IMAGE RESOURCES NL — Capital/Financing Update 2011

Aug 24, 2011

ASX Release 25 August 2011

ASX code: IMA

2[nd] Floor, 16 Ord Street West Perth WA 6005 PO Box 644 West Perth WA 6872 Telephone 08 9485 2410 Facsimile 08 9485 2840 info@imageres.com.au www.imageres.com.au

ABN 57 063 977 579

FEASIBILITY STUDY TO COMMENCE

______________

HIGHLIGHTS

• IRR of 32.1%-42.9%

• Capital payback within first 18-22 months of operation

• NPV of $59M-$98M for the first six resources

• Net life of mine cash flow after capital of $170M-$259M

• Capital costs of $84M

• 3.6Mtpa multi-pit operation over initial 12 year mine life

• Image commits to Feasibility Study

SUMMARY

Based on the positive results of the August 2011 Scoping Study on the mostly 100%owned North Perth Basin Heavy Mineral Project in Western Australia, Image has targeted 2014 for the commencement of production.

The project represents one of the largest undeveloped high-grade HM resources in Australia.

Robust economic returns for the project demonstrated by and within the parameters of the study, indicate a capital payback period of between 18 and 22 months from a 3.6M tonnes per annum sequential, multi-pit operation encompassing six of Image’s defined resources located between Cooljarloo in the north to Gingin in the south.

The study envisages production at an average of approximately 185,000 tonnes of heavy minerals in concentrate per annum for 12 years. Production over the life of the mine is expected to total approximately 1,393,000t of ilmenite (+50% SR grade), 85,000t of rutile, 193,000t of zircon and 93,000t of leucoxene using a conventional Wet Concentrator Plant and Mineral Separation Plant.

Using A$0.90 and A$1.00 to the US dollar exchange rates, the study indicates the project can generate a net project cash flow of between $170 million and $259 million over the 12 year period.

Preliminary non-optimised metallurgical test work performed on the Atlas deposit using conventional heavy mineral separation techniques yielded recoveries to product of 82.7% for ilmenite, 71.9% for rutile, 70.7% for zircon and 43.8% for leucoxene. Similar recoveries have been applied to the remaining deposits where testwork is yet to be carried out. It is anticipated that further test work will significantly improve on the initial Atlas deposit test work recoveries.

According to Image’s managing director, George Sakalidis; “The robust outcomes of the study are an extremely positive sign for the company given the conservative estimates of commodity pricing and metallurgical recoveries.”

“We have now achieved a critical mass for the resource base which, combined with solid grades and projected strong commodity prices, provides Image with the opportunity to become a substantial and highly profitable long term heavy mineral producer.” he said.

“The study results vindicate the Board’s strategy; Image is now well placed to capitalise on the buoyant heavy mineral market for the benefit of shareholders.”

Based on these results, the Board of Image has resolved to commence a Feasibility Study with the aim of achieving production in 2014.

==> picture [349 x 356] intentionally omitted <==

Figure 1 Resource Locations

2

SCOPING STUDY

The Scoping study was carried out by the following consultants to the company:

• Widenbar & Associates Resource estimation

• Lassin Services Pty Ltd Process design

• • Nagrom Pty Ltd Metallurgical testing • Engenium Capital and operating costs • Creative Mined Pty Ltd Mine design and optimisation

The Scoping Study examined a 400 tonnes per hour Wet Concentrator Plant (WCP) with a 30 tonnes per hour Mineral Separation Plant (MSP) scenario for a stand alone operation.

The study process design contains a number of constraints, leaving scope to improve efficiencies and increase value. Increased throughput of 600 tonnes per hour and the option of producing a mixed HM concentrate for sale, with no MSP, will be examined.

All dollar values are Australian dollars unless indicated otherwise. Exchange rates of A$1.00 and A$0.90 to the US dollar were applied during the Scoping Study, resulting in a range of financial outcomes. The A$0.90 case accords with the Bloomberg Consensus 2014 exchange rate forecast by major contributing global banks. Pit optimisations were carried out using the A$1.00 exchange rate pit shells. The A$0.90 exchange rate was applied to the revenue stream using the A$1.00 exchange rate pit shells and costs.

