By Gene Arensberg
The following is a portion of a note we sent to a few of our trading and newsletter brethren recently, slightly edited for this public version.
On December 5, 2013 Timberline Resources (NYSE MKT: TLR $0.185) announced they had entered into a Confidentiality/Exclusivity Agreement with a newly formed private company called RockStar Resources. The press release said in part:
“…the Company has entered into a Confidentiality Agreement, including a No-Shop/Exclusivity clause valid through February 28, 2014, with RockStar Resources, a private corporation, ("RockStar") in order to explore mutually beneficial transactions.”
In an S8 filing (8-K) with the SEC, Timberline further clarified with this comment:
On December 2, 2013, Timberline Resources Corporation (the “Registrant”) entered into an addendum, dated effective November 22, 2013, to a confidentiality agreement (“Addendum”) with RockStar Resources, Inc. (“RockStar”), a private Idaho corporation. Pursuant to the Addendum the Registrant granted RockStar a no-shop/exclusivity right valid through February 28, 2014 (“Exclusivity Period”). Under the no-shop/exclusivity right the Registrant has agreed not to (i) solicit, initiate or take any action to facilitate or encourage any inquiries or the making of any proposal from a person or group of persons other than RockStar and its affiliates that may constitute, or could reasonably be expected to lead to, an Alternative Transaction (as defined in the addendum); (ii) enter into or participate in any discussions or negotiations with any person or group of persons other than RockStar and its affiliates regarding an Alternative Transaction ; or (iii) furnish any non-public information relating to Timberline or any of its subsidiaries, assets or businesses, or afford access to the assets, business, properties, books or records of the Company or any of its subsidiaries to any person or group of persons other than RockStar and its Agents, in all cases for the purpose of assisting with or facilitating an Alternative Transaction; or (v) enter into an Alternative Transaction or any agreement, arrangement or understanding , including, without limitation, any letter of intent, term sheet or other similar document, relating to an Alternative Transaction.
The Registrant and RockStar will negotiate in good faith the terms of a transaction involving stock or assets of the Registrant and, if and when the parties agree on such terms, provide the Registrant a written offer in the form of a binding Memorandum of Agreement (“MOA”) setting forth the agreed upon terms for the transaction. In such terms, there shall be included a commitment to purchase US$1 million in shares of common stock of the Registrant, which purchase amount shall be credited to the definitive terms contained within the MOA.
Clearly Timberline appears to be in discussions with RockStar for a possible corporate transaction.
(Very short term volume candle chart of TLR, 1 hour increments, 20 days)
When I saw the press release, I remembered that RockStar had recently entered into an agreement with Calico Resources (TSX: CKB.V) to acquire all of the shares, essentially buying the 2.3 million ounce Grassy Mountain project located in SE Oregon for a reported $35 million (subject to financing).
Calling Grassy Mountain their “Inaugural Project,” the Rockstar press release went on to say:
“We are extremely pleased to announce the inaugural acquisition by RockStar of a high quality U.S. advanced stage exploration project that meets our strict profile for opportunity,” said Dennis E. Wheeler, Chairman and Chief Executive Officer of RockStar. “Calico has already made substantial investment into the development of the Grassy Mountain Project. With RockStar’s expertise in permitting, mine design and optimization, and operational development, we expect to expeditiously advance this major gold project through feasibility and toward production. Grassy Mountain is in an excellent location, near major highways and just 70 miles west of Boise, Idaho, with a large land package that gives significant upside to further gold resource development.”
(Chart showing Calico Resources, 1 year, weekly; the subject of the RockStar bid announced Dec 3)
Wait a minute. Dennis E. Wheeler? The former Coeur d' Alene Chairman?
RockStar is being led by Wheeler?
Yep.
On RockStar’s website, we read this about Wheeler and the RockStar team:
Mr. Wheeler is the former Chairman, President & CEO, Coeur d’Alene Mines Corporation. Mr. Wheeler led Coeur for 25 years, building the company into a leading $2.5 billion New York Stock Exchange listed international silver and gold company with mines on three continents. He is a former President of the Silver Institute, an international organization of producers and refiners, and a previous Director of the World Gold Council. Mr. Wheeler was the First Recipient of the American Institute of Mining and Metallurgical Engineers Environmental Leadership Award. Mr. Wheeler currently serves on the Cecil D. Andrus Center for US Public Policy Foundation Board.
