ITEM 2. DESCRIPTION OF PROPERTIES

We have acquired mineral prospects for exploration in Nevada mainly for target commodities of gold and silver, and formerly copper. The prospects are held by both patented and unpatented mining claims owned directly by us or through legal agreements conveying exploration and development rights to us. Most of our prospects have had a prior exploration history, which is typical in the mineral exploration industry. Most mineral prospects go through several rounds of exploration before an economic ore body is discovered, and prior work often eliminates targets or points to new ones. Also, prior operators may have explored under a completely different commodity price structure or technological regime. Mineralization which was uneconomic in the past may be ore grade at current market prices when extracted and processed with modern technology.

Nevada Gold Properties

The Company currently controls three mineral properties in Nevada including Eureka, Paiute, and Seven Troughs (Figure 1).

Eureka (Battle Mountain/Eureka Trend)

We acquired the Eureka Project as part of our acquisition of Staccato Gold Resources Ltd. (“Staccato Gold”) and its wholly owned subsidiary, BH Minerals USA, Inc. (“BH Minerals”), in June 2010. Eureka comprises an area of approximately 16,000 acres (>

The Eureka Project is situated in the southern part of the Eureka mining district, within T19N, R53E and unsurveyed T17N and T18N, and R53E. The property is also within the bounds of the United States Geological Survey (“USGS”) 1:24,000-scale 7.5-minute topographic series maps of the Pinto Summit and Spring Valley Summit quadrangles.

Property Description

The Eureka Project (Figure 2) includes the Lookout Mountain, Windfall and Oswego targets. Mineralization generally occurs along north-to-south trending zones of gold mineralization, each approximately 3 to 4 miles (4.8-6.5 km) in strike length. Each of these mineralized zones is open and will require additional in-fill and step-out drilling.

Historical production of gold in the district included approximately 112,000 oz at the Windfall Mine, which began operation in 1975 (Russell, 2005). An additional 17,700 oz of gold was produced from the Lookout Mountain Pit which operated in 1987 (Cargill, 1988, Jonson, 1991).

The Eureka Project has no known reserves, as defined under Industry Guide 7, and the proposed work program for the property is exploratory in nature.

We pay federal and county claim maintenance fees on the Eureka Project. The federal claim fees are due to the BLM before September 1 of each year, and the remainder is due to Eureka County on November 1 of each year. All unpatented mining claims on the Eureka property have been located under the General Mining Laws of the United States on US Bureau of Land Management (“BLM”) managed lands.

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Figure 1. Timberline Project Locations

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Figure 2.  Timberline’s Eureka Project Area and Gold Occurrences

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The following table summarizes the claims and royalties for the Eureka Project:

Eureka Project Claim and Royalty Summary

We have the right to explore and develop the Lookout Mountain target subject to a mining lease and agreement dated August 22, 2003 with Rocky Canyon Mining 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. We have fulfilled the work commitment on the Lookout Mountain target. 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.

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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 royalty.

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 2020, Royal Gold continued to maintain 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 Project 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. This road is of uncommon quality and scale for rural Nevada due to its construction as a mine haul road at considerable cost in 1980’s dollars.

The southern parts of the Eureka Project 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 Project 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 piñon pine 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 (37.8° C) or more. Winter temperatures generally range from as cold as below 0º F (-17.8ºC) to, more commonly, 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 may accumulate on the property during the winter months.

The Eureka Project 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 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.

Historical Exploration: 1970s to 1990s

The reader should note that discussions in this document pertaining to assay results and concentrations of gold mineralization span many years and reporting standards have changed considerably over that time.  References to historical reports of assay results or the grade (concentration) of gold mineralization may cite results in troy ounces of gold per short ton of rock, which will be abbreviated “opt”. More recent gold assay or concentration data will be reported in this document as grams of gold per tonne (metric) of rock, which will be abbreviated “g/t”. In most cases when discussing modern data, we make an effort to cite the unit conversion, which is on the basis of 1.00 opt = 34.286 g/t.      

