8-K

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): September 22, 2006
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.)
1100 East Lakeshore Drive, Suite 301 Coeur d’Alene, ID				83814
(Address of principal executive offices)				(Zip Code)
	Registrants’ telephone number: (208) 664-4859
	N/A (Former Name or Former Address if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing 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 (17 CFR  230.425) [     ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR  240.14a-12) [     ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act   (17 CFR      240.14d-2(b)) [     ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange  Act (17 CFR        240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement.

On September 22, 2006, the Registrant (“TBLC”), entered into a binding Memorandum of Understanding (“MOU”) with Steve Van Ert and Noel Cousins (the “Sellers”), residents of California and Arizona, respectively. The MOU memorialized certain verbal terms and conditions informally agreed upon by the parties on August 7, 2006. Pursuant to the MOU, TBLC has the right to explore and develop the Conglomerate Mesa Project, Inyo County, California within T16-17S, R38-39E, Mt. Diablo Meridian (the “Project Area”) which is comprised of 104 unpatented mining claims. The MOU contemplates the parties entering into in a more definitive formal agreement (Lease Option to Purchase Agreement) no later than October 15, 2006.

The MOU also provides TBLC with the right to purchase a 100-percent interest in the Project, subject to a 4-percent NSR production royalty of which 1-percent may be purchased for $1-million. In the first year of the proposed agreement, TBLC is obligated to make an option payment of $75,000 and issue 100,000 shares of its common stock to the Sellers, along with a commitment to $100,000 in exploration expenditures. The option payment will continue at $75,000 in 2007, and then increase by $25,000 per year annually to a cap of $250,000. Annual share payments and work commitments will remain fixed at 100,000 and $100,000, respectively.

The MOU also includes a provision wherein:

·

TBLC agrees to indemnify the Sellers from any and all claims and other liabilities arising from TBLC’s activities within the Project Area; and

·

A Quit Claim Deed of the Project Area back to Steve Van Ert will be held in escrow pending the occurrence of an event of default by TBLC or termination of the MOU or the aforementioned definitive formal agreement prior to completion..

A copy of the MOU as executed is attached hereto as Exhibit 10.1 and incorporated by reference hereto.

Item 8.01

Other Events.

Press Release

On September 25, 2006, the TBLC issued a press release announcing that it had executed a Memorandum of Understanding on September 22, 2006, with Steve Van Ert and Noel Cousins, for the Lease/Option of Conglomerate Mesa Gold Project in Inyo County, California which also included (historical) statistical and background information  regarding project area.

A copy of the press release is attached hereto as Exhibit 99.1

Item 9.01 Exhibits.

Exhibit 10.1

An executed copy of the Memorandum of Understanding by and among

Timberline Resources Corporation and Steve Van Ert and Noel Cousins

dated September 22, 2006.

Exhibit 99.1

September 25, 2006 Press Release announcing Timberline Resources

Corporation  entering into a Memorandum of Understanding  with Steve

Van Ert and Noel.

SIGNATURES.

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, thereunto duly authorized.

	Timberline Resources Corporation
Date:    September 28,  2006	By:    /s/ John Swallow
	John Swallow
	Chief Executive Officer and Chairman of the Board of Directors

EX-10

Exhibit 10.1

MEMORANDUM OF UNDERSTANDING

Conglomerate Mesa Project, CA

This document, when signed by Steve Van Ert, Noel Cousins, and Timberline Resources, represents the understanding and agreement by the parties of the terms and conditions agreed to on 7August2006 under which terms and conditions Timberline will have the right to explore and develop the Conglomerate Mesa Project, Inyo County, California. The project area is comprised of 104 un-patented mining claims under title by Steve Van Ert and is within a greater Area of Interest subject to this agreement. For the purposes of this agreement all funds and share distributions will be 85% to Steve Van Ert and 15% to Noel Cousins. Upon execution by both parties, Timberline will be able to commence work on the project. This MOU will serve as the foundation for a definitive formal agreement to be executed by Timberline, Steve Van Ert, and Noel Cousins no later than September 15, 2006. The formal agreement will be a Lease Option to Purchase Agreement.

AREA OF INTEREST

All terms of this agreement will be binding for mineral claims currently held or to be staked by the parties during the term of this agreement, within T16-17S, R38-39E, Mt Diablo Meridian.

THIRD PARTY CLAIMS

Neither party will communicate with the owners of nor acquire third party claims within the A.O.I. without consent of the other party.  Such consent will not be unreasonably withheld.

