IMAGE RESOURCES NL — Interim / Quarterly Report 2020

Sep 1, 2020

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Image Resources NL

ABN : 57 063 977 579

INTERIM FINANCIAL REPORT For the half-year ended 30 June 2020

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CONTENTS

INTERIM FINANCIAL REPORT

	Page No.
Directors’ Report	3
Auditor’s Independence Declaration	7
Statement of Profit or Loss and Other Comprehensi ve Income	8
Statement of Financial Position	9
Statement of Changes in Equity	10
Statement of Cash Flows	11
Notes to the Financial Statements	12
Directors' Declaration	19
Independent Auditor’s Review Report	20

• Page 2 -

DIRECTORS’ REPORT

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Your directors submit the financial report of the Company for the hal f-year ended 30 June 2020.

DIRECTORS

The following persons , unless otherwise stated, were directors of Image Resources NL (“ Image ”) duri ng the w hole 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 Huangcheng Li

Mr George Sakalidis (resigned: 29 May 2020)

OPER ATING AND FINANCIAL REVIEW

Operating Result

The profit from continuing operations for the hal f-year ended 30 June 2020 was $14,192,000 (2019: $6,909,000).

Review of Operations

Image Resources NL (“Image” or “the Company”) has foll owed up i ts first full year of production i n 2019 at the Boonanarring Mineral Sands Project loc ated 80km north of Perth, wi th sustained operating success duri ng the half year ending 2020 (“1H 2020”) resulting in a si gni fic ant i ncrease i n profit before ta x w hen compared to first half of 2019 (“1H 2019”).

The following summarises the key drivers of operational and fi nanci al performance for 1H 2020:

• Wet Concentration Plant (“WCP”) ore throughput of 1.9Mt for 1H 2020 compared to 1.5Mt for 1H 2019. 1H 2020 ore throughput on pace with CY2020 gui dance with pl ant avai l abi lity averagi ng greater than 90% compared to target of 85%.

• Heavy mineral concentrate (“HMC”) producti on of 167kt for 1H 2020 compared to 138kt for 1H 2019. Record HMC production in the March quarter (“Q1”) of 84kt fol lowed by si mil ar producti on i n the Jun e quarter (“Q2”) of 83kt, keeping the Company on-track to achieve production gui dance of 300 -330,000 tonnes for CY2020.

• HMC sales of 110kt for 1H 2020 compared to 116kt for 1H 2019. Lower HMC sales i n Q1 of 45kt fol lowed by an increase in sales of 65kt for Q2 with sales accelerating in June and sales anti ci pated to be heavi ly weighted in 2H to meet CY2020 guidance of 300 -330,000kt (refer relevant ASX announcements subsequent to 1H 2020 below ).

• Increased average HMC realised sales pri ce of A$642 per tonne for 1H 2020 compared to A$580 for 1H 2019 due to increased ZrO2 grades and a lower average AUD versus USD parti al ly offset by lower zircon prices.

• Lower cost of sales (excluding depreciation and amortisati on) of $228 per tonne for 1H 2020 compared to $326 per tonne for 1H 2019 due pri mari ly to hi gher HMC production.

• Page 3 -

DIRECTORS’ REPORT

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The following table provides a summary of the key drivers of underlying E BITDA for the Boonanarri ng Proj ect:

	6 month s to	6 month s to
	30 Ju ne 2020	30 Ju ne 2019
HMC Production (DMT 000s)	167	138
HMC Sales (DMT 000s)	110	116
HMC Realised Price ($/DMT )	642	580
HMC Cost of Sales ($/DMT )	228	326
HMC Margin ($/DMT )	414	254
HMC Sales (A$ millions)	70.6	67.3
Cost of sales excluding depreciation and amorti sation (A$ milli ons)	(25.1)	(40.5)
Underlying E BITDA (A$ millions)	45.5	26.8

Underlying EBITDA

Underlying E BITDA, defined as earnings before interest, ta x, depreci ati on and amortisati on, and other expenses is used as a key measure of the Company’s financi al performance. The reconci li ati on of the underlyi ng E BITDA to the financial metrics reported in the 1H 2020 financi al statements under Australi an Accounti ng standards is presented below.

