UNITED STATES

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PART I5 

ITEM 1. DESCRIPTION OF BUSINESS5 

ITEM 1A.  RISK FACTORS9 

ITEM 1B. UNRESOLVED STAFF COMMENTS18 

ITEM 2. DESCRIPTION OF PROPERTIES18 

ITEM 3. LEGAL PROCEEDINGS38 

ITEM 4. MINE SAFETY DISCLOSURES38 

PART II39 

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES39 

ITEM 6. SELECTED FINANCIAL DATA41 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION41 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK46 

ITEM 8. FINANCIAL STATEMENTS47 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE68 

ITEM 9A. CONTROLS AND PROCEDURES68 

ITEM 9B. OTHER INFORMATION69 

PART III70 

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE70 

ITEM 11. EXECUTIVE COMPENSATION73 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS76 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE78 

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES79 

PART IV81 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES81 

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Unless otherwise indicated, any reference to “Timberline”, or “we”, “us”, “our”, etc. refers to Timberline Resources Corporation and/or all its subsidiaries, including TDI (where applicable prior to its sale), Staccato Gold, BH Minerals, Wolfpack US, and Talapoosa Development Corp.

cautionary note regarding FORWARD-LOOKING STATEMENTS

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risks related to our title and rights in our mineral properties; 

risks related to integration issues with acquisitions; 

risks related to our stock trading on the Over-the-Counter markets 

risks related to joint ventures and partnerships; 

risks related to potential conflicts of interest with our management;  

risks related to our dependence on key management; 

risks related to our Eureka, Elder Creek and other acquired growth projects; 

risks related to our business model; 

risks related to our participation in Lookout Mountain LLC with PM&Gold Mines, Inc.; 

risks related to evolving corporate governance standards for public companies; 

risks related to our Canadian regulatory requirements; and 

risks related to our shares of common stock or other securities. 

This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Risk Factors”, “Description of Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated, or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law.

We qualify all the forward-looking statements contained in this Annual Report by the foregoing cautionary statements.

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

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In August 2014, we closed our acquisition of Wolfpack Gold (Nevada) Corp. (“Wolfpack US”), a U.S. company and a wholly-owned subsidiary of Wolfpack Gold Corp. a Canadian-based resource company (“Wolfpack Gold”), that was in the business of acquiring, exploring, and developing mineral properties with a focus on gold exploration in the dominant gold producing trends in Nevada. As a result of this acquisition, we obtained cash and several projects at various stages of exploration in the gold trends in Nevada.

On March 31, 2018, we did not make the required payment of $2 million nor issue the one million common shares of the Company by March 31, 2018, as required by the Talapoosa Amended Agreement, and, therefore, the Amended Agreement was terminated per its terms on March 31, 2018. The termination of the Agreement and abandonment of the property, resulted in a $3.2 million write off of a Loss on abandonment of mineral rights.

In May 2018, we entered into a definitive agreement to acquire ownership interests in two joint venture agreements in Nevada from Americas Gold Exploration, Inc (“AGEI”). The acquisition includes a 73.7% interest in the Paiute property joint venture with Nevada Gold Mines LLC (“Nevada Gold”), and the opportunity to earn up to 65% ownership in the Elder Creek joint venture with McEwen Mining, Inc. The acquisition of the two joint venture ownership interests, at Elder Creek with McEwen Mining and at Paiute with Nevada Gold, from AGEI closed on August 14, 2018 for consideration of ten million shares of our common stock and five million warrants to purchase shares of our common stock. An additional five million warrants with the same terms are expected to be issued to AGEI, subject to certain achievements. Upon closing, we became the operator at both of these joint venture projects.

During the year ended September 30, 2019, the Company recognized an abandonment expense of $48,500 relating to two patented mining claims at in the New York Canyon area of the Eureka property that the Company had ceased making advance royalty payments on.

On June 28, 2019, we entered into a Limited Liability Company Agreement (the “LLC” and the “LLC Agreement”) with PM&Gold Mines, Inc. (“PM&G”) for the advanced exploration, and if determined feasible, the development of our Lookout Mountain Gold project, located on the southern end of the Battle Mountain-Eureka Trend near Eureka, Nevada. PM&G is a private firm incorporated in Nevada with an interest to explore and advance gold projects to production. The LLC Agreement calls for PM&G to fund exploration and development activities in two stages for an earned equity in the project. Timberline will contribute certain claims that constitute the Lookout Mountain project and adjacent historical Oswego Mine area (the “Project”) to the LLC in exchange for its ownership position.

Concurrent with completion of the Agreement, PM&G also participated in a private placement and acquired 3,367,441 shares, or 4.99%, of our common shares. The placement includes the right of PM&G to maintain its position in Timberline by pro-rata participation in future financings. The initial interests in the LLC are 51% PM&G and 49% Timberline. PM&G’s contribution to the LLC must be earned-in. Timberline will manage the Project at least through Stage I of investment. PM&G shall retain the right to manage all Stage II activities with or without Timberline’s participation.

Overview of Our Mineral Exploration Business

We are a mineral exploration business and, if and when we establish mineral reserves, a development company. Mineral exploration is essentially a research activity that does not produce a product. Successful exploration often results in increased project value that can be realized through the optioning or selling of the claimed site to larger companies. We acquire properties which we believe have potential to host economic concentrations of minerals, particularly gold and silver. These acquisitions have and may take the form of unpatented mining claims on federal land, or leasing claims or private property owned by others. An unpatented mining claim is an interest that can be acquired to the mineral rights on open lands of the federally owned public domain. Claims are staked in accordance with the Mining Law of 1872, recorded with the federal government pursuant to laws and regulations established by the Bureau of Land Management (the Federal agency that administers America’s public lands), and grant the holder of the claim a possessory interest in the mineral rights, subject to the paramount title of the United States.

We will perform basic geological work to identify specific drill targets on the properties, and then collect subsurface samples by drilling to confirm the presence of mineralization (the presence of economic minerals in a specific area or geological formation). We may enter into joint venture agreements with other companies to fund further exploration and/or development work. It is our plan to focus on assembling a high-quality group of gold and silver exploration prospects using the experience and contacts of the management group. By such prospects, we mean properties that may have been previously identified by third parties, including prior owners such as exploration companies, as mineral prospects with potential for economic mineralization. Often these properties have been sampled, mapped and sometimes drilled, usually with indefinite results. Accordingly, such acquired projects will either have some prior exploration history or will have strong similarity to a recognized geologic ore deposit model. We will place geographic emphasis on the western United States, and Nevada in particular.

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The focus of our activity has been to acquire properties that we believe to be undervalued; including those that we believe to hold previously unrecognized mineral potential. Properties have been acquired through the location of unpatented mining claims (which allow the claimholder the right to mine the minerals without holding title to the property), or by negotiating lease/option agreements. Our President and CEO, Steven Osterberg, and our CFO, Ted Sharp, as well as our Directors, have experience in evaluating, staking and filing unpatented mining claims, and in negotiating and preparing mineral lease agreements in connection with those mining claims.

The geologic potential and ore deposit models have been defined and specific drill targets identified on the majority of our properties. Our property evaluation process involves using basic geologic fieldwork to perform an initial evaluation of a property. If the evaluation is positive, we seek to acquire it, either by staking unpatented mining claims on open public domain, or by leasing the property from the owner of private property or the owner of unpatented claims. Once acquired, we then typically make a more detailed evaluation of the property. This detailed evaluation involves expenditures for exploration work which may include rock and soil sampling, geologic mapping, geophysics, trenching, drilling, or other means to determine if economic mineralization is present on the property.

Portions of our mineral properties at September 30, 2019 are owned by third parties and leased to us, or carry a financial commitment from us, as outlined in the following table:

Of the leased claims listed above, 373 of the Lookout Mountain claims and 6 of the Silverado claims have been transferred to Lookout Mountain LLC under the terms of the Lookout Mountain LLC Agreement with PM&Gold. All of the leases are contracts with varied terms which provide for us to earn an interest in the property. For additional information see “Item 2 - Description of Property” below.

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Our strategy with properties deemed to be of higher risk or those that would require very large exploration expenditures is to present them to larger companies for strategic partnerships. Our strategy is intended to maximize the abilities and skills of the management group, conserve capital, and provide superior leverage for investors. If we present a property to a major company and they are not interested, we will continue to seek an interested partner.

For our prospects where drilling costs are reasonable and the likelihood of success seems favorable, we will undertake our own drilling. The target depths, the tenor of mineralization on the surface, and the general geology of the area are all factors that determine the risk as calculated by us in conducting a drilling operation. Mineral exploration is a research and development activity and is, by definition, a high-risk business that relies on numerous untested assumptions and variables. Accordingly, we make our decisions on a project-by-project basis. We do not have any steadfast formula that we apply in determining the reasonableness of drilling costs in comparison to the likelihood of success, i.e., in determining whether the probability of success seems “favorable.”

Our Competition

The mineral exploration industry is intensely competitive in all phases. In our mineral exploration activities, we will compete with many companies possessing greater financial resources and technical facilities than we do for the acquisition of mineral concessions, claims, leases, and other mineral interests as well as for the recruitment and retention of qualified employees, including mining engineers, geologists, and other skilled mining professionals. We use consultants and compete with other mining companies for the man hours of consulting time required to complete our studies. We also compete with other mining companies for exploration and development equipment and services. We must overcome significant barriers to enter into the business of mineral exploration as a result of our limited operating history.

We cannot assure you that we will be able to compete in any of our business areas effectively with current or future competitors or that the competitive pressures faced by us will not have a material adverse effect on our business, financial condition, and operating results.

Our Offices and Other Facilities

We currently maintain our administrative office at 101 East Lakeside Ave., Coeur d’Alene, ID 83814. The telephone number is (866) 513-4859 (toll free) or (208) 664-4859. We also maintain field offices and warehouse space in Eureka, NV 89316.

Our Employees

We are an exploration company and currently have 1 full-time employee. Management engages independent consultants under contract arrangements as necessary to execute on company strategies in the current financially challenging environment and expects to hire staff and additional management as necessary for implementation of our business plan.

Regulation

The exploration and mining industries operate in a legal environment that requires permits to conduct virtually all operations. These permits are required by local, state, and federal government agencies. Federal agencies that may be involved include: The U.S. Forest Service (USFS), Bureau of Land Management (BLM), Environmental Protection Agency (EPA), National Institute for Occupational Safety and Health (NIOSH), the Mine Safety and Health Administration (MSHA), and the Fish and Wildlife Service (FWS). Individual states also have various environmental regulatory bodies, such as Departments of Ecology. Local authorities, usually counties, also have control over mining activity. The various permits address such issues as prospecting, development, production, labor standards, taxes, occupational health and safety, toxic substances, air quality, water use, water discharge, water quality, noise, dust, wildlife impacts, as well as other environmental and socioeconomic issues.

Prior to receiving the necessary permits to explore or mine, a mine operator must comply with all regulatory requirements imposed by all governmental authorities having jurisdiction over the project area. Very often, in order to obtain the requisite permits, the operator must have its land reclamation, restoration, or replacement plans pre-approved. Specifically, the operator must present its plan as to how it intends to restore or replace the affected area. Often all or any of these requirements can cause delays or involve costly studies or alterations of the proposed activity or time frame of operations, in order to mitigate impacts. All of these factors make it more difficult and costly to operate and have a negative and sometimes fatal impact on the viability of the exploration or mining operation. Finally, it is possible that future changes in these laws or regulations could have a significant impact on our business, causing those activities to be economically re-evaluated at that time. For a more detailed discussion of governmental and environmental regulatory requirements applicable to our mineral exploration business see the section titled “Description of Properties - Overview of Regulatory, Economic and Environmental Issues” below.

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Reclamation

We generally are required to mitigate long-term environmental impacts by stabilizing, contouring, re-sloping and re-vegetating various portions of a site after mining and mineral processing operations are completed. These reclamation efforts are conducted in accordance with detailed plans, which must be reviewed and approved by the appropriate regulatory agencies.

The Commodities Market

The prices of gold and silver have fluctuated during the last several years, with the prices of gold and silver falling to their lowest levels in the past several years in 2015 and early 2016, before rebounding. In 2017, gold traded between approximately $1,151 and $1,346 per ounce. In 2018, gold has traded between approximately $1,175 and $1,355 per ounce. In 2019, gold has traded between approximately $1,270 and $1,547 per ounce. The price of gold was $1,548 per ounce on January 3, 2020. All of these gold prices are based on the London PM Fix Price per troy ounce of gold in U.S. dollars.

In 2017, silver traded between approximately $15.22 and $18.56 per ounce. In 2018, silver has traded between approximately $13.97 and $17.52 per ounce. In 2019, silver has traded between approximately $14.38 and $19.42 per ounce. The price of silver was $18.21 per ounce on January 3, 2020. All of these silver prices are based on the London Fix Price per troy ounce of silver in U.S. dollars.

Seasonality

Seasonality in Nevada is not a material factor to our operations. Certain surface exploration work may need to be conducted when there is no snow on the ground, but it is not a material issue.

ITEM 1A.  RISK FACTORS

Risks Related to Our Company

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The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition.

We have a limited operating history on which to base an evaluation of our business and prospects.

