240 7845

www.imageres.com.au PO Box 1075 Balcatta WA 6914

Issued Capital : Shares - Quoted:

140,156,193 fully paid ordinary shares

Options - Unquoted: 8.8 Million total

Cash at end of quarter : $2.622M

Directors:

Peter Thomas

Non-executive Chairman

Peter Davies Managing Director

George Sakalidis Executive Director – Exploration

HIGHLIGHTS

NORTH PERTH BASIN (NPB)

• Optimisation studies for the NPB Project shows the potential for an independent project delivering posttax IRR over 80% and payback in less than 16 months

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

• Project environmental approvals process is on schedule. Public Environmental Review process commenced on 8[th] January 2014

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

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

CORPORATE

Investment Highlights

• ‘Pure play’ mineral sands company with tenements only in WA

• Base Case Feasibility Study optimisation work has confirmed potential for very high project returns and rapid payback

• Production could start early 2015

• Cash position of $2.622M at end December is sufficient for a further 12 months of activities at the current expenditure levels

• $1.194M was received during the December quarter through return of bonds and R&D rebate

• Focus is on project finance and off-take agreements.

• Projected production of 180kt/year high quality products including over 50kt Zircon in the first two years

• Experienced mineral sands project team established

NORTH PERTH BASIN

The encouraging results of the work to quantify the project upside potential were announced on 4[th] November 2013.

The work to quantify the upside potential in the Boonanarring and Atlas project through capital cost reductions in the wet processing plant, establishment of a low cost dry mill and zircon cleaning circuit not only significantly improved the project economics, but also eliminated the risk related to relying on other parties for downstream processing of concentrates.

The Base Case Feasibility Study and the subsequent optimisation studies have clearly demonstrated the attractiveness of the project, coupled with low technical, infrastructure and sovereign risks. The project economics are robust, even under low pricing environments.

In addition the project has the following competitive advantages:

• low sovereign risk;

• location, particularly the fact that all the required infrastructure is already in place;

• access to a local workforce with extensive mineral sands mining and processing experience;

• the high grade and in-situ value of the resource; and

• the high quality of the products.

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

PER Process

Image has been given approval by the Western Australian Environmental Protection Authority (EPA) to release the Public Environmental Review (PER) for its North Perth Basin mineral sands project. The release of the PER document on 8th January 2014 provides for a five week public review period.

The PER documents the results of the environmental investigations and assessments which have been carried out since late 2012 and is the result of close co-operation between Image and the Office of the Environmental Protection Authority (OEPA) to use this PER and its assessment as an example of the successful implementation of the EPA’s streamlined Environment Significance Decision Framework.

Subject to the outcomes from the public review of the PER and parallel processing of the secondary project approvals, all permits and approvals allowing the project construction work to commence on site could now be in place by September 2014

Zircon Testwork Results

Image recently completed testwork on zircon from its high-grade Boonanarring deposit, 90 km north of Perth, which confirmed that the zircon can be cleaned to produce first class quality and high value products.

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The test work also suggests the level of cleaning and associated reagent costs would be in line, or possibly lower, than those previously ascribed in its economic studies. These studies highlighted amongst the lowest zircon inducement prices in the world and a project internal rate of return approaching 90% (see ASX announcement 4 November 2013).

Potential Northern Extensions to Boonanarring

Image recently completed magnetic mapping between its Boonanarring and Red Gully projects and has identified magnetic features that may host potential extensions to both the high grade Boonanarring Eastern Strand and the medium grade Western Strand.

The potential multiple extensions are north of the 10.5km strike length high grade Boonanarring mineral sands Reserves, which form part of the Company’s North Perth Basin Project (NPB Project).

The current Boonanarring Reserves (refer ASX Release dated 16.09.13) contain amongst the highest in ground value per tonne of mineral sands in the world at 8.3% HM, with 24.5% of the HM consisting of high value zircon. Any potential strike or resource extensions at Boonanarring would therefore add significant economic value to the NPB Project.

Purchase of Major Items of Equipment

In November 2013 Image purchased at auction, several major items of equipment that will be required for the Dry Mill. These included a sand dryer and three magnetic separators. All items were in close to as new condition and have been dismantled and transported to store in northern NSW.