Operating sales revenue Costs of sales excluding depreciation and amortisati on Underl yi ng E BIT DA Depreciation and amortisation E xploration, corporate and other Realised foreign currency loss Finance costs (net) P r ofi t b ef or e tax Income ta x expense Net pr ofit af ter t ax	6 month s to 30 Ju ne 2020 (A$000’s) 6 month s to 30 Ju ne 2019 (A$000’s) 70,611 67,320 (25,098) (40,515)
	45,513 26,805 (16,292) (7,238) (4,184) (4,589) (1,684) (575) (3,912) (4,659)
	19,441 9,744 (5,249) (2,835)
	14,192 6,909

Boonanarring

Overall, performance for 1H 2020 was very posi tive with heavy mineral concentrate (HMC) production of 167k tonnes of HMC, 21% higher than in 1H 2019, w hil e cost of sales were 30% lower than i n 1H 2019. The net result being project operating margin of $414 per tonne were signi fic antly hi gher than the corresponding margin of $254 per tonne in 1H 2019. Underlying project E BITDA for 1H 2020 of $45.5 milli on was also substanti al ly hi gher (78%) than in 1H 2019 ($2 6.8 million).

The company continues to see WCP availability consistently above the target rate of 85% and thi s, combined with higher average ore processing feed rate than in 1H 2019, has supported HMC producti on of 167,000 tonnes for the half year, putting the Company in a strong positi on to achieve HMC producti on gui dance for CY2020 of 300,000 to 330,000 tonnes.

Sales for Q1 2020 were delayed by the impact of COVID -19 i n China, and general shi ppi ng delays, but increased substantially in Q2 and accelerated in June, with shi pments for a nominal 2 5,000 tonnes in Apri l, 10,000 tonnes i n May and two shipments of a nominal 20,000 and 10,000 tonnes in June. Average realised pri cing for 1H 2020 of $642 per tonne was significantly higher than in 1H 2019 ($580 per tonne) due to increased ZrO2 grades in th e HMC and a lower average AUD:USD foreign exchange rate parti al ly offset by l ower zircon pri ces i n 1H 2020. The

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DIRECTORS’ REPORT

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Company continued to operate relatively unaffected by COVID -19 w ith no confi rmed c ases at any of the Company’s sites. The Company remains vigil ant wi th respect to COVID -19 and has maintained stri ct adherence to modific ations of its daily work practices and procedures in li ne wi th recommendations from regul atory and health officials to reduce the potential risks posed by COVID -19 to its employees, contractors, consultants and their families as well as the loc al communities i n w hi ch they reside.

Explorat ion

In 1H 2020 exploration efforts have been focussed on the zircon -ri ch Boonanarring proj ect area and the development of additional Mineral Resour ces for conversi on to Ore Reserves. The objecti ve is to qui ckly and efficiently evaluate areas of mineralisation withi n pumpi ng (or haul ing) distance from the current loc ati on of the WCP. The goal is to identify two years of new Ore Reserves at Boonanarri ng pri or to the end of December 2020.

Focus areas during this reporting period include Boonanarring Southern E xtensi on Area, Boonanarring Northern E xtension Area, Boonanarring North -Western E xtensi on Area, Boonanarri ng West (including Trandos Blue Lake) and Gingin North.

Drilling programmes are also being conducted on a number of other proj ect areas to meet mi ni mum expenditure requirements, to investigate potential mineralised zones and to enhance the understanding and size of existing Mineral Resources.

In 1H 2020 the Company completed 1,030 drill hol es for 34,753 metres.

SIGNIFICANT EVENTS SUBSEQUENT TO REPORTING DATE

Other than the following matters:

• Subsequent to period end the Company signed a master sal es agreement for 100,000 tonnes of HMC to off - take partner Shantou Natfort Zirconium and Ti tani um Co. Ltd (“Natfort”) and Guangdong Ori ent Zirconi c Ind Sci & Tech Co, Ltd (“OZC”) for deliveries across a three to fi ve month period (at Image’s discreti on) starting in July 2020. This 100,000 tonnes sales a greement provides greater certainty for substanti al ly hi gher sal es in second half 2020 than in first half 2020 and for the Company to meet c alendar year 2020 sal es guidance of 300, 000 to 330,000 HMC w hich is unchanged. The Company continues to proactivel y seek to diversi fy i ts sales base through the sale of additional HMC to i nterested buyers outsi de of existing off -take agreements.

