Timberline Resources Corporation (AMEX: TLR) – Near Term Gold Production, Value Accretion With Pending Acquisition

company”) is an NYSE Amex listed junior exploration/mining

company focused on developing the Butte Highlands project in

western Montana.

• The company is in the shareholder approval phase of acquiring

Staccato Gold Resources Ltd.

• Gold production is targeted for late 2011 with projected output of

60,000 ounces per year.

• The project is being developed through a joint venture with an

affiliate of Small Mine Development LLC, a well respected

underground development and mining company with primary

clients such as Newmont Mining Corporation.

• The 50/50 joint venture carries TLR’s 50% interest to production.

• We initiate coverage on TLR with a BUY rating and fair value of

$1.53 per share on the assumption the acquisition is completed. If

the acquisition is not completed, our fair value drops to $1.17

which would be a HOLD.

Risks

• The company currently has no operating mines.

• Access to capital and share dilution.

• The company does not yet hold all permits required to mine the

Butte Highlands project.

(All figures are in US$ unless otherwise noted.)

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