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 (“opt”), was a Carlin-type sediment-

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hosted disseminated gold occurrence. Wilson’s work emphasized the east side of Hamburg Ridge and the Windfall Trend, where he drilled conventional air rotary holes. 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 opt gold. 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.

Significant exploration on the Eureka property occurred during the drilling programs mounted during the 1980s and 1990s. 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 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 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 (“RC”) drilling program which tested gold mineralization along the Ratto Ridge Fault and associated geochemical anomalies and jasperoids developed along the north-to-south 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 optioned the Lookout Mountain Deposit 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 assay values ranging from 0.10 to 0.135 opt gold. EFL also drilled nine holes, two of which penetrated 500 feet (152 meters) into the floor of the pit, that 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 north-to-south 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 (400 meters) and encountered several gold intercepts.

Work by Nevada Gold also included airborne 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 analyses at MB Associates in California and 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.

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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 opt gold in the Dunderberg, and drill hole EBR-9 which intersected 115 feet (35 m) grading 0.043 opt gold in the Nevada Group. Offsets of EBR-9 found 90 feet grading 0.028 opt gold, and another hole, which was lost before reaching planned depth, found 45 feet (14 m) of 0.024 opt gold. 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 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.

Exploration: 2005 to 2010 (Staccato Gold)

Staccato Gold (“Staccato”) advanced exploration of the Eureka Project 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 to 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 program demonstrated the stratabound nature of gold mineralization in thick zones of collapse breccia within the Ratto Ridge structural zone. Current Timberline director, David Mathewson, was a consulting geologist for Staccato during this period, leading much of the core logging and development of the geological model at Lookout Mountain. Metallurgical and other technical characteristics of known mineralization were also investigated at Lookout Mountain.

An exploration Plan of Operations was prepared by Staccato and was approved in 2009 by the BLM and the State of Nevada Department of Environmental Protection (“NDEP”) for the Lookout Mountain Trend. The Plan of Operations called for approximately 266 acres of disturbance that can be accessed for use in a phased approach and covers the entire structural corridor. The Plan of Operations allowed ground disturbance to complete additional infill, metallurgical, and exploration drilling necessary to advance the development of the Lookout Mountain deposit and other targets along the trend.

In October 2009, Staccato also initiated work at the Windfall Target 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.

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 as drilled define the Windfall fault zone as a 150 to 200-foot (46 – 61 m) thick zone striking roughly north-to-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 which intersected 75 feet (23 m) at 0.153 opt gold, and five other holes were drilled 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 opt gold in hole 7, 135 feet (41 m) at 0.016 opt gold in hole 8, 115 feet (35 m) at 0.010 opt gold in hole 9, and 100 feet (30.5m) at 0.018 opt gold 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, with 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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Exploration by Timberline Resources: 2010-2019

Timberline acquired Staccato Gold in 2010 as management believed that the Eureka Project has excellent potential for continued exploration success. Based on the work of previous companies and by Timberline, gold mineralization at the Lookout Mountain target is currently defined over a structural corridor that extends up to 3.7 to 4.3 miles (6 to 7 kilometers) in strike length. This structure hosts several areas of drill-indicated gold, and the potential for discovery of additional mineralization in this corridor is strong. The Lookout Mountain mineralization itself is open for expansion at depth and along strike. 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 target area has 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, identify orientations of mineralized cross structures intersecting the main structural zones, and follow up on soil geochemical 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 historic drill holes were reviewed along Ratto Ridge at Lookout Mountain to develop geologic cross sections and plans for the entire Lookout Mountain Deposit. Geologic grade shells were also 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 resource estimate that resolved past technical issues and provided a basis for potentially advancing the property following additional drilling.

From 2010 through 2013, the exploration work programs totaled approximately $9,000,000 on the Eureka Project. The programs defined sufficient data to prepare a mineral resource estimate at Lookout Mountain and prepared a technical report compliant with NI 43-101, 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 RC drilling directed primarily at resource in-fill and definition drilling,  and; 

·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 Deposit 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 Deposit. In addition, significant exploration potential was noted.

The mineral resource 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, allowing the geostatistical analysis of the modeled mineralization to aid in the establishment of estimation parameters, and interpolating grades into a three-dimensional block model.

