by Doug Ashbury
Northern News Services

NNSL (Dec 01/97) - Kit Resources Ltd., formerly Arauco Resources, has moved to strengthen its position in the Kitikmeot.

The Calgary-based junior has signed a letter of intent to acquire Inmet Mining Corporation's Izok Lake property west of Bathurst Inlet for $40 million.

Kit paid $100,000 on signing and will pay $900,000 more within 30 days.

Before May 31, 1998, the company will have to raise an additional $39 million to close the deal.

Simultaneous to the Izok deal, Kit said a $900,000 Canadian Hydrographic Survey has demonstrated the feasibility of deep-draft vessel access to a proposed port in southern Bathurst Inlet.

"There's a lot of work to be done," Kit president and chief operating officer W. Robert Gilroy, said Wednesday at the GeoScience Forum in Yellowknife.

Prior to 1997, Kit spent $37 million on exploration at George and Goose, at the south end of Bathurst Inlet. So far this year, they have spent $6.3 million, according to Kit's senior project geologist, Ron Parent.

Kit organized the hydrographic survey with participation from the Kitikmeot Inuit Association, GNWT and a shipping company that owns ice-class vessels.

Sponsors paid for more than half the cost of the survey.

The Bathurst port is key to Izok, as well as Kit's George and Goose properties, becoming operational, said Gilroy, who used to manage the Lupin mine when it was owned by Falconbridge.

"It was the last great technical unknown. These waters had never been charted."

The proposed port would be 160 kilometres from the existing winter road system that serves Echo Bay's Lupin mine and diamond developments. George Lake is 500 kilometres northeast of Yellowknife.

Ships could use the Northwest Passage to transport mineral concentrate out for smelting. A port could serve Echo Bay as well as diamond mines and its proposed George and Izok lakes mines.

The Nanisivik and Polaris mines have shown the favorable economics of ocean supply routes in the Arctic.

Kit, renamed to reflect the company's Kitikmeot focus, hopes to commission a new feasibility study next year, and then, ideally, go for project financing.

The cost to get Izok, George and Goose operational could reach seven figures. Izok's resource is zinc, copper, lead and silver. George and Goose are gold properties. Gold continues its slump closing at $298.90 Wednesday.

Kit said the George-Goose geological resource is 5.3 million tonnes with an average grade of 10.6 grams per tonne in six deposits, five at George and one at Goose. Cost to produce the George-Goose resource is currently estimated at $242 US an ounce.

The Izok deal also includes the nearby Hood River and Gondor properties. Kit will take a 100 per cent stake in Hood and 76.6 per cent interest in Gondor.

In February, Kit closed its deal with Homestake Mineral Development Company to acquire 100 per cent of the George Lake and Back River properties.

Kit, with 38 million shares, has a market capitalization of $15.2 million.