ANNUAL CASH PAYMENTS

Timberline shall be obligated to make annual cash payments to Steve Van Ert and Noel Cousins (85%/15%) according to the following schedule:

On execution of the Formal Agreement, 15September2006                   US $75,000

Year 1 anniversary, 15September2007                                                           75,000

Year 2 anniversary, 15September2008                                                         100,000

Subsequent years to a production decision said amount will be increased $25,000 annually to a cap of $250,000/year.

ANNUAL WORK EXPENDITURES

Timberline will be obligated to expend for the benefit of the property a minimum annual expenditure of US $100,000.

TIMBERLINE SHARES

Timberline will issue the following shares to Steve Van Ert and Noel Cousins (85%/15%). Acceptance of shares upon the anniversary date will be at the option of Van Ert and Cousins.

On execution of Formal Agreement, 13October2006                              100,000

       Timberline will take care of the first year tax obligation incurred by receipt of these  

        shares by Van Ert and Cousins.

Year 1 anniversary, 15September2007                                                         100,000

Year 2 anniversary, 15September2008                                                         100,000

All subsequent years to a production decision                                              100,000

REGULATORY FILINGS SEPTEMBER 2006

In consideration of maintaining the Project in ‘good standing”, Steve Van Ert will complete all governmental filings due 31August 2006. Such funds expended by Steve Van Ert will be reimbursed by Timberline within three working days of receipt of billings and documentation of payment by Van Ert. Should either party breaches this MOU, said party will be responsible for reimbursement or forfeiture of the Regulatory Filings amount.

PURCHASE AT A PRODUCTION DECISION

Timberline will exercise its Option to Purchase by issuing to Steve Van Ert and Noel Cousins (85%/15%) 1,000,000 Timberline shares upon completion of a positive feasibility study and a production decision.

PRODUCTION ROYALTY

Following the Purchase at a Production Decision, Timberline will have a 100% ownership of all mineral claims and associated rights subject to a production royalty reserved to Steve Van Ert and Noel Cousins (85%/15%) of 4% NSR. Timberline is granted the option to purchase 1% of the NSR for $1,000,000.

Should a secondary non-metallic material be produced and sold from the Project Steve Van Ert and Noel Cousins will be entitled to an 8% over-riding royalty.

Following Purchase at a production decision Timberline will pay to Steve Van Ert and Noel Cousins (85%/15%) the greater of $150,000 annually or the dollar amount generated from the Production Royalty.  

DATA

Timberline will deliver to Van Ert and Cousins copies of all data generated during that period. Such delivery will be made no later than 1November and 1May annually.

TITLE IN ESCROW

Upon execution of the Formal Agreement Steve Van Ert will deliver a Quit Claim Deed to Timberline for all claims held by Van Ert within the Area of Interest. Timberline will in turn deliver a Quit Claim Deed for all such claims back to Van Ert to be Held in Trust by a third party. Such Deed and claims will be released to Van Ert upon termination or default by Timberline of the Agreement.

The following parties agree and consent to the terms and conditions that will govern this agreement.

Addendum to Memorandum of Understanding

Timberline Resources shall indemnify Steve Van Ert and Noel Cousins against and hold them harmless from any suit, claim, judgment or demand whatsoever arising out of Timberline's activities within the Area of Interest on or after August 7, 2006, and this provision shall be included in the formal agreement to executed by the parties.

EX-99

EXHIBIT 99.1

September 25, 2006 Press release

Timberline Signs Memorandum of Understanding for Lease/Option of Conglomerate Mesa Gold Project

COEUR D'ALENE, Idaho, Sept. 25, 2006, Sep 25, 2006 (PRIMEZONE via COMTEX) -- Timberline Resources Corporation (OTCBB: TBLC) today announced the signing of a Memorandum of Understanding (MOU) outlining the terms for a Lease/Option to Purchase Agreement for the Conglomerate Mesa Gold Project in Inyo County, California. The project hosts structurally and stratigraphically controlled, sediment-hosted gold mineralization similar to the "Carlin-type" deposits of north-central Nevada. Four claim blocks have been acquired or staked within the project area totaling 250 claims, covering nearly ten square miles, including several mineralized gold zones identified by prior operators.