Although we have been in the business of exploring mineral properties since our incorporation in 1968, we were inactive for many years prior to our new management in 2004. Since 2004 we have not yet established any mineral reserves. As a result, we have not had any revenues from our exploration division. However, we have had a drilling services wholly-owned subsidiary which has generated revenues in past fiscal years. In addition, our operating history has been restricted to the acquisition and exploration of our mineral properties, and this does not provide a meaningful basis for an evaluation of our prospects if we ever determine that we have a mineral reserve and commence the construction and operation of a mine. Other than through conventional and typical exploration methods and procedures, we have no additional way to evaluate the likelihood of whether our mineral properties contain any mineral reserves or, if they do that they will be operated successfully. As a result, we are subject to all of the risks associated with developing and establishing new mining operations and business enterprises including:

completion of feasibility studies to verify reserves and commercial viability, including the ability to find sufficient gold reserves to support a commercial mining operation; 

the timing and cost, which can be considerable, of further exploration, preparing feasibility studies, permitting and construction of infrastructure, mining, and processing facilities; 

the availability and costs of drill equipment, exploration personnel, skilled labor, and mining and processing equipment, if required; 

compliance with environmental and other governmental approval and permit requirements; 

the availability of funds to finance exploration, development, and construction activities, as warranted; 

potential opposition from non-governmental organizations, environmental groups, local groups, or local inhabitants which may delay or prevent development activities; 

potential increases in exploration, construction, and operating costs due to changes in the cost of fuel, power, materials, and supplies; and 

potential shortages of mineral processing, construction, and other facilities-related supplies. 

The costs, timing, and complexities of exploration, development, and construction activities may be increased by the location of our properties and demand by other mineral exploration and mining companies. It is common in exploration programs to experience unexpected problems and delays during drill programs and, if warranted, development, construction, and mine start-up. Accordingly, our activities may not result in profitable mining operations and we may not succeed in establishing mining operations or profitably producing metals at any of our properties. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations.

We have a history of losses and expect to continue to incur losses in the future.

We have incurred losses since inception and expect to continue to incur losses in the future. We incurred the following net losses during each of the following periods:

$1,657,283 for the year ended September 30, 2019; 

We had an accumulated deficit of approximately $60.2 million as of September 30, 2019. We expect to continue to incur losses unless and until such time as one of our properties enters into commercial production and generates sufficient revenues to fund continuing operations. We recognize that if we are unable to generate significant revenues from mining operations and dispositions of our properties, we will not be able to earn profits or continue operations. At this early stage of our operation, we also expect to face the risks, uncertainties, expenses, and difficulties frequently encountered by companies at the start-up stage of their business development. We cannot be sure that we will be successful in addressing these risks and uncertainties and our failure to do so could have a materially adverse effect on our financial condition.

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Risks Associated with Mining and Exploration

Our Elder Creek Project is subject to certain future work expenditure requirements in order for us to earn an ownership portion of the property. The underlying Elder Creek JV with McEwen which Timberline (assumed from AGEI) has an earn-in right as operator with terms of earn-in as follows:

51% Earn-In for $2.6 M over 4 years by December 31, 2021, consisting of: 

Year 1: $100,000 One Time Cash Payment by May 17, 2018 amended to September 28, 2018 (completed) 

Year 1: $500,000 Work Commitment by December 31, 2018 (completed) 

Year 2: $500,000 Work Commitment by December 31, 2019 (completed) 

Year 3: $750,000 Work Commitment by December 31, 2020 

Year 4: $750,000 Work Commitment by December 31, 2021  

65% Earn-In for an additional $2.5M work commitment for a total of $5.1M over 6 years by December 31, 2023. 

We have met the work commitments for the Year 1 obligation and those of Year 2 ended December 31, 2019. If we are unable to raise sufficient funds through capital raising activities or through bringing in a project partner prior to the payment date, we may not have sufficient funds to meet our other future work commitment obligations at the time they become due under the agreement terms. If we are unable to make the expenditures by the specified dates and we are unable to negotiate an extension or new terms, we would default under the earn-in agreement and risk having the project revert back to the current owner and our investments in the project would be lost, which could have a materially adverse impact on our financial condition and the value of our common stock.

All of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral reserve on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from these properties, and if we do not do so, we will lose all of the funds that we expend on exploration. If we do not discover any mineral reserve in a commercially exploitable quantity, the exploration component of our business could fail.

We have not established that any of our mineral properties contain any mineral reserves according to recognized reserve guidelines, nor can there be any assurance that we will be able to do so. A mineral reserve is defined by the Securities and Exchange Commission in its Industry Guide 7 as that part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. The probability of an individual prospect ever having a "reserve" that meets the requirements of the Securities and Exchange Commission's Industry Guide 7 is extremely remote; in all probability, our mineral properties do not contain any “reserve”, and any funds that we spend on exploration will probably be lost. Even if we do eventually discover a mineral reserve on one or more of our properties, there can be no assurance that they can be developed into producing mines to extract those minerals. Both mineral exploration and development involve a high degree of risk, and few properties that are explored are ultimately developed into producing mines.

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade, and other attributes of the mineral deposit, the proximity of the mineral deposit to infrastructure such as a smelter, roads, and a point for shipping, government regulation, and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral deposit unprofitable.

Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral reserve in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral reserve. If we cannot exploit any mineral reserve that we might discover on our properties, our business may fail.

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial, and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, and other matters. Regarding our future ground disturbing activity on federal land, we will be required to obtain a permit from the US Forest Service or the Bureau of Land Management prior to commencing exploration. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could face difficulty and/or fail.

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We believe that we are in compliance with all material laws and regulations that currently apply to our activities, but there can be no assurance that we can continue to do so. Current laws and regulations could be amended, and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

Environmental hazards unknown to us, which have been caused by previous or existing owners or operators of the properties, may exist on the properties in which we hold an interest. In past years, we have been engaged in exploration in northern Idaho, which is currently the site of a Federal Superfund cleanup project. Although we are no longer involved in this or other areas at present, it is possible that environmental cleanup or other environmental restoration procedures could remain to be completed or mandated by law, causing unpredictable and unexpected liabilities to arise. At the date of this Annual Report, we are not aware of any environmental issues or litigation relating to any of our current or former properties.

Future legislation and administrative changes to the mining laws could prevent us from exploring our properties.

New state and U.S. federal laws and regulations, amendments to existing laws and regulations, administrative interpretation of existing laws and regulations, or more stringent enforcement of existing laws and regulations, could have a material adverse impact on our ability to conduct exploration and mining activities. Any change in the regulatory structure making it more expensive to engage in mining activities could cause us to cease operations.

Regulations and pending legislation governing issues involving climate change could result in increased operating costs, which could have a material adverse effect on our business.

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate change interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change could impose significant costs on us, our venture partners, and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Given the political significance and uncertainty around the impact of climate change and how it should be dealt with, we cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation. The potential physical impacts of climate change on our operations are highly uncertain and would be particular to the geographic circumstances in areas in which we operate. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels, and changing temperatures. These impacts may adversely impact the cost, production, and financial performance of our operations.

If we establish the existence of a mineral reserve on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the reserve, and our business could fail.

If we do discover mineral reserves in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the reserve, develop processes to extract it, and develop extraction and processing facilities and infrastructure. There can be no assurance that a mineral reserve will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.

Land reclamation requirements for our properties may be burdensome and expensive.

Although variable depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long-term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents and re-establish pre-disturbance land forms and vegetation.

In order to carry out reclamation obligations imposed on us in connection with our potential development activities, we must allocate financial resources that might otherwise be spent on further exploration and development programs. We plan to set up a provision for our reclamation obligations on our properties, as appropriate, but this provision may not be adequate. If we are required to carry out unanticipated reclamation work, our financial position could be adversely affected.

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Mining exploration and development are inherently hazardous and subject to conditions or events beyond our control, which could have a material adverse effect on our business and plans.

Mining and mineral exploration involves various types of risks and hazards, including:

environmental hazards; 

power outages; 

metallurgical and other processing problems; 

unusual or unexpected geological formations; 

personal injury, flooding, fire, explosions, cave-ins, landslides, and rock-bursts; 

inability to obtain suitable or adequate machinery, equipment, or labor; 

metals losses;  

fluctuations in exploration, development, and production costs; 

labor disputes; 

unanticipated variations in grade; 

mechanical equipment failure; and 

periodic interruptions due to inclement or hazardous weather conditions. 

These risks could result in damage to, or destruction of, mineral properties, production facilities, or other properties, personal injury, environmental damage, delays in mining, increased production costs, monetary losses, and possible legal liability.

Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our Company.

Mineral exploration, development, and production involve many risks, which even a combination of experience, knowledge, and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks inherent in the exploration, development and production of minerals, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence could have a material adverse impact on our Company.

Increased costs could affect our financial condition.

We anticipate that costs at our projects that we may explore or develop will frequently be subject to variation from one year to the next due to a number of factors, such as changing ore grade, metallurgy, and revisions to mine plans, if any, in response to the physical shape and location of the ore body. In addition, costs are affected by the price of commodities such as fuel, rubber, and electricity. Such commodities are at times subject to volatile price movements, including increases that could make production at certain operations less profitable. A material increase in costs at any significant location could have a significant effect on our profitability.

A shortage of equipment and supplies could adversely affect our ability to operate our business.

We are dependent on various supplies and equipment to carry out our mining exploration and, if warranted, development operations. Any shortage of such supplies, equipment, and parts could have a material adverse effect on our ability to carry out our operations and, therefore, limit or increase the cost of production.

Estimates of mineralized material are subject to evaluation uncertainties that could result in project failure.

Our exploration and future mining operations, if any, are and would be faced with risks associated with being able to accurately predict the quantity and quality of mineralized material within the earth using statistical sampling techniques. Estimates of any mineralized material on any of our properties would be made using samples obtained from appropriately placed trenches, test pits, and underground workings and intelligently designed drilling. There is an inherent variability of assays between check and duplicate samples taken adjacent to each other and between sampling points that cannot be reasonably eliminated. Additionally, there also may be unknown geologic details that have not been identified or correctly appreciated at the current level of accumulated knowledge about our properties. This could result in uncertainties that cannot be reasonably eliminated

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from the process of estimating mineralized material. If these estimates were to prove to be unreliable, we could implement an exploitation plan that may not lead to commercially viable operations in the future.

Mineral prices are subject to dramatic and unpredictable fluctuations.

We expect to derive revenues, if any, from the eventual extraction and sale of precious metals such as gold and silver. The price of those commodities has fluctuated widely in recent years, and is affected by numerous factors beyond our control including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new extraction developments, and improved extraction and production methods. The effect of these factors on the price of precious metals, and, therefore, the economic viability of any of our exploration projects, cannot accurately be predicted.

The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring mineral claims. If we cannot continue to acquire properties to explore for mineralized material, we may be required to reduce or cease exploration activity and/or operations.

The mineral exploration, development, and production industry is largely fragmented. We compete with other exploration companies looking for mineral properties and the minerals that can be produced from them. While we compete with other exploration companies in the effort to locate and license mineral properties, we do not compete with them for the removal or sales of mineral products from our properties if we should eventually discover the presence of them in quantities sufficient to make production economically feasible. Readily available markets exist worldwide for the sale of gold and other mineral products. Therefore, we will likely be able to sell any gold or mineral products that we identify and produce.

There are hundreds of public and private companies that are actively engaged in mineral exploration. A representative sample of exploration companies that are similar to us in size, financial resources, and primary objective include such publicly traded mineral exploration companies as Allegiant Gold Ltd. (AUAU.V), NuLegacy Gold Corp (NUG.V), Otis Gold Corp. (OGLDF), Adamara Minerals Corp. (ADZ.V), Comstock Mining Inc. (LODE).

Many of our competitors have greater financial resources and technical facilities. Accordingly, we will attempt to compete primarily through the knowledge and experience of our management. This competition could adversely affect our ability to acquire suitable prospects for exploration in the future. Accordingly, there can be no assurance that we will acquire any interest in additional mineral properties that might yield reserves or result in commercial mining operations.

Third parties may challenge our rights to our mineral properties, or the agreements that permit us to explore our properties may expire, if we fail to timely renew them and pay the required fees.

In connection with the acquisition of our mineral properties, we sometimes conduct only limited reviews of title and related matters, and obtain certain representations regarding ownership. These limited reviews do not necessarily preclude third parties from challenging our title and, furthermore, our title may be defective. Consequently, there can be no assurance that we hold good and marketable title to all of our mining concessions and mining claims. If any of our concessions or claims were challenged, we could incur significant costs and lose valuable time in defending such a challenge. These costs or an adverse ruling with regards to any challenge of our titles could have a material adverse effect on our financial position or results of operations. There can be no assurance that any such disputes or challenges will be resolved in our favor.

We are not aware of challenges to the location or area of any of our mining claims. There is, however, no guarantee that title to the claims will not be challenged or impugned in the future.

Acquisitions and integration issues may expose us to risks.

Our business strategy includes making targeted acquisitions. Any acquisition that we make may be of a significant size, may change the scale of our business and operations, and may expose us to new geographic, political, operating, financial, and geological risks. Our success in our acquisition activities depends on our ability to identify suitable acquisition candidates, negotiate acceptable terms for any such acquisition and integrate the acquired operations successfully with our own. Any acquisitions would be accompanied by risks. For example, there may be significant decreases in commodity prices after we have committed to complete the transaction and have established the purchase price or exchange ratio; a potential mineralized property may prove to be below expectations; we may have difficulty integrating and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise and maintaining uniform standards, policies and controls across the organization; the integration of the acquired business or assets may disrupt our ongoing business and our relationships with employees, customers, suppliers, and contractors; and the acquired business or assets may have unknown liabilities which may be significant. If we choose to use

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equity securities as consideration for such an acquisition, existing shareholders may suffer dilution. Alternatively, we may choose to finance any such acquisition with our existing resources. There can be no assurance that we would be successful in overcoming these risks or any other problems encountered in connection with such acquisitions.

