IMAGE RESOURCES NL — Interim / Quarterly Report 2012

Oct 30, 2012

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QUARTERLY REPORT - for the Quarter Ended 30 September 2012

HIGHLIGHTS

Image Resources NL

ABN 57 063 977 579 ASX Code: IMA Level 2, 16 Ord Street West Perth WA 6005 T +61 8 9485 2410 F +61 8 9485 2840

E info@imageres.com.au PO Box 644 West Perth WA 6872 Issued Capital : Shares - Quoted: 106,655,193 fully paid ordinary shares

Options - Unquoted: 10.9 Million total

Cash at end of quarter : $1.406M Directors:

Peter Thomas

Non-executive Chairman

Peter Davies

Managing Director

George Sakalidis Executive Director – Exploration

Investment Highlights

• Image is a ‘pure play’ mineral sands company with tenements only in WA

• The Company is actively progressing the high grade North Perth Basin Project

• Experienced mineral sands project team established

• Feasibility Study is due for completion in mid 2013

• First production planned for 2014

• Projected production of 200kt per year high quality Ilmenite and 45 kt per year Premium and Standard grade Zircon

• Low capital cost of entry and rapid payback.

NORTH PERTH BASIN

• New drilling confirms major northern extension to the Boonanarring heavy mineral (HM) deposit resulting in an additional JORC Indicated Resource of 7.4Mt @ 7% HM containing 520kt of HM at a 2.5% HM cut-off.

• The average Zircon content of this new JORC Indicated Resource has increased from the estimate of 11% of HM, which was used in the analysis work carried out in May and June this year, to 17.4% of HM.

• This discovery brings the currently defined Boonanarring total Resources to 10.5Mt @ 7.0% HM containing 740,000t of HM at a 2.5% HM cut-off (see Table 4 for full details of Resources).

• Resource drilling completed on Block C at Boonanarring with visual estimates confirming the continuous strike extent of high grade mineralisation over 7.7km.

• These results confirm the strong project economics and support the strategy of scheduling the high grade Boonanarring deposit as the initial mining target.

• Mining Lease Applications and environmental approvals work are in progress. CORPORATE

• A further $1.941 million raised by placing shares at market.

• Further fundraising to complete the North Perth Basin Project Feasibility Studies is progressing.

• Discussions with potential investors in relation to divestment of non-core assets continue.

NORTH PERTH BASIN

Feasibility Study

Image’s North Perth Basin Project represents one of the largest undeveloped high-grade HM resources in Australia, with excellent existing infrastructure and upside exploration potential.

Exploration and evaluation work carried out during the Quarter, adopting conservative parameters, confirms robust economic returns for the project.

Image is implementing the strategy of initially developing the high grade Boonanarring resources to produce HMC for sale or toll treatment. This option is not only attractive in terms of project economics, but will provide a quicker path to production at lower risk, with a significantly lower up-front capital requirement than would be the case if a Dry Mill is constructed initially. This initial low capital cost project would then provide the operating platform and cash flow for the staged development of parallel mining operations at Atlas and the other projects, together with the construction of a Dry Mill.

Feasibility Study work in progress includes:

• Drilling of the remaining northern sections at Boonanarring;

• Associated resource modelling and mine planning;

• Bulk sample testing for process flowsheet design and preparation of Ilmenite and Zircon samples for customer acceptance testing;

• Detailed planning for project infrastructure;

• Consideration of project logistics options;

• Discussions with potential downstream customers ;

• Completion of the hydrological studies and field testwork;

• Continuation of the environmental studies and project approvals activities;

• Native Title negotiations at Atlas;

• Consideration of project finance options;

• Securing funds to cover the remaining costs for the Feasibility Study and associated activities.

Development schedules are dependent on the environmental approvals processes, but work to date has shown that, subject to funding, commencement of operations at Boonanarring in 2014 remains achievable.

The Company’s aim is to then bring Atlas on line as a parallel mine with a separate wet plant as soon as possible, in order to increase annual production and cashflow and further improve the overall project economics.