The final drill results of the 2011 exploration program were successfully incorporated into the updated mineral resource and 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, the mineralized zone at Lookout Mountain was successfully extend 600 feet (183m) to the south of the existing mineral deposit, and mineralization was also expanded 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 Deposit.

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Assay results from drilling during the 2012 and 2013 exploration program were incorporated into another update to the resource and 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. There are no proven and probable reserves as defined under Guide 7 and as such Timberline’s activities there remain exploratory in nature.

The Lookout Mountain Deposit is a large “Carlin-type” gold system with a defined gold resource (see Updated Technical Report on the Lookout Mountain Project, MDA, Effective March 1, 2013, filed on SEDAR April 12, 2013) and drill-indicated mineralization which extends over a north-to-south trend of approximately 3 miles (>

Table 1.  Lookout Mountain Gold Resource (1)(2)(3)

Notes:

(1)0.006 opt (0.21 g/t) cut-off applied to oxidized material to capture mineralization potentially available to open pit extraction and heap leach processing. 0.030 opt (1.03 g/t) cut-off applied to unoxidized material to capture mineralization potentially available to open pit extraction and lower heap leach recoveries or sulfide processing. 

(2)Rounding may cause apparent discrepancies. 

(3)The effective date of the Lookout Mountain updated gold resource is February 20, 2013. 

The full MDA Resource Estimate with various cut-off grades can be seen at:

 http://timberlineresources.co/wp-content/uploads/2015/07/LookoutMt_-43-101_2013.pdf.

Gold mineralization near the historical open pit at Lookout Mountain (Figure 3) includes 19 intercepts ranging from 0.146 to 2.250 opt gold (5.02 to 77.14 grams per ton [“g/t”]) (see Table 2 and news releases dated July 10, 2018 and Dec 1, 2020 at http://timberlineresources.co/press-releases). The mineralization is associated with extensive zones of fault breccias, collapse-breccias, and with orpiment and realgar (arsenic sulfides) which are commonly found in many major Carlin-type gold deposits.

Exploration activities at the Eureka Project, including Lookout Mountain, were curtailed during 2014, as a result of the limited availability of capital. To reduce ongoing expenses, the Company consolidated the Elko field office into our Eureka facility and limited the exploration program. The limited program did, however, include geochemical waste rock environmental characterization, independent metallurgical testing, continued monitoring of water quality, and definition of hydrologic work plans. In addition, low-cost geologic mapping, and stratigraphic and structural analyses continued in selected detailed areas. These activities resulted in identification of new targets characterized by anomalous mineralogy and trace element geochemistry as indicators of possible gold mineralization.

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Figure 3.  Lookout Mountain Geology and High-Grade Gold Zone  

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Table 2.  Selected High-Grade Gold Drill Intercepts from the Lookout Mountain Deposit

In fiscal 2015, Timberline drilled three holes at Lookout Mountain to confirm a previously recognized partial drill intercept of higher-grade gold mineralization at depth in the water well “orpiment discovery zone” (Figure 3). This higher-grade mineralization is associated with the previously defined resource zone of near-surface, gold mineralization. The geology in the holes stratigraphically correlates well 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 mineralogically consistent with higher-grade occurrences as recognized in many deeper levels of Carlin-type systems. Highlights of the 2015 Lookout Mountain drilling include 65 feet (19.8 m) @ 0.09 opt gold (3.09 g/t), including 25.2 feet (7.7 m) @ 0.146 opt gold (5.02 g/t) in BHSE-171. In addition, three intercepts of >3 g/t gold over lengths of up to 50 feet (>

In 2015, a six-hole RC drill program on the Windfall target was also completed. The drilling successfully tested the on-strike, offset, and down-dip extensions of gold mineralization that was previously mined at Windfall. The drill holes were completed over a strike length of approximately 3,000 feet (914 m) and 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 (3.09 g/t) of gold including a subsection of 20 feet (6.1 m) @ 0.26 opt (8.91 g/t) of gold.

