1288750--12/8/2009--Timberline_Resources

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Risks Associated With Mining and The Exploration Portion of Our Business All of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral reserve on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from these properties and if we do not do so we will lose all of the funds that we expend on exploration. If we do not discover any mineral reserve in a commercially exploitable quantity, the exploration component of our business could fail. Mineral operations are subject to applicable law and government regulation. Even if we discover a mineral reserve in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral reserve. If we cannot exploit any mineral reserve that we might discover on our properties, our business may fail. Future legislation and administrative changes to the mining laws could prevent us from exploring our properties. If we establish the existence of a mineral reserve on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into a producing mine. If we cannot raise this additional capital, we will not be able to exploit the reserve, and our business could fail. Mineral exploration and development is subject to extraordinary operating risks. We do not currently insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which would have an adverse impact on our Company. Estimates of mineralized material are subject to evaluation uncertainties that could result in project failure. Mineral prices are subject to dramatic and unpredictable fluctuations. The mining industry is highly competitive and there is no assurance that we will continue to be successful in acquiring mineral claims. If we cannot continue to acquire properties to explore for mineral resources, we may be required to reduce or cease exploration activity and/or operations. Third parties may challenge our rights to our mineral properties or the agreements that permit us to explore our properties may expire if we fail to timely renew them and pay the required fees. Acquisitions and integration issues may expose us to risks. Joint ventures and other partnerships in relation to our properties may expose us to risks. Risks Related To Our Company We have a limited operating history on which to base an evaluation of our business and prospects. Investors interests in our Company will be diluted and investors may suffer dilution in their net book value per share if we issue additional employee/director/consultant options or if we sell additional shares to finance our operations. Recent market events and conditions, including disruptions in the U.S. and international credit markets and other financial systems and the deterioration of the U.S. and global economic conditions, could, among other things, impede access to capital or increase the cost of capital, which would have an adverse effect on our ability to fund our working capital and other capital requirements. Dependence on Key Management Employees Certain Risks Associated with Operation of Our Wholly Owned Subsidiary, Timberline Drilling, Incorporated. Our subsidiary derives all of its revenues from companies in the mining exploration and production industry, a historically cyclical industry. Timberline Drilling may be unable to attract and retain qualified, skilled employees necessary to operate its business. Shortages in equipment and supplies could limit Timberline Drilling s drilling operations and jeopardize its relations with customers. The mining services industry is a competitive industry. Cyclical downturns in the mining industry could negatively impact Timberline Drilling s business. Timberline Drilling s operations in foreign countries expose us to a variety of political and business risks. The availability of an adequate workforce cannot be guaranteed and may affect our ability to timely and profitably fulfill our contracts. Fluctuations in business costs may affect the profitability of long term contracts. Extreme weather conditions in certain areas in which Timberline Drilling operates could impact its operations. We have been assessed penalties for payroll taxes at Timberline Drilling for the late payment of payroll taxes from the period of October 1, 2007 through May 15, 2008. Risks Associated With Our Common Stock Our stock price has been volatile and your investment in our common stock could suffer a decline in value. Because we do not intend to pay any dividends on our common shares, investors seeking dividend income or liquidity should not purchase our shares. We may lose our listing on the NYSE Amex and your investment in our common stock could suffer a decline in value. Shares Eligible for Sale Could Depress the Market for Common Stock

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1288750--12/8/2009--Timberline_Resources_Corp