Joint ventures and other partnerships in relation to our properties may expose us to risks.

We are currently involved in, and may enter into in the future, joint ventures or other partnership arrangements with other parties in relation to the exploration, development, and production of certain of the properties in which we have an interest. Joint ventures can often require unanimous approval of the parties to the joint venture or their representatives for certain fundamental decisions such as an increase or reduction of registered capital, merger, division, dissolution, amendments of constating documents, and the pledge of joint venture assets, which means that each joint venture party may have a veto right with respect to such decisions which could lead to a deadlock in the operations of the joint venture or partnership. Further, we may be unable to exert control over strategic decisions made in respect of such properties. Any failure of such other companies to meet their obligations to us or to third parties, or any disputes with respect to the parties' respective rights and obligations, could have a material adverse effect on the joint ventures or their properties and, therefore, could have a material adverse effect on our results of operations, financial performance, cash flows, and the price of our common stock.

Risks Related to Our Company

Minimal staffing may be reasonably likely to materially affect the Company’s internal control over financial reporting

With a very limited staff, it is difficult to maintain appropriate segregation of duties in the initiating and recording of transactions, thereby creating a segregation of duties weakness. Due to the significance of segregation of duties to the preparation of reliable financial statements, this weakness may result in more than a remote likelihood that a material misstatement or lack of disclosure within the annual or interim financial statements not be prevented or detected.

Conflicts of Interest

Certain of our officers and directors may be or become associated with other businesses, including natural resource companies that acquire interests in mineral properties. Such associations may give rise to conflicts of interest from time to time. Our directors are required by Delaware Corporation law to act honestly and in good faith with a view to our best interests and to disclose any interest, which they may have in any of our projects or opportunities. In general, if a conflict of interest arises at a meeting of the board of directors, any director in a conflict will disclose his interest and abstain from voting on such matter or, if he does vote, his vote will not be counted.

We have not adopted any separate formal corporate policy regarding conflicts of interest; however, other corporate governance measures have been adopted, such as creating a directors’ audit committee requiring independent directors. Additionally, our Code of Ethics does address areas of possible conflicts of interest. As of the date of filing of this report, we had three independent directors on our board of directors (Leigh Freeman, Paul Dircksen and David Mathewson). We have formed three committees to ensure our legal compliance. We established an independent audit committee consisting of two independent directors, both of whom were determined to be “financially literate” and one of whom was designated as the “financial expert.” We also formed a compensation committee comprised entirely of independent directors and a corporate governance and nominating committee, a majority of which is comprised of independent directors. At this time, we feel that these committees and our Code of Ethics provide sufficient corporate governance for our purposes.

Dependence on Key Management Employees

Our ability to continue our exploration and development activities and to develop a competitive edge in the marketplace depends, in large part, on our ability to attract and maintain qualified key management personnel. Competition for such personnel is intense, and there can be no assurance that we will be able to attract and retain such personnel. Our development now and in the future will depend on the efforts of key management figures such as Steven Osterberg and Ted Sharp. The loss of any of these key people could have a material adverse effect on our business. In this regard, we have attempted to reduce the risk associated with the loss of key personnel and have obtained directors and officers insurance coverage. In addition, our shareholders have approved our 2015 Stock and Incentive Plan and 2018 Incentive Plan so that we can provide incentives for our key personnel.

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We may not realize the benefits of Eureka, Elder Creek, Paiute, Lookout Mountain, Seven Troughs and other acquired growth projects.

As part of our strategy, we will continue existing efforts and initiate new efforts to develop gold and other mineral properties. We have four such project areas, including Eureka, Elder Creek, Paiute, Lookout Mountain and Seven Troughs. A number of risks and uncertainties are associated with the development of these types of projects, including political, regulatory, design, construction, labor, operating, technical and technological risks, and uncertainties relating to capital and other costs and financing risks. The failure to successfully develop any of these initiatives could have a material adverse effect on our financial position and results of operations.

As part of our business model, we pursue a strategy that may cause us to expend significant resources exploring properties that may not become revenue-producing sites, including the Eureka projects.

Part of our business model is to pursue a strategy which includes significant exploration activities, such as proposed exploration and, if warranted, development at the Eureka, Elder Creek, Paiute, and the Seven Troughs projects. Because of the nature of exploration for precious metals, a property’s exploration potential is not known until a significant amount of geologic information has been generated. We may spend significant resources exploring and developing the projects and gathering certain geologic information only to determine that the project is not capable of being a revenue-producing property for us.

Our business is subject to evolving corporate governance and public disclosure regulations that have increased both our compliance costs and the risk of noncompliance, which could have an adverse effect on our stock price.

We are subject to changing rules and regulations promulgated by a number of governmental and self-regulated organizations, including the SEC and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity, and many new requirements have been created in response to laws enacted by Congress, making compliance more difficult and uncertain. For example, on July 21, 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) with increased disclosure obligations for public companies and mining companies in the United States. Our efforts to comply with the Dodd-Frank Act and other new regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of our management’s time and attention from operating activities to compliance activities.

We are required to comply with Canadian securities regulations and are subject to additional regulatory scrutiny in Canada.

We are a “reporting issuer” in the Canadian provinces of British Columbia and Alberta. As a result, our disclosure outside the United States differs from the disclosure contained in our SEC filings. Our reserve and resource estimates disseminated outside the United States are not directly comparable to those made in filings subject to SEC reporting and disclosure requirements, as we generally report reserves and resources in accordance with Canadian practices. These practices are different from the practices used to report reserve and resource estimates in reports and other materials filed with the SEC. It is Canadian practice to report measured, indicated, and inferred resources, which are generally not permitted in disclosure filed with the SEC. In the United States, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. United States investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. Further, “inferred resources” have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Disclosure of “contained ounces” is permitted disclosure under Canadian regulations; however, the SEC only permits issuers to report “resources” as in place tonnage and grade without reference to unit measures. Accordingly, information concerning descriptions of mineralization, reserves, and resources contained in disclosure released outside the United States may not be comparable to information made public by other United States companies subject to the reporting and disclosure requirements of the SEC.

We are also subject to increased regulatory scrutiny and costs associated with complying with securities legislation in Canada. For example, we are subject to civil liability for misrepresentations in written disclosure and oral statements. Legislation has been enacted in these provinces which creates a right of action for damages against a reporting issuer, its directors and certain of its officers in the event that the reporting issuer or a person with actual, implied, or apparent authority to act or speak on behalf of the reporting issuer releases a document or makes a public oral statement that contains a misrepresentation or the reporting issuer fails to make timely disclosure of a material change. We do not anticipate any particular regulation that would be difficult to comply with. However, failure to comply with regulations may result in civil awards, fines, penalties, and orders that could have an adverse effect on us.

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Risks Associated with Our Common Stock

Our stock price has been volatile and your investment in our common stock could suffer a decline in value.

We are subject to the continued listing criteria of the TSX-V and our failure to satisfy these criteria may result in delisting of our shares of common stock.

If the TSX-V delists our shares of common stock, investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced liquidity, decreased analyst coverage of our securities, and an inability for us to obtain additional financing to fund our operations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 2. DESCRIPTION OF PROPERTIES

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We pay federal and county claim maintenance fees on the Eureka property. The federal claim fees are due to the BLM by September 1 of each year, and the remainder is due to Eureka County by November 1 of each year. The following table summarizes the claims and royalties for the Eureka property:

Eureka Property Claim and Royalty Summary

Of the claims listed above, the 373 Lookout Mountain claims, the 108 South Ratto claims, 8 of the 16 South Rustler/W-Claims, 56 of the 111 unpatented Secret Canyon/Oswego claims and the 6 patented Secret Canyon/Oswego claims were transferred to Lookout Mountain LLC under the terms of the Lookout Mountain LLC agreement with PM&G. The 2 patented New York Canyon claims that were abandoned in fiscal 2019 have been removed from the table.

We have the right to explore and develop the Lookout Mountain project subject to a mining lease and agreement dated August 22, 2003 with Rocky Canyon Mining Company, and amended on June 1, 2008. The lease term was extended to 20 years on June 1, 2008, and thereafter for as long as minerals are mined on the project. Advance royalty payments are $6,000 per month, or $72,000 per year. Pursuant to the amended lease, annual minimum exploration expenditures of $250,000 are required for five years commencing on June 1, 2008, and an additional expenditure of $250,000 is required before June 1, 2016, for a total minimum work commitment of $1,500,000. Exploration expenditures in excess of $250,000 in any year can be accumulated

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and carried forward and credited to expenditures required in succeeding years. We have fulfilled the work commitment on the Lookout Mountain project. A 3.5% NSR royalty, plus a 1.5% NSR royalty capped at $1.5 million (excludes Trevor and Dave claims) exists on the project.

During the year ended September 30, 2012, we acquired the Windfall patented claims. The claims were acquired in exchange for $400,000 cash and 76,662 shares of our common stock with a value of $500,000, based upon the weighted-average closing price of our common stock on the NYSE MKT during the 15 days prior to the acquisition. A 4% NSR royalty exists on these claims.

The Secret Canyon/Oswego, South Ratto, and New York Canyon claim groups are owned by us, subject to royalty agreements. NSR royalties of 2% exist on the projects for claims located within one mile of the Windfall Patented claims. A small portion of the Heiro-Syracuse claim group is subject to an additional 1% NSR.

The Hamburg Ridge project is composed of the Hoosac, North Amselco, and South Rustler/W claim groups. The Hoosac and North Amselco claims are owned by us and are currently under lease to Royal Crescent Valley, LLC, a subsidiary of Royal Gold, Inc. During FY 2018, Royal Gold maintained BLM lease payments and Eureka County fees on the Hoosac and North Amselco claim groups. They also pay Timberline Advanced Minimum Royalty payments on a monthly basis. The South Rustler/W-Claims are owned by DFH Co.

Accessibility, Physiography, Climate and Infrastructure

U.S. Highway 50 passes to the east of the Eureka property and access is gained by heading south out of Eureka on U.S. Highway 50 and connecting with unpaved local roads, some of which are periodically maintained by Eureka County. The turnoff for the New York Canyon claim group is about a half mile south of Eureka on U.S. Highway 50 and is an unpaved road running up New York Canyon to the east side of the claim group.

The Windfall group and the northern parts of the Hoosac and Lookout Mountain groups are accessed by the Windfall Canyon Road and its westward extension (the former haul road for the Lookout Mountain Mine), which turns southwest off U.S. Highway 50 approximately 2 miles south of Eureka.

The southern parts of the Eureka property are accessed by traveling approximately 8 miles south of Eureka on U.S. Highway 50 to South Gate, then 1 mile south-southwest on the Fish Creek Valley road to the unimproved Secret Canyon Road, then northwest to the southern part of the Hoosac claims. Approximately 2 miles from South Gate on the Fish Creek Valley Road, a turnoff to the west and northwest on the Ratto Canyon Road accesses the southern portion of the Lookout Mountain group. Many dirt tracks within the Eureka property allow additional access.

Terrain on the Eureka property is rugged, with high ridges, steep canyons, and narrow valleys. Elevations range from 7,000 to 9,000 feet (2,100-2,400 m). Ridges show abundant bedrock exposures, slopes and valleys are typically covered by soil and alluvium. Sagebrush abounds in lower-elevation areas while juniper and pinion cover the higher elevations. Grasses and shrubs grow on the highest ridge tops. The climate of the project area is semi-arid with the area receiving moderate winter snows and occasional summer thunderstorms, with heavy rain from time to time during otherwise hot and dry summers. In winter, access is not maintained off the paved roads and November snow commonly lingers until April.

Summer temperatures usually consist of many consecutive days over 90º F (32.2º C), and temperatures can reach as high as 100º F (40.6° C) or more. Winter temperatures generally range from as cold as below 0º F (-17.8ºC) to usually in the 20º to 35ºF (-6.67º to 1.7 º C) range. Precipitation amounts vary from year to year, averaging about 10.0 inches (25.4 cm) for the area. Several feet of snow usually accumulate on the property during the winter months.

The Eureka property is situated in north-central Nevada in an area with established mining infrastructure. Transmission power lines serve Eureka from the north. All essential services such as food and lodging are available in Eureka, including the dockage for shipments of heavy equipment. A small airport at Eureka is available for private air transport. Railroad access is also available in the area. The gold mines of north-central Nevada continue to produce a significant portion of the world’s gold, and skilled miners and mining professionals are available in Eureka, and 100 miles to the north in Carlin, Elko, and Spring Creek. Permitting a mining operation in Nevada has been a process with which local, state, and federal regulators are very familiar and generally cooperative.

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Historical Exploration: 1970’s to 1990’s

The most significant exploration on the Eureka property has been the drilling programs mounted over recent years. Drilling on the Hoosac and Windfall claims date from Norse-Windfall (63 holes, 1970s-1980s), Amselco (8 holes, mid-1980s), Tenneco (18 holes, 1989-1991), Pathfinder (18 holes, 1993), and Pathfinder/Cambior (36 holes, 1995-1997). On the Lookout Mountain claim group, drilling programs began with Amselco (296 holes, 1978-1985) followed by the Windfall group (20 holes, 1986), EFL Gold Company (10 holes, 1990), Nevada Gold (40 holes, 1992-93), and Echo Bay (70 holes, 1994-95). The drilling programs were conducted concurrent with and guided by extensive geologic mapping, geochemical rock and soil sampling programs, and air and ground geophysics. Geological mapping and geochemical programs were very successful in discovering target areas characterized by permissive structures and traces of gold with arsenic, antimony, and mercury anomalies in soil and rock.