During the continued difficult commodities environment of fiscal year 2016 and 2017, the Company did not complete drilling or field exploration activities on the Eureka Project. However, the Company used this time to secure 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, a reconciliation of BLM and Nevada state bond calculations with actual disturbed acreage was subsequently completed in early fiscal year 2017.

During fiscal year 2018, we completed further internal geologic review of high-grade (>5 g/t and up to 77 g/t) gold mineralization that is associated with extensive zones of structurally controlled fault and gouge breccias, as well as carbonaceous collapse-breccia (Table 2). This geologic review led to design and completion of a detailed gravity survey around Lookout Mountain and further analysis of historical geophysical survey data. The survey defined a low-density gravity low anomaly 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 and gold mineralization of the Lookout Mountain resource. The

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gravity anomaly is recognized to correlate well with features noted in an airborne magnetics survey and geologic mapping. Major structures identified by magnetics and geologic mapping bound the gravity anomaly.

Three lines of shallow historical (1992) induced polarization/resistivity (IP) data at Lookout Mountain define three north-to-south 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 open-pit area was also reviewed in concert with the Timberline gravity data. The gravity data correlates 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 with the existing north-to-south trending gold resource at Lookout Mountain. The central portion of the graben contains a large, high-resistivity anomaly, which had been tested locally on the west side by only four previously noted closely spaced holes (BHSE-152, -171, -172, -173) at the water well orpiment discovery zone, all of which contain relatively high-grade gold.

Additional field work in 2018 was also completed at the Windfall target. Work focused on collection of 40 rock chip samples in and between the historical Rustler, Windfall, and Paroni pits. Highlights included 10 samples with greater than 0.029 opt (1.0 g/t) and 6 greater than 0.088 opt (3.0 g/t) gold, up to a maximum of 0.382 opt (13.1 g/t) gold. In total, 17 samples assayed greater than 0.007 opt (0.250 g/t), 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.

At the Oswego trend, results of 2018 surface rock chip sampling and geologic mapping identified high-grade gold exploration targets near the historic Oswego Mine. The Timberline team collected 54 rock samples along the Oswego Trend, including high-grade gold at the Road Cut target and high-grade silver and gold at the Geddes-Bertrand target. 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 interval averaged 0.36 opt (12.4 g/t) 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.

These results are particularly encouraging because of the relatively close proximity of the Road Cut occurrence to structures associated with the Lookout Mountain deposit. The occurrence of wide-spread gold and silver mineralization over such a large area, encompassing the Lookout Mountain and Oswego Trends, suggests the existence of a robust large-scale mineralizing system.

During fiscal year 2019, limited field activities occurred during the first part of the year due to capital constraints. Field activities were later re-initiated upon entering the Lookout Mountain LLC Agreement with PM&G to fund advancement of the Lookout Mountain target with an initial focus on the high-grade mineralization in the historic open pit area. Initial work entailed a continuation of re-logging of drill core in the vicinity of the Lookout Mountain resource, where past core and rotary drilling has partially delineated an area of high-grade (defined as drill hole intercepts of ≥ 0.10 opt or >, Carlin-style gold mineralization, where 17,700 ounces of gold averaging 0.12 opt (4.11 g/t) were produced in the mid 1980s. These include 48 drill intercepts of ≥0.25 opt (8.6 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 has a strike length of approximately 500 feet (>constrained at least in part by stratigraphy and zones of decalcified collapse breccias. The breccias locally contain the minerals orpiment and realgar (arsenic sulfides).

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

Based on the 2019 geologic reviews, an initial drill plan was developed to further advance the Lookout Mountain Target during FY 2020. This plan included approximately 8,000 ft (>was designed to test the geologic continuity of stratiform and structurally-controlled high-grade mineralization to the east of the historic pit area beyond the limits of the resource (Figure 3). In addition, planned in-fill RC drilling was designed to target gaps in the existing resource drilling, as well as offset and confirm historic drill intercepts from rotary and RC drilling. Many of the historic drill intercepts occurred before the advent of Canadian NI 43-101, which established certain quality control procedures that may not have been followed historically. The drilling also aimed to test and expand the “Orpiment Gold Discovery Zone” of high-grade mineralization located east of the pit, which was discovered in drilling by Timberline in 2015 (see news release dated April 20, 2015 at http://timberlineresources.co/press-releases).

