IMAGE RESOURCES NL — Interim / Quarterly Report 2017

Sep 5, 2017

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IMAGE RESOURCES NL

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HALF-YEAR FINANCIAL REPORT

30 JUNE 2017

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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 31 December 2016 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 the Financial Statements	11
Directors' Declaration	15
Independent Auditor’s Review Report	16

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DIRECTORS’ REPORT

Your directors submit the financial report of the Company for the half-year ended 30 June 2017.

DIRECTORS

The following persons, unless otherwise stated, were directors of Image Resources NL (“ Image ”) during the whole of the half-year and up to the date of this report:

Mr Robert Besley Mr Patrick Mutz Mr Aaron Chong Veoy Soo Mr Chaodian Chen Mr Fei Wu Mr Peter Thomas Mr George Sakalidis

REVIEW AND RESULTS OF OPERATIONS

The total loss from continuing operations for the half-year ended 30 June 2017 was $3,870,237 (2016: $2,008,034).

The Company’s activities during the six month period are summarised in this report which, unless otherwise stated, should be read as if dated 30 June 2017.

Activities during the six months have been primarily focused on the completion of a bankable feasibility study focused on the development of the Company’s 100%-owned high-grade Boonanarring/Atlas Project in the North Perth Basin while continuing to expand the resources and reserves base. Achievements during this period include:

Fund Raising

On 14 December 2016, the Company announced plans to conduct a non-renounceable, fully underwritten rights issue to offer 5 new shares for every 12 shares held on 19 December 2016. The shares were offered at $0.04 per share to raise a total of $6.325M before costs. The offer was scheduled to close on 12 January 2017 but was subsequently extended and closed on 19 January 2017. Total amount raised was $6.325M before costs.

Update of Mineral Resources for Boonanarring

On 13 January 2017, the Company announced the update of Mineral Resources for Boonanarring in accordance with the JORC Code (2012) which resulted in a doubling of total tonnes of resources, albeit at lower heavy mineral (HM) grade and mineral assemblage. Updated mineral resources reported were 43.7M tonnes at 5.6% HM content and 18.1% zircon in the HM.

Potential Boonanarring Extension

On 8 March 2017, the Company announced drilling results confirming a 5.6km northern extension of the Boonanarring high-grade mineralisation. Outstanding high-grade intersections included 8m @ 23.8% HM in IX00245, 8m @ 21.1% HM in IX00244 and 8m @ 16.3% HM in IX00250. Even though this limited 10-hole drilling programme demonstrated that the high-grade eastern strand is present over 5.6km, further drilling is required to outline additional Mineral Resources, as in some cases only 1 to 2 holes were drilled every 200-400m. Land access for additional drilling is currently being negotiated.

Update of Boonanarring Ore Reserves

On 10 April 2017, the Company announced an update of the Ore Reserves for Boonanarring in accordance with the JORC Code (2012), which resulted in a 39% increase in the total tonnes of ore. Updated Ore Reserves reported were 20M tonnes at 7.2% HM and 22.4% zircon in the HM.

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DIRECTORS’ REPORT

Completion of Land Purchase

On 21 April 2017, the Company completed the purchase of a 550-hectare section of land at Boonanarring that will encompass the initial box-cut for open pit mining operations, the location of the ore processing plant and a supply of ore for up to two and a half years of processing.

Update of Atlas Mineral Resources and Ore Reserves

On 8 May 2017, the Company announced an update of the Mineral Resources for Atlas in accordance with the JORC Code (2012), which resulted in a 68% increase in the total tonnes of Mineral Resources from that previously reported in 2013 to 18.1M tonnes at 6.0% HM. On 30 May 2017, the Company announced the updated Ore Reserves for Atlas were 9.5M tonnes of ore at 8.1% HM in the ‘probable’ category.

Bankable Feasibility Study Results - Boonanarring and Atlas Projects

During the period, the Company completed a Bankable Feasibility Study (BFS) on its 100%owned, High-Grade Boonanarring and Atlas Mineral Sands Projects located in the North Perth Basin in WA. Highlights from the BFS announced 30 May 2017 are as follows:

• Low project capital cost estimate of A$52M inclusive of ~$8M for resalable land;

• Project Pre-Tax NPV of A$135M at 8% discount rate;

• Project Pre-Tax IRR of 64%; Payback period of 22 months;

• Off-Take Agreement for 100% of products/revenue in place;

• Relocatable capital equipment to produce HMC already acquired; and

• First production targeted for March 2018.

Commencement of Project Financing.