The methods of collection and analyses of some historical soil and rock samples were not always available in the data, but it is likely that the samples were collected, documented, prepared, and analyzed to the standards of professional diligence and analytical techniques applicable at the time. The importance of a geochemical-geological exploration approach is evidenced by the fact that the drilling of many such anomalies has resulted in significant indications of disseminated gold mineralization. The Windfall, Rustler, and Paroni deposits on the Windfall claims and the Lookout Mountain deposit were discovered by drilling soil and rock anomalies in permissive structural and stratigraphic settings. Drill testing of several geochemical anomalies in permissive geological settings has also resulted in the discovery of several additional promising zones of gold mineralization on the Hamburg Ridge, Windfall, and Lookout Mountain claim groups. As yet, these zones have not been fully tested.

Amselco Exploration began exploring the Lookout Mountain project in 1978, conducting extensive geologic mapping, soil and rock sampling and an initial 15-hole reverse circulation drilling program which tested gold mineralization along the Ratto Ridge Fault and associated geochemical anomalies and jasperoids developed along the N-S trending Ratto Ridge. This drilling discovered significant sediment-hosted disseminated gold mineralization at depth. Amselco drilled 296 holes between 1978 and 1985, also discovering five areas of gold mineralization along Ratto Ridge which contain partially developed gold resources. These areas are located at South Lookout Mountain, Pinnacle Peak, Triple Junction, South Ratto Ridge, and South Adit. In 1986, while Amselco was in process of becoming BP Minerals, Amselco management decided that the Lookout Mountain deposit was not of further interest, even though their geologists reportedly believed the deposit had significant potential. The property was optioned to a joint venture of three companies which then owned Norse-Windfall Mines.

In 1990, EFL Gold Mines took bulk samples from the floor of the Lookout Mountain pit. These samples returned assays values ranging from 0.10 to 0.135 oz. of gold/ton. EFL also drilled nine holes, two of which, drilled 500 feet (152 meters) into the floor of the pit, showed both oxide and sulfide gold mineralization.

During the period 1992-1993, Nevada Gold completed geologic mapping, took more than 500 soil samples to expand and fill in Amselco’s soil grid, and drilled 42 widely spaced holes, primarily along Ratto Ridge. Drilling targeted favorable stratigraphy at depth near fault intersections. Nevada Gold discovered that geochemical anomalies are apparently controlled by E-NE and N-NW to NW trending cross structures which intersect the N-S trending Ratto Ridge Fault. Much of the Nevada Gold work focused on the potential in Cambrian Dunderberg Shale and Hamburg Dolomite east of the Ratto Ridge Fault, and potential in the Devonian Nevada Group, especially the Bartine Limestone west of the fault. Outcrops of Bartine Limestone in the area show weak gold mineralization, strong alteration, and anomalous pathfinder element geochemistry. Nevada Gold drilled 42 holes to a maximum depth of approximately 1,300 feet and encountered several gold intercepts.

Work by Nevada Gold also included air and ground geophysics and a stratigraphic and geochemical study in conjunction with geologic mapping to develop and prioritize several target areas. Approximately 800 rock samples were collected and had high-quality multi-element ICP, graphite furnace analyses at MB Associates in California, and ICP and neutron activation analysis at Activation Laboratories in Canada. However, geological and geochemical targets, or additional drilling in areas of known mineralization previously discovered by Amselco found insufficient mineralization to meet Nevada Gold’s objectives. It should be noted that the potential for mineralization west of the Ratto Ridge crest has not been explored adequately.

Echo Bay (1993-95) not only worked Ratto Ridge but also acquired additional ground to the north, south, and southwest. They conducted mapping, sampling, and scattered drilling in the area, exploring deep high-grade potential in the Cambrian Dunderberg Shale and Hamburg Dolomite, and testing Devonian Nevada Group targets west of the Ratto Ridge Fault. Echo Bay drilled several promising holes, including drill hole EBR 27 which intersected 110 feet (34 m) grading 0.043 oz. of gold/ton in the Dunderberg, and drill hole EBR-9 which intersected 115 feet (35 m) grading 0.043 oz. of gold/ton in the Nevada Group. Offsets of EBR-9 found 90 feet grading 0.028 oz. of gold/ton, and another hole which was lost before reaching planned depth found 45 feet (14 m) of 0.024 oz. of gold/ton. Further offsets of EBR-9 and several widely spaced holes averaging 1,000 feet (305 m) deep (EBR 15, 16, 17, 18, and 20) found some anomalous gold along Ratto Ridge but no major

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intercepts. Eventually, the Echo Bay project totaled 104 RC holes. Faced with depletion of budgets with no significant exploration success, the decline in gold prices and large land payments, Echo Bay decided to drop the property.

On the Windfall, Hamburg Ridge, and New York Canyon claim groups, Bill Wilson of the Idaho Mining Corp, then Windfall Venture, later Norse-Windfall, initiated reconnaissance mapping, soil and rock chip sampling, trenching, and drilling in the early 1970s. He noted that the original underground Windfall Mine, which was discovered in 1908 and produced approximately 65,000 tons of “invisible gold” mineralized rock grading 0.368 oz./ton, was a Carlin-type sediment-hosted disseminated gold occurrence. Wilson’s work emphasized the east side of Hamburg Ridge, the Windfall Trend, where he drilled, with conventional air rotary, holes F1 through F20, and Z-1 through Z-31, Z42, and ZA-1 on the current Windfall group. He drilled holes Z32-41 on the Hoosac group. The drill holes were generally from 50 to 250 feet deep. Six of Wilson’s original forty-three Z-holes intersected gold mineralization exceeding 0.02 oz. of gold/ton. This success led to infill drilling and the development of the Windfall open pit mine in 1975, and soon thereafter, the Rustler and Paroni open pit mines. Gold was extracted in a heap-leach operation from sanded and silicified dolomite and silicified shale.

No geologic maps exist from this period other than a few maps compiled from USGS work. Although many drill hole location maps are archived in Century Gold files, the coordinates for many drill hole collars are not available, very few collars are visible in the field, and assay data from infill drilling is poorly documented.

Exploration: 2005 to 2010 (Staccato Gold)

Staccato Gold advanced exploration of the Eureka property and completed drilling between 2005 and 2007, and in follow-up initiated a comprehensive work program in June 2008 which included geologic modeling of all drilling results. This modeling included structural and stratigraphic controls to mineralization, additional density determinations, and new drilling and metallurgical test data. Results of this work were incorporated into subsequent exploration work completed since 2008.

From 2005-2007 core drilling programs at Lookout Mountain completed by Staccato Gold provided data to better define stratigraphy in the higher-grade breccia-hosted gold zones at the Lookout Mountain pit and discovered new areas of mineralization. The core drilling and a drill hole re-logging program demonstrated the stratabound nature of gold mineralization in thick zones of collapse breccia within carbonate rock flanking the Ratto Ridge structural zone. Metallurgical and other technical characteristics of known mineralization were subsequently investigated at Lookout Mountain.

In October 2009, Staccato Gold also initiated work at the Windfall Project including detailed mapping and sampling programs and completed a ten-hole drill program totaling 8,030 feet (2,448 m). The drilling program focused on testing the extent of gold mineralization below the Windfall and Rustler open pits, located approximately 3 miles northeast of the main Lookout Mountain project mineralized area. The Windfall project is one of several prospective gold projects on our extensive Eureka property in Nevada.

Results from the surface mapping program, review of historical production and geologic maps, and drilling indicate that high-grade gold is locally controlled within cross structures cutting the main Windfall fault zone, at the contact between the Hamburg Dolomite and Dunderburg Shale. The 2009 drill program tested approximately 3,600 feet (1,097 m) of strike length of the Windfall fault zone with wide spaced drilling. The Windfall fault zone is part of an extensive mineralized structural trend which extends for over 17,000 feet (5,182 m) based on historical data.

All holes in the 2009 exploration program encountered thick intercepts of low-grade gold (holes 5–12) or anomalous gold mineralization (holes 13 and 14) within the Windfall fault zone. The offset and exploration holes drilled define the Windfall fault zone as a 150 to 200-foot (46 – 61 m) thick zone striking roughly north-south and dipping approximately 60 degrees to the east, containing two or more significant zones of mineralization.

Five of the ten holes were drilled as offsets to follow up on the high-grade gold intercept drilled in hole 4 (75 feet (23 m) at 0.153 ounces of gold/ton), and five were drilled as exploratory holes to test the strike and dip extent of the Windfall fault zone. Several thick intercepts of gold mineralization were returned, including 135 feet (41 m) at 0.011 ounces of gold/ton in hole 7, 135 feet (41 m) at 0.016 ounces of gold/ton in hole 8, 115 feet (35 m) at 0.010 ounces of gold/ton in hole 9, and 100 feet (30.5m) at 0.018 ounces of gold/ton in hole 11.

A secondary hanging wall structure identified by the mapping program was also encountered in drill holes 7, 8, 11, and 13 and is characterized by strong silicification and decalcification of Windfall Formation and Dunderberg shale in the hanging wall side of the fault, and Dunderberg shale and Hamburg Dolomite on the footwall side. Drilling indicates a down to the east offset of the Dunderberg – Hamburg contact. This secondary structure represents an attractive and untested target at depth.

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Lookout Mountain Exploration

We believe that the Eureka property has excellent potential for continued exploration success. The current Lookout Mountain mineralization is defined over a middle section of a mineralized structural corridor that extends up to 6 to 7 kilometers (3.7 to 4.3 miles) in strike length. This structure hosts several areas of drill-indicated mineralization, and the exploration potential in this corridor is strong, as evidenced by historical drilling, and soil and rock geochemical analyses. The Lookout Mountain mineralization itself is open for expansion at depth and along strike, especially to the south. Regionally, several other target areas also exist where historical production and exploration have occurred, but only limited systematic exploration has been conducted.

The Lookout Mountain project and Windfall project areas have now been mapped and sampled including a detailed program conducted over the main mineralized areas. The principal objectives of the mapping and sampling program were to characterize offsets along the main mineralized fault zones at Windfall and Lookout Mountain, identify orientations of mineralized cross structures intersecting the main structural zones, and follow up on soil anomalies. The mapping program, combined with surface sampling and acquisition of historical data, has provided a clearer understanding of the structures along the Ratto Ridge and Windfall areas, as well as identified several significant new exploration target areas.

Over 400 drill holes have been re-logged along Ratto Ridge at Lookout Mountain to ensure geologic consistency with surface mapping. Based on this work, new geologic cross sections and plans were constructed for the entire Lookout Mountain deposit. Geologic grade shells have also been built, and construction of a 3-D model of the geology based on the results of historical drill re-logging and mapping efforts was completed. This new work led to an updated mineral estimate that resolved past technical issues and provides a basis for potentially advancing the property following additional drilling.

An exploration Plan of Operations has been approved by the BLM and the State of Nevada Department of Environmental Protection (“NDEP”) for the Lookout Mountain project. The Plan of Operations calls for approximately 266 acres of disturbance that can be accessed for use in a phased approach, and covers the entire Ratto Ridge structural zone. The Plan of Operations will allow us to complete additional infill, metallurgical, and exploration drilling necessary to advance the development of the Lookout Mountain project.

From 2010 through 2013, the exploration work programs totaled approximately $9,000,000 on the Eureka property. Program objectives were to obtain sufficient data to prepare an NI 43-101 compliant technical report at Lookout Mountain, conduct initial gold recovery studies, initiate environmental baseline investigations, better understand the controls of mineralization, and to outline additional exploration drill targets. In summary, these objectives were met in the 2010-2013 exploration by completion of the following:

16,675 feet (5,083 m) of core drilling focused primarily for metallurgical and geotechnical scoping studies; 

46,965 feet (14,315 m) of reverse circulation (RC) drilling directed primarily at resource in-fill and definition drilling; 

Drill testing of high-grade sulfide lenses within the oxide mineralization to better understand the geologic controls and geometry; 

Additional testing activities, including metallurgical testing on core samples, channel sampling and bulk sampling within the historical Lookout Mountain pit, identification of additional exploration targets on the Eureka Property outside of the main Lookout Mountain Project area, and drilling and construction of additional groundwater monitoring wells. 

An initial technical report entitled, Technical Report on the Lookout Mountain Project, Eureka County, Nevada, USA, compliant with NI 43-101 (“2011 Technical Report”), was completed on May 2, 2011. The Technical Report was prepared by Mine Development Associates (“MDA”) of Reno, Nevada under the supervision of Michael M. Gustin, Senior Geologist, who is a qualified person under NI 43-101. The Technical Report details mineralization at the Lookout Mountain Project. In addition, significant exploration potential was noted.

The Technical Report was modeled and estimated by MDA by statistical evaluation of available drill data utilizing geologic interpretations provided by Timberline. The geologic interpretations were used to constrain gold mineral domains on vertical cross sections spaced at 50- to 100-foot intervals across the extents of the Lookout Mountain mineralization. The cross sections were rectified to the mineral-domain interpretations on level plans spaced at 10-foot intervals, analyzing the modeled mineralization geostatistically to aid in the establishment of estimation parameters, and interpolating grades into a three-dimensional block model.

