ZOL.L Regulatory News (ZOL)

29 December 2020

Zoltav Resources Inc.

("Zoltav" or the "Company")

Corporate Update

&

Holdings in Company

Zoltav (AIM: ZOL), the Russia-focused oil and gas exploration and production company, provides a corporate update following a review by the board of directors, in consultation with the Company's major shareholders, of the strategic options available to the Company to secure long-term value from the Company's Bortovoy Licence, its sole producing asset.

Bortovoy Licence Development Strategy

As previously announced, the two currently producing western fields on the Bortovoy Licence are in natural decline and an ongoing capital investment programme has been required, and will continue to be required, in order to sustain production and commercialise the remaining reserves. The board has determined, following a technical and economic feasibility study, that developing the eastern fields, where there remain substantial undeveloped reserves, by connecting them to the Western Gas Plant and expanding the plant's capacity, will be necessary in order to deliver long-term value from the asset.

A final project investment decision for the development of the eastern fields remains subject to securing committed project finance. Negotiations with the major Russian banks remain ongoing however, to date, the Company has been unable to agree binding terms for such project finance and, as previously announced, any offer of project finance is likely to provide only a portion of the required capital investment programme and, as such, will likely require a significant equity contribution from the Company and/or its shareholders.

Holdings in Company

The Company has been notified today of a share purchase agreement ("SPA") pursuant to which ARA Capital Holdings Limited ("ARA Capital Holdings") has agreed to buy, and Bandbear Limited ("Bandbear") has agreed to sell, an interest in the Company of 62,596,644 shares, representing 44.10 percent of Zoltav's total issued share capital (the "Transaction"). Prior to the completion of this Transaction, Bandbear will acquire the 6,353,568 shares that are currently held by Drentru Services LTD, which will subsequently be acquired by ARA Capital Holdings under the Transaction.

The SPA provides for the Transaction to take place in two stages. Initially, ARA Capital Holdings has acquired 8,100,000 Zoltav shares, representing 5.7 percent of Zoltav's total issued share capital. Accordingly, ARA Capital Holdings has today notified the Company that, together with its related party ARA Capital Limited ("ARA Capital"), it holds an interest in 70,696,643 Zoltav shares, representing 49.80 percent of the Company's total issued share capital, and Bandbear has today notified the Company that it now holds an interest in 48,143,076 Zoltav shares, representing 33.9 percent of the Company's total issued share capital.

The acquisition of the remaining shares held by Bandbear is conditional upon several conditions precedent including ARA Capital Holdings obtaining clearance from the Russian Federal Antimonopoly Service ("FAS").

Under the terms of the SPA, the purchase price is denominated in Russian Roubles and amounts to approximately RUR 1.8 billion (approximately US$24.3 million) and consists of three instalments which shall be paid according to the following payment schedule: the first instalment, which is equal to approximately US$3 million, has already been paid on entering into the SPA; the balance will be divided into two equal installments which shall be paid no later than 31 December 2023 and 31 December 2024 respectively. The purchase price per share equates to 29 pence per share (see note 1 below).

Loan Agreement Update

Zoltav announced on 14 July 2020 that it had entered into a loan agreement with ARA Capital Holdings under which ARA Capital Holdings provided a revolving loan facility for up to US$9,000,000 (the "Loan"). The Loan is currently due for repayment by 31 December 2020 (unless otherwise extended or converted into equity by mutual agreement). The Company currently has insufficient amounts of cash or other sources of liquidity or alternative sources of finance to repay the Loan and, as a result, ARA Capital Holdings has agreed to extend the final repayment date to 31 March 2021 (The "Loan Extension"). All other terms of the Loan remain unchanged. The Loan Extension has been granted so as to enable the Company and ARA Capital Holdings sufficient time to discuss the options available in respect of the settlement of the Loan which may include the conversion of the Loan into equity on terms to be agreed.

ARA Capital Holdings is the parent company of ARA Capital - both entities combined own 49.80 percent of the issued share capital of the Company. ARA Capital Holdings and ARA Capital are therefore regarded as related parties as defined by the AIM Rules for Companies. The Loan Extension is a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. The directors of Zoltav consider, having consulted with the Company's nominated adviser, SP Angel Corporate Finance LLP, that the terms of the related party transaction are fair and reasonable as far as shareholders are concerned.

Note 1: Given that the two following instalments are denominated in Roubles, the purchase price per share is calculated based on the GBP:RUB exchange rate of The Central Bank of the Russian Federation as at 29 December 2020 which was 100.02 RUB per GBP.

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About Zoltav

Zoltav is an oil and gas exploration and production company focused on Russia. The Company holds the Bortovoy Licence in the Saratov region of South Western Russia, a 3,215 sq km area along the northern margin of the Pre-Caspian basin, one of the largest hydrocarbon basins in the CIS. The Bortovoy Licence contains a number of productive gas fields in the west of the Licence and a processing plant. The Company is currently evaluating strategies to commercialise the eastern fields of the Bortovoy Licence. For further information on Zoltav, or to sign up for our news alert service, visit: www.zoltav.com.