On 31 May 2017, the Board of Directors approved the recommendation in the BFS to seek project financing and continue with the development of the Boonanarring/Atlas Project.

SIGNIFICANT EVENTS SUBSEQUENT TO REPORTING DATE

Other than the following matters there have been no material significant events subsequent to the reporting date:

• On 12 July 2017, the Company announced that it had received commitments to subscribe for a placement of 33,648,356 new shares at a price of 9 cents each, to raise $3,028,352 (before costs). The funds are intended to be used to continue to fast-track development of the Boonanarring project in advance of full project capital funding.

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 30 June 2017.

This report has been signed in accordance with a resolution of directors.

For and on behalf of the Directors

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SIGNED: Robert Besley Chairman

Perth 5[th] September 2017

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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 30 JUNE 2017

Notes Continuing Operations REVENUE Interest and dividends income Other revenue 3 EXPENSES Depreciation expense Loss on disposal of property, plant and equipment Changes in the fair value of available for sale financial assets Exploration and tenement expenses Other expenses 3 Finance Costs 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 Other comprehensive loss for the period, net of tax Total comprehensive loss for the period attributable to members of the Company Earnings per share 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 30 Jun 2017 ($) 12,810 1,848 (27,298) (2,286) (1,957) (2,723,401) (1,018,775) (111,178) (3,870,237) - (3,870,237) - - (3,870,237) (0.75) (0.75)	Half Year Ended 30 Jun 2016 ($) 3,494 91,739 (9,450) - - (881,174) (1,200,588) (12,055)
		(2,008,034) -
		(2,008,034)
		(77,573)
		(77,573)
		(2,085,607)
		(0.87) (0.90)

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STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017

Notes Current Assets Cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Property, plant and equipment 4 Inventory Other financial assets 5 Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Provisions Total Current Liabilities Non-Current Liabilities Borrowings 6 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity 7 Reserves 7 Accumulated losses TOTAL EQUITY The accompanying notes form part of these financial statements.	30 Jun 2017 ($) 1,361,186 36,728 78,449 1,476,363 14,696,002 756,084 5,557 15,457,643 16,934,006 512,811 158,526 671,337 3,984,000 3,984,000 4,655,337 12,278,669 62,140,233 39,400 (49,900,964) 12,278,669	31 Dec 2016 ($) 1,107,723 15,142 117,886
		1,240,751
		12,753,476 756,084 7,514
		13,517,074
		14,757,825
		416,284 127,614
		543,898
		3,972,000
		3,972,000
		4,515,898
		10,241,927
		56,251,135 21,519 (46,030,727)
		10,241,927

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STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 30 JUNE 2017

Balance at 1 January 2016 Operating loss for the period Other comprehensive loss Total comprehensive loss for the period Transactions with owners in their capacity as owners Issue of shares Cost of share issue Total transactions with owners in their capacity as owners Balance at 30 June 2016 Balance at 1 January 2017 Operating loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners Issue of shares Cost of share issue Options expense for the period Total transactions with owners in their capacity as owners Balance at 30 June 2017	Contributed Equity (Net of Costs) ($) Available for Sale Financial Asset Reserve ($) Employee Benefits Reserve ($) Accumulated Losses ($) Total ($)
	42,018,708 74,993 393,640 (41,563,378) 923,963 - - - (2,008,034) (2,008,034) - (77,573) - - (77,573)
	- (77,573) - (2,008,034) (2,085,607) 14,324,136 - - - 14,324,136 (59,830) - - - (59,830)
	14,264,306 - - - 14,264,306
	56,283,014 (2,580) 393,640(43,571,412) 13,102,662
	56,251,135 (2,600) 24,119 (46,030,727) 10,241,927 - - - (3,870,237) (3,870,237)
	- - - (3,870,237) (3,870,237) 6,325,196 - - - 6,325,196 (436,098) - - - (436,098) - - 17,881 - 17,881
	5,889,098 - 17,881 - 5,906,979
	62,140,233 (2,600) 42,000(49,900,964) 12,278,669

The accompanying notes form part of these financial statements.