Also, in early FY2020, an amended work plan to the 2009 BLM Plan of Operations for Lookout Mountain was filed with the BLM. This work plan amendment proposed bonding with an additional 9 acres of proposed disturbance beyond the existing 28

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acres of disturbance. With the increased bond, construction of up to 249 drill sites and 28,657 feet of road access focused in the immediate area of the historic Lookout Mountain open pit will be permitted. The work plan was subsequently approved in 2020. Upon completion of a corporate financing in August 2020, the Company submitted additional bond capital of $246,013 to the BLM in preparation for drilling at the Lookout Mountain target in late FY2020 and early FY2021.

Subsequent Events—FY 2021

Subsequent to the end of FY2020, the drill program at the Lookout Mountain Target was completed in December 2020. The final 2020 drilling program completed included 12 RC holes totaling 8,000 ft (2,438m) and 3 core holes totaling 4,478 ft (1,365 m).

Assay results received to-date include those from the first seven RC drill holes of the 2020 program. This drilling falls within or near the existing Lookout Mountain resource footprint and had three objectives: (1) to confirm and extend high-grade (>3 g/t) gold mineralization in the vicinity of historic conventional rotary drill results; (2) to infill the resource within and near the Lookout Mountain open pit; and (3) to test the continuity of mineralization in the water well orpiment discovery zone outside the existing resource (Figure 3). All of these drill holes intercepted significant disseminated gold mineralization.

Drill hole assay highlights include:

·Hole BHSE-176 intercepted near surface high-grade gold mineralization, 15.24m averaging 0.294 opt (10.09 g/t), beginning at 21.34m downhole depth. Within this interval, there are sub-intervals of 9.14m of 0.524 opt (16.31 g/t), including 3.05m of 1.01 opt (31.40 g/t). 

·Holes BHSE-177 and 178 encountered shallow oxide gold within the existing resource, including 18.29m of 0.028 (0.87 g/t) (from surface), 48.77m of 0.032 opt (1.00 g/t), and 59.44m of 0.020 opt (0.63 g/t). 

·Holes BHSE-180, 181, and 182 confirmed northward and down dip extensions of mineralization beyond the historic Lookout Mountain pit, including gold intercepts up to 18.29m of 0.051 opt (1.58 g/t) in the latter of these holes. 

·Hole BHSE-184 drilled 18.29m @ 0.93 g/t gold below the near-surface of the historic pit. 

·Hole BHSE-186 intercepted 6.10m of near surface high-grade gold (5.21 g/t) and a separate, broader zone (25.91m) at 0.77 g/t mineralization at further depth within the historic pit area.      

·Holes BHSE-187 encountered 7.62m of 4.49 g/t gold outside the existing resource area within a broader zone of 32.00m at 1.82 g/t. 

For full details see news release dated December 1, 2020 at http://timberlineresources.co/press-releases.

We also initiated a major program of geophysical exploration at the beginning of FY2021 including:

1.A property-wide gravity survey on a 200m grid was completed (see news release dated November 2, 2020 at http://timberlineresources.co/press-releases). 

2.An induced polarization/resistivity (“IP”) survey was completed covering 3.1km of the Lookout Mountain Trend and stretching east more than 3.0km to cover the Oswego Trend, along with one additional 3.2km line near the Windfall Mine; and 

3.A controlled source audio magnetotellurics (“CSAMT”) survey across several target areas at Lookout Mountain and elsewhere (still underway at the time of this writing). 

This geophysical work was aimed primarily at improving the Company’s understanding of the major structures that control the historic gold occurrences and future exploration targets. Gravity is a well-established method for mapping how different rock units interact with adjacent formations and how faulting, intrusive, and volcanic activity have affected the targeted sedimentary rocks. Electrical geophysical methods such as IP and CSAMT are designed to measure the presence of alteration and mineralization that may be associated with gold. In Carlin-type gold systems, these include pyrite, clay alteration, silicification, and graphite. These data assist geologists in targeting future drilling and interpreting the existing drilling database in the subsurface.