• On 27 July 2020, the Company completed the l oading and sale of the seventh shipment of HMC for the 2020 c alendar year contai ning 29k dry metric tonnes (DMT ). Thi s shipment was secured by a l etter of credit (LC) and subsequently, on 30 July 2019 full payment for the shi pment was received in USD.

• On 17 August 2020, the Company completed the l oading and sale of the ei ghth shipmen t of HMC for CY2020 of a nominal 20k wet metric tonnes (WMT ).

• Sales agreements for t wo additional shipments of a nominal 20k WMT each, have been recei ved with tentati ve departure dates in September, one of w hich is part of the 100 kt master sal es agreement.

• Trial mining of ore from the high -grade core of the E astern Strand at Boonanarri ng was i mplemented i n August. The objective of this trial is to determi ne i f higher grade and quali ty zircon c an be i sol ated i n HMC that c an be sold separately from the typic al HMC and pri ced with premi um grade zircon. Sel ective stockpi ling of high-grade, high zircon ore will likely lead to l ower zircon grades in typic al HMC bei ng sold duri ng this trial. This w ill likely translate to lower realised pri ce per tonne of HMC sold in the shorter term, until the ore with higher zircon grade and quality is processed and the HMC sol d. If the tri al i s successful, hi gher average realised prices will be achieved in the longer term.

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DIRECTORS’ REPORT

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• On 11 August 2020, the Company completed the purchase of another section of l and that w ill allow access for further drilling of the Boonanarring Northern and North- western E xtensi on Areas under Project ‘MORE’ .

There have been no other material signific ant matters or circumstances that have arisen subsequent to the end of the reporting period w hich have had, or are likely to have, a materi al i mpact on the operati ons of the Company or the financial statements.

FOR WARD LOOK ING STATEMENTS

Ce rtain state men ts m ade du ring or in co nne ctio n with this co mmu nication , in clu ding, witho u t limitation, those con cerning the e cono mic ou tlo ok fo r the m in in g in dus try, ex pe ctatio ns re gardin g prices, ex plo ratio n o r dev elopmen t cos ts an d othe r o pe ratin g res ults, growth pros pe cts an d th e ou tloo k o f I m age ’s o pe ratio ns , con tain o r com prise ce rtain fo rward -loo king s tatem en ts regarding Im age’ s ope rations , e con om ic pe rf orm an ce an d fin ancial con ditio n. Alth ou gh Im age be lie ves th at th e ex pe ctatio ns ref le cte d in s u ch f orward- lo oking s tate men ts are re as on able, no ass urance can be giv en th at su ch ex pe ctatio ns will prove to h ave be en corre ct .

Acco rdingly, re su lts co uld diffe r m ate rially f ro m thos e se t o ut in the forward lo okin g s tateme n ts as a res ult o f, am on g o the r facto rs, ch an ges in e con om ic an d m arke t co ndition s, s u ccess o f bus in ess and o pe ratin g in itiativ es, ch an ges that cou ld resu lt from f u tu re acqu is itio ns o f n ew ex plo ratio n prope rties, th e ris ks and h azards in he ren t in th e m in in g bus in ess ( in cludin g in dus trial accide nts, env iro nme ntal h azards or geo lo gically re lated co nditions ), ch an ges in the regulato ry env iro nme nt an d o th er gove rn men t actions , ris ks inhe re nt in the o wne rsh ip, e xploration an d o pe ratio n o f o r in ves tm en t in min ing pro pe rties, flu ctu atio ns in prices an d ex ch ange rate s and bus ine ss and o pe ratio ns ris ks m an ageme nt, as well as gen erally thos e addition al facto rs se t fo rth in o ur periodic filin gs with ASX.