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STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 30 JUNE 2017

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and contractors Research and development tax incentive related expense Interest received Interest paid Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Payments for exploration and evaluation Release of restricted cash – term deposits for bank guarantees Payments for deposit at call Proceeds from sale of investments Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Share issue expenses Proceeds from interest bearing loan Payment for interest bearing loan transaction costs Net cash provided by financing activities Net 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 30 Jun 2017 ($) 3,848 (933,091) - 10,318 (99,178) (1,018,103) (1,944,041) (2,643,833) - - - (4,587,874) 6,325,196 (465,756) - - 5,859,440 253,463 1,107,723 1,361,186	Half Year Ended 30 Jun 2016 ($) 5,180 (1,151,160) (16,143) 4,249 -
		(1,157,874)
		(81,501) (921,637) 20,000 (750,000) 137,038
		(1,596,100)
		1,000,000 (47,495) 4,000,000 (40,000)
		4,912,505
		2,158,531 877,603
		3,036,134

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2017

NOTE 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES

Basis of Preparation

These general purpose financial statements for the interim half-year reporting period ended 30 June 2017 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 31 December 2016, together with any public announcements made by the Company during the halfyear in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

Going Concern

The directors recognise that the ability of the Company to continue as a going concern and to pay its debts as and when they fall due is dependent on the ability of the Company to secure additional funding through either the issue of further shares, options and / or project financing.

The directors have reviewed the business outlook and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Company will achieve the matters set out above. As such, the directors believe that they will continue to be successful in securing additional funds as and when the need to raise working capital arises.

Should the Company be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial report. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

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 an emerging Mineral Sands producer focused on the development of its high-grade Boonanarring Project in the North Perth Basin while continuing to expand its resources and reserves base. Currently all the Company’s mineral sands tenements, reserves and resources are located in Western Australia.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2017

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.

NOTE 3 REVENUE AND EXPENSES OTHER INCOME: Rendering of services (net) Profit on sale of available for sale financial assets OTHER EXPENSES: Occupancy costs Filing and ASX Fees Corporate, staff and management Other expenses from continuing operations NOTE 4 PROPERTY PLANT AND EQUIPMENT At the beginning or the period Additions Disposals Depreciation expense At the end of the period NOTE 5 OTHER FINANCIAL ASSETS Available-for-sale financial assets At the beginning of the period Changes in the fair value during the period – allocated to profit and loss At the end of the period NOTE 6 BORROWINGS Non-Current Interest bearing loan Fees associated with draw-down on 8 June 2016	Half Year Ended 30 Jun 2017 ($) 1,848 - 1,848 78,878 2,911 650,125 286,861 1,018,775 12,753,476 1,972,292 (2,468) (27,298) 14,696,002 7,514 (1,957) 5,557 4,000,000 (16,000) 3,984,000	Half Year Ended 30 Jun 2016 ($) 1,469 90,270
		91,739
		78,835 25,755 804,832 291,166
		1,200,588
		4,000,000 (40,000)
		3,960,000

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2017

The loan is with Murray Zircon Pty Ltd and was fully drawn down on 8 June 2016 on completion of the transaction with Murray Zircon and Orient Zirconic. Murray Zircon is a related party due to it holding a 42% interest in the shares of the Company.

The key terms of the loan include an interest rate of 5% per annum accruing daily, payment of interest half-yearly in arrears, amounts outstanding repayable upon first production of 20,000 wet tonnes of heavy mineral concentrates (First Production) and allows for repayment to be made using funds under the Prepayment Facility once available (early payment is allowed at any time, with no ability to redraw) and customary default provisions. The loan is secured against all present and after-acquired property of the Company and a mining mortgage in respect of certain core tenements held by Image.

NOTE 7 CONTRIBUTED EQUITY Contributed Equity – Ordinary Shares: At the beginning of the period Issued during the period: - Placement issue of shares at $0.04 Share issue costs At the end of the period Reserves Available-for-sale financial assets reserve Share based payment reserve Options The Company had the following options over un-issued fully paid ordinary shares at the end of the period Exercisable at $0.085 on or before 4 December 2018 Exercisable at $0.10 on or before 4 December 2018	30 Jun 2017 Number 379,511,740 158,129,891 - 537,641,631 1,500,000 1,500,000 3,000,000	30 Jun 2017 ($) 56,251,135 6,325,196 (436,098)
		62,140,233
		(2,600) 42,000
		39,400

NOTE 8 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 that 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 $1,273,500. The company no longer has any joint ventures over any of its tenements.

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.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2017

NOTE 9 SIGNIFICANT EVENTS SUBSEQUENT TO REPORTING DATE

Other than the following matters:

• On 12 July 2017, the Company announced that it had received commitments to subscribe for a placement of 33,648,356 new shares at a price of 9 cents each, to raise $3,028,352 (before costs). The funds are intended to be used to continue to fast-track development of the Boonanarring project in advance of full project capital funding.

There have been no material significant events subsequent to the reporting date.

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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 30 June 2017 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:

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ORIGINAL SIGNED BY ROBERT BESLEY

Chairman

Perth Dated this 5[th] day of September 2017

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