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The final drill results of the 2011 exploration program were successfully incorporated into the NI 43-101 compliant “Updated Technical Report on the Lookout Mountain Project, Eureka County, Nevada, USA” issued by MDA on May 31, 2012 (“2012 Technical Report”). As a result of the 2011 exploration program, we successfully extended the mineralized zone at Lookout Mountain 600 feet to the south of the existing mineral deposit, and expanded mineralization along the west margin of the deposit. Results from Lookout Mountain, and from the South Adit area, significantly increased the reported mineralization at the Lookout Mountain Project.

Assay results from drilling during the 2012 and 2013 exploration program were incorporated into an NI 43-101 compliant “Updated Technical Report on the Lookout Mountain Project, Eureka County, Nevada, USA” issued by MDA on April 11, 2013 (“2013 Technical Report”).

Cautionary Note to U.S. Investors: The Lookout Mountain Technical Report uses the terms “mineral resource,” “measured mineral resource,” “indicated mineral resource” and “inferred mineral resource”. We advise investors that these terms are defined in and required to be disclosed by Canadian regulations (NI 43-101); however, these terms are not defined terms under Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. As a reporting issuer in Canada, we are required to prepare reports on our mineral properties in accordance with NI 43-101. We reference the Lookout Mountain Technical Report in this Annual Report on Form 10-K for informational purposes only, and the Lookout Mountain Technical Report is not incorporated herein by reference. Investors are cautioned not to assume that all or any part of a mineral deposit in the above categories will ever be converted into Guide 7 compliant reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.

Eureka

Exploration activities at Eureka were curtailed during 2014, as a result of the limited availability of capital. To reduce ongoing expenses, we consolidated our Elko field office into our Eureka facility and limited the exploration program. The limited program did include geochemical waste rock environmental characterization, independent metallurgical testing, and continued monitoring of water quality, and definition of hydrologic work plans. In addition, geologic mapping, and stratigraphic and structural analyses have been completed along with rock and soil sampling in selected detailed areas. This activity has resulted in identification of new targets characterized by anomalous mineralogy and trace element geochemistry as indicators of possible gold mineralization.

In fiscal 2015, three holes were drilled at Lookout Mountain to confirm a previously recognized partial drill intercept of higher-grade gold mineralization at depth. This higher-grade mineralization is associated with the previously defined zone along Ratto Ridge of near-surface, low-grade gold mineralization. The four drill holes were offset approximately 140 feet from a single previous partial intercept. The geology in the holes is stratigraphically well correlated with gold intercepts occurring in mineralized variably carbonaceous collapse breccias similar to previous gold intercepts in the pyritic Dunderberg Shale-Hamburg Dolomite contact zone. The four intercepts are thought by Timberline geologists to be related to a higher-grade occurrence as recognized in many deeper levels of Carlin-type systems. Highlights of 2015 Lookout Mountain drilling include 65 feet (19.8 m) @ 0.09 ounces of gold per ton, including 25 feet (7.6 m) @ 0.14 opt in BHSE-171. Three of four recently drilled Lookout holes intercepted >3 g/t gold over lengths of approximately 15 to 5 feet (4.5 to 7.6 meters).

During the continued difficult commodities environment of fiscal year 2016 and 2017, we did not complete any drilling or field exploration activities on the Eureka Project. However, we have secured 19 historical mine-related workings including shafts, adits, and trenches to ensure public safety in compliance with State of Nevada Abandoned Mine Lands regulations. In addition, with field reviews, we did complete a reconciliation of BLM and Nevada state bond calculations with actual disturbed acreage. This process was subsequently completed in early fiscal year 2017. We also initiated reclamation of drill sites at Lookout Mountain which will, when completed, result in staged refunds of bond funds.

During fiscal year 2018, we completed a detailed geologic review and reinterpretation of the Lookout Mountain gold mineralization. Work focused on internal geologic modeling of 17 intercepts of high-grade (>0.136 opt & up to 2.250 opt) gold mineralization that is associated with extensive zones of structurally controlled fault- and gouge-breccias, as well as carbonaceous collapse-breccia (see Table below). The gold mineralization is associated with orpiment and realgar (arsenic sulfides), which are commonly found in many major Carlin-type gold deposits. This geologic review led to design and completion of a detailed gravity survey and further analysis of historical geophysical survey data. A detailed grid area around the historical Lookout Mountain open-pit area defined a circular gravity low approximately 1.25 miles (2 km) in diameter and bounded and cut by several complex internal structures. The west margin of the anomaly is coincident with jasperoid alteration

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and gold mineralization of the Lookout Mountain resource. The gravity anomaly is recognized to correlate well with reduced-to-pole airborne magnetics survey and geologic mapping. Major structures identified by magnetics and geologic mapping bound the gravity anomaly.

The results of the geological review are as follows:

Three lines of historical (1992) IP data at Lookout Mountain define three N-S trending anomalies which are partially coincident with the high-grade gold drill intercepts and fault structures. In addition, a single line of historical Controlled Source Audio Magneto-Telluric (CSAMT) data which crosses the Lookout Mountain historical open-pit area was also reviewed in the context of the recently collected gravity data. The gravity data coordinates well with structures identified in the CSAMT and with magnetic signatures and geologic mapping. In particular, the CSAMT data identify a high-resistivity feature spatially associated with jasperoid along the west boundary of an area of low resistivity interpreted to be a graben. The graben’s west boundary is extensively drilled and is approximately coincident the existing north-south trending gold resource at Lookout Mountain. The central portion of the graben contains a large, high-resistivity anomaly, which has only been tested locally on the west side by only four previously noted closely-spaced holes (BHSE-152, -171, -172, -173), all of which contain relatively high-grade gold. The gold is associated with vein-like and brecciated arsenic sulfides within carbonaceous breccia, above extensively altered (“sanded” and veined) limestone, and below altered shale. The east boundary fault, and other faults within the graben structure remain undrilled and represent priority target areas.

Windfall Exploration

In 2015, we also completed a six-hole RC drill program on the Windfall target. The drilling successfully tested the on-strike, offset, and down-dip extensions of gold mineralization that was previously mined at Windfall. Six drill holes completed over a strike length of approximately 3,000 feet (914 m) intersected gold mineralization consistent with results from over 600 historical drill holes, highlighted by BHWF-40 which intersected 80 feet (24.9 m) at 0.09 opt of gold including a subsection of 20 feet (6.1 m) @ 0.26 opt of gold.

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In 2018, additional field work focused on rock grab sampling combined with compilation of drilling data and geologic modeling, has traced a continuous zone of gold mineralization along a length of approximately 1.7 miles (2.7 km) in and between the historical Rustler, Windfall, and South Paroni pits. The sampling collected 40 rock chip samples. Highlights included 10 samples with greater than 1 g/t (0.029 opt) gold and 6 greater than 3 g/t (0.088 opt), up to a maximum of 13.1 g/t (0.382 opt). In total, 17 samples assayed greater than 0.250 g/t (0.007 opt), documenting the extensive zone of gold mineralization. These pits produced approximately 115,000 oz of gold from oxidized, near-surface ore and were among the first heap-leach mining operations in Nevada.

With results of recent rock grab sampling, the Company has identified several priority targets for drill testing. The anticipated initial targets will be sited on patented claims owned by Timberline.

Oswego Exploration

The Oswego trend is the central of three parallel, north-south, gold-mineralized structural trends on the Eureka property. Results of 2018 surface rock chip sampling and geologic mapping have defined, high-grade, gold exploration targets along the Oswego trend. The Oswego trend, which extends 3.1 miles (5 km) north-south, includes high-grade gold at the Road-Cut target which is situated approximately 4,000 feet (1.2 km) due east of the Lookout Mountain resource area, and high-grade silver and gold at the Geddes- Bertrand target, and numerous additional untested targets.

In 2018, company geologists generated and announced assay results for 54 rock samples collected at Oswego. Most notably, 9 grab samples were collected at approximately 20 feet (6 m) spacing over a 180-foot (55 m) section of road cut along a moderately east-dipping, strongly mineralized fault zone (the Road-Cut target). The assays averaged 0.4 ounces per ton (opt) gold. The Road-Cut target sits approximately 2,000 feet (610 m) east of the major graben-bounding fault structure associated with the Lookout Mountain gold resource. The relatively close proximity of the Road-Cut occurrence to structures associated with Lookout Mountain suggests a possible geologic connection.

The occurrence of wide-spread gold and silver mineralization in outcrop in the Oswego trend suggests the existence of a robust mineralizing system. Several rock formations on the trend are well-known as favorable hosts for large Carlin-type deposits in the region.

Lookout Mountain Gold Project:

On May 9, 2019, we entered into a non-binding Letter of Intent to form a Limited Liability Company (the “Agreement”) with PM&Gold Mines, Inc. (“PM&G”) for the advanced exploration, and if determined feasible, the development of our Lookout Mountain Gold project, located on the southern end of the Battle Mountain-Eureka Trend near Eureka, Nevada. A final Agreement received regulatory approval from the TSX Venture Exchange on July 27, 2019. PM&G is a private firm incorporated in Nevada with an interest to explore and advance gold projects to production. The parties executed a binding definitive Limited Liability Company Agreement (the “LLC” and the “LLC Agreement”) effective June 28, 2019 following completion of business and technical due diligence.

The LLC Agreement calls for PM&G to fund exploration and development activities in two stages for an earned equity in the project. Timberline will contribute certain claims that constitute the Lookout Mountain project and adjacent historical Oswego Mine area (the “Project”) to the LLC in exchange for its ownership position. Timberline will manage the project at least through Stage I of investment. PM&G shall retain the right to manage all Stage II activities with or without Timberline’s participation.

Concurrent with completion of the Agreement, PM&G also participated in a private placement and acquired 3,367,441 shares, or 4.99%, of our common shares. The placement includes the right of PM&G to maintain its position in Timberline by pro-rata participation in future financings. The initial interests in the LLC are 51% PM&G and 49% Timberline. PM&G’s contribution to the LLC must be earned-in as follows:

Stage I – Earn 51%: PM&G will earn 51% of the Project in consideration of incurring exploration expenditures of $6 million dollars to be directed towards advance of the low-grade oxide and high-grade oxide and refractory mineralization over a two-year period. The primary focus of the expenditure will seek to identify any near-term production potential (oxide/high-grade mineralization). This exploration will also test expansion of both high-grade and oxide mineralization outside the defined resource. The plan and effort have been developed and agreed upon through a joint Management Committee appointed by the Company and PM&G.

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Stage II – Earn 70%: PM&G will earn a 70% interest in the Project when a bankable feasibility study is completed. PM&G would fund tasks at its sole expense to support the feasibility study including initiating permitting, metallurgical studies, trade-off studies, and other technical work deemed reasonable and appropriate, along with annual holding fees if Stage I has been completed. Work towards the feasibility study will be completed within 3 years of completing Stage I or as mutually agreed upon by both companies. To ensure the Project continues to advance, the Technical Committee will prepare an annual budget to implement prudent and appropriate activities.

Timberline Option to Participate 51- 49%: – When the $6 million expenditure is reached (Stage I), Timberline has the option to participate in subsequent expenditures at the 49% level. Should Timberline determine to participate, all future costs incurred to bring the Project to production will be split on a pro-rata basis.

If Timberline should choose not to participate, the Company will be further diluted and PM&G will earn 70% ownership by completing the above activities defined as Stage II.

Timberline Option to Participate 70 – 30%: At the end of Stage II, Timberline may elect to participate in subsequent expenditures at the 30% level or may elect one of the following options:

Reduce its interest to a 10% net profit interest (“NPI”) or a 2% net smelter royalty (“NSR”), or 

Sell its remaining interest in the Project to PM&G at a price agreed between the parties following completion and evaluation of Stage I and Stage II exploration, per terms of the Mutual Right of First Refusal (“ROFR”) defined below. 

If PM&G determines not to advance beyond the 51% following completion of Stage I, it may elect one of the following options:

Participate at the 51 percent level or be diluted to a 30 percent interest by TLRS completing the Stage II activities as defined above or 

Reduce its interest to a 10% NPI or a 2% NSR payable in gold, or 

Sell its remaining interest in the Project to Timberline at a price agreed between the parties following completion and evaluation of Stage I exploration, per terms of the Mutual ROFR defined below. 

Mutual Right of First Refusal (“ROFR”) – The Agreement will include a mutual ROFR wherein either JV partner may acquire the other partner’s interest at fair market value or as mutually agreed. Both partners will have a right to exercise the ROFR should either receive a 3rd party offer.

Lookout Mountain Exploration Activities

Exploration activities on the Lookout Mountain project were initiated under the Earn-in Agreement in Q4 of FY2019. These activities included initiating a comprehensive re-logging of drill core in the vicinity of the historical Lookout Mountain open pit. Past core and rotary drilling has partially delineated an area of high-grade (defined as drill hole intercepts of ≥0.10 ounces/ton (opt) (3.43 grams/tonne (g/t)), Carlin-style gold mineralization in the Lookout Mountain historical open pit mine area, where 17,700 ounces of gold averaging 0.12 opt (4.11 g/t) were produced in 1987. These include 48 drill intercepts of ≥0.25 oz/ton ((8.6 gram/tonne (g/t), and 64 intercepts of 0.10 – 0.25 opt (3.4 – 8.6 g/t). The high-grade gold area as currently delineated extends approximately 1,000 feet (305 m) within the pit area and is open to the east and is 100-300 feet (30–91 m) wide. It includes relatively flat-lying to moderate dipping, high-grade zones at multiple elevations including some exposure in the historical pit. The gold mineralization is constrained at least in part by stratigraphy and zones of decalcified collapse breccias. The breccias locally contain orpiment and realgar (arsenic sulfides), which are commonly found in many major Carlin-style gold deposits.