INDEPENDENCE DECLAR ATION BY AUDITOR

The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 is set out on page 7 for the half-year ended 30 June 2020.

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

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SIGNED: Patrick Mut z

Managing Director Perth 1 September 2020

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AUDITORS INDEPENDENCE DECLARATION

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Auditor's Independence Declaration

To those charged with the governance of Image Resources NL

As auditor for the review of Image Resources NL for the half-year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been:

(i) no contraventions of the independence requirements of the Corporations Act 2001 in relation to the review; and

(ii) no contraventions of any applicable code of professional conduct in relation to the review.

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Elderton Audit Pty Ltd

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Nicholas Hollens Managing Director

01 September 2020 Perth

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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 30 JUNE 2020

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Note	6 month s to 30 Ju n 2020 ($000’s) 6 month s to 30 Ju n 2019 ($000’s)
Con t inu ing operat ion s Operating sales revenue Cost of sales 3	70,611 67,320 (34,443) (40,872)
Gross profit Other income Government royalties Shipping and other selling costs Corporate expenses E xploration and evaluation expenses Other expenses Realised foreign currency loss	36,168 26,448 84 - (3,317) (3,167) (3,630) (3,714) (1,920) (2,115) (2,348) (1,465) - (1,009) (1,684) (575)
Operating profit Finance income Financing costs 4	23,353 14,403 35 20 (3,947) (4,679)
Profit before tax Income ta x expense	19,441 9,744 (5,249) (2,835)
Net profit after tax Oth er comprehen sive income Unrealised foreign currency loss	14,192 6,909 - (294)
Other comprehensive loss for the period , net of tax	- (294)
Total compreh en sive in come for th e period, net of tax	14,192 6,615
Earn in gs per share Basic profit per share (cents per share) Diluted profit per share (cents per share)	Cent s Cent s 1.45 0.68 1.40 0.68

The accompanying notes form part of these financi al statements .

• Page 8 -

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020

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Notes	30 Ju n 2020 ($000’s) 31 Dec 2019 ($000’s)
Cu rrent Asset s Cash and c ash equivalents Trade and other receivables 5 Inventory 6 Other assets	36,067 49,935 7,374 593 33,885 16,789 892 468
Total Current Asset s	78,218 67,785
Non -Current Asset s Property, plant and equipment 7 Other financial assets Deferred ta x assets	87,588 95,582 2,886 2,885 - 4,358
Total Non-Current Asset s	90,474 102,825
TOTAL ASSETS	168,692 170,610
Cu rrent Liabilit ies Trade and other payables Provisions Borrowings 8	17,122 16,210 806 692 38,478 37,679
Total Current Liabilit ies	56,406 54,581
Non -Current Liabilit ies Provisions Borrowings 8 Deferred ta x liabilities	15,357 15,380 55 18,858 891 -
Total Non-Current Liabilit ies	16,303 34,238
TOTAL LIABILITIES	72,709 88,819
NET ASSETS	95,983 81,791
Equ ity Issued c apital 9 Reserves 9 Accumulated losses	108,553 108,553 3,098 3,098 (15,668) (29,860)
TOTAL EQ UITY	95,983 87,791

The accompanying notes form part of these financi al statements.

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STATEMENT OF CHANGES IN EQUITY FOR THE HALF-YEAR ENDED 30 JUNE 2020

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Issu ed Capit al ($000’s) Warrant s Reserve ($000’s) Finan cial Asset s at F VOCI ($000’s)	Accumu lated Losses ($000’s) Total ($000’s)
As at 1 January 2019 103,170 4,314 10 Operating profit for the period - - - Other comprehensive loss - - -	(50,692) 56,802 6,909 6,909 (294) (294)
Total comprehensive profit - - - Transactions with owners Issue of shares 1,788 - - Cost of share issue (12) - -	6,615 6,615 - 1,788 - (12)
Total transactions with ow ners 1,776 - -	- 1,776
At 30 Jun e 2019 104,946 4,314 10	(44,077) 65,193
As at 1 January 2020 108,553 3,088 10	(29,860) 81,791
Operating profit for the period - - -	14,192 14,192
Other comprehensive loss - - -	- -
Total comprehensive profit - - -	14,192 14,192
At 30 Jun e 2020 108,553 3,088 10	(15,668) 95,983

The accompanying notes form part of these financi al statements .