Boonanarring Project (Image 100%)

Work for the quarter has concentrated on the Boonanarring Project. Infill drilling was completed on Blocks B and C on the Northern Section of the project area (Figure 1) at sufficient density for a JORC Indicated Resource to be estimated. This programme was completed, with 234 holes drilled for 11 494m, in early September 2012. All assay results from Block B were received at the end of August.

HM from individual metre intervals were amalgamated to form 56 composites for mineralogy determination. The composites were designed to provide mineralogy for each interpreted geological zone, concentrating on the strand zones. They were created by compositing the concentrate from between 3 and 45 individual metre drill samples (average of 11 concentrate samples per composite), either from a single hole for higher grade strand mineralisation or a group of adjacent holes for low grade or “trash” mineral. Composites were created on each 200m drill line.

Each composite was analysed using single bead XRF and the mineral composition calculated using a combination of industry standard elemental abundances and elemental compositions derived from testwork. The statistics for the raw data are shown in Table 1.

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In addition, the mineralogy was assessed qualitatively by a consultant with extensive experience in the mineralogy, processing characteristics and product quality of Western Australian mineral sands deposits. Further work is planned to refine the analysis breakdown between Ilmenite, Leucoxene and Rutile composition of the mineral assemblage. The current split is regarded as being conservative in terms of ore value.

Table 1

		Table 1	Table 1	Table 1	Table 1	Table 1
		Block B Mineralogy Content Statistical Summary
**Statistic **	**Ilmenite **	Leucox Rutile	**Zircon **	**Mon **	**Staur **	Tourm	**Kyan **	Others
Average	44.0	10.1 4.5	19.4	0.6	4.2	3.2	3.0	10.8
Min	9.7	1.7 0.4	1.0	0.0	0.6	0.4	0.4	0.3
Max	60.6	20.7 6.7	59.6	1.7	7.0	5.4	5.0	74.3

Notes: “Others” comprise mainly iron oxides and undifferentiated alumino-silicates.

The HM assay and mineralogy results have enabled Image, working with Lynn Widenbar and Associates, to define a maiden JORC Indicated Resource for the Boonanarring Block B totalling 7.4Mt @ 7.0% HM, containing 520kt of HM at a 2.5% HM cut-off. Of particular interest are the extremely high Zircon grades in the eastern strandline (see below). Table 2 summarises the resource estimate and Table 3 shows the corresponding mineral content.

Table 2 Boonanarring Block B Resource 28 September 2012

INDICATED RESOURCES	Volume (million cubic metre)	Tonnage (Mt) HM (%) HM Contained (kt) Slimes (%)	Oversize (%)
West Strand East Strand	1.8 1.9	3.6 4.3 150 13.7 3.8 9.5 370 16.0	4.3 8.0
TOTAL	3.7	7.4 7.0 520 14.9	6.2

Notes: 2. 5% HM cut-off Slimes: minus 63micron fraction OS: oversize, plus 1mm fraction. Values rounded to reflect uncertainty of estimates.

Table 3 Boonanarring Block B Resource, % Mineral Content of HM

INDICATED RESOURCES	HM Contained (kt)	ILMENITE (%) LEUCOXENE (%) RUTILE (%) ZIRCON (%)	VHM Total (%)
West Strand East Strand	150 370	54.3 13.6 4.3 13.4 42.9 8.0 2.4 21.1	85.6 74.4
TOTAL	520	48.4 10.7 3.3 17.4	79.8

This new resource is separated from the Boonanarring HM deposit by Block C as shown in Figure 1. Figure 2(a) shows the variation in HM grades along the strike of the model for both the western and eastern strands and Figure 2(b) shows the corresponding variation in zircon grade as modelled for both strands. Appendices to the ASX release on 4[th ] October 2012 tabulate the Block B resource estimate at various cut-off grades and reflect the criteria used to determine the resource status. Please refer to these Appendices for details.