The total cost for the purchase, dismantling and transport of this equipment represented a saving of approximately $700,000 on the capital cost of the project.

Image continues to seek ways to lower the capital cost of the project.

Work planned for the March Quarter

Work is continuing on the approvals front. The five week public review period for the PER, is running from 8[th] January to 12[th] February 2014. Work has commenced on the applications for the secondary approvals.

Distribution of product samples and discussions with potential off-take partners for Ilmenite and Zircon products is continuing.

Subject to progress in project funding discussions with major lenders, activities may be carried out to include:

• Further process testwork to progress the Low Cost Dry Mill concept

• Continuation of capital cost reduction initiatives

• Continuation of overall project optimisation studies

• Further discussions with potential project financiers and off-take customers

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Ground magnetic surveys to test remaining prospective areas have been completed. Limited drilling programmes are planned to test high priority targets in line with meeting tenement expenditure commitments.

DIVESTMENT OF NON-CORE ASSETS

During the Quarter, Image continued to rationalise non-core assets, including surrender or reduction in area of some tenements and conversion of other tenements to retention licences.

Ground magnetic surveys are in progress to enable Image either to identify drill targets with high potential or to further reduce tenement holding costs by dropping areas which are demonstrated to have limited prospectivity.

Doral have advised encouraging results from the first year of activity at the Yoongarillup JV, where Doral have an option to purchase subject to the results of the exploration programme.

Image has commenced discussion with a number of parties related to divestment of other non-core assets.

CORPORATE

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

The Company retained cash at bank of $2.622M at 31.12.13. Given the reduced rate of expenditure, this will be sufficient to cover corporate and administrative costs and limited exploration field work into the 2014/15 financial year.

The Company’s cash position was strengthened following cancellation of environmental bonds from relinquished tenements, and receipt of the 2012/13 financial year R&D rebate.

Expenditure remains under constant review and is being deferred to the maximum extent possible pending finance.

For more information visit www.imageres.com.au

Please direct enquiries to:

Peter Davies Managing Director Phone +61 8 9485 2410 Mob +61 409 296 676

George Sakalidis Executive Director - Exploration Phone +61 8 9485 2410 Mob +61 411 640 337

Media Enquiries Simon Jemison

c/o Collins Street Media Mob +61 408 004 848

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COMPETENT PERSON’S STATEMENT – EXPLORATION RESULTS

The information in this report 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 2012 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 – TECHNICALSTUDIES

The information in this presentation 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 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.

COMPETENT PERSON’S STATEMENT – PROJECT EVALUATION

The information in this presentation 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 presentation

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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Tenement Schedule in accordance with ASX Listing Rule 5.3.3

