Timberline Resources Corp (fka TLRS)

[Picassa]

NOW 60M Shares but Gold 1425$ !!!


Timberline Resources Corp.
41M Shares | $40M Market Cap

Higher-grade gold production slated for second-half of 2010, 50/50 venture with SMD (Small Mines Development). Carried into production. Marginally profitable drilling company and exploration projects.

Timberline is an example of extremes rising from a sub-dollar a share to over $5 before collapsing to $0.19. The company was in the process of merging with Small Mines Development when the credit markets froze, markets collapsed during the second half of 2008. During the market carnage, then the largest shareholder/fund of Timberline had a forced liquidation of roughly 3 million of its holdings, which were liquidated into a historically weak market tanking the price to literally bargain prices. Timing could not have been worse but out of the misfortune emerges a new opportunity!

Timberline and Small Mines Development (SMD) cancelled their proposed merger due to market, economic and credit conditions and restructured their relationship which included the owner of SMD Ron Guill, a Timbelrine director, taking an equity position ($0.90/share) making! him the largest shareholder with just over 5.5 million shares.

Butte Highlands Gold project is projected to commence production in about 1 year. The 50/50 joint venture with SMD calls for the roughly $15 million of capital investment to start gold mining, a very low CAPEX project which will be paid fully by SMD meaning Timberline does not require to finance to get into production! Timberlines 50% CAPEX obligation will come from cash flow from future gold production.

Butte Highlands is projected to produce 70,000 or more ounces of high-grade gold per year with cash costs in the $350–$400 range. With $1,000 gold this would bring in about $20–$25M for TLRs 50% position or $0.40–$0.50 a share with current gold prices and production estimates. Gold prdoucers are trading on a valuation of 8-10+ times cash flow numbers. Using 8 * $0.55 a share = $4.40. That is without any value for their drilling division or their other exploration projects.

So can Timberline return to $5+ a share? If successful production is indeed realized, relative valuations would support this but this could be well over a year away before successful comerical production is achieved. At around $1 a share, Timberline is a low risk, higher reward investment. I suspect as we approach production, the stock should be trading multiples higher than current prices.

http://www.theaureport.com/pub/na/5744