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Figure 1 Boonanarring Project Area Drilling and Resource Blocks

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Figure 2 Perspective view of Block B strands. Blocks coloured by (a) Interpolated HM Grade and (b) Interpolated Zircon grade as % of HM

Total Boonanarring Resource

Using drilling and mineralogical data supplied by Iluka on mining lease M70/1194, Image previously estimated a total Measured Resource at a 2.5% HM cut-off of 3.1Mt at 7.2% HM, containing 221,000t of HM (refer IMA ASX Release 9 March 2011). Together with the Block B, the overall Boonanarring Resources have increased to 10.5Mt @ 7.0% HM, segregated into Measured and Indicated categories, as shown in Table 4.

Table 4

	Table 4
Overall Boona	narring HM Resource 02 October 2012
CLASSIFICATION HM CUTOFF MEASURED 2.5 INDICATED 2.5	VOLUME (cu m x106) TONNES (x106) HM SLIMES 1.7 3.1 7.2 9.9 3.7 7.4 7.0 14.9	HM Tonnes (x 103) 220 520
TOTAL 2.5	5.4 10.5 7.0 13.4	740

The new resource adds 90,000 tonnes of zircon to the previously defined 33,000 tonnes, bringing the total zircon endowment in the Boonanarring project to 123,000 tonnes. Image is very encouraged by this upgrade, which has been defined over 4.6km of the 12.0km prospective strike of the deposit. It is also significant when compared to Image’s Atlas deposit, which contains 89,000t of zircon over 6.5km strike.

OTHER PROJECTS

Erayinia JV (Image 30%, diluting)

During the quarter Integra Mining completed a 67-hole, 2918m reconnaissance aircore drilling programme (360m x 180m grid) to test geological and geochemical targets at the Stockholm, Titanic and Red October prospects in the Aldiss South area. Drill sample analysis is currently in progress. Processing of airborne electromagnetic (AEM) data sourced through CSIRO over part of the joint venture tenements has commenced, with the aim of identifying aircore drilling targets in areas where paleochannel cover is likely to be minimal.

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Results from the remaining nine RC holes completed during the previous quarter on the Admiral trend returned intersections of 8m @ 0.13g/t Au from 44m in ISRC1021 and 4m @ 0.74g/t Au from 112m in ISRC1022. Integra is planning to continue aircore drilling at Aldiss South, together with processing of AEM data to assist in drill targeting in this area

CORPORATE

$1,941,113 for Feasibility Study work and general working capital was raised during the quarter by issuing shares, to a combination of sophisticated and professional investors, at 30 cents each. Following the share issues, Image has 106,655,193 fully paid shares on issue. This further raising of funds at $0.30 is considered to be a very positive outcome in the current market.

Fiona Lawe Davies and Dennis Wilkins of DWCorporate were appointed as joint Company Secretaries on 25.09.12. The Board expresses thanks to Rudolf Tieleman who has carried out this duty over the last 10 years since the Company was incorporated. Mr Tieleman will continue as CFO.

Image is seeking to divest its non-core mineral assets, including its gold tenements in the Erayinia area, in order to focus on its core North Perth Basin mineral sand project.

Given market sentiment, the Company continues to balance expenditure and programmes with available cash reserves, whilst examining numerous financing options to underpin completion of the Feasibility Study and, as targeted, to deliver first production in 2014.

Going Concern

The directors have prepared the financial statements of the Company on a going concern basis.

In arriving at this position, the directors considered the following pertinent matters:

• (a) cash on hand at the date of the financial statements was approximately $1,406,000 and the Company holds liquid securities which valued on a marked-to-market basis have a value of $936,951 (it is acknowledged that the marked-to-market approach to valuing equities in junior explorers is an unreliable basis for determining realisable value);

• (b) current cash resources are inadequate to fund the Company’s desired level of activities over the next twelve months;

• (c) the North Perth Basin Project is not a mere exploration asset but rather is the subject of a feasibility study and is thought by the Board to have a very substantial net present value;

• (d) offers of and opportunities to raise additional funding are being considered to enable the entity to maintain its desired level of activities over the coming twelve months;

• (e) if such additional funding is not secured, the Company will reduce its rate of expenditure to the extent necessary to ensure it remains solvent – amongst other significant opportunities to reduce expenditure, as detailed in Note 17, the Company has a clear path to protect its core assets by applying for retention licences over its JORC resources ;

• (f) the Board expects to be able to raise funding at least sufficient to maintain its going concern status.

