Strong drill results at KCD, programs launched at Kayali and Kinsley Mountain, and $29 million in working capital to drive key milestones by year-end

VANCOUVER, B.C. – Pilot Gold Inc. (PLG - TSX) (“Pilot Gold” or the “Company”) is pleased to report its financial results for the second quarter ended June 30, 2013, and provides an update on activities highlighted by continued strong gold and silver drill results at TV Tower’s KCD target, the launch of drilling at TV Tower’s oxide gold Kayali target, and the resumption of drilling at Kinsley Mountain, Nevada.

“We believe the quality of our projects, our proven team and healthy treasury are strong differentiators in today’s market, and position Pilot Gold as a standout in the sector,” stated Matt Lennox-King, President and CEO, Pilot Gold. “We will continue to build on our success in the second half of 2013, with significant exploration drilling of an additional 29,000 metres at our priority projects, and expect to meet key resource and permitting milestones by year end.”

Q2 2013 HIGHLIGHTS AND SIGNIFICANT EVENTS SUBSEQUENT TO QUARTER-END:

• Continued to actively advance the TV Tower property, with approximately 14,800 metres drilled to date at the KCD target.  Approximately 75% of the second milestone expenditure requirement to earn-in to an additional 20% interest has been completed.
• Reported results from the first 42 drill holes from the 15,000-metre drill program at TV Tower’s KCD target, including:

              •  26.6 g/t gold, 47.2 g/t silver, and 2.12% copper over 16.5 metres in KCD-102, and

             •  15.3 g/t gold over 45.2 metres in KCD-142

• Commenced a 7,500-metre drill program on the bulk-tonnage, oxide gold Kayali target at TV Tower
• Launched 22,000-metre drill program at Kinsley in Nevada
• Sold our remaining 17.5% interest in the Gold Springs property to High Desert Gold for a 7.5% equity  interest in that company

WORK PROGRAM UPDATES

TV Tower:

Pilot Gold currently holds a 40% interest in the project and became project operator in 2012 with an option to increase the Company’s interest in TV Tower from 40% to 60%.  The $5-million, first-year minimum earn-in expenditure commitment was completed in January 2013. In March 2013, the Company issued 1,637,500 common shares to "TMST", a subsidiary of Teck Resources Limited ("Teck") the Company’s 60% joint venture partner at TV Tower, in connection with achieving this first milestone.  During the six months ended June 30, 2013, Pilot Gold had incurred approximately $5.56 million in Eligible Expenditures at TV Tower (year ended December 31, 2012: $4.77 million), and has $1.7 million remaining to surpass the second-year $7-million earn-in expenditure requirement. The 2013 program, with a budget of $7.9 million, is currently underway. 

The planned program at TV Tower for 2013 includes 30,000 metres of drilling at KCD, Kayali and other priority targets. At KCD, the 2013 drill program includes a planned 15,000 metres of infill and step-out drilling on the gold and silver zones and a staged metallurgical testing program. Drilling has begun at the Kayali bulk-tonnage, oxide target, with 7,500 metres planned in 2013. An additional 7,500 metres is planned at other promising targets upon receipt of forestry permits. In the six months ended June 30, 2013, approximately 13,700 metres of drilling had been completed in the 2013 program.  To date there have been approximately 18,000 metres drilled in the 2013 program.

Kinsley:

Kinsley is a Carlin-style, sediment hosted project and past producer located along the Long Canyon Trend in North Eastern Nevada. Pilot Gold earned a 65% interest in Kinsley Mountain in February 2013.  

Pilot Gold launched a planned 22,000 metre RC and core drill program on July 16, 2013. The current program is designed to extend and further define Kinsley’s high-grade and bulk-tonnage mineralization and will include geophysical, engineering, metallurgical surveys, and district wide exploration.  A subsidiary of Nevada Sunrise Gold Corporation (“NEV”) currently holds a 35% interest in Kinsley. The Company is project operator. To maintain their respective current pro rata interest, each joint venture partner is responsible to fund its share of expenditures at Kinsley.