Exchange rate has the most significant effect on financial performance. A 5% variation in exchange rate generates a 25% variation in NPV. By comparison a 5% variation in either operational costs or zircon price produces 15% NPV deviation, whilst the NPV deviation is 8% for the same variation in either development capital expenditure or ilmenite price.

IDENTIFIED MINERAL RESOURCES

The study assessed all of Image’s identified mineral resources as at 22 July 2011 and demonstrates that mining just six of Image’s 100% owned resources, using the Scoping Study parameters, is viable. These resources are summarised below with a more detailed breakdown shown in Appendix 1. All three resource classifications have been included to allow assessment of priorities for further development.

Deposit	Classification	% HM CUTOFF	VOLUME (cu m)	TONNES	HM (%)	SLIMES (%)	HM (t)
Atlas	Measured & Indicated	2.5	5,332,000	10,776,000	7.8	15.7	841,000
Red Gully	Indicated & Inferred	2.5	3,385,000	5,980,000	7.7	11.2	459,000
Hyperion	Indicated	2.5	1,800,000	3,700,000	7.8	19.3	290,000
Helene	Indicated	2.5	5,600,000	11,500,000	4.6	18.6	523,000
Gingin South	Measured, Indicated & Inferred	2.5	4,513,000	8,080,000	6.1	6.5	492,000
Gingin North	Indicated & Inferred	2.5	1,257,000	2,408,000	5.5	15.0	132,000
Total Resource		2.5	21,887,000	42,444,000	6.4	14.4	2,737,000

3

The resource block models for each deposit were regularised and values assigned prior to pit optimisation. The output of the pit optimisation was used to rank each deposit by a series of key performance indicators, including annual value and strip ratio. The ranking was used to sequence the mining of the deposits and create a life of mine schedule. The output from the schedule was analysed on an annual basis and used to estimate project economics.

Prior to scheduling, the optimised resources were excluded if they had a mine life of less than one year or a total value of less than the cost of relocating the WCP to site. Individual pits were excluded if they had an area of less than 1ha. These parameters resulted in the exclusion of the Boonanarring, Cooljarloo and Bidaminna resources from the mining schedule.

PROJECT ECONOMICS

Based on the results of the study for a 400tph concentrator over 12 years the project economics are summarised as follows:

economics are summarised as follows:
Exchange Rate (A$:US$)	1.00	0.90
Commodity prices: ilmenite rutile zircon leucoxene	US$ 200 US$ 1350 US$ 2240 US$ 500
Mine Life	12 years
NPV @ 10% discount	$58.8M	$97.6M
AverageIRR(Internal Rate of Return)	32.1%	42.9%
Net project cash flow after capital costs	$170M	$259M
Total RevenueLife of Mine	$872M	$969M
Annual Average Operating costs	$44.7M
Capitalcosts	$83.8M

The study-adopted commodity pricing is conservative having regard to widely published industry forecasts.

COSTING ASSUMPTIONS

The WCP and MSP Flow Sheets and Mass Balances were supplied to engineering consultants Engenium who provided indicative Capital and Operating cost estimates. Plant equipment capital was costed in detail, and other costs – piping, electrical, installation, buildings were estimated in relation to the equipment cost. Estimated capital costs are $83.8M and are summarised as follows:

costs are $83.8M and are summarised	as follows:
Pre-funding development	$ 6.4M
Direct Costs Mine Site	$20.2M
Indirect Costs Mine Site	$ 7.0M
Total Mine Site	$33.6M
Direct Costs MSP Site	$33.6M
Indirect Costs MSP Site	$11.9M
Total MSP Site	$45.5M
Other Costs
Storage	$ 2.4M
Inventory	$ 2.3M
Total Other Costs	$ 4.7M
TOTAL CAPITAL	$83.8M

4

Annual operating costs have been estimated at $44.7M for the project. Mining contractors have been allowed for in order to initially reduce capital costs and increase flexibility. This strategy will be confirmed in later studies. Processing costs have been estimated using electric power from the grid with provision for the capital cost of power lines.