A Vulture Start-up
So what is this new company that Mr. Wheeler has formed? The snapshot on their website says:
Mining & Exploration Projects
As a new precious metals mining company, RockStar Resources, Inc. focuses on identifying and investing in high-quality mining and/or exploration projects which are approaching feasibility. Our mission is to help advance these mining projects toward operations and production.
Experience
RockStar Resources was formed in 2013 to identify the best available mining projects in need of funding, permitting and/or feasibility, and help advance those projects toward production. Led by former Coeur d'Alene Mines CEO Dennis E. Wheeler, the RockStar team has combined more than 125 years of mining experience.
About Us
RockStar Resources, Inc. invests in premier gold and silver mining projects and with its extensive mining experience and expertise, helps advance those projects toward production. The Company was incorporated in 2013 and is headquartered in Coeur d'Alene, Idaho. (Emphasis ours.)
That pretty much says it all. RockStar is apparently a Vulture Opportunity start-up, and it is led by a pro. It seems to be concentrating on projects in the U.S., and near to the Coeur d' Alene, Idaho neighborhood.
And now, in return for a modest funding commitment to TLR, ($750,000 at $0.20 per TLR share in three $250,000 tranches between now and February) it looks to me like Timberline has given RockStar an exclusive shot at a deal, (going out on a limb here somewhat), ... presumably to acquire either Butte Highlands, Lookout Mountain and the other Nevada properties, or all of the above.
In short, it looks to me like Paul Dircksen’s Timberline, (which despite being funded through to production at Butte by its 50% JV partner, has been trading on the NYSE at a price that suggests the market apparently assumes the company will go out of business in this tough market for juniors) – LOOKS TO BE "IN PLAY." Similar to Buck Morrow’s Calico. (See chart below.)
Timberline has significant resources for a well funded Vulture Start-up to take and run to a now very close finish line (with respect to Butte Highlands and production of the high-grade gold deposits there), and it has a very under-appreciated exploration project in Nevada in Lookout Mountain (and the other exploration properties that TLR has acquired).
Ordinarily I would be on the phone trying to learn as much as I can about this recent development, but time constraints between now and the New Year have conspired to prevent that. I will be mostly out of pocket, so to speak, and totally out of communication entirely for long periods of time, between now and then.
(Image: TLR's Butte Highlands HQ, equipment barns and mine portal.)
So, I wanted to share the information above with you so that you might be able to get into position in time for a possible corporate transaction and use your ways and means to learn what you can while the market for TLR is still in a coma. (See chart below.)
Speculation
Not knowing the direction or substance of the discussions by TLR with Mr. Wheeler and company (RockStar), this is merely rank speculation, but I suspect intuitively that Mr. Wheeler will understand the deeply hidden value of TLR, probably better than most because of his long tenure with CDE. (He's from and in the neighborhood and knows the locals.)
By now he will have visited the mine site at Butte Highlands, seen the infrastructure already in place, the ramp down into Nevin Hill (almost to the pay zone) and have made his assessment of the late stage permitting underway with the MDEQ.
By now he will have also come up to speed with Lookout Mountain and the Nevada assets.
I have to believe that if TLR were to be sold it would probably fetch significantly more than the current $0.185 price (a tiny $13.9 million market cap). The brutal, take-no-prisoners bear market has priced TLR as though it is headed for the dust bin of juniors. Instead, if my hunch is right, TLR is under discussion even as we speak for a new corporate transaction.
Of course there are any number of possibilities that might result from an exclusive look period, but my sense is that Mr. Wheeler will see the near-immediate production possibilities of Butte Highlands, the very high grade material they have to work with there (averaging about 1/3 of an ounce of gold per tonne of Montana skarn about 30 minutes from the exsting mill that will process the gold ore on a contract basis) and want that low-cost gold for his new RockStar Resources.
I certainly would, were I in his Idaho rock-kicking, gold-producing shoes.
***
(TLR 10 years, monthly, compared to the XAU. Note how the XAU is near its extreme lows of the last decade. A perfect time to be putting great gold assets away if you are a Dennis Wheeler and RockStar Resources.)
