ZOL.L Regulatory News (ZOL)

Embargoed: 1015hrs, 22 May 2013

Zoltav Resources Inc.

("Zoltav" or the "Company")

Final Results for the Year Ended 31 December 2012

Chairman's report for the year ended 31 December 2012

Major post balance sheet events

·; Proposed acquisition of CenGeo Holdings Limited (CenGeo) for US$26 million (approximately £17.4 million) satisfied through the issue of 473,157,416 new Zoltav Resources Inc. (Company) shares announced on 20 March 2013 (Acquisition).

·; CenGeo, through a wholly owned subsidiary, holds the Koltogor Blocks comprising a newly issued 25 year exploration and production licence (Koltogor Licence) containing the undeveloped Koltogor oil discovery.

·; Agreement signed with ARA Capital Limited, the Company's largest shareholder, giving the Company the right to call US$20 million (approximately £13.4 million) of working capital to help fund the work programme on the Koltogor Licence by way of a subscription for new Company shares at 3.5 pence per share.

·; Strengthening of the Board with appointments of Michael Lombardi and John Grimshaw as Non-Executive Directors.

2012 Highlights

·; Considerable progress was made on the Company's acquisition strategy resulting in the proposed acquisition of CenGeo.

·; ARA Capital Limited provided £500,000 of working capital by way of a convertible loan in support of acquisition strategy and has, post year-end, undertaken to convert this prior to the publication of the Admission Document (Circular) in respect of the proposed acquisition of CenGeo.

Summary financials

·; Loss for the year ended 31 December 2012: US$3,528,000 (2011: US$2,340,000).

·; Loss attributable to shareholders for the year ended 31 December 2012: US$3,528,000 (2011: US$2,340,000).

·; Shareholders' equity as at 31 December 2012: US$130,000 (2011: US$1,425,000).

·; Basic loss per share for the year ended 31 December 2012: US Cents 0.94 (2011: US Cents 0.63).

Chairman's statement

The strategy of the Company is to identify investment opportunities within the natural resources sector in the CIS, where the Board believes there are attractive opportunities to create value for shareholders through the acquisition of assets in various stages of development.

The Board was pleased to receive the support for this process from the Company's largest shareholder, ARA Capital Limited, which agreed to provide £500,000 of additional working capital during the year through an unsecured convertible loan. £250,000 of this convertible loan was drawn down by the Company during 2012, with the balance drawn down in February 2013. Access to such working capital has allowed the Board the flexibility to carry out detailed due diligence on target opportunities.

The Board has evaluated a small number of opportunities during the year and I am pleased to advise that this work, as announced post year-end on 20 March 2013, has resulted in the announcement of the Company's first major transaction: the proposed acquisition of the entire issued share capital and shareholder loans of CenGeo which, through its wholly owned subsidiary, holds the Koltogor Blocks containing the undeveloped Koltogor oil discovery. The consideration payable for CenGeo is US$26 million (approximately £17.4 million) to be satisfied entirely through the issue of 473,157,416 Company shares at 3.5 pence per share.

Completion of the transaction, which requires the announcement of and publication of the Circular in relation to the Company (as enlarged by the Acquisition) and the Acquisition agreement and the consent of shareholders being given at a General Meeting, will mark the Company's transition from being an investment company to an oil and gas company.

The Koltogor Licence covers a contiguous area of 528 square kilometres in the Khantiy-Mansisk Autonomous Okrug, one of Russia's most prolific oil producing regions. It is in close proximity to a number of major producing fields including Samotlor, Russia's largest, underlining the prospectivity of the Koltogor area.

In parallel with the proposed acquisition of CenGeo, the Company also announced on 20 March 2013 that it has entered into a conditional agreement with its largest shareholder, ARA Capital Limited, to provide US$20 million (approximately £13.4 million) of working capital to fund the future work programme on the Koltogor Licence. ARA Capital Limited has also given an undertaking to convert its £500,000 convertible loan prior to publication of the Circular.