Estimated operating costs are as follows:

ted operating costs are as follows:
Operating Cost Area	Operating Cost Estimate
	($/unit)
Site Operating Costs
Overburden Removal	1.52/t overburden
Mining	2.23/t mined
Wet Concentrator Plant	2.80/t feed
Wet Concentrator Plant Relocation	2.5M/relocation
MSP	22.0/t feed
Technical	1.5M/yr
Administration	2.2M/yr
Total Site Operating Cost	35.2M/yr
Off Site Operating Costs
Transport	10.0/t production
Shipping	11.0/t production
Storage	1.0/t production
Commissions	3%
Royalties	5%
Total Off Site Operating Costs	9.5M/yr
TOTAL OPERATING COSTS	44.7M/yr

LAND STATUS

Mining tenure to the six resources is a mix of granted mining leases and exploration licences. Mining leases will now be applied for over those resources not already so covered.

The six resources are situated on a mix of Freehold Land and Vacant Crown Land. Whether native title affects any of the Vacant Crown Land is being investigated. Ethnographic studies to date have not identified any significant heritage sites, although surveys remain to be completed over a limited number of areas. Environmental studies have not indicated endangered priority species plants within the proposed mining areas however surveys remain to be completed in some areas.

MINING METHOD

The study utilised conventional dry mining techniques typical of current mineral sand mining practice in the region, entailing overburden removal by hydraulic excavator and ore mining by scrapers and/or excavators. This is a low risk and highly flexible mining method that can adapt to variable in-pit conditions.

FEASIBILITY STUDY

Based on the results of the Scoping Study, the Image Board has decided to proceed immediately with a Feasibility Study with the aim of achieving production in 2014.

5

The Feasibility Study work schedule includes the following:

• Infill drilling

• Resource upgrades

• Recruitment of key personnel

• Metallurgical testwork

• Geotechnical drilling/testwork

• Ethnographic and environmental studies

• Detailed engineering design

• Detailed capital and operating cost estimates

The infill drilling during the Feasibility Study will target areas classified as Inferred Resources to upgrade them to Indicated or Measured Resources. This drilling and the high likelihood of identifying extensions to resources have the potential to positively impact project economics.

EXPLORATION UPSIDE

Image remains committed to a focussed exploration programme to increase the project resource base.

Significantly :

• grant of the tenement covering an interpreted 3.5km extension of the highgrade Atlas deposit is imminent and drilling of this extension is anticipated to start in the next quarter;

• the established zircon-rich Boonanarring resource is interpreted to extend for a further 7.7km. Drilling of this extension is anticipated to significantly expand and upgrade this resource and allow for its inclusion in the mining schedule;

• at least another 100km of magnetic targets remain to be drill tested on a number of prospective shoreline positions, particularly in the Gingin area. This exploration programme will target shallow high-grade deposits, similar to Atlas, which have the capacity to increase the project life and/or throughput and to improve project economics.

For more information on the company visit www.imageres.com.au

Please direct enquiries to: George Sakalidis Roger Thomson Managing Director Executive Director Phone (08) 9485 2410 Phone (08) 9485 2410 Mob 0411 640 337 Mob 0419 969 183

The information in this report is based on information compiled or reviewed by George Sakalidis BSc (Hons), who is a member of the Australasian Institute of Mining and Metallurgy. George Sakalidis is a Director of Image Resources NL. George Sakalidis 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’. George Sakalidis consents to the inclusion of this information in the form and context in which it appears in this report.

