According to an IGN interview:
In an interview with IGN, del Toro said, “I love working with Kojima-san. We are still in touch. We are still friends and working into doing something together, but that’s not going to be [Silent Hills].”
Guillermo del Toro also detailed a bit about what Silent Hills — though still very early in the development process — could have been.
“We were in the planning stages, and it’s a shame it’s not going to happen,” del Toro said. “We were talking about really pushing the boundaries of the new consoles, and making the game really mess with your head. One of the great moments in Metal Gear [Solid] was Psycho Mantis. The idea that a game can actually interact with you, and stuff like that.”
It’s good to know the collaboration will keep going, especially since there is so much uncertainty about what’s next for Kojima.
Also worth noting that some fans believed Silent Hills was in full production, but del Toro says it was in planning stages, meaning that very little real work had been finished.