COEUR D'ALENE, Idaho, Oct. 10, 2008 (GLOBE NEWSWIRE) -- Timberline Resources Corporation (AMEX:TLR) announced today that it has signed a non-binding Letter of Intent to amend the purchase agreement to acquire Small Mine Development, LLC ("SMD"), one of the largest underground mine contractors in the United States. The Company expects to sign the definitive version of the amendment to the purchase agreement shortly.
The Letter of Intent reflects a revised purchase price of $70-million to Ron Guill, the sole owner of SMD and a Timberline Director. Timberline has agreed to pay $25-million in cash at closing, payable from a secured financing facility, and $45-million in Timberline common stock (valued at $1.16 per share). The Letter of Intent also contemplates that Timberline will establish a Restricted Stock Plan for key employees and management. There are no options or warrants included in the new agreement or in the Restricted Stock Plan. In conjunction with the amended agreement, Timberline is in advanced negotiations with Auramet Trading, LLC with regard to extending and/or amending its existing bridge loan facility.
SMD was founded in 1982 and has approximately 300 employees working at six mine sites, for clients such as Newmont Mining. In 2007, SMD had earnings before interest, taxes, depreciation, and amortization (EBITDA) of $23.8-million on revenues of $101.4-million. Over its last five fiscal years, SMD has generated EBITDA of 22 to 24-percent of revenue on steady revenue growth.
Timberline CEO Randal Hardy stated, "We are very pleased to reach this agreement, despite extremely difficult market conditions, and believe that it is advantageous to our shareholders and to the employees of both SMD and Timberline. The revised deal structure allows us to complete the acquisition while bypassing the capital markets and avoiding unmanageable debt."
Timberline Chairman John Swallow added, "We believe that the amended terms remove considerable uncertainty regarding the acquisition while adding a committed, long-term majority shareholder in Ron Guill. We remain confident that our combined management team will deliver strong returns from our contract mining and drilling businesses, despite the present market uncertainty. Furthermore, by adding underground mine development and operation to our in-house capabilities, we will be well-positioned for further growth within the resource sector."
With SMD fully integrated, Timberline plans to aggressively advance its Butte Highlands Gold Project. The Company recently announced that a preliminary in-house economic analysis indicated the potential for the project, once successfully developed, to significantly increase consolidated EBITDA with a gold price as low as $500 per ounce. (See Timberline's press release dated September 19, 2008 for details.) Partial results from the Company's ongoing drill program at Butte Highlands will be announced shortly.
Timberline Resources Corporation has taken the complementary businesses of mining services and mineral exploration and combined them into a unique, forward-thinking investment vehicle that provides investors exposure to both the "picks and shovels" and "blue sky" aspects of the mining industry.
Timberline has contract drilling subsidiaries in the western United States and Mexico and an exploration division focused on high-potential, district-scale gold projects. With its anticipated acquisition of a premier American underground mine contractor, Small Mine Development, Timberline will strengthen its position as an emerging, vertically-integrated resource company. Timberline is listed on the American Stock Exchange and trades under the symbol "TLR".
Statements contained herein that are not based upon current or historical fact are forward-looking in nature. Such forward-looking statements reflect the Company's expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. When used herein, the words "anticipate," "believe," "estimate," "plan," "intend" and "expect" and similar expressions, as they relate to Timberline Resources Corporation, or its management, are intended to identify such forward-looking statements. These forward-looking statements are based on information currently available to the Company and are subject to a number of risks, uncertainties, and other factors that could cause the Company's actual results, performance, prospects, and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, such factors, including risk factors, discussed in the Company's Annual Report on Form 10-KSB for the year ended September 30, 2007. Except as required by the Federal Securities law, the Company does not undertake any obligation to release publicly any revisions to any forward-looking statements.