At the time of this writing, the Company has news released a summary image of the gravity data (See Company news release dated Nov 2, 2020), but the IP survey is still being processed and the CSAMT survey is still underway.  

Elder Creek Project

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) in regards to the 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

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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 underlying Elder Creek JV with McEwen granted Timberline the right to earn up to a total of 65% ownership in two stages for total expenditure of $5.1M over 6 years by December 31, 2023. Upon completion of the 65% earn-in expenditures, if McEwen elected to participate, the parties would form a joint venture, and each party would contribute to further exploration spending according to their ownership interest. If McEwen declined to participate at 65%, the agreement included industry-standard dilution to a 2% NSR royalty.

Following acquisition of the project from AGEI in mid-2018, Timberline completed a NI43-101 Technical Report on the Elder Creek Copper-Gold Project providing a comprehensive description of the project. In 2018 and 2019, the Company tested two priority copper-gold targets by completing 10 km of IP surveys, seven RC drill holes totaling 5,290 ft (1,613m), and one core hole drilled to a depth of 1,497 ft (456 m). The geophysical anomalies suggested the presence of extensive sulfides, which was later confirmed by drilling that encountered abundant disseminated sulfides and local structurally-controlled semi-massive sulfides. The associated copper mineralization occurred variably as both copper oxides and sulfides along with molybdenum, silver, and variable gold.

Timberline management considered the initial geophysical and drilling program at Elder Creek to be encouraging and to validate the potential for a significant porphyry copper-gold system on the property. However, the next phases of exploration and development at Elder Creek would have been very capital intensive, so the Company sought to bring in a major company partner to farm into its rights under the agreement with McEwen Mining. As of November 2019, the search had resulted in a potential agreement with a major company. However, the proposed agreement required the consent of McEwen Mining, which was not obtained prior to the June 30, 2020 anniversary deadline for payment of holding costs. McEwen Mining was unwilling to renegotiate the agreement and consent to the assignment to a third party, therefore Timberline elected to terminate the agreement on the anniversary date.

On June 30, 2020, Timberline opted not to make the required payment of the BLM and county fees to McEwen. As a result, pursuant to the terms of the McEwen JV agreement, the agreement terminated on July 9, 2020. As a result of the termination of the agreement, operations of the Elder Creek Project reverted back to McEwen and we retain no interest. A loss of $1,218,715 was recognized for the quarter ended June 30, 2020 due to management’s decision to terminate the agreement concurrent with the non-remittance of the required payment at the end of the quarter, this to focus our exploration resources on Lookout Mountain. The entire investment in Elder Creek was expensed in fiscal 2020.

Paiute Project

The Paiute Project (formerly referred to as the ICBM Project) 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 Barrick Gold. Timberline acted as operator of the project through November 2013 earning a 73.7% interest in the project, with LAC holding the remaining interest.

Historical exploration demonstrated that gold mineralization is present on the property in styles of mineralization currently being mined elsewhere in the Battle Mountain district including at the Fortitude/Phoenix complex to the south and Lone Tree to the west. An analysis of historical data led to recognition that the property also 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 and LAC 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 a 51% ownership position in the property and the joint venture by making certain exploration expenditures over a four-year period. If AGEI earned an initial 51% interest, LAC agreed to withdraw from the Joint venture in exchange for a 5% Net Proceeds royalty and to amend the agreement allowing AGEI to increase its equity interest by 19% for a total of 76.6% by making additional exploration expenditures with Timberline retaining the balance of ownership. AGEI also assumed the role as operator of the joint venture.

On August 14, 2018 Timberline finalized the re-acquisition of the property from AGEI along with the contiguous Elder Creek property as part of a two-property acquisition from AGEI. Timberline re-assumed the operator’s position in the underlying property.

