SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): August 31, 2012
DISCOVERY ENERGY CORP.
f/k/a "Santos Resource Corp."
(Exact name of registrant as specified in its Charter)
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Nevada 000-53520 98-0507846
(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification Number)
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One Riverway Drive, Suite 1700
Houston, Texas 77056
713-840-6495
(Address and telephone number of principal executive offices,
including zip code)
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________________________
(Former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of Registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Native Title Agreement
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On September 3, 2012, Discovery Energy SA Ltd (the "Subsidiary"), the
Australian subsidiary of Discovery Energy Corp. (the "Company"), completed the
execution of an agreement titled "Deed (Pursuant to Section 31 of the Native
Title Act 1993)" (referred to hereinafter as the "Native Title Agreement") with
(a) the State of South Australia, (b) representatives of the Dieri Native Title
Holders (the "Native Title Holders") on behalf of the Native Title Holders, and
(c) the Dieri Aboriginal Corporation (the "Association"). The Native Title
Holders have certain historic rights on the lands covered by the Petroleum
Exploration License (PEL) 512 in the State of South Australia (the "License").
The Company is seeking to have the License issued to the Subsidiary. The
License covers 584,651 gross acres overlaying portions of the geological system
generally referred to as the Cooper and Eromanga basins. The Native Title
Agreement memorializes the agreement of the Native Title Holders and the
Association to the issuance of the License and the Subsidiary's activities with
respect to the License.
The term of the Native Title Agreement commenced upon its execution, and it
will terminate on the completion of the operations proposed or which may be
undertaken by the Subsidiary in connection with the License and all subsequent
licenses resulting from the License. The License is expected to be granted for
an initial term of five years and for two additional, five-year renewal terms.
When the License falls due for renewal, the Subsidiary, if not in default under
the License, would be entitled to the renewal of the License in accordance with
the terms of the License. The Subsidiary would also be entitled to the grant of
a subsequent license, such as a production license, pipeline license or an
associated activities license, upon its application for same if warranted. By
entering into the Native Title Agreement the Native Title Holders agree to the
grant of the License and all subsequent licenses to the Subsidiary, and they
also covenant not to lodge or make any objection to any grant of licenses to the
Subsidiary in respect of the License area unless the Subsidiary is in breach of
an essential term under the Native Title Agreement. The Native Title Agreement
provides that it will not terminate in the event of a breach of a payment
obligation, but the parties may avail themselves of all other remedies available
at law, which would involve recourse to the non-exclusive jurisdiction of the
courts of the Commonwealth of Australia and the State of South Australia.
Recourse for breach of operational obligations of the Subsidiary in favor of the
Native Title Holders and the Association would be subject to the stipulated
dispute resolution procedure involving negotiation and mediation before any
party may commence court proceedings or arbitration.
In consideration of the Native Title Holders' entering into the Native
Title Agreement, the Subsidiary is obligated to make to them a one-time payment
in the amount of AUS$75,000 (or approximately US$77,258 based on exchanges rates
in effect on August 21, 2012). Moreover, throughout the term of the License,
the Subsidiary is obligated to pay to the State of South Australia for the
benefit of the Native Title Holders production payments in amounts equal to 1%
of the value at the wellhead of petroleum produced and sold from the lands
covered by the License. Furthermore, for facilitating the administration of
this Native Title Agreement, the Subsidiary will pay in advance to the
Association an annual fee comprising 12% of a maximum administration fee (the
"Maximum Administration Fee"), which is AUS$150,000 (or approximately US$154,516
based on exchanges rates in effect on August 21, 2012) (subject to adjustment
for inflation). This 12% payment will be made for each year of the first
five-year term of the License. After the first five-year term of the License,
the payment will be four percent 4% of the Maximum Administration Fee for each
year of the second and third five-year terms of the License.
The Subsidiary has virtually unlimited ability to assign and transfer
(partially or entirely) its rights in the Native Title Agreement, provided
certain procedural requirements are met. This ability should enhance the
Subsidiary's ability to procure an industry joint venture partner.
The Native Title Agreement features extensive provisions governing
aboriginal heritage protection in connection with the Subsidiary's activities
relating to the License. Management believes that these provisions (as well as
the other provisions of the Native Title Agreement) are reasonable and
customary, and are the industry standard throughout Australia. Under the Native
Title Agreement, the Native Title Holders authorize the Subsidiary to enter upon
the License area at all times and to commence and proceed with petroleum
operations, and, while the provisions governing aboriginal heritage protection
could adversely affect operational strategy and could increase costs, the Native
Title Holders and the Association covenant that they will not interfere with the
conduct of those operations; will actively support the Subsidiary in procuring
all approvals, consents and other entitlements and rights as are necessary to
support the interests of the Subsidiary in furthering the project; will refrain
from doing any act which would impeded or prevent the Subsidiary from exercising
or enjoying any of the rights granted or consented to under the Native Title
Agreement; and will observe all applicable laws in performing their obligations
under the Native Title Agreement.