Tenements held at the end of the Quarter	Tenements held at the end of the Quarter	Tenements held at the end of the Quarter	Tenements held at the end of the Quarter
Location	Tenement	Nature of Interest	Project	Equity (%) held at start of Quarter	Equity (%) held at end of Quarter
WA	E28/1895	Granted	KING(ERAYINIA JV)	16.1% diluting	16.1% diluting
WA	E28/2071	Granted	TALC LAKE(ERAYNIA JV)	16.1% diluting	16.1% diluting
WA	E69/2034	Granted	SERPENTINE LAKES	100%	100%
WA	E70/2636	Granted	COOLJARLOO	100%	100%
WA	E70/2742	Granted	CHANDALA(DerbyMines JV)	Earned 80%	Earned 80%
WA	E70/2825	Granted	BIDAMINNA STH	100%	100%
WA	E70/2844	Granted	BIDAMINNA NTH	100%	100%
WA	E70/2892	Granted	CADDA SPRINGS	100%	100%
WA	E70/2898	Granted	COOLJARLOO	100%	100%
WA	E70/3032	Granted	GINGIN	100%	100%
WA	E70/3041	Granted	REGANS FORD SOUTH	100%	100%
WA	E70/3086	Granted	GABY'S PEAK	100%	100%
WA	E70/3100	Granted	QUINNS HILL	100%	100%
WA	E70/3192	Granted	BOOTINE	100%	100%
WA	E70/3292	Granted	COOLJARLOO(Matilda Minerals JV)	Earning70%	Earning70%
WA	E70/3298	Granted	BIDAMINNA -PARK	90%	90%
WA	E70/3328	Granted	VERNE HILL(COOLJARLOO)	100%	100%
WA	E70/3411	Granted	REGANS FORD	100%	100%
WA	E70/3418	Granted	BELL	100%	100%
WA	E70/3494	Granted	BRYALANA	100%	100%
WA	E70/3720	Granted	BLUE LAKE	100%	100%
WA	E70/3892	Granted	CHAPMAN HILL	100%	100%
WA	E70/3966	Granted	REGANS FORD WEST	100%	100%
WA	E70/3997	Granted	MUNBINIA	100%	100%
WA	E70/4077	Granted	DARLING RANGE	100%	100%
WA	E70/4129	Granted	MULLERING SOUTH	100%	100%
WA	E70/4130	Granted	MULLERING NORTH	100%	100%
WA	E70/4244	Granted	WOOLKA	100%	100%
WA	E70/4245	Granted	WINOOKA	100%	100%
WA	M70/0448	Granted	GINGIN SOUTH	100%	100%
WA	M70/1192	Granted	RED GULLY	100%	100%
WA	M70/1193	Granted	GINGIN NORTH	100%	100%
WA	M70/1194	Granted	BOONANARRING	100%	100%
WA	P70/1516	Granted	COOLJARLOO	100%	100%
WA	P70/1540	Granted	CADDA SPRINGS	100%	100%
WA	E28/2241	Granted	WOODLINE	100%	100%
WA	E28/2242	Granted	WOODLINE	100%	100%
WA	M70/1311	Granted	BOONANARRING	100%	100%
WA	G70/0250	Granted	BOONANARRING	100%	100%
SA	2004/0921	Application	SA-OOLDEN RANGE	100%pending grant	100%pending grant
WA	M70/1305	Application	ATLAS	100%pending grant	100%pending grant
WA	P70/1520	Application	COOLJARLOO	100%pending grant	100%pending grant
WA	R69/0001	Application	SERPENTINE LAKES	100%pending grant	100%pending grant
WA	E70/4549	Application	HARRIS BRIDGE	-	100%pending grant
WA	R70/0051	Application	COOLJARLOO NORTH	-	100%pending grant
WA	E70/4572	Application	YARDARINO	-	100%pending grant
MiningTenements acquired duringthe Quarter
WA	E70/4549	Application	HARRIS BRIDGE	-	100% pending grant
WA	R70/0051	Application	COOLJARLOO NORTH	-	100% pending grant
WA	E70/4572	Application	YARDARINO	-	100% pending grant
MiningTenements disposed duringthe Quarter
WA	E70/3359	Relinquished	NABAROO	100%	-

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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

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Name of entity
IMAGE RESOURCES NL
ABN Quarter ended (“current quarter”)
57 063 977 579 31/12/2013
Consolidated statement of cash flows
Year to date
Current quarter
Cash flows related to operating activities (6.months)
$A’000
$A’000
1.1 Receipts from product sales and related debtors 12 63
1.2 Payments for
(a) exploration & evaluation (461) (1,248)
(b) development
(c) production
(d) administration (268) (539)
1.3 Dividends received
1.4 Interest and other items of a similar nature received 18 45
1.5 Interest and other costs of finance paid
1.6 Income taxes paid/R&D refund received (net) 999 999
1.7 Other (provide details if material)
Net operating cash flows 300 (680)
Cash flows related to investing activities
1.8 Payment for purchases of:
(a) prospects (6) (7)
(b) equity investments
(c) other fixed assets (46) (46)
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) – bond security
195 179
deposits
Net investing cash flows 143 126
1.13 Total operating and investing cash flows (carried
443 (554)
forward)
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• 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)	443	(554)
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	- -	- -
	-	-
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	443 2,179 -	(554) 3,176 -
	2,622	2,622

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
		139
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
	-	-
	68	68

• 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
	531
	-
	-
	286
Total	817

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)	363	168
	2,259	2,011
	-	-
	-	-
Total: cash at end of quarter(item 1.22)	2,622	2,179

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 and location	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
	Refer Quarterly Report
	Refer Quarterly Report

• 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 (seenote 3)	Amount paid up per security (seenote 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	-	-
(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: ..................... ....................................... Date: 31 January 2014 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

6. 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.

17/12/2010 Appendix 5B Page 5