In addition to relogging historical drill core, project land survey control was completed by a Nevada licensed land surveyor. The work was designed as part of a QAQC assessment of historical data with results to facilitate advancing the project spatial controls to standards required for mine planning, resource modelling and engineering.

Eureka Project Exploration Summary

There are no proven and probable reserves as defined under Guide 7 at the Eureka property, and our activities there remain exploratory in nature.

Our total exploration budget for the project for fiscal year 2020 is approximately $3,000,000 at Lookout Mountain which is to be funded by PM&G, and $125,000 for Windfall, not including land maintenance costs. The expenditures for this work program at Lookout Mountain are mandated by the JV agreement; expenditures at Windfall are discretionary and may be scaled back or not conducted at all, depending upon the availability of capital separate from the Lookout Mountain JV. For

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further details on the exploration budget for the Eureka Property, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Mineral Exploration – Exploration Plans and Budget.”

Elder Creek Project

On August 14, 2018, we finalized the acquisition of the Elder Creek property as part of a two-property acquisition from Americas Gold Exploration Inc. The Elder Creek property is located in northern Nevada, 8 miles west-northwest of Battle Mountain in Lander and Humboldt Counties immediately west of Battle Mountain (see figure below). The project lies within the Battle Mountain mining district, covers approximately 9,600 acres (15 miles square) and includes 583 unpatented lode mining claims.

The major styles of mineralization recognized in the Elder Creek area are calc-alkaline, porphyry copper style mineralization and associated peripheral gold-silver-bearing base-metal vein systems. The hydrothermal alteration zoning pattern indicates the presence of a large magmatic-hydrothermal center(s) to the Elder Creek porphyry system. The stockwork quartz veined core of the system is northeasterly-elongate and exceeds 1 by 2 miles (~1.5 by 3 km), which compares favorably to other global porphyry copper systems and regional systems such as Robinson, Yerington, Butte, and Bingham.

In May, 2018, Timberline entered into a Purchase and Sale Agreement with America’s Gold Exploration Inc. (AGEI) to purchase the latter’s rights, title and interest in, to, and under the Elder Creek Joint Venture (JV Agreement) with a subsidiary of McEwen Mining (McEwen).

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The underlying Elder Creek JV with McEwen grants Timberline, as operator of the project, terms of earn-in to acquire a 51% ownership for $2.6 M expenditure over 4 years by December 31, 2021, and a 65% ownership for an additional $2.5M expenditure for a total commitment of $5.1M over 6 years by December 31, 2023. The agreement includes industry standard dilution to a 2% NSR following earn-in. Upon completion of the 65% earn-in expenditures, if McEwen elects to participate, the parties will form a joint venture (the “Joint Venture”), and each party would contribute to further exploration spending according to their ownership interest. There are no underlying royalties on the property.

On November 28, 2018 the Company announced completion of a NI43-101 Technical Report on the Elder Creek Copper-Gold Project. The report provides a comprehensive description of the project.

The Elder Creek property has no known reserves, as defined under Guide 7, and the proposed program for the property is exploratory in nature.

Accessibility, Physiography, Climate and Infrastructure

Access to the Elder Creek property is along dirt roads south from the Interstate 80 Exit at Mote Road which is approximately 12 miles west of Battle Mountain. A single lane dirt road for approximately 5 miles southward leads to the center of the property block.

The climate is typical of the northern Great Basin with cold, wet winters and hot, dry summers. Most of the precipitation is received during the months of November through May, primarily in the form of snow. The months of June through October are generally dry, although thunderstorms can create wet periods.

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Union Pacific Railroad Co., completed exploration on the property -and in 1968 they drilled 8 deep core holes that encountered sub-economic copper-molybdenum values.

Additional exploration in the 1960’s focused on geophysical targets and included multiple drill holes in and around S36, T33N, R43E. The drill holes discovered low-grade copper mineralization under pediment gravels where located within the north-northeastern, outer fringe of an annular magnetic anomaly that surrounds the porphyry system core. Also, in the 1960’s, Valmy Copper Corporation drilled five shallow holes that identified low-grade copper oxide mineralization from surface to 190- 330 feet deep along the inner edge of the annular magnetic anomaly. The reported copper grades were considered to be too low to warrant further exploration.

Low-level gold values within and around the Elder Creek stock led to fairly extensive drilling by several major companies in the 1980’s and 90’s. V. E. K. Associates held the property in 1984 and brought in Cordex (1987) to drill 3 holes, BRM Gold (1991) drilled 4 holes, and Battle Mountain Gold (1992) completed 3 holes. Battle Mountain Gold staked most of the Elder Creek stock and completed about 40 drill holes, reportedly encountering substantial low-level gold but no orebody. Western Mining Co. (1994-95) drilled 11 holes in the Elder Creek property area and 8 holes on adjacent ground. The deepest hole went to a depth of about 1,500 feet. Eleven of these holes contained thirty, 10-foot intervals that exceeded 100 ppb gold (Theodore et al., 2000, p.185). During 1995, a Santa Fe-Battle Mountain Gold joint venture drilled 7 holes north of the property, one on the north boundary of the Mote claims. The Mote claims were located by NLRC in 1999.

Geology of the Elder Creek Area

In the western part of the Elder Creek area, the Dewitt Thrust fault places Ordovician Valmy Formation cherts and shales on top of Cambrian Harmony Formation quartz- and feldspathic-sandstones and shales, which are locally calcareous. Faults at Elder Creek dip steeply, strike north-northwest to north-northeast and show normal and oblique-slip offset. The Elder Creek Fault indicates normal, down-to-the- west movement.

The Cambrian Harmony Formation underlies most of the Elder Creek area and is intruded by dikes and stocks of the Eocene Elder Creek porphyry center (Theodore et al., 1973). In addition to the felsic intrusions associated with the Elder Creek center, there are older dioritic and andesitic dikes in the area as well as Eocene pebble dikes that contain lithic fragments of the Devonian Scott Canyon Formation.

At Elder Creek, the Cambrian Harmony Formation consists of arkosic sandstone and interbedded shale that forms part of the upper plate of the Roberts Mountains allochthon, emplaced during the Devonian-early Mississippian Antler Orogeny (Roberts, 1964). The Roberts Mountains allochthon is comprised of several thrust slices and is exposed in the area as the DeWitt thrust which juxtaposes Cambrian Harmony Formation on top of the Ordovician Valmy Formation.

King (2011) documented three major phases of felsic intrusions that include early-stage, fine- to medium-grained sub-porphyritic hornblende-biotite granodiorite and intermediate-stage and late-stage quartz eye-hornblende-biotite granodiorite porphyry. The intermediate- and late-stage intrusions have been dated by K-Ar to be 37.3 + 0.7 Ma and 35.4 + 1.1 Ma, respectively (Theodore et al., 1973 and McKee, 1992).

Hydrothermal breccias are locally present in the Elder Creek complex and are dominated by quartz and rock flour matrix which supports sub-rounded to sub-angular clasts of Harmony Formation and porphyry phases. Clasts are typically pervasively altered and occasionally mineralized with copper oxides.

Alteration is extensive at Elder Creek and occurs in broad annular zones that suggest a large magmatic-hydrothermal center(s) is present within the Elder Creek porphyry system. The intense stock-work fractured and quartz veined core of the system is northeasterly-elongate and exceeds 3.0 km by 1.5 km. Surface exposures indicate the limit of potassic (biotite+K-feldspar) alteration is about 4.0 km by 2.5 km and the outer limit of biotite-pyrite-pyrrhotite hornfels in the Harmony Formation sandstones exceeds 4.5 km by 3.5 km. Actinolite alteration occurs locally within the quartz veined core of the porphyry system. Garwin (2014) interprets the actinolite as characteristic of inner- propylitic alteration that overprints and flanks the potassic zone in many global porphyry deposits. Several northerly-trending zones of late-stage, feldspar-destructive quartz-sericite-pyrite alteration occurs in the outer portions of the Elder Creek porphyry system, and the largest zone, near the Gracie mine, exceeds 2.0 km by 1.5 km.

McEwen (or predecessor companies) completed extensive soil and rock sampling on the property between 2011-2012. Trace element analyses from over 5,500 soil and rock samples confirm strong zonation in the magmatic-hydrothermal system at Elder Creek. Garwin’s (2014) work on behalf of AGEI concluded that the distribution of key trace elements suggests there may be two primary centers at Elder Creek including: 1) Cu-Mo-Ag-W-As-Li centered over the west central part of the area and 2) Cu-Au-Mo-W-Bi-As in the northerly elongate zone that extends along the east side of the property. The presence of Li > 30 ppm and the relative lack of Bi in the western center which is cored by early-stage intrusions may indicate that this center is early

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and has been overprinted by a later porphyry event. The near-surface expression of this later event could be the eastern, Bi-rich and Li-deficient zone that contains intermediate-stage quartz-eye porphyry intrusions. A Bi-rich plume has the potential to be the high-level signature of a northerly-elongate mineralized cupola at depth.

2018 Timberline Exploration

Following acquisition of the project from AGEI in mid-2018, Timberline completed an initial 3-hole drill program to test for copper and gold, and associated metals, on two priority targets. Mineralization at Elder Creek is variably distributed throughout the complex as disseminated sulfides and as locally concentrated, structurally controlled massive sulfide veins.

Drilling confirmed the presence of copper oxide and sulfides in the Valmy Copper Oxide Pit-area. Reverse circulation (RC) drill hole RCEC18-01 intersected 110 feet (34 meters) of 0.44% copper. The entire 500-foot (152 meters) hole averaged 0.21% copper, and bottomed in mineralization at 500 feet due to depth limitations of the rig (see Table below). It contains multiple intervals of anomalous copper with silver ± gold. These holes intersected continuous copper mineralization grading 0.2% to 0.3% from surface to their maximum depths of 200 to 300 feet. The hole successfully tested the grade and continuity of mineralization intersected in five shallow vertical holes drilled in 1967 when copper prices were $0.38/lb.

RCEC18-01 was collared in heterolithic breccia of the Harmony Formation, and over its 500 foot (152 meters) length also intercepted oxidized arkosic quartzite, and a quartz-bearing porphyritic intrusion with strong potassic (biotite) and silica alteration. The hole was sited within a zone of porphyry-style quartz veining, and over a strong annular magnetic anomaly encircling a non-magnetic core to the system.

Core hole CCEC18-02 deepened reverse circulation hole RCEC18-02 to1,497 feet and intersected visible chalcopyrite and molybdenite mineralization throughout with mineralization best developed in hydrothermal breccias between 1313.5 – 1360 feet (400.5-414.6 m) (see Table below). It intercepted pervasively altered hornfels (after Harmony Formation shale and arkosic sandstones), feldspar porphyry intrusive rocks and hydrothermal breccias. The cross-cutting textures and breccias reflect multiple, overprinting events including emplacement of copper and molybdenum sulphides. The chalcopyrite and molybdenite are concentrated (typically 2-6%) from 1,313.5 - 1,360 feet (400.5 – 414.6 meters), where they occur primarily within veins and the quartz-sulphide matrix to breccia which cross-cuts potassic-altered hornfels and associated porphyritic intrusions.

The Timberline drilling intersected thick and consistently mineralized sections of copper mineralization with variable molybdenum, gold, and silver. The results confirm discovery of a large porphyry copper-gold system with typical anomalous multi-trace element signatures. The mineralization remains open laterally and at depth.

With the exploration success in 2018, Timberline contracted Zonge Geophysics of Reno, Nevada to complete a 10 km Induced Polarization (IP)/Resistivity survey at the property. The survey characterized the rocks for signatures associated with concentration of sulfides (IP), associated silicification (Resistivity) as hydrothermal alteration, and identification of major fault zones within the project area. The project is fully permitted with the BLM for additional drilling, which is planned after completion of the geophysical work.

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The Induced Polarization /Resistivity (IP) geophysical survey was completed in late 2018 in follow-up to drilling of core hole CCEC18-02 and RCEC18-01. Key conclusions of the IP survey include:

The IP maps a distinct body of sulfide mineralization ≥1,600 m long and 500 - 800 m wide within a very large (4 km) circular copper-molybdenum-gold-silver porphyry mineral system;  

The IP suggests that, although well mineralized, Timberline’s initial drill holes did not test the strongest part of the large mineral system. Furthermore, historical drilling was too shallow (typically <200m depth) to intersect the anomaly.  

2019 Timberline Exploration

In follow-up to the 2018 drilling and IP results, reverse circulation (RC) hole RCEC19-01 was drilled in mid-2019 to a depth of 1,960 feet (600 meters) to target the heart of the IP/resistivity (IP) geophysical anomaly. RCEC19-01 intercepted approximately 590 feet (180 m) of intensely stockwork quartz-veined, altered (quartz-biotite ± sericite) Harmony Formation quartzite and hornfels and an underlying thick section of 1,361 ft (415 m) of intensely-altered, quartz-feldspar, variably porphyritic intrusive rock. Alteration of the intrusion is dominated by quartz-sericite with variable chlorite and biotite. Porphyry style mineralization is visible throughout and is especially notable within the intrusive phase as pyrite-chalcopyrite ± molybdenite, with anomalous copper, molybdenum, and silver as follows:

Management considered the initial drilling and geophysical program results at Elder Creek to be encouraging and to validate the presence of a large porphyry copper-type mineral system. Additional follow-up drilling has been completed in late 2019; the drilling intersected strong visible host-rock alteration and iron-copper-and molybdenum mineralization; all assays are pending.