Following completion of the Acquisition, the full ARA Capital Limited investment of US$20 million and conversion of its loan, it is expected that ARA Capital Limited will own 45.0% of the enlarged issued share capital of the Company; and that Mr Bukhtoyarov, through his company Bandbear Limited (beneficial majority owner of CenGeo), will own 29.1% of the Company. The Company is delighted to receive Mr Bukhtoyarov's support for the Company's strategy and I look forward to welcoming him as a shareholder.

Further information on the CenGeo transaction and the Koltogor Blocks can be obtained from the Company's 20 March 2013 announcement (available on the Company's website www.zoltav.com) and in the Circular which will be published in due course.

Financial results

Throughout 2012, the Company continued to operate as an investing company. The Company made an operating loss of US$3,528,000 (2011: US$2,340,000). As announced at the half year, the Company chose to realise investment gains on the investments made in Rosneft, Gazprom and Lukoil. The Company sustained further losses on the investments made by the previous Board including in relation to Evergreen Energy following its filing for bankruptcy in January where the investment value has been written down. The value of the Company's shareholding in Paternoster Resources Plc (formerly Viridas PLC) has also declined significantly.

Board appointments

In line with Company's commitment to high standards of corporate governance, we announced, on 20 March 2013, the appointments of Michael Lombardi and John Grimshaw to the Board; they each bring a great deal of relevant legal and administrative experience to the Company.

Mr Lombardi is a highly experienced commercial lawyer. He is qualified as a Jersey solicitor and is a senior partner of Ogier, one of the world's largest offshore law firms, headquartered in Jersey; and which acts as Company Secretary to the Company.

Mr Grimshaw has considerable experience advising on trust, tax and investment planning. He is a member of the Society of Trust and Estate Practitioners and the Institute of Directors.

Outlook

Efforts over the past year to identify attractive acquisition opportunities have delivered an excellent first transaction for the Company. I believe the CenGeo acquisition represents extremely good value for shareholders and delivers a sizeable appraisal asset with near-term production potential. It marks a truly transformational moment for the Company.

Symon Drake-Brockman

Chairman

21 May 2013

Enquiries:

Statement of comprehensive income for the year ended 31 December 2012

All the items dealt with in arriving at the result for the period relate to continuing activities.

There were no components of 'other comprehensive income' which are required to be separately disclosed during the current and preceding year.

The accompanying notes form an integral part of these financial statements.

Statement of Financial Position as at 31 December 2012

The accompanying notes form an integral part of these financial statements.

The financial statements were approved by the Board of Directors and authorised for issue on 21 May 2013.

The accompanying notes form an integral part of these financial statements.

The accompanying notes form an integral part of these financial statements.

Notes to the financial statements for the year ended 31 December 2012

1. General information

The Company was incorporated in the Cayman Islands, which does not prescribe the adoption of any particular accounting framework. The Board has therefore adopted International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and as adopted by the European Union. The Company's shares are listed on the AIM of London Stock Exchange. The financial statements are prepared in United States Dollars.

The Company previously acted as the holding company of a group. Following the disposal of all the subsidiaries to its former holding company, Crosby Capital Limited on 4 October 2010, the Company became an investing company with no subsidiary undertakings.

The financial statements for the year ended 31 December 2012 (including the comparatives for the year ended 31 December 2011) were approved by the Board of Directors on 21 May 2013.

2. Adoption of new and revised standards

The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations effective as of 1 January 2012.

(a) Amendments early adopted by the Company:

There were no standards, amendments and interpretations adopted early by the Company.

(b) Standards, amendment to standards and interpretations effective and relevant to the Company's operations:

Amendments resulting from improvements to IFRS did not have any impact on the accounting policies, financial position or performance of the Company.

(c) New standards, amendment to standards and interpretations effective but not relevant:

·; IFRS 1 Amendment: Severe hyperinflation & removal of fixed dates for first time adopters;

·; IFRS 7 Amendment: Disclosures - transfers of financial assets;

·; IAS 12: Deferred Tax - recovery of underlying assets.