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The underlying 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 76.1% ownership of the project after 2018-2020 expenditures. LAC’s parent company, Barrick, is now the operator of Nevada Gold Mines (NGM), a Nevada joint venture between Barrick and Newmont. NGM operates the nearby Fortitude/Phoenix Complex and Lone Tree Mines. Terms of the continued earn-in are as follows:

·No mandatory work commitments are included; 

·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 (based on $300,000 earn-in for 60% of the project); and 

·If diluted project equity reaches 10% or less, LAC converts to a 2% NSR royalty. 

On November 28, 2018 the Company announced completion of a NI 43-101 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 1990s and drilled nine RC 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 RC drilling program to test the main soil anomalies on the property. One drill hole reported 20 feet (6.1 m) of 0.038 opt (1.18 g/t) 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 feet (61m) zone of 411 ppb gold in drill hole ICBM-95-1 within a quartz-actinolite-sulfide veined granodiorite stock or sill. Follow-up RC 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 opt 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”.

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 granitic to granodioritic intrusives. An older Devonian or Ordovician diabase intrusive is exposed in the southwest part of the project and surrounding area.

At Paiute, the granitic to granodiorites intrusives occur 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 and actinolite occur 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 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 northeast-striking structures. Locally, the structures are occupied by granodiorite porphyry dikes. The structures are typically altered and mineralized.

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Figure 4.  Paiute Project Geology and Primary Target Areas

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Previous explorers of the Paiute Project have collected 1,283 soil samples and 301 rock samples in the area and analyzed many of them 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 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.

2018-2019 Timberline Exploration

Exploration expenditures for FY 2018 were limited to geological field reviews, rock grab sampling and assays to characterize surface mineral showings. In addition, an application was submitted to the BLM, with receipt thereafter, of an approved Notice of Intent (NOI) to allow disturbance related to construction of drill roads and pads. The BLM approved the application and the property is fully permitted for road construction and drilling. Work during FY2019 included continued data compilation and review in preparation for drilling planned for FY2020.

Paiute Project Activity during Fiscal Year 2020:

Drilling at Paiute was initiated in the 1st quarter of FY2020, and with assay results announced on January 16, 2020 for our first two drill holes. Drilling intercepted long intervals of disseminated gold mineralization in granodiorite porphyry and metamorphosed sandstone (Figure 4, Table 3). Both RC holes were terminated in hard, silicified and mineralized rock.

Hole PCRC 19-01 intercepted 125 feet (38 m) grading 0.012 opt (0.36 g/t) gold with associated pyrrhotite-pyrite-arsenopyrite in silicified, metamorphosed arkosic sandstone (see Table 3). The hole bottomed in 160 ft (49 m) of silicified granodiorite porphyry. The previously identified 2 km-long gold “Lone Tree-type” structural zone (Figure 4) remains largely untested below the 500 feet (152m) depth of historic drilling and is entirely untested over an interval of approximately 500 meters along the trend of the zone. The structural zone includes surface rock chip samples which previously returned multiple values greater than 1.0 g/t of gold including two samples over 0.322 opt (10 g/t) gold and one sample with 1.38 opt (42.9 g/t) gold and 16.9 opt (527 g/t) silver (see Company news release dated May 24, 2018 at http://timberlineresources.co/press-releases). 

Table 3.  2019 Drill Hole Assay Results

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PCRC 19-02 twinned and deepened historical hole ICBM-95-06, which intercepted gold mineralization within highly silica-altered, sulfide-poor (trace – 1% pyrite) granodiorite porphyry. The hole intercepted multiple zones of gold mineralization in granodiorite porphyry and metamorphosed arkosic sandstone, including 40 ft (12 m) of 0.020 opt (0.61 g/t) gold, 80 ft (24 m) of 0.016 opt (0.51 g/t) gold, 25 ft (8 m) of 0.036 opt (1.12 g/t) gold, and 25 ft (8 m) of 0.025 opt (0.48 g/t) gold over its 710 feet (216 m) length and bottomed in mineralization (Table 3). The mineralization in PCRC 19-02 expands on multiple intercepts in nearby historic holes (see Table 4). Management believes that the Paiute Project has the potential for bulk-mineable, open-pit gold mineralization based on the near surface thicknesses and gold grades drilled to date.

During FY 2020 year the Company also acquired historical IP and magnetic geophysical survey data to further guide future drill targeting of the under-tested structural zone and largely un-tested porphyry gold targets.

