Timberline Resources Corp (fka TLRS)

[Picassa]

Timberline Resources Corporation (TSX-V: TBR.V - News)(AMEX: TLR - News) ("Timberline" or the "Company") announced today that it has signed a non-binding Letter of Intent ("LOI") to sell its wholly-owned contract drilling subsidiary, Timberline Drilling, Inc. ("TDI"), to a private company formed by a group of investors, including certain members of the current senior management team of TDI.



The sale is valued at approximately $13 million, subject to closing
adjustments, and will allow Timberline to:

-- focus on the Company's core business of gold exploration, development,
and production;

-- repay its $5 million convertible debt obligation and, with the
assumption of all TDI debt by the purchaser, become debt-free;

-- retain certain strategic benefits of owning the drilling subsidiary by entering into an agreement with the purchaser to provide future core drilling services to Timberline at below-market prices;

-- accelerate drilling and exploration at its district-scale South Eureka
(Nevada) gold property.


Paul Dircksen, Timberline's President and CEO, commented, "With gold prices exceeding $1,800 per ounce, we believe that the economic potential of our core business is extremely compelling and requires our uncompromised focus. Our advanced exploration at South Eureka entails significant investment as we work to define a major gold deposit, and the sale of TDI will propel us forward in that effort. Furthermore, gold production from the Butte Highlands Joint Venture is expected early next year, rendering cash flow from TDI operations less attractive relative to near-term monetization. We also welcome the opportunity to become a debt-free company. We are very pleased with this agreement and are optimistic that we can successfully close this sale in a timely manner."

The Company entered into the LOI after an extensive process that included in-depth discussions with other potential purchasers and an evaluation of the transaction relative to the current valuations of public companies in the drilling sector. Paradigm Capital of Toronto acted as the Company's financial advisors related to this transaction.

The sale is expected to close on or before November 15, 2011 and is contingent upon the successful execution of a definitive sale agreement with reasonable, customary, and mutually-agreeable conditions and successful due diligence.