The property was originally explored by Newmont while it was within the Cerro Gordo Wilderness Study Area (WSA). Initial drilling of just one of the mineralized zones ("Resource Area") outlined mineralized material pre-dating (and not compliant with) NI 43-101 standards totaling 175,000 ounces of gold contained in 3 million tons grading 0.06 ounces per ton (oz/t). Newmont withdrew from Conglomerate Mesa in 1993. Federal agencies dropped the property's WSA status the following year, removing significant impediments to future development.

The core area of the Conglomerate Mesa property was explored by BHP in 1995, with eight target zones identified, based partly on surface road cut channel samples which included the following highlights:

 Dragonfly Zone         40 ft of 0.37 oz/t gold (within 140 ft of

                         0.12 oz/t gold)

                        7 ft of 0.25 oz/t gold

                        15 ft of 0.11 oz/t gold

 Mid CMFS Zone          10 ft of 0.03 oz/t gold

 Resource Area          40 ft of 0.15 oz/t gold

 East Area              5 ft of 0.10 oz/t gold

                        15 ft of 0.21 oz/t gold

 South Drainage Zone    6 ft of 0.12 oz/t gold

                        20 ft of 0.04 oz/t gold

In 1997, BHP conducted a widely-spaced, 10-hole reverse-circulation drill program at Conglomerate Mesa which included the following highlights:

 Dragonfly Zone         CM97-3     20 ft of 0.06 oz/t gold

                        CM97-4     30 ft of 0.10 oz/t gold

                                   40 ft of 0.11 oz/t gold

                                   30 ft of 0.05 oz/t gold

                        CM97-5     40 ft of 0.04 oz/t gold

 Mid CMFS Zone          CM97-6     35 ft of 0.04 oz/t gold

 Resource Area          CM97-9     35 ft of 0.03 oz/t gold

Later that year, BHP made a corporate decision to withdraw from the gold industry and dropped the property.

Timberline, as part of recent due diligence efforts at Conglomerate Mesa, acquired rock chip samples from three of the known mineralized zones, returning the following results:

 Dragonfly Zone         Cgl06-01   0.35 oz/t gold

                        Cgl06-02   0.07 oz/t gold

                        Cgl06-03   0.45 oz/t gold

 Resource Area          Cgl06-04   0.14 oz/t gold

 East Area              Cgl06-05   0.52 oz/t gold

The gold mineralization and associated alteration are structurally and

stratigraphically controlled. The gold mineralization at Conglomerate Mesa is introduced along axial plane fault zones within a northerly trending anticline and preferentially within favorable host sediments.

All available data from prior operators is now being compiled in preparation for an immediate program of geologic mapping and geochemical sampling to define targets for a drill program planned for early 2007.

Timberline's V.P. of Exploration, Paul Dircksen stated, "The host rock

lithology, alteration, and geochemistry at Conglomerate Mesa represent

the discovery of Carlin-style gold mineralization outside the main trends of north-central Nevada. The grades and distribution of mineralization indicate the potential for the discovery and delineation of a multi-million ounce gold deposit amenable to bulk or underground mining techniques."

The MOU provides Timberline the right to purchase a 100-percent interest in the Project, subject to a 4-percent NSR production royalty of which 1-percent may be purchased for $1-million. In the first year of the proposed agreement, Timberline is obligated to make an option payment of $75,000 and 100,000 shares of its common stock to the property owners, along with a commitment to $100,000 in exploration expenditures. The option payment will continue at $75,000 in 2007, and then increase by $25,000 per year annually to a cap of $250,000. Annual share payments and work commitments will remain fixed at 100,000 and $100,000, respectively.

This press release has been reviewed and approved by Paul Dircksen, a Qualified Person as defined by NI 43-101.

Timberline Resources Corporation is a unique, growth-oriented company that combines positive cash flow from its ownership of Kettle Drilling, Inc. with "blue sky" upside from its mineral exploration division. Timberline is a fully-reporting company with fewer than 20 million shares outstanding. Its common stock is quoted on the OTC Bulletin Board 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. The timing of the SEC registration and review process is inherently uncertain and may be delayed indefinitely, and if completed does not guarantee that Timberline will attract additional market attention or complete any necessary financing in the future, or that the price of Timberline's securities will rise.

This news release was distributed by PrimeZone, www.primezone.com

SOURCE: Timberline Resources Corporation

By Staff

CONTACT:  Timberline Resources Corporation

          John Swallow, Chairman & CEO

          (208) 664-4859

          www.timberline-resources.com

(C) 2006 PRIMEZONE, All rights reserved.