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`STATEMENT OF CASH FLOWS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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	6 month s to	6 month s to
	30 Ju n 2020	30 Ju n 2019
	($000’s)	($000’s)
CASH F LOWS FRO M OPERATING ACTIVITIES
Receipts from customers	64,957	54,865
Payments to suppliers and contractors	(43,557)	(35,443)
Other income	84	-
Interest received	35	21
Interest paid	(4,071)	(253)
Net cash from operat in g act ivit ies	17,448	19,190
CASH F LOWS FRO M INVESTING ACTIVITIES
Purchase of property, plant and equipment	(8,791)	(1,038)
Payments for exploration and evaluation	(1,998)	(4,574)
Net cash u sed in invest in g act ivit ies	(10,789)	(5,612)
CASH F LOWS FRO M FINANCING ACTIVITIES
Proceeds from issue of shares	-	1,534
Share issue expenses	-	(29)
Proceeds from interest bearing loan	-	566
Repayment of borrowings	(19,828)	(1,895)
Net cash (u sed in ) / from fin ancin g act ivit ies	(19,828)	176
Net (decrease) / increase in cash h eld	(13,169)	13,754
Cash at the beginning of the financial period	49,935	11,886
Effect of exchange f luctuations on c ash held	(699)	44
Cash at th e end of th e finan cial period	36,067	25,684

The accompanying notes form part of these financi al statements.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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NOTE 1 BASIS OF PREPAR ATION AND ACCOUNTING POLICIES

Basis of Preparation

These general -purpose financial statements for the i nteri m hal f-year reporti ng peri od ended 30 June 2020 have been prepared in accordance w ith the requirements of the Corporati ons Act 2001 and Australi an Accounting Standard 134: Interim Financi al Reporting .

These financial statements were approved by the Board of Directors on the date of the Di rectors Decl aration.

This interim financial report is intended to provi de users with an update on the l atest annual financi al statements of the Company. As such, it does not contain information that represents rel atively i nsi gni fic ant changes occurring during the half-year. It is therefore recommended that thi s fi nanci al report be read i n conj unction wi th the annual fi nancial stat ements for the year ended 31 December 2019, together wi th any publi c announcements made by the Company during the half-year in accordance with continuous discl osure requi rements arising under the Corporations Act 2001.

Going Concern

The Company recognises that its ability to continue as a goi ng concern to meet its debts w hen they fall due is dependent on successful production and product sal es from the Boonanarri ng project resulti ng i n the project’s ongoing profitable operation. The Directors have reviewed the busi ness outlook, taking into account the early production achievements and the fact that signi fic ant c ash flow i s being generated , and are of the opini on that the use of the going concern basis of accounti ng i s appropri ate.

Accounting Policies

The same accounting policies and methods of computati on have been followed i n this i nteri m fi nancial report as were applied in the most recent annual financial statements.

The Company has adopted all of the new, revised or amendi ng Accounting Standards and Interpretati ons issued by the Australian Accounting Standards Board that are mandatory for the current reporting peri od. The adoption of these Accounting standards and Interpretati ons did not have any si gni fic ant i mpact on the financi al performance or position of the Company.

NOTE 2 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 operati ng decision makers) i n assessing performance and determi ning the alloc ation of resources. The Company is a Mineral Sands mini ng Company operating its 100% owned high - grade zircon rich Boonanarring mine located i n the North Perth Basi n of Western Australi a. Currently al l the Company’s mineral sands tenements, reserves and resources are l oc ated i n Western Australi a .

Revenue and assets by geographical region

The Company operates w holly within the geographic al l oc ati on of Australi a with all of its assets loc ated there. All revenue is received from two customers based i n Chi na.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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	6 month s to	6 month s to
	30 Ju n 2020	30 Ju n 2019
	($000’s)	($000’s)
NOTE 3 COST OF SALES
Mine operating costs	35,047	33,136
Depreciation and amortisation	13,077	7,238
Amortisation of c apitalised borrow ing costs	3,215	2,691
Inventorymovement	(16,896)	(2,193)
	34,443	40,872

Cost of goods sold is in the inventory value of each tonne of finished product sol d. All production is added to i nventory at cost, w hich includes direct costs and depreciation and amortisation . The inventory value recognised as cost of goods sold for each tonne of finished product sol d i s the wei ghted average value per tonne for the stockpile from which the product is sold.

