Pilot expects Goldstrike resource by mid-year

In the last five months Pilot Gold (TSX: PLG) has found five gold zones at its Goldstrike project in southwestern Utah near the state’s border with Nevada.

Goldstrike — a Carlin-style gold system similar in many ways to the prolific deposits along Nevada’s Carlin trend — churned out 209,000 oz. gold from 12 shallow pits between 1988 and 1994 at a grade of 1.2 grams gold per tonne, and Pilot Gold has big plans for the project.

The junior drilled 191 holes last year, including 10 large-diameter core holes for metallurgy, with another six holes completed so far this year. It expects to have results from early metallurgical work within six weeks and wrap up a resource estimate by mid-year.

“We’d like to see a resource that could produce a minimum 100,000 oz. gold a year for a 10-year mine life,” says Pilot Gold’s president and CEO Cal Everett, who joined the company in February 2016.

The economic geologist, who spent nearly two decades at BMO Nesbitt Burns and PI Financial before cofounding Axemen Resource Capital, was familiar with the project and thought it had potential.

“In 2014, I was representing another party that was looking at the Goldstrike project,” he says. “We knew they were talking to other companies — myself and four other groups — so in a bearish market for gold, in an obscure corner of southwestern Utah, five groups recognized that there was a gold district just sitting there. It was pretty exciting.”

Pilot Gold bought the owner of Goldstrike — Cadillac Mining — for $7.2 million in shares two and a half years ago, and when the company approached Everett, it was an easy decision.

“I knew the asset reasonably well and was happy to come out of retirement and join the team,” he says. “These big, near-surface, heap-leach gold systems in the southwestern U.S. are rare.

“There are so few projects out there for senior producing mining companies to pick up,” Everett continues. “Most of those exposed at surface have been mined. It’s no different in Chile, where the old porphyries at surface were easy to find, but now they’re drilling deeper to find these deposits.”

Before Pilot Gold drilled a single hole at Goldstrike, its geological team — headed by Moira Smith, the company’s vice-president of exploration and geoscience — compiled data from 1,519 historic drill holes, reviewed chip trays from reverse-circulation drilling, and mapped and 3-D modelled the property to determine how it should be drilled. This all took 16 months.

“Moira is a brilliant scientist,” Everett says. “She likes data mining and likes when somebody else has spent US$20 million drilling holes 20 years ago, when gold was sub-US$400 per ounce. She takes her team into the historic database, digitizes it, models it, and says, ‘yes, we want the asset.’ They won’t drill until they are ready.”

Smith, formerly the chief geologist in Nevada for Fronteer Gold, has a laudable track record. She was instrumental in advancing Long Canyon, Fronteer Gold’s flagship asset, which is now owned by Newmont Mining (NYSE: NEM). Before Fronteer, she served as a U.S. exploration manager, senior geologist and project manager for Teck (TSX: TCK.B; NYSE: TCK), where she managed exploration programs for several advanced-stage projects throughout the Americas, including Pogo, the 5.5 million oz. gold deposit now owned by Sumitomo Mining and in production in Alaska, the 1.5-billion-tonne Petaquilla copper-molybdenum-gold porphyry deposit in Panama and the 3.5 million oz. El Limon gold deposit in Mexico. (First Quantum Minerals [TSX: FM; LON: FQM] owns Petaquilla and Torex Gold Resources [TSX: TXG] owns El Limon.)

Moira and the executive team at Pilot Gold have yet to determine the size of the company’s exploration budget for the year, but Everett says drilling will continue at the property with at least two drill rigs, and notes there will be many “deliverables” on the project in 2017.

In addition to more assays and initial metallurgical results that are due shortly, the company has applied for a plan of operations that it could receive within the next couple of months. Securing a plan of operations can take just over a year, and Pilot is 10 months into the process.

The plan of operations is important for anyone exploring targets that are the size of Goldstrike. It will help Pilot Gold put in hundreds of new drill sites and give its team access to parts of the property that it hasn’t accessed yet. The company has drilled less than 10% of the 30 sq. km area, mainly around the deposit’s Main zone.

“We know that the 30 sq. km area is geochemically anomalous in gold, and to access where we know there’s additional gold, we need the plan of operations to build a few roads to these areas,” Everett says. “Once we have the plan of operations we can go to areas throughout the property — where we know historically that additional gold is located — and drill to include these areas into a resource.”

The main target is shallow Carlin-style, oxide gold mineralization within the project’s historic mine trend between and down-dip of the historic pits.

In addition to the Main zone, the five recently discovered zones include: Aggie, Peg Leg, Dip Slope, Warrior and Covington.

Pilot Gold has confirmed two higher-grade zones within the Main and Aggie zones.

The Warrior zone is an extension 350 metres west of the Aggie zone, on strike towards the Covington pit area. The company has only drilled a few holes into Warrior so far, but Everett says “it looks great.”

The Dip Slope target covers 3.5 sq. km, of which 85% is under-drilled or only sparsely drilled. Dip Slope hosts several historic pits, as well as unmanned gold intercepts in historic holes next to the pits.

“We know it’s gold-bearing, and once we have our plan of operations we can fully test the Dip Slope zone,” he says. “It could be larger than 3.5 km, we just don’t know yet. There were four mined pits there historically, but it wasn’t identified as a major area at that time.”

