Halilağa is a copper-gold porphyry project located 20 kms southeast of TV Tower. In 2012, Pilot Gold completed an initial NI 43-101 resource estimate and an NI 43-101 preliminary economic assessment (PEA¹) for the property. The PEA illustrates the concept of a straight-forward, open-pit mining operation. The project hosts a number of key attributes, including favourable terrain, low elevation, access to infrastructure, and high grades at surface. There also exists potential to improve project economics through contract mining and equipment leasing, metallurgical improvements and government tax incentives.

Preliminary Economic Assessment
Completed in 2015, the Halilağa PEA suggests that conceptually, the project may be viable in today’s cost environment within the very preliminary parameters of a PEA. The Halilağa PEA presents the concept of a conventional open-pit mining scenario (with an approximate 1:3 strip ratio) and standard milling and floatation processing with a CIL plant for recovery of copper and gold. 

The Halilağa PEA illustrates a simplified economic model to suggest an after-tax NPV (7%) of $474 million and 43.1% IRR (base case of $1,200/oz gold and $2.90/lb copper). With total projected capital costs of $558.5 (including contingency of $107.7 million), after-tax payback is projected at 1.3 years.

Click here to read more about the PEA: http://www.pilotgold.com/images/PilotGold/OurProjects/Halilaga/2015_Halilaga_PEA.pdf

Project Highlights (using approximate spot prices of December 2014: $1,200/oz Au; $2.90/lb Cu)

Total copper produced (payable)

779.4 million pounds

Total gold produced (payable)

924.2 thousand ounces

Average copper grade (CuEq of 0.545%)

0.34 %

Average gold grade

0.34g/t

Average copper equivalent

0.55%

Average annual gold production (payable)

67.9 thousand ounces

Average annual copper production (payable)

57.2 million pounds

Pre-production capital cost (including $65.4 million contingency)

$346.0 million

Total capital cost (including $107.7 million contingency)

$558.5 million

The Project has strong leverage to rising commodity prices as well as resiliency to lower prices:

Parameter (pre-tax)

$2.90/lb Cu; $1,200/oz Au

$3.50/lb Cu; $1,350/oz Au

$2.25/lb Cu; $1,100/oz Au;

NPV7%

$510.9 million

$894.3 million

$130.2 million

IRR

45.8%

67.4%

19.8%

Payback Period

1.2 years

0.9 years

2.0 years

The revised PEA is preliminary in nature as it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and there is no certainty that the preliminary assessment and economics set forth in the PEA will be realized.

Project Development Plan
The proposed project concept is to develop a green-fields copper-gold deposit with open pit mining and conventional milling and flotation concentration methods and a cyanide plant for improved gold recoveries. The production rate was assumed to be 25,000 tonnes per day over 13.6 years with about 124.3 million tonnes of mineralized material mined and processed during the project life. The overall strip ratio (the ratio of waste rock to economic mineralized rock) of the mine is approximately 1.3:1.  

An estimated 779.4 million pounds of copper and 924,000 ounces gold would be produced at an average grade of 0.34% copper and 0.34 g/t gold. Due to better than average grades in years one to three, more than 266,400 ounces of gold and 304 million pounds copper would be payable during that period. 

Operating And Mining Costs
Unit and total operating costs were estimated for Halilaga over the life of the project. Operating costs (“OPEX”) were developed from first principles for mining, processing, and administration using operating plans as the bases and considering labour, materials, consumables, and certain contract services.  Estimated operating and mining costs are higher than in the 2012 PEA as operating overhead and processing costs are now spread over a smaller operation.  The selection of a contract miner resulted in a relatively small increase in OPEX in lieu of a previously contemplated owner-operator fleet of $180.1 million.  The estimated cash costs in the revised PEA for copper are $1.08 per pound, net of by-products.           

Capital Costs
Estimated pre-production capital costs are 61% lower than in the 2012 PEA due primarily to a smaller mine and the contemplation of contract mining over an owner-operator scenario.  The estimated pre-production capital costs include process plant ($131.6 million), indirect costs ($37.6 million), on site infrastructure ($29.6 million) and tailings storage ($25 million).

Life of mine sustaining capital costs are estimated at $212.6 million (including $42.3 million contingency) with most of the expenditures associated with the Tailings Storage Facility of $103.3 million.  Closure costs are estimated to be $50.2 million.

Large property in mining-friendly jurisdiction
Located in northwest Turkey, Halilağa was discovered by Fronteer Gold. The project is located in an area that includes large open pit clay, quartz and coal mines, a major power plant, and tile factories. Power is readily available from a nearby coal-fired generating station. The project consists of 19 licenses covering 93 square kms. Copper-gold porphyry mineralization discovered to date comprises a single zone flanked by, and probably related to, high sulphidation epithermal alteration.                                                                                    

Drill highlight: thick zones of mineralization starting from surface
Since its discovery in 2007, the Kestane porphyry zone at Halilağa expanded rapidly through drilling, which returned significant thicknesses of copper-gold mineralization extending over a strike length of 1,200 metres and a width of up to 850 metres, with drill intercepts ranging over 600 metres.  Drill hole HD-01 returned 0.50 g/t gold and 0.53% copper over 298.2 metres from surface, including 1.03 g/t gold and 1.03% copper over 105.4 metres.

