Thursday, March 28, 2024
39.0°F

Timberline to acquire Staccato Gold

| March 24, 2010 9:00 PM

COEUR d'ALENE - Timberline Resources Corp. (NYSE Amex:TLR) and Staccato Gold Resources Ltd. (TSX-V:CAT) have entered into an agreement for Timberline to acquire, through a court-approved plan of arrangement, all of the issued and outstanding common shares of Staccato by means of a share exchange. Under the agreement, Staccato shareholders will receive one share of common stock of Timberline and $0.0001 for every seven Staccato common shares held. This represents a value of about 17 cents Canadian per Staccato common share based on the closing price of Timberline shares on the NYSE Amex on March 22, an 82 percent premium to the closing price of Staccato shares on the date prior to announcement of the arrangement and a 76 percent premium to Staccato's 20-day volume weighted average closing price.

With the completion of this arrangement, Timberline will acquire Staccato's South Eureka property which includes a drill-tested exploration portfolio and the advanced-stage Lookout Mountain project, located along Nevada's Battle Mountain - Eureka trend, and about $5 million in cash.

The South Eureka property is comprised of several projects included within one of the largest exploration land packages in the Battle Mountain/Eureka Trend, about 15,000 acres. The property has identified exploration potential evidenced by historic workings and gold anomalies throughout the district. The flagship Lookout Mountain project features a defined section of mineralized material within a large scale structural corridor and numerous high-priority targets to test. Timberline's Butte Highlands Gold Project is funded to production by its joint venture partner; therefore, Timberline intends to focus its exploration efforts at Staccato's Lookout Mountain project.

Benefits for Timberline shareholders are

n Low cost acquisition of significant mineralized material base with near-term gold production potential at the Lookout Mountain project

n Large, drill-tested, highly prospective project portfolio on Nevada's Battle Mountain Eureka gold trend

n Cash infusion of about $5 million for exploration and development, primarily at the Lookout Mountain project

n Addition of strategic assets in Nevada while maintaining an attractive share structure

Benefits for Staccato Shareholders

n Strong premium to recent Staccato market price and a fresh start toward realization of shareholder value

n Anticipated near-term gold production at the Butte Highlands joint venture where Timberline owns a 50 percent carried-to-production interest

n A vertically-integrated company with in-house capability, expertise, and strategic alliances to explore, drill, permit, develop and produce - and the corporate strength to advance Staccato's projects

n Two core drilling subsidiaries with positive cash flow and annual revenue over U.S. $17 million in the fiscal year ended Sept. 30, 2009, will provide economical drilling for exploration and development

n Attractive corporate vehicle and share structure to accommodate additional acquisitions and growth

"We are very pleased with this acquisition opportunity and the value it represents for our shareholders," Randal Hardy, Timberline chief executive officer, said in a press release. "We are focused on projects that offer near-term production potential with significant exploration upside, and we believe that Staccato's South Eureka properties provide an excellent fit. Combined with our development-stage Butte Highlands project and our core drilling businesses, the Staccato assets will advance our goal of positioning Timberline as an emerging junior gold producer.

"Following a thorough technical review, we believe that the Lookout Mountain project has potential for near-term open pit production with relatively modest capital expenditures. We believe our team is well-suited to advance the project. Our V-P Exploration, Paul Dircksen, has extensive gold exploration and mine development experience in Nevada and has contributed to the discovery of several gold deposits that later became operating mines. Our newest board member, Bob Martinez, adds extensive metallurgical knowledge and experience managing heap leach operations in Nevada. Paul, Bob and our entire team are enthusiastic about acquiring Staccato and look forward to advancing the Lookout Mountain project."

Paul Dircksen, Timberline's chairman and vice president of exploration, said Staccato's South Eureka package lies within the Battle Mountain/Eureka Trend in Nevada, just a few miles from Barrick's two-million ounce Archimedes/Ruby Hill mine.

"Our internal studies indicate that the Lookout Mountain project hosts significant oxide gold mineralization amenable to low-cost, heap-leach recovery techniques, along with a smaller, high-grade, sulfide resource," he said. "Our plan is to drill in-fill and step-out holes to further define and expand known mineralized zones, conduct additional metallurgical testing, and complete an economic scoping study for a near-term production decision. We also plan to launch field programs at Windfall and other earlier-stage, high-potential targets. We are very excited to acquire the South Eureka property and believe that it is an excellent fit for our business plan and our team."

Grant Ewing, Staccato's president and CEO, said the company is pleased with Timberline's premium offer.

"Timberline is a near-term producer that has the expertise and the knowledge base to move our advanced stage Lookout Mountain project towards production, in addition to their own projects," he said. "We are impressed with the Timberline management team and believe that the combined assets of Staccato and Timberline represent enhanced value creation potential for Staccato shareholders."

Upon completion of the arrangement, Timberline will have about 56 million common shares issued and outstanding, with 73 million shares on a fully diluted basis. Current Timberline shareholders will own about 74 percent of the shares outstanding and former Staccato shareholders will own about 26 percent. On a fully diluted basis, Timberline will be owned 71 percent by current Timberline shareholders and 29 percent by current Staccato shareholders. In conjunction with the arrangement, Timberline will seek a listing of its shares of commons stock on the TSX Venture Exchange with the intent to have a listing in Toronto in addition to the NYSE Amex listing.

Pursuant to the arrangement, the holders of a portion of the outstanding Staccato options and the holders of all Staccato warrants will be entitled to receive Timberline options and warrants at the exchange ratio and with corresponding changes to the exercise price based on the exchange ratio. The balance of the outstanding Staccato options will either be exchanged for Staccato shares prior to the closing or canceled at closing.

Completion of the arrangement is subject to regulatory approvals and a favorable vote of at least two-thirds of the holders of Staccato common shares voted at a special meeting of shareholders to be held on May 14 and a favorable vote of a majority of the holders of shares of Timberline common stock voted at a special meeting of shareholders to be held in May.

The arrangement is subject to customary closing conditions including the receipt of all necessary court and regulatory approvals, including the approval of the NYSE Amex and the TSX Venture Exchange. The agreement provides for the payment of reciprocal break fees under certain conditions, and the arrangement is expected to close by June 15, 2010.

The arrangement has been unanimously approved by the board of directors of both Staccato and Timberline, and the management and directors of both companies have entered into support agreements. The agreement contains a commitment from Staccato not to solicit or initiate discussions concerning alternative transactions to the proposed arrangement.