(d) Standards, amendments and interpretations not yet effective:

·; IAS 1 Amendment: Financial statement presentation - presentation of items of other comprehensive income;

·; IAS 19 Revised: Employee benefits;

·; IAS 27 Revised: Separate financial statements;

·; IAS 28 Revised: Investments in associates and joint ventures;

·; IAS 32 Amendment: Offsetting financial assets and financial liabilities;

·; IFRS 1 Amendment: Government loans;

·; IFRS 7 Amendment: Financial instruments: disclosures - enhanced derecognition disclosure requirements;

·; IFRS 9: Financial instruments - classification and measurement;

·; IFRS 10: Consolidated financial statements;

·; IFRS 11: Joint arrangements;

·; IFRS 12: Disclosure of interests in other entities;

·; IFRS 13: Fair value measurement;

·; IFRIC 20: Stripping costs in the production phase of a surface mine;

·; Annual improvements May 2012.

Except for IFRS 9 and IFRS 13, the Directors do not expect that the adoption of these accounting standards and interpretations in future periods will have a material impact on the operations of the Company.

3. Summary of significant accounting policies

(a) Basis of preparation

The significant accounting policies that have been used in the preparation of these financial statements are summarised below. These policies have been consistently applied to the years presented unless otherwise stated. The adoption of new or amended IFRS and the impacts on the financial statements, if any, are disclosed in note 2 to the financial statements.

The financial statements have been prepared under historical cost basis except for financial instruments classified as fair value through profit or loss, which are measured at fair value. The measurement bases are fully described in the accounting policies below.

The Directors have prepared cashflow forecasts through to 31 May 2014, which take account of the following:

·; the running costs of the Company as an investing company;

·; the continued support for its operating expenses provided by the Company's major shareholder, ARA Capital Limited;

·; the proposed acquisition of CenGeo for US$26 million will be satisfied through the issue of new shares in the Company. The Company has also entered into an agreement with ARA Capital Limited to provide a further US$20 million working capital to fund the future work programme; and

·; the acquisition constitutes a reverse takeover under the AIM Rules and therefore, trading in the Company's shares has automatically been suspended under Rule 14. This does not have any impact upon the going concern of the Company as it will be readmitted upon fulfilling specific requirements of the Aim Rules.

The forecasts indicate sufficient cash balances remain throughout the period to 31 May 2014. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management's best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are set out in note 4 to the financial statements.

(b) Property, plant and equipment

Measurement bases

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to the working condition and location for its intended use. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.

All other costs, such as repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

The gain or loss arising from a retirement or disposal is determined as the difference between the sales proceeds and the carrying amount of the assets, and is recognised in the income statement.

Depreciation

Depreciation is provided to write off the cost of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method, at the following rates per annum:

The assets' residual values, depreciation method and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

(c) Leases

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Company determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

Classification of assets leased to the Company

Assets that are held by the Company under leases which transfer to the Company substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Company are classified as operating leases.

Assets acquired under finance leases

Where the Company acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets, are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases.

Subsequent accounting for assets held under finance lease corresponds to those applied to comparable acquired assets. The corresponding finance lease liability is reduced by lease payments less finance charges.

Assets acquired under finance leases (continued)

Finance charges implicit in the lease payments are charged to the statement of comprehensive income over the period of the lease so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to the statement of comprehensive income in the accounting period in which they are incurred.

Operating lease charges as the lessee

Where the Company has the rights to use of assets held under operating leases, payments made under the leases are charged to the income statement on a straight-line basis over the lease terms except where an alternative basis is more representative of the time pattern of benefits to be derived from the leased assets. Lease incentives received are recognised in the income statement as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the statement of comprehensive income in the accounting period in which they are incurred.

(d) Foreign currencies

The financial statements are presented in United States Dollars, which is also the functional currency of the Company.

Foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the statement of comprehensive income.

Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined and are reported as part of the fair value gain or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

(e) Financial instruments

Financial assets and financial liabilities are recognised when and only when, the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the statement of comprehensive income.

Financial assets

The Company classifies its financial assets into one of the following categories: financial assets at fair value through profit or loss and receivables.

Financial assets (continued)

Regular purchases of financial assets are recognised on the trade date. Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at every reporting date. The accounting policies adopted for each category are:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term, or it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent pattern of short-term profit-taking.