Metallurgical work
Preliminary metallurgical testing used in the PEA was conducted in 2007 and 2013 by ALS Metallurgy (formerly G & T Metallurgical Services Ltd.) of Kamloops, B.C. Canada. The results show that the mineralized material is of moderate competency and hardness and is amenable to grinding in a conventional SAG mill / ball mill circuit.  Flotation testing indicated that 88.2% of the copper and 58.4% of the gold are recovered to the final concentrate, an additional 15% of the gold head grade would be recovered through the cleaner tail carbon-in-leach (CIL) circuit increasing overall gold recovery to 73.4% with a concentrate grade of 30% copper and 20.1 g/t gold. Additional testing and optimization may improve recoveries.

Resource estimate
The revised PEA, prepared by JDS Mining & Energy Inc. (“JDS”), is based on an updated mineral resource estimate (the “Updated Resource”). The Updated Resource outlines an Indicated Mineral Resource of 182.7 million tonnes, grading 0.30 g/t gold (1.762 million ounces) and 0.27% copper (1.09 billion pounds or 493.3 tonnes), and an Inferred Mineral Resource of 178.7 million tonnes, grading 0.24 g/t gold (1.379 million ounces) and 0.23% copper (906.3 million pounds), using a 0.43 g/t gold-equivalent1 cut-off.  The Updated Resource is an update of the resource estimate documented in a Technical Report, dated March 23, 2012 (the “2012 Resource”), prepared by Garth Kirkham, P.Geo. of Kirkham Geosystems Ltd., and James Gray, P.Geo. of Advantage Geoservices Ltd. The Updated Resource is based on assay data available as of July 4, 2013. The geologic model used for the Updated Resource was again prepared by Teck Resources Limited and is conceptually the same as that used for the 2012 Resource. Geologic control for estimation was based on the same rock type as well as structural zonation on the flanks of the porphyry unit as the 2012 Resource. The 2012 Resource was estimated by inverse distance interpolation; the Updated Resource was estimated by ordinary kriging. Copper, gold and molybdenum grades were estimated using 2.0 m composited drill data. The Updated Resource is tabulated within the same optimized pit shell as was generated for the 2012 Resource as the optimization assumptions are still valid. The impact of drilling since the 2012 Resource has been to increase confidence as reflected by the increase in Indicated mineral resources as a portion of the total resource estimate.

1Metal equivalence is based on prices/recoveries of: Cu-$2.90 per lb/90%, Au-$1200 per oz/70% and Mo-$12.5 per lb/50%.

All mineralized material classified as Indicated (69%) and Inferred (31%) Mineral Resources was considered in the optimization and mine plan. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The revised PEA is preliminary in nature as it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves, and there is no certainty that the preliminary assessment and economics set forth in the PEA will be realized. 

Partnership with a major
Teck Resources Limited's Turkish subsidiary, Teck Madencilik Sanayi Ticaret A.Ş. , (“Teck”) is Pilot Gold’s 60% joint venture partner and project operator.            

Our focus today
Discussions with Teck Resources Limited and various third-parties to unlock the value and potentail of our Turkish business is ongoing.
 

1 The Halilağa PEA is preliminary in nature; readers are cautioned that the economic analysis summarized in the Halilağa PEA and highlighted on this website are only intended to provide an initial, high-level review of the project. Further studies, including engineering and economics, are required (typically as a Pre-Feasibility Study ["PFS"]) with regards to infrastructure and operational methodologies. Moreover, the Halilağa PEA mine plan and economic model include the use of a significant portion of Inferred resources which are considered to be too speculative geologically to be used in an economic analysis, except as permitted by NI 43-101 for use in PEAs, as mineral resources that are not mineral reserves do not have demonstrated economic viability and are too speculative geologically to have the economic considerations applied to them that would enable them to be characterized as mineral reserves. Furthermore, mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. There is also no certainty that these inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied, nor is there any guarantee that the project economics or production profile described in the Halilağa PEA would be achieved.  Mineral Resources and Mineral Reserves are also subject to risks related to metallurgical, environmental, permitting, legal, title, taxation, socio-economic, marketing, political, and other relevant issues, that are beyond the control of the Pilot Gold. Accordingly, at the present level of development there are no mineral reserves at Halilağa. For further details on Halilağa, please view the NI 43-101 Technical Report, “Preliminary Economic Assessment Technical Report for the Halilağa Project, Turkey”, dated October 10, 2012, filed on SEDAR at www.sedar.com (as updated by the Company's news release dated January 29, 2015).

Moira Smith, Ph.D., P.Geo., VP Exploration and Geoscience, Pilot Gold, is the Company's designated Qualified Person within the meaning of NI 43-101 and has reviewed and validated that the information contained herein is accurate.