The Company currently awaits receipt of an Approved Record of Decision from the United States Interior Department’s Bureau of Land Management (the "BLM") for a Plan of Operations.  Upon receipt, the approved Plan of Operations will allow for expanded exploration activities over an area of up to 70 acres in the southern third of the property, beyond the previously disturbed areas.  Currently, exploration is being conducted under the existing Notice of Intent.

Through June 30, 2013 the Company had capitalized approximately $0.70 million in expenditures at Kinsley (year ended December 31, 2012: $3.67 million).  During Q2 2013, $0.21 million was recovered from NEV, the Company’s partner at Kinsley pursuant to that company’s provisional funding of the first cash call (maintain its pro rata share of costs at Kinsley through to June 30, 2013).

A total of 1,542 metres has been completed to date under the 2013 program, with approximately $0.7 million incurred through June 30, 2013 of a budgeted $5.2 million for the year1.

Halilaga:

The Company holds a 40% interest in Halilaga, a copper-gold porphyry located 20 kilometres southeast of TV Tower. Halilaga advanced considerably during 2012, with an initial resource estimate and the completion of a preliminary economic assessment (the "Halilaga PEA").  Based on recommendations of the authors of the Halilaga PEA, Pilot Gold has initiated a number of strategic studies in conjunction with TMST, the Company’s 60% partner and operator at Halilaga. The strategic studies underway include economic, metallurgical, environmental and engineering analyses to advance the concept and potential of this porphyry project.

From January 1, 2013 to June 30, 2013, the Company’s share of expenditures at Halilaga was $0.1 million (year ended December 31, 2012: $1.63 million).  Pilot Gold’s share of the budget for the year is $0.2 million.

Portfolio:

•  On July 8, 2013, the Company received the remaining $1 million cash component due from the sale of the Regent exploration property to Rawhide Mining LLC (“RMC”). Pursuant to the related agreement, Pilot Gold retains a net profits royalty of 15% on the property and is entitled to a sliding scale gold equivalent bonus payment, each of which is payable in certain circumstances should RMC achieve production at Regent.

• On August 2, 2013, the Company sold its remaining interest in the Gold Springs project to High Desert Gold Corporation for a 7.5% interest in that company, providing continued exposure to exploration and development at Gold Springs. As business terms of the transaction had been substantially agreed to prior to June 30, 2013, the Company impaired the carrying value of Gold Springs and recognized a loss of $0.4 million during Q2 2013 to fair value Pilot Gold’s share interest in Gold Springs with the value of agreed-upon consideration.

• With effect of August 1, 2013, Pilot Gold and Nevada Clean Magnesium Inc. agreed to replace the option agreement that provided the Company the ability to earn-in to an initial 60% of the Griffon property with an agreement for the purchase by Pilot Gold of a 100% interest of Griffon.  The Company issued 180,000 Common Shares pursuant to the acquisition agreement.

•  During the six-months ended June 30, 2013, the Company wrote-down its interest in the New Boston ($1.28 million) property as it no longer met the profile for continued retention in Pilot Gold’s portfolio of assets.     

TV Tower, Kinsley, Regent and Griffon are each early stage exploration projects, none of which contain any mineral resource estimates as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). The potential quantities and grades disclosed herein are conceptual in nature and there has been insufficient exploration to define a mineral resource for the targets disclosed herein. It is uncertain if further exploration will result in these targets yielding a mineral resource.  There is also no certainty that Regent’s net profits royalty or gold equivalent bonus payment will be realized. 

Although there has been no economic analysis summarized in this press release relating to the Halilaga PEA, readers are cautioned that the Halilaga PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Halilaga PEA will be realized.

SELECTED FINANCIAL DATA

The following selected financial data is derived from the Company’s unaudited condensed interim consolidated financial statements for the six month period ended June 30, 2013, as prepared in accordance with International Financial Reporting Standards.

