Amid mounting speculation that the Silent Hills project may have been cancelled, Konami has issued a statement that suggests the game is, at the very least, undergoing major changes.
When the Silent Hills was first announced, Walking Dead star Norman Reedus was named as its lead actor, lending both his face and voice to the game. But on Monday Konami confirmed to GameSpot that "our contract period with Reedus has expired," following the actor's claims on Twitter that the entire project has been axed.
Regarding those rumours, Konami wouldn't discuss the Silent Hills project specifically, but said: "We will continue to develop the Silent Hill series."
http://www.gamespot.com/articles/konami-responds-to-silent-hills-cancellation-claim/1100-6426908/
So it looks like it def got canceled as they side stepped the question. Or at least this version of Silent Hills, but they plan on making other games. Unfortunate news to say the least but there you have it.