That’s enough for now, except for the additional due diligence leads below, so I’ll leave it there.
Bottom Line: This may be a case of Gene jumping the gun (it wouldn’t be the first time), but I sense and suspect not. Keep an eye on TLR just ahead, especially toward the end of the year. I suspect that we will hear something sooner, rather than later on it.
That is all for now. Seasons Greetings.
***Supplemental***
Additional notes:
The Rockstar Resources Board and Management
In addition to Wheeler, K. Leon Hardy, President and COO | Mr. Hardy is the former Chief Operating Officer of Coeur d’Alene Mines Corporation. He is a geological engineer who has successfully managed operating mines and developed mining projects in some of the most challenging environments in the world including Nevada, the Silver Valley of Idaho, Southern Argentina, the Andes in Bolivia, Southeast Alaska, and the Sierra Madre Mountains of Mexico. |
Richard T. Richins, Executive Vice President, Environmental Compliance & Government Affairs Mr. Richins is a well known environmental and governmental affairs expert instrumental in the successful, multi-year permitting at the Kensington Gold Mine in Alaska, with extensive experience in Idaho, Nevada and internationally. He is a past recipient of the Environmental Conservation Distinguished Service Award, the top environmental awarded from the American Institute of Mining, Metallurgical and Petroleum Engineers (AIME). | Edward Jette, Senior Vice President of Metals | Mr. Jette brings over 25 years of experience in the Natural Resource Industry, previously holding positions with Johnson Matthey and the Englehard Corporation. Mr. Jette also was the Managing Director, Commercial Business Development for Coeur d’Alene Mines Corporation, helping establish a relationship with the People’s Republic of China and negotiating the first gold refining contract between the United States and the PROC. | | Elizabeth Druffel, Chief Financial Officer | Elizabeth Druffel brings more than 13 years of financing and accounting experience to RockStar, having served most recently as the former Treasurer and Chief Accountant of Coeur d’Alene Mines Corporation, with extensive experience in analysis of financial statements and business transactions and overseeing a team of 50 accounting and finance employees globally. She also was previously employed as an Audit Senior Manager with KPMG LLP and is a Certified Public Accountant. | | Independent Board of Directors | | Cecil D. Andrus, Former US Secretary of the Interior | Four term Governor of Idaho from 1971 to 1977 and again from 1987 to 1995. Instrumental in passage through Congress of the Alaska Lands Act, 1995. Founded the Andrus Center for Public Policy at Boise State University, dedicated to independent, non-partisan policy formation on critical issues confronting Idaho, the American West and the United States. | | Roger Kauffmann, Mining Engineer | Former President and COO, AMAX Gold, Inc. Executive VP and COO, Hecla Mining Company responsible for 5 metals mines and 10 industrial mineral operating locations. Constructed 3 metals mines in Chile, Far East Russia, and Alaska. Business development extensive including Venezuela. | | James R. Ayers, Conservation Consultant | President of Alaska Strategies, a private conservation firm providing management services including strategic planning for local governments, businesses and national non-profits regarding public policy, legislation and media. Former Vice President and Senior Advisor for Oceana, Inc.; Chief of Staff to Governor of Alaska; Executive Director of the Exxon Valdez Oil Spill Trustee Council; and Director of Alaska Marine Highway System and of Legislative Relations for Alaska Governor. |
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Watch a 2010 video interview of Wheeler here: http://www.bloomberg.com/video/65112564-coeur-d-alene-mines-wheeler-interview.html
Note: Wheeler resigned from CDE in July of 2011.
Formation of Rockstar Resources press release: http://www.cdapress.com/news/business/article_065a33a8-aa35-56cc-9e2f-44ffc9ab4686.html
COEUR d'ALENE - Former Coeur d'Alene Mines CEO Dennis E. Wheeler has been named chairman of RockStar Resources, a new private Coeur d'Alene-based company formed to advance precious metals projects into production with financial and permit support.
"The current metals environment has created a unique opportunity to help many smaller excellent mining projects which are currently on hold because of lack of financing or delays in the progress of the permitting process, which are often the most difficult and time-consuming tasks in getting a mine into production," Wheeler said. … more
That is all. Carry on and good luck.
(TLR 1 year, weekly, during the worst of the brutal bear market for junior miners and explorers.)