Total assets decreased to $70.26 million as at June 30, 2013 (December 31, 2012: $72.39 million), and comprise primarily cash and short-term investments of $29.79 million (December 31, 2012: $37.38 million).  The decrease reflects the write down of deferred exploration expenditures ($1.37 million) relating to the New Boston and Buckskin North properties, translation of the Company’s assets held in entities with a Canadian dollar functional currency and cash outflows related to corporate activities through the six months ended June 30, 2013, offset by the value of a share issuance during the period pursuant to the TV Tower Agreement, and capitalised to the Earn-in Option non-current asset. The balance of current assets comprises receivables and prepayments of $3.24 million (December 31, 2012: $1.23 million) which have increased primarily due to the timing of payments from Orta Truva relating to work performed by the Company on TV Tower.

For the three and six months ended June 30, 2013, Pilot Gold reported a net loss of $3.84 million and $6.35 million respectively, compared to net losses of $1.38 million and $2.84 million for the same periods in the prior year.  The losses per share for the three and six month periods ended June 30, 2013 were $0.04 and $0.07 respectively (three and six months ended June 30, 2012: $0.02 and $0.05 per share).  The most significant contributors to the losses for the six months ended June 30, 2013 were the write down of deferred exploration expenditures ($1.37 million), the recognition of non-cash stock based compensation ($1.56 million) and the cost of wages and benefits ($0.92 million). These costs were offset by management fees received as part of the TV Tower agreement ($0.36 million) and interest earned on the Company’s cash deposits of $0.24 million. The most significant contributors to the comparative period loss were stock based compensation expenses and wages, offset by changes in the fair value of the Company’s financial instruments.  In light of the ongoing uncertainty and volatility in equity and debt markets for exploration companies, the Company continues to rationalize expenditures and exploration activity in an effort to conserve capital and streamline operations without impairing the ability to accomplish the goals management established at the beginning of the year for each of Pilot Gold’s material projects.

Other comprehensive losses for the three and six months ended June 30, 2013 were $1.62 million and $2.71 million (comprehensive losses of $0.98 million and $0.66 million for the same periods in the prior year).  The six month period ended June 30, 2013 includes a $2.84 million loss (six months ended June 30, 2012: $0.01 million) from the impact of exchange gains and losses arising from exchange differences on the translation of Pilot Gold’s foreign operations with a non-United States dollar functional currency, and amounts reclassified to the statement of loss relating to impaired equity investments of $0.13 million during the six months ended June 30, 2013 (six months ended June 30, 2012, loss of $0.66 million relating to the net loss on revaluation of the Company’s financial assets). The impact from exchange differences will vary from period to period depending on the rate of exchange. In the period between January 1, 2013 and June 30, 2013, there was a 5% change in the exchange rate between the United States and Canadian dollars.

Liabilities at June 30, 2013 and at December 31, 2012 reflect primarily accounts payable and accruals recorded at period end arising from ongoing activities.

This press release should be read in conjunction with Pilot Gold’s unaudited condensed interim consolidated financial statements and Management’s Discussion and Analysis for the six months ended June 30, 2013. These documents can be found on the Company’s website (www.pilotgold.com) or on SEDAR at www.sedar.com. All amounts are presented in United States dollars unless otherwise stated.

ABOUT PILOT GOLD

Pilot Gold is a well-funded gold exploration company led by a proven technical team that continues to discover and define high-quality projects featuring strong grades, meaningful size and mining-friendly addresses. Our three key assets include interests in the TV Tower and Halilaga projects in Turkey, and the Kinsley project in Nevada, each of which has the ability to become a foundational asset. We also have a pipeline of projects characterized by large land positions and district-wide potential that can meet our growth needs for years to come.