Inventory movement represents the movement i n bal ance sheet i nventory stockpil es, including the non -c ash depreciation and amortisation components and movement i n the net realisable value adj ustments.

NOTE 4 FINANCING COSTS
Interest expense	3,801	4,635
Other financing costs	146	44
	3,947	4,679

Refer to note 8 for the accounting policy on borrow ing/ fi nanci ng costs.

	30 Ju n 2020	31 Dec 2019
	($000’s)	($000’s)
NOTE 5 TRADE AND OTHER RECEIVABLES
Trade Receivables	6,488	-
GST and tax refundable	728	592
Other receivables	158	1
	7,374	593

Trade receivable are amounts due from customers for goods sol d i n the ordi nary course of busi ness. Trade receivables amounts reflect sales of mineral sands and are backed by a l etter of credit when the shi p dispatches . Funds are received from the letter of credit in US doll ars general ly w ithi n five busi ness days from the date the ship dispatches.

Due to the short- term nature of current receivabl es, their c arryi ng amount is assumed to be the same as their fair value.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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		30 Jun 2020	31 D ec 2019
		($000’s)	($000’s)
NOTE 6	INVENTORIES
Ore stockpiles – at cost		451	466
Heavy mineral concentrate and other intermediate stockpi les – at cost		32,049	15,139
Stores and	consumables – at cost	1,385	1,184
		33,885	16,789

Subsequent to period end the Company signed a sales agreement for 100,000 tonnes of HMC to off -take partner Shantou Natfort Zirconium and Titanium Co. Ltd (“Natfort”) and Guangdong Ori ent Zi rconi c Ind Sci & Tech Co, Ltd (“OZC”) for deliveries across a three to five month peri od (at Image’s discreti on) starting i n July 2020.

On 27 July 2020, the Company completed the l oading and sale of the seventh shi pment of HMC for the 2020 c alendar year containing 29k dry metric tonnes (DMT ).

NOTE 7 PROPERTY, PLANT AND EQ UIPMENT

	Plant and Equipment ($000’s) Land and B uildings ($000’s) Mine D evelopment ($000’s) B orrowing C osts ($000’s) Total ($000’s)
	At 30 Jun e 2020
	Cost 54,810 16,245 35,442 21,968 128,465
	Accumulated Depreciation (22,636) - (9,434) (8,807) (40,877)
	Closing carrying amoun t 32,174 16,245 26,008 13,161 87,588
	Reconciliation of c arrying amounts
	As at 1 January 20 20 39,602 11,469 28,135 16,376 95,582
	Additions 1,090 14,776 2,464 - 8,330
	Reclassific ation 320 - (320) - -
	Depreciation (8,838) - (4,271) (3,215) (16,324)
	At 30 Jun e 2020 32,174 16,245 26,008 13,161 87,588

Note: 1 During the period the Company completed the purchase of a section of l and that wil l all ow access for further drilling of the Boonanarring Northern and North- western E xtension Areas under Project ‘MORE’.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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NOTE 7 PROPERTY, PLANT AND EQ UIPMENT (CO NT’D)

	Plant and Equipment ($000’s) Land and B uildings ($000’s) Mine D evelopment ($000’s) B orrowing C osts ($000’s) Total ($000’s)
	At 31 December 2019 Cost 53,720 11,469 32,978 21,968 120,135 Accumulated Depreciation (14,118) - (4,843) (5,592) (24,553)
	Closing carrying amoun t 39,602 11,469 28,135 16,376 95,582
	Reconciliation of c arrying amounts: As at 1 January 2018 48,905 11,394 19,131 21,632 101,062 Additions 4,331 75 3,374 7 7,787 Mine closure and rehabilitation - - 10,655 - 10,655 Disposals (901) - - - (901) Transfers 523 - (523) - - Depreciation (13,256) - (4,502) (5,263) (23,021)
	At 31 December 2018 39,602 11,469 28,135 16,376 95,582