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

Please direct enquiries to: Peter Davies Managing Director Phone (08) 9485 2410 Mob: 0409 296 676

George Sakalidis Executive Director Phone (08) 9485 2410 Mob: 0411 640 337

COMPETENT PERSON’S STATEMENT – EXPLORATION RESULTS

The information in this presentation 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 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 presentation.

COMPETENT PERSON’S STATEMENT – EXPLORATION RESULTS FOR THE ERAYINIA JV

The information in this report that relates to exploration results for the Erayinia JV is based on information compiled by Roger Thomson BSc, ARSM, MAusIMM, who is a Member of the Australian Institute of Geoscientists. Roger Thomson is a Director of Image Resources NL. Roger Thomson 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 of Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Roger Thomson consents to the inclusion of this information in the form and context in which it appears in this report.

COMPETENT PERSON’S STATEMENT – RESOURCE ESTIMATES

The information in this presentation that relates to mineral resources is based on information compiled by Lynn Widenbar BSc, MSc, DIC, MAIG, MAusIMM employed by Widenbar & Associates who is a consultant to the Company. Lynn Widenbar has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the ‘Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Lynn Widenbar consents to the inclusion of this information in the form and context in which it appears in this presentation.

COMPETENT PERSON’S STATEMENT – PROJECT EVALUATION

The information in this presentation that relates to project evaluation is based on information compiled by Peter Davies BSc Eng (Hons) ARSM, C.Eng. MIMMM, 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.

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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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

	Name of entity	Name of entity	NL Quarter ended (“current quarter”) 30/9/2012	NL Quarter ended (“current quarter”) 30/9/2012
	IMAGE RESOURCES		NL
	ABN 57 063 977 579 Consolidated statement of cash flows
			30/9/2012
Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net operating cash flows		Current quarter $A’000		Year to date (3.months) $A’000
		142 (1,126) (539) 18		142 (1,126) (539) 18
		(1,505)		(1,505)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments –security deposits (c) other fixed assets 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) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)		(8) (5) 80		(8) (5) 80
		67		67
		(1,438)		(1,438)

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(1,438)	(1,438)
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) Net financing cash flows	1,941	1,941
	1,941	1,941
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	503 903	503 903
	1,406	1,406

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
		152
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	Amount available $A’000	Amount used $A’000

• See chapter 19 for defined terms.

Appendix 5B Page 2

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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
	1,476
	-
	-
	124
Total -Assumes successful capital raisings during the December 2012quarter	1,600

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) –Short term deposits	143	43
	1,263	860
Total: cash at end of quarter(item 1.22)	1,406	903

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	Nature of interest (note (2))	Interest at beginning ofquarter	Interest at end of quarter
	E37/1102 E77/1132 E70/3893	Relinquished Relinquished Relinquished	100% 100% 100%	0% 0% 0%
	E70/4135 E28/2207 E70/4245	Granted Granted Granted	100% 100% 100%	100% 100% 100%

• See chapter 19 for defined terms.

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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 (see note 3)	Amount paid up per security (see note 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:
	106,655,193	106,655,193
(a) Increases through issues	6,470,376	6,470,376
(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 7.8 Issued during quarter 7.9 Exercised during quarter 7.10 Expired during quarter			Exercise price	Expiry date
	2,200,000	Notquoted	$2.12	20/11/2012
	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: Print name:

............................................................ Date: 31 October 2012 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

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.

== == == == ==

• See chapter 19 for defined terms.

17/12/2010 Appendix 5B Page 5