Peg Leg is southwest of the Main zone and near the historic Covington and Hamburg pits. It is over a kilometre long and 250 metres wide. Historically, only three holes tested the zone. Last year Pilot Gold drilled 12 widely spaced holes and came up with several areas worthy of follow up.

The company has released two batches of assay results this month. On Feb. 8 it reported results from follow-up drilling at the Peg Leg and Covington pit areas.

Highlights from the Covington pit area, west of the main zone, include 1.57 grams gold over 6.1 metres and 4.10 grams gold over 7.6 metres, including 6.32 grams gold over 4.6 metres, in hole 191; and 1.15 grams gold over 10.7 metres in hole 182.

Highlights from Peg Leg include 1.78 grams gold per tonne over 29 metres, including 3.54 grams over 12.2 metres in hole 179; 0.90 gram gold over 6.1 metres and 0.76 gram gold over 33.5 metres, including 1.47 grams gold over 6.1 metres, in hole 183; and 1.33 grams gold over 18.3 metres in hole 187.

On Feb. 1, Pilot Gold released drill results from the Main and Aggie zones and the new Dip Slope and Warrior zones, northwest of the Main zone.

Dip Slope highlights include 0.51 gram gold over 41.1 metres, including 1.24 grams over 6.1 metres, in 142; and 1.14 grams gold over 6.1 metres in 153. At Warrior, highlights are 0.86 gram gold over 22.9 metres, including 1.45 grams over 4.6 metres, in hole 188; and 0.59 gram gold over 25.9 metres in hole 166.

In the Main and Aggie zones, intercepts were 0.53 gram gold over 22.9 metres, including 1.03 grams gold over 4.6 metres in hole 131; and 0.84 gram gold over 27.4 metres, including 1.55 grams gold over 10.7 metres in hole 175.

In January, Pilot Gold released assays from Peg Leg, including 0.82 gram gold over 21.3 metres in hole 135; and 0.54 gram gold over 25.9 metres and 0.75 gram gold over 10.7 metres in hole 149. Hole 149 was drilled along the southern Peg Leg margin and is said to lie along the same fault that hosts mineralization in the historic Covington pit, 650 metres west, and the historic Moosehead pit, located another 1 km farther west.

The drill program this year will focus on the Peg Leg, Warrior and Dip Slope targets to include these areas in the resource estimate. Drilling at Warrior will extend the zone, where it is open to the northwest.

In addition to Goldstrike, Pilot Gold owns Black Pine, an early-stage exploration project in southeastern Idaho. Like Goldstrike, the Black Pine asset came with a past-producing mine and a treasure trove of historical data.

After acquiring the project six months ago from Western Pacific Resources (TSXV: WRP; US-OTC: WRPSF) for US$800,000 in cash, 300,000 shares of Pilot Gold and a 0.5% net smelter return royalty to Western Pacific, one of Smith’s geologists found data that was hidden in an old forest services file in a back-up hard drive that Pilot Gold received from the seller.

“When we bought the project we didn’t know it existed,” Everett says. “The dollar savings to us could be greater than US$10 million, but the real benefit is the amount of time it saves us. It would take years to redo that work.”

Smith and her team have been modelling data from Black Pine’s 1,866 historic drill holes for a few months.

“We will release the initial data compilation summary of the historic results to the market so people can understand how important this asset is,” Everett says. “We have the gold and silver assay data for all the drill holes, surface samples and blast holes. The drill target area covers 12 sq. km, so it’s got scale.”

Previously called Mineral Gulch, Black Pine hosts a large, Carlin-style sediment-hosted gold system. The property has a past-producing heap-leach gold mine that churned out 435,000 oz. gold at a historic grade of 0.7 gram gold per tonne from seven shallow pits between 1991 and 1998.

Kinsley Mountain, a Carlin-style, sediment-hosted gold property — 90 km south of Newmont Mining’s Long Canyon deposit — is Pilot Gold’s third project in the U.S., and a deeper, high-grade target.

The project is in southeastern Elko County in an under-explored area east of the Carlin trend in northeastern Nevada. Like Black Pine and Goldstrike, the Kinsley Mountain property hosts a past-producing mine with an exploration database and numerous, untested gold targets.

The company is waiting for results from an airborne survey over the entire project, and in the Secret Canyon shale area has identified 11 targets that Everett and his team would drill at 305 metres deep from surface. “In many cases there is historic drilling that shows gold in this horizon,” Everett says. “It covers 10 sq. km, targeting structural intercepts.”

There is already one high-grade zone, the Western Flank, that contains 284,000 oz. gold at 6 grams gold per tonne. Pilot Gold would target the Secret Canyon shale intersection with certain faults, and look for high-grade gold, rather than near-surface oxide material.

“We’d like to drill it, but we haven’t figured out the timing yet,” Everett says, adding that in terms of priorities, Goldstrike ranks first, and Black Pine and Kinsley Mountain, third.

At press time Pilot Gold’s shares traded at 62¢ per share within a 52-week trading range of 26.5¢ (February 2016) to 95¢ per share (August 2016). The company has 150 million shares outstanding for a $93-million market capitalization.

Michael Gray, a mining analyst at Macquarie in Vancouver, has a one-year, 90¢ target price on the stock, and likes what he sees at Goldstrike.

“Pilot controls 100% of a district-size belt with multimillion-ounce potential,” Gray said in a recent research note. “Pilot is a top pick for 2017 amongst the global gold explorers we cover.”