Toronto-McChip Resources Inc. said Sept. 17 that it has signed a lease agreement with PotashCorp granting that company the right to mine potash from lands leased from McChip in the Rocanville area of Saskatchewan. McChip said that upon signing PotashCorp is obligated to pay the company $250,000, including a nonrefundable option payment and fees for historical technical data provided to PotashCorp by the company. Under the terms of and upon execution of the lease agreement, an additional advance of $100,000 shall be payable to McChip by PotashCorp after the execution of a unit agreement each year thereafter, until the year in which PotashCorp reaches commercial production on the lands specified in the lease. These advance payments will be recouped by PotashCorp from actual royalties due McChip. From the date of commercial production the company will earn a royalty on potash ore produced from the leased property at a rate equivalent to the royalty rate payable to the Crown calculated on potash ore from time to time, pursuant to the provision of the regulations provided under The Crown Minerals Act of the Province of Saskatchewan. Richard McCloskey, McChip president, said that “the extensive capital required to develop and mine potash, combined with the discontinuous leases held by McChip, would make it highly unlikely that the company would or could develop the property on its own. This agreement enables us to benefit financially from the long-held leases without incurring additional capital risk.”
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