Timberline options 1M oz. Talapoosa gold project in Nevada

Since taking the helm of Timberline Resources (TSXV: TBR; NYSE-MKT: TLR) on Jan. 1, Kiran Patankar has wasted little time getting to work and enlarging the junior’s footprint in Nevada. 

The former investment banker has completed a deal to acquire an option for 100% of Gunpoint Exploration’s (TSXV: GUN; US-OTC: CJIMF) Talapoosa project, a low-sulphidation property with a defined resource of over 1 million oz. gold in the Walker Lane trend of western Nevada, 45 km east of Reno, in Lyon County. 

“This is a project that we believe has excellent potential to get into production on a fairly accelerated timetable, and it is consistent with adding resources in our backyard at reasonable acquisition metrics,” Patankar tells The Northern Miner. “We’re optimistic about Talapoosa’s potential to generate near-term gold production and cash flow.”

Under the agreement, Timberline will pay Gunpoint Exploration US$300,000 in cash and issue 2 million shares of its common stock. If it exercises the option over the next 30 months, Timberline will pay Gunpoint US$10 million. Gunpoint also retains a 1% net smelter return royalty, which Timberline can buy at any time for US$3 million. The acquisition cost may increase based on a contingent payment of another US$10 million if the gold price averages over US$1,600 per oz. for 90 days once Timberline has exercised its purchase option.

“The acquisition cost could ultimately be in the US$10 to US$20 per oz. gold range, which is an attractive acquisition price for gold in Nevada in a partially permitted project,” Patankar says. 

The CEO, a geologist by training, describes Talapoosa as more of a development project than an exploration project, given that it has a plan of operations and an environmental impact statement with the Bureau of Land Management for a 42-million-tonne, heap-leach open-pit mine. 

“All of the engineering studies that were done as part of that approval process are in our possession,” he says. “We’ve got Talapoosa right at the sweet spot, where we can build at a reasonable capex something that has gone a fair way to receiving permitting already by the BLM. Obviously those permits are going to have to be updated, but we’re excited about it.”

The property has had a long exploration history after gold was first found in 1863. By the late 1990s, eight mining companies had drilled 564 holes totalling 71,000 metres. In 1996, Miramar Mining completed a feasibility study and the open-pit, heap-leach project was fully permitted with the Bureau of Land Management and the State of Nevada. But the project remained undeveloped due to low gold prices. (In 2008, Newmont Mining (NYSE: NEM) acquired Miramar for $1.5 billion.)

Since Gunpoint Exploration acquired the project from Chesapeake Gold (TSXV: CKG; US-OTC: CHPGF) in March 2010, Talapoosa’s resource has grown by 40% and its grade improved by 20%. Measured and indicated resources stand at 31.3 million tonnes grading 1.11 grams gold per tonne and 14.97 grams per tonne silver for 1.10 million contained oz. gold and 13.65 million oz. silver. In the inferred resource category, Talapoosa contains 11.2 million tonnes grading 0.72 gram gold per tonne and 6.65 grams silver, for 233,532 contained oz. gold and 2.17 million oz. silver.

Patankar says the priorities in the coming weeks and months are to file an updated technical resource report, which includes some of the metallurgical studies Gunpoint Exploration completed last year on the project, and complete a preliminary economic assessment before the end of the second quarter, possibly as early as April.

Patankar says it’s also conceivable that Timberline can complete a prefeasibility study on Talapoosa before the end of 2015 and a feasibility study by the first half of 2016. “We’re going to be building on the extensive engineering and permitting work that has already been done,” he says, adding that he believes “the economics are going to prove this is a doable project for the company.”

Patankar points out that there were “a number of other suitors” looking at Talapoosa, but that Gunpoint Exploration’s chairman, Randy Reifel, felt Timberline’s technical team had the experience to advance the project to the feasibility stage. 

Timberline’s vice-president of exploration, Steven Osterberg, has a history in the business and his career includes stints at BHP Minerals International, and Tetra Tech, while Paul Dircksen, vice-president of business development and technical services, has held senior management positions with Lacana Gold, Orvana Minerals, Bravo Venture Group and Brett Resources.

In addition, Gunpoint Exploration’s president and CEO, Max Baker, an exploration geologist with over 30 years of experience, will join Timberline’s team so there will be both “continuity and a fresh set of eyes.” 

Patankar is quick to point out that Timberline is far from being a “one-trick pony,” however, as it has several other strong projects in the U.S., including the district-scale Eureka project in Nevada, 338 km west of Talapoosa and 6.5 km from Barrick Gold’s (TSX: ABX; NYSE: ABX) Archimedes/Ruby Hill mine. 

The 60 sq. km South Eureka land package on the south end of Nevada’s Battle Mountain-Eureka Trend, is one of the largest remaining undeveloped gold properties in Nevada, according to Timberline. The project’s flagship deposit Lookout Mountain has a measured and indicated resource of 26.3 million tonnes grading 0.62 gram gold per tonne for 508,000 contained oz. gold, and an inferred resource of 10.6 million tonnes grading 0.41 gram gold for 141,000 contained oz. gold.

Timberline acquired the Eureka property in its 2010 acquisition of Staccato Gold and believes that most of the sediment-hosted gold mineralization appears amenable to heap-leach recovery.

The junior also has a joint-venture with privately held Highland Mining on the Butte Highlands project in Montana, a high-grade underground gold project. Highland is the operator and is funding all mine development costs through to commercial production. Timberline has a 50% free-carried interest.

“Our stake in that project is akin to a royalty,” Patankar says. “It is substantially permitted now — one of the first to be permitted in Montana in the last 20 to 25 years — so it’s a tremendous achievement.”  

Patankar notes that for a company of Timberline’s size to have three projects that all have production potential is “a unique investment proposition.”

“We’re not sitting on our hands, unlike 90% of the junior mining companies,” he says. “We’ve got a great story to tell, a fantastic technical team and a project in Talapoosa that has near-term production potential in one of the world’s best jurisdictions.”

The company has US$1.2 million in cash and no debt. At press time it was trading at 71¢ per share within a 52-week range of 42¢ to $2.28 per share. The company has 10 million shares outstanding.