For more information, visit www.pilotgold.com or contact:

Investors:
Patrick Reid, VP Corporate Affairs
Phone: 604-632-4677 or Toll Free 1-877-632-4677
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Media:
Ian Noble, Director, Corporate Communications
Phone: 604-809-8750
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For more information on the TV Tower, Halilaga or Kinsley Mountain properties refer to the following technical reports filed on the Company’s website at www.pilotgold.com and under Pilot Gold’s SEDAR profile at : “Updated Technical Report on the TV Tower Exploration Property, Canakkale, Western Turkey”, effective July 15, 2012 and dated August 3, 2012 prepared by Paul Gribble, C.Eng., FIMMM; “Preliminary Economic Assessment Technical Report for the Halilaga Project, Turkey” effective August 27, 2012 and dated October 10, 2012 prepared by Gordon Doerksen, P.Eng., James Gray, P.Geo., Garth Kirkham, P.Geo., Dino Pilotto, P.Eng., Maritz Rykaart, P.Eng, and Kevin Scott, P.Eng.; and “Technical Report on the Kinsley Project, Elko County, Nevada, U.S.A.” effective February 15, 2012 and dated March 26, 2012 prepared by Michael Gustin, CPG and Moira Smith, Ph.D., P.Geo.

All statements in this press release, other than statements of historical fact, are "forward-looking information" with respect to Pilot Gold within the meaning of applicable securities laws, including statements that address timing of exploration and development plans at the Company’s mineral projects. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "planned", "expect", "project", "predict", "potential", "targeting", "intends", "believe", "potential", and similar expressions, or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "should", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management at the date the statements are made including, among others, assumptions about future prices of gold, copper, silver and other metal prices, currency exchange rates and interest rates, favourable operating conditions, political stability, obtaining governmental approvals and financing on time, obtaining renewals for existing licences and permits and obtaining required licences and permits, labour stability, stability in market conditions, availability of equipment, accuracy of any mineral resources and mineral reserves, successful resolution of disputes and anticipated costs and expenditures. Many assumptions are based on factors and events that are not within the control of Pilot Gold and there is no assurance they will prove to be correct.

Such forward-looking information, including, but not limited to, statements that address reserve potential, potential quantity and/or grade of minerals, potential size of a mineralized zone, potential expansion of mineralization, the timing and results of future resource estimates, proposed timing of exploration and development plans at the Company’s mineral projects, and the estimation of mineral reserves and resources involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of Pilot Gold to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.

Such factors include, among others, risks related to the interpretation of results at certain of our exploration properties, reliance on technical information provided by our joint venture partners or other third parties as related to any of our exploration properties; changes in project parameters as plans continue to be refined; successfully completing the earn-in on the TV Tower project, including the ability to incur the minimum annual Expenditure Requirements and future issuance of common shares as consideration to complete the earn-in agreement; current economic conditions; future prices of commodities; possible variations in grade or recovery rates; current and proposed exploration and development; timing of receipt of the Kinsley Plan of Operations; the intention or ability of NEV to fund its share of expenditures at Kinsley; the costs and timing of the development of new deposits; failure of equipment or processes to operate as anticipated; the failure of contracted parties to perform; uses of funds in general including future capital expenditures, exploration expenditures and other expenses for specific operations; the timing and success of exploration activities generally; delays in permitting; satisfaction of Turkish requirements relating to the periodic submissions of Environmental Impact Assessments; possible claims against the Company or its joint venture partners; labour disputes and other risks of the mining industry; delays in obtaining governmental approvals, financing or in the completion of exploration as well as those factors discussed in the Annual Information Form of the Company dated March 27, 2013 (the “AIF”) in the section entitled "Risk Factors", under Pilot Gold’s SEDAR profile at .

Although Pilot Gold has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Pilot Gold disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise. Accordingly, readers should not place undue reliance on forward-looking information. Further details relating to Pilot Gold are also available in the AIF, available under Pilot Gold’s SEDAR profile at .