6

Appendix 1

North Perth Basin Scoping Study Identified Resources

Deposit	Classification	HM CUTOFF (%)	VOLUME (cu m)	TONNES	HM (%)	SLIMES (%)	HM (t)
Atlas	Indicated	2.5	524,000	1,079,000	3.2	19.2	34,000
	Measured	2.5	4,808,000	9,697,000	8.5	15.3	822,000
	Total	2.5	5,332,000	10,776,000	7.8	15.7	841,000
Red Gully	Indicated	2.5	1,930,000	3,410,000	7.8	11.5	267,000
	Inferred	2.5	1,455,000	2,570,000	7.5	10.7	192,000
	Total	2.5	3,385,000	5,980,000	7.7	11.2	459,000
Hyperion	Indicated	2.5	1,800,000	3,700,000	7.8	19.3	290,000
Helene	Indicated	2.5	5,600,000	11,500,000	4.6	18.6	523,000
Gingin South	Inferred	2.5	399,000	733,000	6.5	8.4	48,000
(combined)	Indicated	2.5	3,242,000	5,820,000	6.5	7.1	377,000
	Measured	2.5	873,000	1,526,000	4.4	7.2	67,000
	Total	2.5	4,513,000	8,080,000	6.1	6.5	492,000
Gingin North	Indicated	2.5	680,000	1,319,000	5.7	15.7	75,000
	Inferred	2.5	577,000	1,090,000	5.2	14.0	57,000
	Total	2.5	1,257,000	2,408,000	5.5	15.0	132,000
Total Resource		2.5	21,887,000	42,444,000	6.4	14.4	2,737,000

Deposit	Classification	HM (t)	Ilmenite (%)	Leucoxene (%)	Rutile (%)	Zircon (%)
Atlas	Indicated	34,000	52.6	8.1	7.5	5.7
	Measured	822,000	52.4	5.0	7.6	10.6
	Total	841,000	53.4	5.2	7.8	10.6
Red Gully	Indicated	267,000	65.7	8.2	3.1	12.4
	Inferred	192,000	65.6	8.2	3.1	12.4
	Total	459,000	65.6	8.2	3.1	12.4
Hyperion	Indicated	290,000	51.7	0.5	6.6	7.2
Helene	Indicated	523,000	70.7	0.7	3.0	10.5
Gingin South	Inferred	48,000	67.4	7.5	5.8	10.9
(combined)	Indicated	377,000	67.6	9.8	5.1	8.1
	Measured	67,000	50.7	15.3	5.6	7.8
	Total	492,000	65.3	10.3	5.2	8.3
Gingin North	Indicated	75,000	57.4	9.3	3.1	3.2
	Inferred	57,000	57.3	11.3	3.8	3.7
	Total	132,000	57.3	10.2	3.4	3.4
Total Resource		2,737,000	60.9	5.5	5.3	9.8

7

North Perth Basin Scoping Study Identified Resources, Mineral Assemblages

Deposit	Classification	HM (t)	Ilmenite (t)	Leucoxene (t)	Rutile (t)	Zircon (t)
Atlas	Indicated	34,000	18,000	3,000	3,000	2,000
	Measured	822,000	431,000	41,000	63,000	87,000
	Total	841,000	449,000	44,000	65,000	89,000
Red Gully	Indicated	267,000	175,000	22,000	8,000	33,000
	Inferred	192,000	126,000	16,000	6,000	24,000
	Total	459,000	301,000	38,000	14,000	57,000
Hyperion	Indicated	290,000	150,000	1,000	19,000	21,000
Helene	Indicated	523,000	370,000	3,000	16,000	55,000
Gingin South	Inferred	48,000	32,000	4,000	3,000	5,000
(combined)	Indicated	377,000	255,000	37,000	19,000	31,000
	Measured	67,000	34,000	10,000	4,000	5,000
	Total	492,000	321,000	51,000	26,000	41,000
Gingin North	Indicated	75,000	43,000	7,000	2,000	2,000
	Inferred	57,000	33,000	6,000	2,000	2,000
	Total	132,000	76,000	13,000	4,000	5,000
Total Resource		2,737,000	1,667,000	150,000	144,000	268,000

The information in this resource summary is based on information compiled or reviewed by Paul Leandri BAppSc who is a member of the Australasian Institute of Mining and Metallurgy. Paul Leandri is an employee of Image Resources NL. He has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Paul Leandri consents to the inclusion of this information in the form and context in which it appears in this resource summary.

8