		30 Ju n 2020	31 Dec 2019
		($000’s)	($000’s)
NOTE 8	BORROWINGS
Current
Interest bearing loan – Senior Secured Loan Notes		38,390	37,606
Operating	lease liabilities	88	73
		38,478	37,679
Non-Current
Interest bearing loan – Senior Secured Loan Notes		-	18,803
Operating	lease liabilities	55	55
		55	18,858

RECOGNITION AND MEASUREMENT

Borrowings are initially recognised at fair value and revalued where the borrowi ngs are denomi nated in a foreign currency.

Transaction costs paid on the establishment of l oan facil ities are c apitalised to property, pl ant and equi pment to the extent that it is probable that some or all of the facility wil l be drawn dow n and that the borrowings are di rectly related to the purchase of property, plant and equipment. Where there i s no evi dence that it is probable that some or all of the facility will be d rawn dow n, the fee i s expensed to profit and l oss. Borrowing costs i ncurred after the property, plant and equipment is installed and operating are expensed to the profi t and loss statement directly as financing costs .

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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NOTE 8 BORROWINGS (CONT’D)

Borrowings are classified as current liabilities unless the Company has an uncondi tional right to defer settl ement of the liability for at least 12 months after the reporting period. The fair value of fi nanci al li abilities c arri ed at amortised cost approximates t heir c arrying values.

(a) Senior Secured Debt Facility.

A senior secured debt facility originally with Pal a Investments Li mited (“Pal a”) and Castel ake IV, L.P. and CL V Investment Solutions LLC which are entities controll ed by Castlel ake L.P. as the Loan Note Hol ders, to rai se A$50,000,000 from the issue of senior secured l oan notes. The senior loan notes amount to US$38,865,000 and c apitalised interest of US$ . US$26,347,241 is the current portion of the l oan at 3 0 June 2020 (31 December 2019: US$19,434,351).

The key terms of the loan include a loan period of three years from draw down, an i nterest rate of 14% for the fi rst fifteen months following draw down and 13% thereafter for the bal ance of the l oan. Interest for the first fi fteen months is added to the loan amount and thereafter paid quarterly i n arrears. The pri nci pal is to be repai d i n seven equal instalments starting in the 18[th] month foll owi ng drawdow n. Drawdow n occurred on 25 May 2018.

	30 Ju n 2020	31 Dec 2019
	($000’s)	($000’s)
NOTE 9 ISSUED CAPITAL
Ordinary share c apital:
Issu ed an d fu lly paid	108,553	108,553
	Nu mber	($000’s)
As at 1 January 2020	980,979,899	108,553
Share issue costs	-	-
At 30 June 2020	980,979,899	108,553
	($000’s)	($000’s)
Reserves
Warrants reserve	3,088	3,088
Available -for-sale financial assets reserve	10	10
	3,098	3,098

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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NOTE 9 ISSUED CAPITAL (CONT’D)

	30 Ju n 2020	31 Dec 2019
	Nu mber	Nu mber
Warrant s
The Company had the following warrants over un -issued ful ly pai d ordinary
shares at the end of the period:
E xercisable at $0.1365 on or before 20 May 2023	14,285,714	14,285,714
E xercisable at $0.11385 on or before 24 May 2023	21,525,000	21,525,000
	35,810,714	35,810,714

NOTE 10 TENEMENT EXPENDITURE COMMITMENTS

The Company has entered into certain obligations to perform mini mum expl orati on work on tenements hel d. These obligations vary from time to time in accordance with contracts si gned. Tenement rentals and mini mum expenditure obligations , that may be varied or deferred on appl ic ation, 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 $1,616,300. The company no longer has any j oint ventures over any of its tenements .

The tenements are subject to legislative requirements w ith respect to the processes for applic ati on, grant, conversion and renewal. Tenements are also subj ect to the payment of annual rent and the meeti ng of mini m um annual expenditure commitments. There is no guarantee that any applic ati ons, conversions or renewals for the Company’s tenements w ill be granted.

