Pilot hits oxide gold at Kinsley, pursues Cadillac

VANCOUVER — With just a few holes Pilot Gold (TSX: PLG; US-OTC: PLGTF) has defined another gold zone at its Kinsley Mountain gold project in Nevada, just a kilometre away from the high-grade Western Flank zone it discovered less than a year ago.

Pilot recently punched two holes into the Right Spot target, which confirmed gold with a few short, low-grade intervals. Armed with better stratigraphic knowledge, the company returned to Right Spot as part of its mid-year drill program and was rewarded with good lengths of oxide gold mineralization.

The best result came from hole 144, which cut 41.1 metres grading 3.35 grams gold per tonne. Other highlights include 3.08 grams gold over 19.8 metres in hole 138, 2.43 grams gold over 19.8 metres in hole 139 and 1.75 grams gold over 22.9 metres in hole 142.

Kinsley sits east of the Carlin trend in northeast Nevada. The property includes the historic Kinsley mine, a heap-leach operation that targeted near-surface oxide mineralization hosted in the Candland shale and Big Horse limestone formations.

There are many stratigraphic layers at Kinsley, however, and Pilot Gold is showing that Candland and Big Horse are not the only prospective units. It’s a concept with solid backing: Pilot’s management team came from Fronteer Gold, which discovered and delineated a 2.6 million oz. gold deposit at the nearby Long Canyon property, largely by looking for gold in underexplored host rocks.

At the Western Flank discovery, which has returned such intercepts as 8.53 grams gold over 36.6 metres and 10.5 grams gold over 42.7 metres, Pilot has found gold in at least four stratigraphic units, including two shale units and two limestone layers.

Right Spot is the surface projection of the Candland shale, so the unit is no surprise, but the fact that Right Spot is returning oxide gold gives the Kinsley project more optionality.

“At Western Flank I would say that out of our high-grade results, 80–90% are in sulphides,” said Matt Lennox-King, president and CEO of Pilot Gold, in an interview. “What we view as being significant about these Right Spot results is that the equation is essentially flipped: here you’ve got 90–95% oxide gold.

“The other cool thing is that these holes are relatively shallow — we didn’t drill deep enough to get into the deeper Secret Canyon shale,” he continued. “That high-grade host unit is still underneath and untested.”

Pilot has three drills turning at Kinsley, though it will reduce that count by one, and is 10,000 metres through a planned 25,500-metre mid-year drill campaign. Western Flank is getting the lion’s share of the drilling attention, but Pilot is also testing targets like Right Spot, which is 1 km southwest, as well as Secret Spot, another kilometre along trend.

“What is so exciting about Kinsley is that you have this broad mineralized trend that exploits or puts mineralization into multiple stacked horizons,” Lennox-King said. “It would be ideal to have a 2 km long continuous corridor of mineralization. As optimistic as I am, that might be a bit too optimistic, but I think at least along those 2 km there will be significant pockets of mineralization, which might or might not be connected.”

Lennox-King says the firm’s exploration successes at Kinsley have prompted longer-term planning.

“We acquired over 1,000 acre-feet of water rights,” he said. “Those were actually all the water rights the old mine had, so you could run a modest heap-leach gold mine with that amount of water. U.S. water law is opaque and arcane, I think would be the best way to put it, so if you can secure water rights early in the process, it’s a big step up for the project.”

Pilot owns 79.1% of Kinsley, with Nevada Sunrise Gold (TSXV: NEV; US-OTC: NVSFG) holding the rest.

Pilot’s success at Kinsley prompted another corporate move: the company has announced a friendly deal to acquire Cadillac Mining (TSXV: CQX; US-OTC: CQXFF), a junior explorer advancing the Goldstrike project in western Utah. Like Kinsley, Goldstrike offers sediment-hosted gold in a complex stratigraphic environment.

“Goldstrike will enhance our high-quality portfolio of eastern Great Basin projects,” Lennox-King said in a statement. “This transaction provides us with another data-rich, past-producing oxide heap-leach project that our team will incubate.”

Goldstrike is on the southeast margin of the Great Basin, which stretches from the California border across Nevada and halfway across Utah. As such the basin hosts America’s most important gold districts, including the Carlin trend and the Battle Mountain–Eureka trend.

Gold in the basin is usually associated with complex stratigraphy and Goldstrike has that, as it sits at the intersection of the Sevier compression thrust fault and the Delamar–Iron Springs mineral belt. Between 1998 and 1994 a heap-leach operation recovered 210,000 oz. gold from oxide mineralization averaging 1.2 grams gold, but exploration has rarely probed deeper than 75 metres. Previous explorers only sought oxide gold, but Cadillac and Pilot believe the project also offers Carlin-type, sediment-hosted gold potential.

To acquire Cadillac and get Goldstrike into its portfolio, Pilot would issue 0.122 share and 0.122 warrant for each Cadillac share. The warrants would be exercisable at $2 for two years. The deal represents a 95% premium to Cadillac’s 20-day, volume-weighted average share price.

Cadillac’s management and board — who own 30.1% of the company — support the transaction.

Pilot’s other key projects are in Turkey (see story above). Both TV Tower and Halilaga are joint ventures with Teck Resources, which owns 60% of each project. Teck is operator at Halilaga but Pilot is operator at TV Tower, where the company can boost its stake to 60% by spending $21 million over three years.

Pilot has already met its second-year spending commitment at TV Tower and still has drills turning at the property. Work to date has outlined a notable epithermal oxide gold resource, but the latest results suggest the potential for a larger copper–gold porphyry in the southern half of the project.

“It’s really the porphyry that we think could change the complexion of the project,” Lennox-King said. “It’s definitely exciting over there. We’ve been plugging away at the science, and we should have news out soon.”

On news of the Kinsley drill results Pilot Gold’s share price fell 2¢ to close at $1.38. The company has a 52-week share price range of 71¢ to $1.75, and 103 million shares outstanding.