ICBM (Paiute) Project

The ICBM Project (Timberline/Nevada Gold) is located 6.5 miles due west of Battle Mountain, in the Battle Mountain Mining District, Lander and Humboldt Counties, Nevada. The property consists of 1,346 acres (2.1 square miles) on BLM-administered lands.

Timberline originally acquired the project in 2010 through acquisition of Staccato Gold who controlled the project as a non-core asset along with the flagship Eureka Project. Staccato controlled the project through an earn-in joint venture (JV) agreement with Lac Minerals (LAC), a subsidiary of Nevada Gold. Timberline acted as operator of the project through November 2013 maintaining a 72% interest in the project, with Nevada Gold holding the remaining interest.

Historical exploration demonstrated that gold mineralization is present on the property in a style of mineralization currently being mined at Newmont’s Fortitude/Phoenix complex to the south. Recent analysis of historical data led to recognition that the property has porphyry copper-gold characteristics similar to Newmont’s nearby historical Copper Basin mine.

Although Timberline controlled the project, as a non-core asset no exploration was completed between 2010 and December, 2013. In December of 2013, Timberline entered into an agreement with Americas Gold Exploration, Inc. (AGEI) to continue exploration at the project. Under the terms of the agreement, AGEI could earn up to 76.6% ownership in the property by making certain exploration expenditures over a four-year period. AGEI also assumed the role as operator of the joint venture.

On August 14, 2018 Timberline finalized the re-acquisition of the property, since renamed Paiute by AGEI, along with the contiguous Elder Creek property as part of a two-property acquisition from AGEI. Timberline has re-assumed the operator’s position in the underlying property, which is now referred to as the Paiute Project. Current ownership of the property is 75.4% Timberline, 24.6% LAC.

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The underlying ICBM JV with LAC is an earn-in agreement and as a result of previous qualifying expenditures by Timberline, AGEI and previous owners, Timberline currently controls 75.4% ownership of the project. Terms of the continued earn-in are as follows:

No mandatory work commitments are required 

As operator, Timberline proposes work budgets with a 30-day option for pro-rata participation by LAC. 

If LAC chooses to not participate, ownership dilutes on a pro-rata basis of $300,000 earn-in for 60% of the project. 

If dilution reaches 10% or less, LAC converts to a 2% NSR. 

On November 28, 2018 the Company announced completion of a NI43-101 Technical Report on the Paiute copper-gold project. The report provides a comprehensive description of the project.

The Paiute project has no known reserves, as defined under Guide 7, and the proposed program for the property is exploratory in nature.

Exploration and Mining History

The Paiute project shares much exploration history with the Elder Creek project (see above) as they are contiguous in location. However, as unique to Paiute, Battle Mountain Gold Company and its predecessors held the Paiute property through the early 1990’s and drilled nine reverse circulation holes within the current claim block. A best intercept of 100 feet (30.5 m) with 925 ppb gold was noted in their drilling.

LAC relocated the claims in late 1992 and conducted basic field work in 1993 that included geologic mapping, rock and soil sampling, and ground magnetics. In late 1994 they completed a nine-hole reverse circulation drilling program to test the main soil anomalies on the property. One drill hole reported 20 feet (6.1 m) of 0.038 opt gold from 20 to 40 feet (6.1 - 12.2 m) that was associated with a narrow vein-like structure in the Harmony Formation.

Pathfinder Exploration joint ventured the property from LAC in early 1995 and completed infill mapping and sampling and target definition. First pass drilling intersected a 200 (61 m) foot zone of 411 ppb gold in drill hole ICBM-95-1 within a quartz-actinolite-sulfide veined granodiorite stock or sill. Follow-up reverse circulation drilling by Pathfinder in 1996 was highlighted by hole 96-5 which intersected sericitized, chloritized, amphibole-rich monzonite/granodiorite porphyry with secondary biotite from 450-490 feet (137.1 – 179.8m). Mineralization within the last 15.1 feet (4.6 m) of the hole averaged 0.035 oz/t Au (1.24 g/t) and was accompanied by increased silicification and sulfides (chalcopyrite, pyrite, arsenopyrite).

Petrographic work by Larson (1996) identified silicified, sulfidic (pyrite, chalcopyrite), quartz/calcite veined quartz monzonite porphyry, Cambrian sandstone/quartzite (Harmony Formation) and diabase lithologies, along with a skarn dominant monzonite or granodiorite porphyry with “significant percentages of pyrite, chalcopyrite, and chalcocite”.

To date, no historical or current resource estimates have been reported at the Paiute project.

Geology of the Paiute Project Area

In the Paiute project area, the Dewitt Thrust fault places Ordovician Valmy Formation cherts and shales on top of Cambrian Harmony Formation quartz- and feldspathic-sandstones and shales, which are locally calcareous. The Harmony Formation is intruded by seven Cretaceous to Tertiary age intrusives which include granodiorite porphyry, porphyritic leucogranite, porphyritic hornblende-biotite monzogranite, granodiorite, biotite-hornblende monzogranite, megacryst porphyry, and monzogranite porphyry. The oldest intrusive is Devonian or Ordovican diabase that is exposed in the southwest part of the project and surrounding area.

At Paiute, the granodiorites and quartz monzonites intruded as high-level plugs, stocks, dikes and sills. Thermal metamorphism associated with the intrusions produced hornfels, quartzite and skarn in the Harmony Formation sediments. Hydrothermal alteration associated with the intrusions consists of argillization, silicification, quartz veining/stockwork that is accompanied by zones of hydrous iron oxides as fracture fillings, disseminations, and occasional gossans. Chlorite + actinolite occurs locally within quartz veins and may represent retrograde metamorphism. Quartz veining occurs throughout the project area and increases in intensity within the alteration zones.

A series of en echelon structures and sub-parallel faults define a strong N 10-20° E - striking structural zone through the central part of the property that extends approximately 16,500 feet in length and up to 1,500 feet in width. This fault zone is well defined by field mapping and is the dominant northeast trending feature. Secondary northwest and north striking faults cut the

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northeast-striking structures. Locally, the structures are occupied by granodiorite porphyry dikes. The structures are typically altered and mineralized.

1,283 soil samples and 301 rock samples have been collected by historical explorers in the Paiute project area and analyzed for 14-elements. Copper, gold, arsenic and bismuth trace element anomalies in soils and rocks occur along the N10-20°E structural zone. A north-northwesterly (N20°W)-trending zone of elevated copper and gold occurs where increased fracturing and actinolitic alteration of the rocks is spatially associated with intrusives near Pathfinder drill-hole 96-5.

Garwin (2014) described the major styles of mineralization in the Paiute area as calc-alkaline, porphyry copper-gold, and gold-bearing structurally controlled vein systems. The main gold mineralized zone on the property is coincident with the N10-20°E structural zone.

Where the rock is not oxidized, fresh disseminated and vein pyrite is pervasive throughout the Paiute project area. Pyrite is the most abundant sulfide and occurs within the bleached zones coincident with alteration and structural zones. Pyrrhotite is nearly as abundant as pyrite and occurs both within and adjacent to alteration and structural zones. Arsenopyrite appears to be closely related to alteration and occurs only within the alteration zones.

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Summary

We believe the global economic environment and monetary climate continue to favor a relatively steady gold and copper price for the foreseeable future with potential for long-term price improvements. While volatility is to be expected, our expectation is that we can identify and pursue opportunities to advance our projects, despite the current gold price and market volatility.

As a company, we are considering financing and strategic corporate opportunities with our focus on providing for the advancement of projects comprising our Lookout Mountain, Elder Creek and Paiute properties, and other property interests we may acquire. In addition, we believe that with appropriate funding, the Windfall project at our Eureka property can be advanced through drill testing on targets defined this year. Further potential will be developed with the advancement of new targets at Oswego. We believe that our management and our board of directors have the knowledge and experience to evaluate financing and strategic opportunities and to provide for the advancement of multiple projects

Overview of Regulatory, Economic and Environmental Issues

Hard rock mining and drilling in the United States is a closely regulated industrial activity. Mining and drilling operations are subject to review and approval by a wide variety of agencies at the federal, state, and local level. Each level of government requires applications for permits to conduct operations. The approval process always involves consideration of many issues including but not limited to air pollution, water use and discharge, noise issues, and wildlife impacts. Mining operations involve preparation of environmental impact studies that examine the probable effect of the proposed site development. Federal agencies that may be involved include: The USFS, BLM, EPA, NIOSH, MSHA, and FWS. Individual states also have various environmental regulatory bodies, such as Departments of Ecology and Departments of Environmental Quality. Local authorities, usually counties, also have control over mining activity.

Gold, silver, and copper are mined in a wide variety of ways, both in open pit and underground mines. Open-pit mines require the gold deposit to be relatively close to the surface. These deposits tend to be low grade (such as 0.01-0.03 ounces per ton gold) and are mined using large, costly earth moving equipment, usually at very high tonnages per day.

Open-pit operations for gold often involve heap leaching as a metallurgical method to remove the gold. Heap leaching involves stacking the ore on pads which are lined with an impenetrable surface, then sprinkling the gold with a weak cyanide solution to extract the gold. The gold impregnated solution is collected and the gold recovered through further processing.

Underground metal mines generally involve higher-grade ore bodies. Less tonnage is mined underground, and generally the higher-grade ore is processed in a mill or other refining facility. This process results in the accumulation of waste by-products from the processing of the ground ore. Mills require associated tailings ponds to capture waste by-products and treat water used in the milling process.

Capital costs for mine, mill, and tailings pond construction can, depending upon the size of the operation, run into the hundreds of millions of dollars. These costs are factored into the profitability of a mining operation. Metal mining is sensitive to both cost considerations and to the value of the metal produced. Metals prices are set on a world-wide market and are not controlled by the operators of the mine. Changes in currency values or exchange rates can also impact metals prices. Changes in metals prices or operating costs can have a huge impact on the economic viability of a mining operation.

Environmental protection and remediation is an increasingly important part of mineral economics. Estimated future costs of reclamation or restoration of mined land are based principally on legal and regulatory requirements. Reclamation of affected areas after mining operations may cost millions of dollars. Often governmental permitting agencies are requiring multi-million-dollar bonds from mining companies prior to granting permits, to ensure that reclamation takes place. All environmental mitigation tends to decrease profitability of the mining operation, but these expenses are recognized as a cost of doing business by modern mining and exploration companies.

Mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. We conduct our operations so as to protect the public health and environment and believe our operations are in compliance with applicable laws and regulations in all material respects. We have made, and expect to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.

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Every mining activity has an environmental impact. In order for a proposed mining project to be granted the required governmental permits, mining companies are required to present proposed plans for mitigating this impact. In the United States, where our properties are located, no mine can operate without obtaining a number of permits. These permits address the social, economic, and environmental impacts of the operation and include numerous opportunities for public involvement and comment.

We intend to focus on exploration and discovery of mineral resources. If we are successful, the ore bodies discovered will be attractive to production companies, or we will potentially bring the ore bodies to production ourselves. The mining industry, like agriculture, is a fundamental component of modern industrial society, and minerals of all sorts are needed to maintain our way of life. If we are successful in finding an economic ore body, be it gold, silver or copper, sufficient value is expected to be created to reward our shareholders and allow for all production and reclamation expenses to be paid ourselves or by the actual producer to whom we convey, assign, or joint venture the project.

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. MINE SAFETY DISCLOSURES

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the fiscal year ended September 30, 2019, our U.S. exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).

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PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Dividend Policy

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Stock Incentive Plans

In February 2005, our Board adopted the 2005 Stock Incentive Plan, which was approved by a vote of shareholders at our Annual Meeting of Shareholders on September 23, 2005. This plan authorized the granting of up to 62,500 non-qualified stock options to our officers, directors, and consultants.

On August 31, 2006, our Board of Directors approved an amendment to the Timberline Resources Corporation 2005 Equity Incentive Plan (the “Amended 2005 Plan”) for the purposes of increasing the total number of shares of common stock that may be issued pursuant to Awards granted under the original 2005 plan from 62,500 shares to 229,167 shares and allowing “Ten Percent Shareholders” (as defined in the Amended 2005 Plan) to participate in the plan on the same basis of any other participant. The Amended 2005 Plan was approved by a vote of shareholders at our Annual Meeting of Shareholders on September 22, 2006.

On August 22, 2008, our shareholders approved a proposal for the increase in the total number of shares of common stock that may be issued pursuant to awards granted under the original 2005 plan as previously amended. Following the increase, the plan provided for 583,334 shares of common stock for awards under the plan.

On May 28, 2010, our shareholders approved a proposal for the increase in the total number of shares of common stock that may be issued pursuant to awards granted under the original 2005 plan as previously amended. Following the increase, the plan provides for 833,334 shares of common stock for awards under the plan.

All share amounts included in this section have been revised to reflect a one-for-twelve reverse stock split that was approved by our stockholders and implemented on October 31, 2014.

On August 24, 2015, our Board of Directors approved the 2015 Stock and Incentive Plan, subject to our Stockholders’ approval. The purpose of the 2015 Stock and Incentive Plan is to promote our interests and our Stockholders’ interests by aiding us in attracting and retaining employees, officers, consultants, advisors and non-employee directors capable of ensuring the future success of our Company. On September 24, 2015, our stockholders approved the adoption of the Company’s 2015 Stock and Incentive Plan in which the Company’s executive officers and directors are participants. This plan replaces our 2005 Equity Incentive Plan, as amended. The aggregate number of shares that may be issued under all stock-based awards made under the 2015 Stock and Incentive Plan is 4 million shares of our common stock.

