8-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):  December 19, 2005

Timberline Resources Corporation

(Exact Name of Registrant as Specified in its Charter)

IDAHO	000-51549	82-0291227
(State or other jurisdiction of incorporation)	(Commission File  Number)	(IRS Employer Identification No.)

36 West 16th Avenue, Spokane, Washington	99203
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (509) 747-5225

N/A

(Former Name or Former Address if Changed Since Last Report)

Check the appropriate box below if the Form 8K fining is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]

Written communications pursuant to Rule 425 under the Securities Act (17CFR230.425)

[  ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)

[  ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

SEC 873  (3-05)

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Item 8.01

Other Events

On December 19, 2005, Timberline Resources Corporation(the "Company") issued a press release announcing that it had entered into a letter of intent (“LOI”)to acquire a 60% equity interest in Kettle Drilling, Inc. (“Kettle”), a privately held drilling company located in Coeur d’Alene, Idaho, from Kettle’s two principal shareholders (the “Principal Shareholders”). Kettle includes on its current list of 25 drilling customers, Phelps Dodge Corporation, Kennecott Exploration, the States of Wyoming and Idaho, and the City of Tacoma, Washington.

In connection with the execution of the LOI, the Company issued 100,000 shares of its common stock to the Principal Shareholders to secure a 75 day exclusive option to complete due diligence and the acquisition (the “Initial Option”). The LOI contemplates that the Company purchase the 60% equity interest of Kettle for 2.8 million dollars in cash (or, at the Principal Shareholders’ option, a combination of two million dollars in cash and $800,000 in the Company’s common stock). The LOI also contemplates, upon the exercise of the first option, the issuance to the Company of a two year option to purchase the remaining 40% equity interest in Kettle from the Principal Shareholders for two million in cash (or, at the Principal Shareholders’, a combination of  two million dollars in cash and the Company’s common stock). Compl etion of the transaction, which is expected to occur in the first quarter of calendar year 2006, is subject to satisfactory completion of due diligence by the Company, negotiation of definitive transaction agreements and receipt of necessary corporate and third party approvals, among other customary closing conditions.

The Press Release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.  

Item 9.01

Financial Statements and Exhibits.

(c) Exhibits.

99.1

Timberline Resources Corporation’s Press Release.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

TIMBERLINE RESOURCES CORPORATION

(Registrant)

Date:  December 19, 2005

By:  /s/ Stephen Goss                         

Stephen Goss, President

EX-99

EXHIBIT 99.1

Press Release

Timberline Signs Letter of Intent to Acquire Kettle Drilling Company

December 19, 2005 – Spokane – Timberline Resources Corporation (OTC:TBLC) announced today that it has signed a Letter of Intent (“LOI”) to acquire Kettle Drilling, Inc. (“Kettle”) of Coeur d’Alene, Idaho.  Kettle is a closely-held company that provides drilling services to the mining and mineral exploration industries, combining state of the art equipment, world-class technical expertise, innovative thinking, and an impeccable safety record to support leading mining companies across North America and worldwide.  Kettle has recorded over $5-million in revenue for 2005 and has been profitable every year since its inception in 1996.

Timberline Chairman John Swallow stated, “On closing, this transaction will transform Timberline into a unique entity among junior explorers, coupling strong cash flow from the Kettle ownership stake with the ‘blue sky’ upside of our highly-experienced exploration team and our growing project portfolio.  We anticipate that future cash flows generated by Kettle will enable significant exploration of our projects without dilutive financings.  Furthermore, an in-house drilling company will create compelling synergies for Timberline, including first-hand insight into project expansion opportunities and readily available, low cost drilling capability at a time when drill rig availability and cost have become major issues for small exploration companies.  We are very excited to close this transaction and join forces with the outstanding team at Ke ttle”.

Timberline has issued Kettle 100,000 non-refundable shares of Timberline stock in exchange for an exclusive 75-day due diligence period.  The LOI calls for Timberline to pay $2.8-million to acquire an initial 60-percent stake in Kettle upon exercise of its option.  On closing, Timberline will receive an additional option to acquire the remaining 40-percent of Kettle for $2-million for a period of two years.  Also, key management personnel at Kettle will agree to stay on for a minimum of three years.  

The proposed transaction is subject to necessary due diligence and Board approval.

Timberline Resources Corporation is a mineral exploration company focused on the cost-effective acquisition and exploration of promising mineral properties in the western United States.  Timberline's flagship property is the Snowstorm Project in north Idaho's "Silver Valley", where it can earn a 49-percent interest from Hecla Mining Company in a bulk-tonnage stratabound copper-silver target, potentially similar to well-known deposits in western Montana.  Timberline also holds early-stage gold properties covering over 7 square miles along the Walker Lane Mineral Belt of south central Nevada.   Timberline has fewer than 8 million shares outstanding and its common stock is quoted on the OTC Market under the symbol “TBLC”.

Certain statements contained in this press release are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are based on beliefs of management as well as assumptions made by and information currently available to management.  Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from expected results.

Contact Information:

John Swallow, Chairman

Phone: (208) 661-2518

www.timberline-resources.com