NOTE 11 SIGNIFICANT EVENTS SUBSEQUENT TO REPORTING DATE

Other than the following matters:

• Subsequent to period end the Company signed a master sal es agreement for 100,000 tonnes of HMC to off - take partner Shantou Natfort Zirconium and Ti tani um Co. Ltd (“Natfort”) and Guangdong Ori ent Zirconi c Ind Sci & Tech Co, Ltd (“OZC”) for deliveries across a three to fi ve month period (at Image’s discreti on) starting in July 2020. This 100,000 tonnes sales agreement provides greater certainty for substanti al ly hi gher sal es in second half 2020 than in first half 2020 and for the Company to meet c alendar yea r 2020 sal es gui dance of 300, 000 to 330,000 HMC w hich is unchanged. The Company continues to proactively seek to diversi fy i ts sales base through the sale of additional HMC to i nterested buyers outsi de of existing off -take agreements.

• • On 27 July 2020, the Company completed the l oading and sale of the seventh shipment of HMC for the 2020 c alendar year containing 29k dry metric tonnes (DMT ). Thi s shipment was secured by a l etter of credit (LC) and subsequently, on 30 July 2019 full payment for the shi pment was received in USD.

• On 17 August 2020, the Company completed the l oading and sale of the ei ghth shipment of HMC for CY2020 of a nominal 20k wet metric tonnes (WMT ).

• Sales agreement s for two additional shipments of a nominal 20k WMT each, have been recei ved with tentati ve departure dates in September, one of w hich is part of the 100 kt master sal es agreement.

• Trial mining of ore from the high -grade core of the E astern Strand at Boonanarri ng was i mplemented i n August. The objective of t his trial is to determi ne i f higher grade and quali ty zircon c an be i sol ated i n HMC that c an be sold separately from the typic al HMC and pri ced with premi um grade zircon. Sel ective stockpi ling of high-grade, high zircon ore will likely lead to l ower zircon grades in typic al HMC bei ng sold duri ng this trial. This w ill likely translate to lower realised pri ce per tonne of HMC sold in the shorter term, until the ore with higher zircon grade and quality is processed and the HMC sol d. If the tri al i s successful, hi gher average realised prices will be achieved in the longer term.

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NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 30 JUNE 2020

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• On 11 August 2020, the Company completed the purchase of another section of l and that w ill allow access for further drilling of the Boonanarring Northern and North- western E xtensi on Areas under Project ‘MORE’

There have been no other material signific ant matters or circumstances that have arisen subsequent to the end of the reporting period w hich have had, or are likely to have, a materi al i mpact on the operati ons of the Company or the financial statements.

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D IR EC TORS' DEC LAR ATION

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The directors of the Company declare that:

1. the accompanying financial statements and notes:

2. ( a) comply with Accounting Standard AASB 1 34: Interi m Financi al Reporting and the Corporations Regulations 2001; and

3. (b) give a true and fair view of the financi al position of the Company as at 30 June 2020 and its performance for the half-year ended on that date.

4. in the directors’ opinion there are reasonable grounds to beli eve that the Company will be able to pay its debts as and w hen they become due and payabl e.

This declaration is made in accordance w ith a res oluti on of the Board of Di rectors:

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SIGNED BY PATRICK MUTZ

Managing Director Perth

Dated this 1st day of September 2020

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IND EPEND ENT AUD ITOR ’S REVIEW REPORT

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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 condensed statement of financial position as at 30 June 2020, the condensed statement of profit or loss and condensed other comprehensive income, condensed statement of changes in equity and the condensed statement of cash flows for the half-year ended on that date, condensed 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 the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards 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 the company’s financial position as at 30 June 2020 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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IND EPEND ENT AUD ITOR ’S REVIEW REPORT (C ON T’D )

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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:

• (i) giving a true and fair view of the Image Resources NL’s financial position as at 30 June 2020 and of its performance for the half-year ended on that date; and

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

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Elderton Audit Pty Ltd

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Nicholas Hollens Managing Director

01 September 2020 Perth

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