With its coffers overflowing, Pilot Gold (PLG-T) is in the enviable position amongst juniors of being able to drive heavy exploration programs at two projects, while helping develop a third into a mine.It’s a story that has gained traction amongst investors of all stripes, with institutional, retail and major industry players all piling into a recent equity raise that led to an overallotment of issued shares.
While the bought-deal financing was originally for $20.6 million, the number climbed to $25.6 million because of sustained interest from the institutional and retail sides. Then Pilot raised another $8.1 million through private placements with Newmont Mining (NMC-T, NEM-N) and Teck Resources (TCK-T, TCK-N).
Prior to the deal, Newmont had a 16.2% stake in the company, while Teck had a 5.4% interest.
With its cash position totalling $43 million, Pilot plans to push ahead on aggressive programs at its TV Tower and Kinsley Mountain exploration projects.
TV Tower is a gold and silver property that stretches over 71 sq. km in central Turkey. Pilot has a joint venture with Teck on the permits, with a right to earn a 60% stake.
While multiple discoveries have been made on the property, the KCD zone has grabbed the most attention thanks to a highlight intercept of 137 metres grading 5.94 grams gold, 12.6 grams silver and 0.53% copper. The result was released on Sept. 19, and Pilot says it extended the high-grade breccia zone identified by the discovery hole 50 metres south.
The result clearly caught the market’s attention, as the news propelled Pilot’s shares up 44% to $1.68.
Now in the midst of a 55-hole, 9,000-metre program at the zone, the latest results released on Nov. 14 returned more eye-catching results, with highlights from three separate holes including 32.5 metres grading 11.63 grams gold, 87 metres grading 3.4 grams gold and 15.2 metres grading 10.03 grams gold, 46.25 grams silver and 3.89% copper.
The latest round of drilling hit mineralization outside of the breccia-hosted zone that Pilot had believed carried all the gold. This finding has led the company to update its geological model, seeing a configuration that involves high-grade, startiform mineralization.
Pilot CEO Matt Lennox-King says the new model could be a game-changer at KCD, since stratiform zones are more tabular in shape, which makes mining more efficient by keeping strip ratios down. Pilot expects to have a maiden resoruce estimate out on KCD by mid-2013.
But as promising as KCD is shaping up to be, it isn’t the entire story at TV Tower, and with its coffers bursting, the company has the freedom to range throughout the property with the drill.
“We believe we have a series of projects on one project,” Lennox-King says. “KCD leads the charge and Kayali is in the number-two slot, followed by Columbaz.”
It is in the midst of a 16,000-metre program at the property, and plans to drill 3,500 metres at Kayali and 3,500 metres at Columbaz in the coming year.
Kayali is a high-sulphidation epithermal zone that has returned a highlight intercept of 114.5 metres grading 0.87 gram gold. Columbaz is a low-sulphidation epithermal vein that has never been drill tested. Geochemical testing has helped define a strike length at Columbaz of over 400 metres.
TV Tower is located in the Biga district, an emerging gold district on the Biga Peninsula in northwestern Turkey. Alamos Gold (AGI-T) has the advanced-stage Agi Dagi and Kirazli projects in the region.
Pilot traces its roots in Turkey back to the Fronteer days, as the latter went into Turkey in late 2004, joint venturing with Teck on two early stage gold projects. At the time it was one of the few juniors in the country, but once it made the Halilaga discovery, it wasn’t about to leave anytime soon.
Halilaga is being developed by Teck, with Pilot holding a 40% stake in the project. A recent preliminary economic assessment outlined a 50,000-tonne-per-day operation with average grades of 0.28% copper and 0.3 gram gold for average annual production of 92,100 oz. gold and 89 million lb. copper. The project generated an after-tax net present value (NPV) of US$474 million using 7% discount rate. Pilot’s share of that NPV would amount to $190 million.
Lennox-King explains that Western companies haven’t explored Turkey sooner because up until early 1990s, the country’s mining code was restrictive of foreign ownership. Since then, however, its evolution has been impressive.
“We think that now Turkey is just as good a place to explore and mine as anywhere else in the world . . . and it may even be better than some parts of Canada,” he says, adding that the regulation process has been streamlined and that the industry’s status as a key contributor to the country’s gross domestic product has led the government to value foreign investment.
And while the country would receive roughly 60% of the Pilot’s hefty exploration budget going forward, its Kinsley Mountain project in northeastern Nevada will also get capital, taking the remaining 40%.
Kinsley is located 80 km southeast of Long Canyon, a project that Pilot’s management team developed and sold to Newmont. Indeed, the same technical team that molded Long Canyon into a desirable target is back at it with Kinsley.
Lennox-King says there are similarities between its former project and its current.
“The host rocks at Long Canyon and Kinsley are similar, the rocks are of a similar age and the general architecture of mountain range and geometry of deposits are similar,” he says. “They are within a broad, Carlin-type footprint, and both do have higher-grade domains — but at the same time they are two different beasts, and will be quite different deposits.”
Kinsley hosts a past-producing mine that turned out 138,000 oxide oz. at an average head grade of 1.4 grams gold. Historic drill holes, however, only went down to an average depth of 65 metres, and 350 holes with grade were left un-mined.
Pilot’s value-add at Kinsley has come by way of drill testing and discovering mineralization to the north and the northeast of the deposit. The company has a 25,000-metre drill program planned for the area, and expects to have a compliant resource estimate done on the project by late next year.
Pilot was formed as a spin-out from Fronteer Gold after the company was acquired by Newmont in 2011 for $2.3 billion. Mark O’Dea, the former CEO of Fronteer, now serves as Pilot’s chairman.
In all, Pilot took 25 former Fronteer people, including members of the board, management and other members of the team. All 25 remain with the company.
Lennox-King, who had been with Fronteer from the beginning, traces his connection to the company back to O’Dea, who called him up, told him he was starting a new company, and needed someone to go to Red Lake to check out some projects.
“The industry was pretty quiet at the time, so I took it,” Lennox-King recalls. “That was eleven years ago, and we’ve been going consistently ever since.”
Sometimes, the easiest decisions are also the best decisions.
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