Table 4.  Summary of Historic Porphyry-Hosted Drilling Gold Assay Results

Seven Troughs Project

During the year ended September 30, 2012, we announced the acquisition from CIT Microprobe Holdings, LLC (California Institute of Technology) (“CIT”) of CIT’s interest in 3,900 acres (6.1 square miles) of patented and unpatented mining claims comprising the majority of the Seven Troughs gold mining district near Lovelock, Nevada. Our acquired interest is as lessee under the terms of a 50-year lease, originally executed in 1975. Terms of the purchase agreement included a cash payment of $50,000 and a 2-percent NSR production royalty reserved to CIT. We have the option to purchase one-half of the NSR production royalty for $1 million.

Seven Troughs is an epithermal gold district recognized as yielding some of the highest gold production grades in Nevada history through small-scale operations in the early 20th century. We believe the district has the potential to host a large precious metals system similar to the high-grade gold and silver veins of Japan's world-renowned Hishikari epithermal gold mine.

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We are under no obligation to make exploration expenditures at Seven Troughs. Since acquiring the property, we have compiled historical mine workings data and completed limited geologic mapping, and geochemical sampling within the district. The Company conducted no significant work on the ground during FY 2020.

Wolfpack Gold Properties

With the acquisition of Wolfpack Gold (“WPG”), we acquired nine mineral properties in Nevada and one in California. We conducted a due diligence review on each property, including organization of the historical data and review of exploration work completed to-date. As of September 30, 2020, only claims on one property (Trail) have been retained, as they are contiguous with our Eureka project.

In 2017, we sold our property and royalty interests in various unpatented claims that were under lease to Pershing Gold. In addition, we sold various other royalty interests that WPG had retained through previous transactions in four other properties.

Summary

Fiscal year 2020 has seen a strong improvement in the gold price from $1,500 to $1,800 per ounce at year end (including a period during which gold traded above $2,000 per ounce). We believe the global economic environment and monetary climate continue to favor an improving gold price for the foreseeable future. While volatility is to be expected, our expectation is that we can identify and pursue opportunities to advance our projects and take advantage of the current gold price and market volatility.

During fiscal year 2020, we executed on an accretive financing that provided for the advancement of our flagship Eureka Project as well as improvements in our team and corporate infrastructure. At the time of this writing, we are still in the midst of reporting results from the fiscal year 2020 exploration program. The partial drill results and geophysical data already announced indicate the potential for significant advancement of the project through expansion of known mineralization and emerging new target areas. We believe that our management and our board of directors have been strengthened during the year and that the team possesses the knowledge and experience to evaluate and take advantage of financing and strategic opportunities and to provide for the advancement of the Company’s several projects

Overview of Regulatory, Economic and Environmental Issues

Hard rock mining in the United States is a closely regulated industrial activity. Mining 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 surface mineable deposits tend to be lower grade (such as 0.01-0.03 opt gold) and are mined using large, costly earth moving equipment, usually at very high tonnages per day. Modern open pit mines are typically very large excavations that require extensive engineering, planning, reclamation, and permitting.

Some open pit operations for gold in which the ores have bene oxidized 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 under-surface, then sprinkling the ore with a weak cyanide solution to extract the gold. The gold-impregnated solution is collected and the gold recovered through further processing. Most new gold discoveries contain ores that are not suitable for heap leach processing. Often this is because the gold is associated with sulfide minerals such as pyrite. Extensive metallurgical testing is required to determine the optimum method for treating such ores, but sulfide ore deposits almost always require complex milling and processing plants.

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. An underground mine may have much less visual impact on the land, but the mine design is complex and requires intensive study and careful engineering.

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Gold processing plants often generate tailings (the residual material left behind after recovery of the gold-bearing minerals), which require permitted and engineered disposal facilities or tailings ponds. Mines and processing plants also often require extensive water treatment, which again will necessitate extensive interaction with the community and regulators during permitting   

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 worldwide 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 are increasingly important parts 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 mining 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 follow 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.

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 or silver, 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.