On December 1, 2018, shareholders approved the new 2018 Incentive Plan. The 2018 Incentive Plan replaced our 2015 Stock and Incentive Plan. Concurrent with the approval of the 2018 Incentive Plan, the 2015 Stock and Incentive Plan was withdrawn for the purposes of issuing new options or equity incentives. There are 8,000,000 Timberline Shares issuable under the 2018 Incentive Plan.

Equity Compensation Plans

The following summary information is presented as of September 30, 2019.

(1) See “Stock Incentive Plans,” above.

There were no options exercised during the years ended September 30, 2019 and September 30, 2018.

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Sale of Unregistered Securities

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under “Risk Factors and Uncertainties” and elsewhere in this document. See “Cautionary Note Regarding Forward-Looking Statements” above.

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Exploration Plans and Budgets

Our exploration focus during fiscal 2020 is on the Elder Creek, Paiute and Lookout Mountain projects.

Elder Creek Project:

Management considered the initial drilling and geophysical program results at Elder Creek to be encouraging and to validate the presence of a large porphyry copper-type mineral system.  Additional follow-up drilling has been completed in late 2019; the drilling intersected strong visible host-rock alteration and iron-copper-and molybdenum mineralization including:  

Valmy Cu-Oxide Target:  Drill holes RCEC18-01, 19-02, 19-03, and 19-04 intersected mineralization including 0.22% Cu over 185 ft (56.4 m) to 0.44% Cu over 110 ft (33.5 m) within heterolithic breccia. 

Primary Copper Porphyry Breccia Target:   Drill hole RCEC 19-05 intersected porphyry-style Cu-Au-Ag mineralization including 305 feet (ft) (93 meters (m)) from 250-555 ft (76.2-169.2m) @ 0.25% Cu, 0.083 g/t Au, and 9 g/t Ag.  The drill hole bottomed in Cu mineralization at a total depth of 555 ft (169.2 m).  

Paiute Project:

Subsequent to the end of FY2019, two drill holes have been completed at the Paiute Project.  Drill hole PCRC19-01 targeted the gold-silver structural zone and was drilled to a depth of 665ft (202.7 m) and intercepted highly silicified Harmony Formation and Tertiary granodiorite intrusive.  Hole PCRC19-02 was drilled as a twin to historical hole ICBM96-05 which bottomed at 585 ft (178.4m) in 15.1 ft (4.6m) @ 1.24 g/t Au and visible copper sulfides.  The twin hole was drilled to 710 ft (216.5 m) and intercepted interlayered silicified hornfels and Tertiary granodiorite intrusive.  Both drill holes intercepted notable gold mineralization as summarized below:

Our exploration plans and budgets for 2020 are dependent upon the availability of capital.

Lookout Mountain Gold Project:

Exploration planned for FY2020 at Lookout Mountain will be conducted by Lookout Mountain LLC, an LLC formed with PM&G for the exploration and advancement of the Lookout Mountain property, and is budgeted for $3,000,000. Exploration will be focused on drilling to test continuity of stratiform and structural (fault)-defined high-grade mineralized zones.  In addition, step-out reverse circulation drilling will test for shallow oxide gold mineralization to the immediate north of the historical pit and will also test to expand high grade mineralization east of the pit.   

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Results of Operations for Years Ended September 30, 2019 and 2018

Consolidated Results

Our consolidated net loss for the fiscal year ended September 30, 2019 declined significantly from the prior year, primarily as a result of the non-cash costs in fiscal year 2018 related to the abandonment of the Talapoosa property, which were partially offset by a much smaller abandonment of claims in fiscal 2019. Stock issuance and option expenses were lower in 2019 than 2018, primarily due to the issuance of stock options to existing and newly appointed officers and directors in 2018. We increased our exploration expenditures in 2019, as a result of drilling programs at our Elder Creek and Paiute properties and higher land holding costs due in part to higher annual federal and county fees to hold unpatented mining claims. Professional fees expenses were higher, and salaries were lower in 2019 than 2018, primarily due to the transition of our Chief Financial Officer position from an internal employee to an external independent contractor firm. We expect to continue to maintain a low level of general and administrative expenses, while focusing our resources on the advancement of our Lookout Mountain, Elder Creek and Paiute projects in the fiscal year ending September 30, 2020.

Financial Condition and Liquidity

At September 30, 2019, we had assets of $15,505,141, consisting of cash in the amount of $30,757; property, mineral rights and equipment, net of depreciation, of $15,023,843, reclamation bonds of $305,184, and other assets in the amount of $145,357.

On September 30, 2019, we had total liabilities of $1,123,229 and total assets of $15,505,141. This compares to total liabilities of $740,421 and total assets of $15,394,921on September 30, 2018. As of September 30, 2019, our liabilities consist of $168,619 for asset retirement obligations, $630,788 of senior unsecured notes payable, and $323,822 of trade payables and accrued liabilities. Of these liabilities, $376,792 are due within 12 months. The increase in liabilities compared to September 30, 2018 is largely due to the senior unsecured note payables as we borrowed additional funds during fiscal 2019. This increase in liabilities was affected positively or negatively by individual small changes in other components of liabilities. The increase in total current assets was due to an increase in a receivable from a related company as we remit expenses on that company’s behalf in anticipation of it receiving funding, which occurred subsequent to the end of the fiscal year, offset by an decrease in cash and prepaid expenses as a result of payment of exploration and operating expenses for the year ended September 30, 2019.

On September 30, 2019, we had negative working capital of $206,378 and stockholders’ equity of $14,381,912 compared to negative working capital of $29,077 and stockholders’ equity of $14,654,500 for the year ended September 30, 2018. Working capital experienced an unfavorable change because of a decrease in cash and prepaid expenses, payments against the payment obligation and payroll, benefits and taxes, offset by an increase in an account receivable and accrued expenses.

During the fiscal year ended September 30, 2019, we used cash from operating activities of $1,449,177, compared to $1,618,235 used for fiscal 2018. A net loss of $1,657,283 for fiscal 2019 compared to a net loss of $5,057,794 for fiscal 2018. The causal factors are disclosed above in the comparative table. At the end of fiscal 2019, we have accumulated approximately $46.4 million and $17.9 million in federal and state net operating losses, respectively, which may enable us to generate like

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amounts in net income prior to incurring any significant income tax obligation. The net operating losses will expire in various amounts from 2020 through 2039.

During the fiscal years ended September 30, 2019, cash of $30,076 was provided by investment activities, compared with cash used of $8,756 in fiscal 2018. We paid $72,715 to purchase mineral properties, while receiving $102,791 for lease payments to us for company-owned mineral properties. During fiscal 2018, we paid $199,500 to purchase mineral properties and $22,158 to increase reclamation bonds, while receiving $100,000 from the sale of mineral properties and $112,902 for lease payments to us for company-owned mineral properties.

During the fiscal year ended September 30, 2019, cash of $1,339,122 was provided by financing activities, compared to cash of $1,670,573 provided during the fiscal year ended September 30, 2018. For the fiscal year ended September 30, 2019, cash of $1,109,395 was provided through the sale of stock and warrants, net of offering costs, $250,000 was provided from a senior unsecured note payable and associated warrants, reduced by $20,273 paid on the payment obligation. This compares to cash of $1,421,767 provided through the sale of stock and warrants, net of offering costs, $300,000 was provided from a senior unsecured note payable and associated warrants, reduced by $51,194 paid on the payment obligation for the fiscal year ended September 30, 2018.

On July 28, 2019, in connection with the Lookout Mountain LLC Agreement, the Company issued 3,367,441 shares of common stock at a price of $0.08 to PM&G for cash proceeds to the Company of $269,395. No warrants were issued with this share purchase.

These consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of our assets and the settlement of our liabilities in the normal course of our operations. Disruptions in the credit and financial markets over the past several years have had a material adverse impact on a number of financial institutions and investors and have limited access to capital and credit for many companies. In addition, commodity prices and mining equities have seen significant volatility which increases the risk to precious metal investors. Market disruptions and alternative investment options, among other things, make it more difficult for us to obtain, or increase our cost of obtaining, capital and financing for our operations. Our access to additional capital may not be available on terms acceptable to us or at all. If we are unable to obtain financing through equity investments, we will seek multiple solutions including, but not limited to, asset sales, corporate transactions, credit facilities or debenture issuances in order to continue as a going concern.

At September 30, 2019, we had a working capital deficit of $206,378. As of the date of this Annual Report on Form 10-K, we have approximately $746,000 outstanding in current liabilities and a cash balance of approximately $31,000. As of the date of this Annual Report on Form 10-K, we do not anticipate that we will be able to continue as a going concern for the next 12 months without receiving significant additional financing. Therefore, we expect to engage in financial transactions to increase our cash balance or decrease our cash obligations in the near term, which may include equity financings, corporate transactions, joint venture agreements, sales of assets, credit facilities or debenture issuances, or other strategic transactions.

The audit opinion and notes that accompany our consolidated financial statements for the year ended September 30, 2019 disclose a ‘going concern’ qualification to our ability to continue in business. The accompanying consolidated financial statements have been prepared under the assumption that we will continue as a going concern. We have incurred losses since our inception. We do not have sufficient cash to fund normal operations and meet all of our obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds. The consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. We believe that the going concern condition cannot be removed with confidence until the Company has entered into a business climate where funding of its activities is more assured. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.

We recognize that we will not be able to execute our operating plans with our current cash balances. With our current cash balance, our anticipated ability to acquire additional capital by way of asset sales and/or financing transactions, and our ability to curtail discretionary exploration expenditures as needed; however, we believe that we will be able to generate sufficient working capital to meet our ongoing, non-discretionary operating expenses for the next 12 months and maintain our primary mineral properties. We recognize that additional capital will be required shortly and may be obtained through financing transactions such as asset sales, corporate transactions, equity investments, joint ventures, debt facilities, or other types of strategic arrangements.

We plan, as funding allows, to follow up on our positive drill results on our Elder Creek and Paiute prospects. We also plan to execute drilling as part of the exploration program at Lookout Mountain as part of an LLC Agreement with funding provided

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by PM&G. Also, subject to available capital, we may continue prudent exploration programs on our material exploration properties and/or fund some exploratory activities on early-stage properties. Our current working capital is not sufficient to meet our currently planned exploration costs and general corporate and administrative expenses for the next 12 months, and we will require additional funding and/or reductions in exploration and administrative expenditures.

Given current market conditions, we cannot provide assurance that necessary financing transactions will be available on terms acceptable to us, or at all. Without additional financing, we would have to further curtail our exploration and other expenditures while we seek alternative funding arrangements to provide sufficient capital to meet our ongoing, non-discretionary expenditures for the next 12 months and maintain our primary mineral properties. If we cannot obtain sufficient additional financing, we may be unable to make required property payments on a timely basis and be forced to return some or all of our leased or optioned properties to the underlying owners.

Financing activities

Private Placements:

On July 28, 2019, in connection with the Lookout Mountain LLC Agreement, we issued 3,367,441 shares of common stock at a price of $0.08 to PM&G for cash proceeds to the Company of $269,395. No warrants were issued with this share purchase.

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The Senior unsecured notes payable are senior to all other debt with the exception of the Payment obligation. The notes require that when the Company enters into any other financings, 25% of the proceeds of such financings will be paid toward reduction of the principal and interest accrued on these notes. No such payments have been made by the Company to the Lender, and the Lender has provided a waiver of default on the Notes that would otherwise exist due to these non-payments.

Off-Balance Sheet Arrangements

We do not have any off-balance-sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity, or capital expenditures.

Critical Accounting Policies and Estimates

See Note 2 to our consolidated financial statements contained in Item 8 of this Annual Report for a complete summary of the significant accounting policies used in the presentation of our financial statements. As described in Note 2, we are required to make estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses. We believe that our most critical accounting estimates are related to asset impairments and asset retirement obligations.

Our critical accounting policies and estimates are as follows:

Asset Impairments

Significant property acquisition payments for active exploration properties and the fair value of equity instruments, including common shares and warrants, issued for properties are capitalized. The evaluation of our mineral properties for impairment is based on market conditions for minerals, underlying mineralized material associated with the properties, and future costs that may be required for ultimate realization through mining operations or by sale. If no mineable ore body is discovered, or market conditions for minerals deteriorate, there is the potential for a material adjustment to the value assigned to mineral properties.

We review the carrying value of long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment or abandonment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the asset is used, and the effects of obsolescence, demand, competition, and other economic factors.

Asset Retirement Obligations

We have an obligation to reclaim our properties after the surface has been disturbed by exploration methods at the site. As a result, we have recorded a liability for the fair value of the reclamation costs we expect to incur in association with our Eureka Property. We estimate applicable inflation and credit-adjusted risk-free rates, as well as expected reclamation time frames. To the extent that the estimated reclamation costs change, such changes will impact future reclamation expense recorded. A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation) in the period in which the liability is incurred, if a reasonable estimate of fair value can be made. The offsetting balance is charged to the related long-lived asset. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

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Timberline Resources Corporation and Subsidiaries

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Timberline Resources Corporation

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Timberline Resources Corporation (the “Company”) as of September 30, 2019 and 2018, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2019 and 2018, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has accumulated losses since inception and negative working capital. These factors raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DeCoria, Maichel & Teague P.S.

DeCoria, Maichel & Teague P.S.

We have served as the Company’s independent auditor since 2006.

Spokane, Washington

January 10, 2020

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See accompanying notes to consolidated financial statements.

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See accompanying notes to consolidated financial statements.

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See accompanying notes to consolidated financial statements.

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