In connection with the entry into the Native Title Agreement, the
Subsidiary entered into a similar agreement with other Aboriginal native
titleholders and claimants with respect to a comparatively small amount of land
also covered by the License. For all practical purposes, the terms of this
additional agreement are the same as those contained in the Native Title
Agreement. Payments made under this second agreement will reduce payments under
the Native Title Agreement on a dollar-for-dollar basis, so that each of the two
groups of native title holders and claimants will receive payments
proportionately based on the amount of land that their respective claims
represent relative to the total area covered by the License.
On September 6, 2012, the related South Australian government agency
formally offered to grant the License to the Subsidiary. The Native Title
Agreement and similar agreement were preconditions to this offer. This offer
must be accepted within 60 days, and a nominal annual fee must accompany the
acceptance. Also upon acceptance, the Company must, within seven (7) business
days, make the one-time payment to the Native Titleholders described above.
Prior to commencing any fieldwork, the Subsidiary will need to post a minimum
security deposit of AU$50,000 (or approximately US$51,500 based on exchanges
rates in effect on August 31, 2012). The Company intends to cause the Subsidiary
to accept the offer timely. Once the offer is accepted and the License is
issued, the Company will report these events in a subsequent Current Report on
Form 8-K, giving further information regarding the issued License.
Assignment Amendment
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On August 31, 2012, the Company and Keith D. Spickelmier entered into an
amendment (the "Second Amendment") with regard to that certain assignment (the
"Assignment") dated effective January 13, 2012 executed by Mr. Spickelmier in
favor the Company, whereby the Company acquired all of Mr. Spickelmier's rights
in a legal document (as amended and restated, the "Liberty Agreement") with
Liberty Petroleum Corporation ("Liberty") whereby Liberty granted to Mr.
Spickelmier an exclusive right to negotiate an option to acquire the License.
By the end of January 2012, the Company had successfully negotiated such an
option. In connection with the execution of the Assignment, the Company (among
other things) issued 20.0 million shares of its common shares to Mr. Spickelmier
for the assignment of his rights in the Liberty Agreement. The Assignment
provided that, if the South Australian Minister of Regional Development (the
"Minister") ever definitively decides not to grant and issue the License, or has
failed to grant and issue the License to the Company prior to April 30, 2012
(whichever occurs first), then Mr. Spickelmier would return immediately to the
Company the 20.0 million shares issued to him in connection with the delivery of
the Assignment. Mr. Spickelmier and the Company previously amended the
Assignment to extend the preceding April 30th date until August 31, 2012
The Assignment also provided that, if the License were issued to the
Company, then Mr. Spickelmier would be entitled to be issued a convertible
non-interest bearing promissory note (the "Note") with a principal amount of
$55,000, payable in full one year after the issuance thereof, such principal to
be convertible into 55.0 million shares of the Company's common stock (at $0.001
per Share) at any time after the Company has increased its authorized capital to
at least 125.0 million shares or has undertaken a reverse stock split in which
at least two or more shares are combined into one share. The Note arrangement
was undertaken because (at the time of the Assignment) the Company did not have
sufficient authorized but unissued shares to issue 55.0 million shares outright.
Since the time of the Assignment, the Company has increased the number of its
authorized but unissued shares so that it now has sufficient such shares to
issue 55.0 million shares outright, thereby rendering the Note arrangement moot.
Accordingly, Mr. Spickelmier and the Company amended the Assignment again in the
Second Amendment to provide that, upon the issuances of the License to the
Company, Mr. Spickelmier will be entitled to receive 55.0 million shares
outright in lieu of the Note.
Mr. Spickelmier and the Company amended the Assignment further in the
Second Amendment to provide that, if the Minister ever definitively decides not
to grant and issue the License, or has failed to grant and issue the License to
the Company prior to November 30, 2012 (rather than the previously agreed upon
August 31, 2012), then Mr. Spickelmier would return immediately to the Company
the 20.0 million shares issued to him in connection with the delivery of the
Assignment. Because of the License offer grant discussed above that occurred
after the signing of the Second Amendment, the amended provisions described in
this paragraph may prove to be moot.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
10.1 Deed (Pursuant to Section 31 of the Native Title Act 1993) among
(a) Honorable Tom Koutstantonis, Minister for Mineral Resources and Energy, for
and on behalf of the State of South Australia, (b) Discovery Energy SA Ltd, (c)
Edward Lander, Rhonda Gepp-Kennedy, one signatory whose name was withheld for
cultural reasons, Sylvia Stuart, Irene Kemp and David Mungerannie, for and on
behalf of the Dieri Native Title Holders, and (d) the Dieri Aboriginal
Corporation.
10.2 Second Amendment dated August 31, 2012 to Assignment dated
effective January 13, 2012 executed by Keith D. Spickelmier in favor of the
Company
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DISCOVERY ENERGY CORP.,
f/k/a "Santos Resource Corp."
(Registrant)
Date: September 7, 2012 By: /s/ Keith J. McKenzie
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Keith J. McKenzie,
Chief Executive Officer