Financial assets may be designated at initial recognition as at fair value through profit or loss if the following criteria are met:

·; the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or recognising gains or losses on them on a different basis; or

·; the assets are part of a group of financial assets which are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management strategy and information about the Company of financial assets is provided internally on that basis to the key management personnel.

Subsequent to initial recognition, the financial assets included in this category are measured at fair value with changes in fair value recognised in the income statement. Fair value is determined by reference to active market transactions or using a valuation technique where no active market exists. Fair value gains or losses do not include any dividend or interest earned on these financial assets. Dividend and interest income is recognised in accordance with the Company's policies in note 3 to the financial statements.

Trade and other receivables

Trade and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are subsequently measured at amortised cost using the effective interest method, less any impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost.

Impairment losses on loans and receivables are provided for when objective evidence is received that the Company will not be able to collect amounts due to it in accordance with the original terms of the receivables. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred, discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in the income statement for the period in which the impairment occurs.

Objective evidence of impairment of individual financial assets includes observable data that comes to the attention of the Company about one or more of the following loss events:

·; significant financial difficulty of the debtor;

·; a breach of contract, such as default or delinquency in interest or principal payments;

·; it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; and

·; significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

Loss events in respect of a Company of financial assets include observable data indicating that there is a measurable decrease in the estimated future cash flows from the Company of financial assets. Such observable data includes but not limited to adverse changes in the payment status of debtors in the Company and, national or local economic conditions that correlate with defaults on the assets in the Company.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed.

The amount of the reversal is recognised in the statement of comprehensive income in the period in which the reversal occurs.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Other financial liabilities

Other financial liabilities include other payables and are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Convertible debt

The fair value of the liability portion of a convertible loan note is determined using a market interest rate for an equivalent non-convertible loan note. This amount is recorded as a liability on an amortised cost basis until it is extinguished on conversion or maturity of the bonds. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in shareholders' equity, net of income tax effects and is not subsequently remeasured.

Debt for equity swaps

Where debt is settled by the issue of equity the equity issued is treated as issued at the value of the amount payable where the creditor is a shareholder.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Company has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised directly in equity is recognised in the statement of comprehensive income.

For financial liabilities, they are removed from the balance sheet when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in the statement of comprehensive income.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and amounts repayable on demand with banks and short-term highly liquid investments which are readily convertible into known amounts of cash without notice and are subject to an insignificant risk of changes in value and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advance if the advances form part of the Company's cash management.

(f) Income tax

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the reporting date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income.

Deferred tax is calculated using the liability method on temporary differences at the reporting date between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward as well as other unused tax credits, to the extent that it is probable that taxable profits, including existing taxable temporary differences, will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.

Deferred tax liabilities are recognised for taxable temporary differences arising on interests in associates and jointly controlled entities, except where the Company is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the period the liability is settled or the asset realised, provided they are enacted or substantively enacted at the reporting date.

Changes in deferred tax assets or liabilities are recognised in the income statement or in other comprehensive income or directly in equity if they relate to items that are charged or credited to other comprehensive income or directly to equity.

Current tax assets and liabilities are presented net if the Company has the legally enforceable right to set off those recognised amounts; and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

(g) Share capital, share premium and capital reserve

Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share premium (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction. Any discount on the issue of ordinary shares is deducted from the share premium account.

The capital reserve arose in prior periods on the application of the reverse acquisition accounting when the Company made its first acquisition.

(h) Revenue recognition

Revenue, which is the fair value of consideration received or receivable, is recognised when it is probable that economic benefits will flow to the Company, when the revenue can be measured reliably, and the stage of completion of the transaction and the costs incurred for the transaction as well as the costs to complete the transaction can be measured reliably, and on the following bases:

·; management fee income, included in other income, is recognised as the services are provided;

·; interest income is recognised as it accrues, taking into account the effective yield on the asset;

·; dividend income is recognised when the right to receive payment is established.

The policies on financial assets at fair value through profit or loss are dealt with in note 3(e) to the financial statements.

(i) Employee benefits

Employee leave entitlements

Employee entitlements to long service payment and annual leave are recognised when they accrue to employees. Provision is made for the estimated liabilities for long service payment and annual leave as a result of services rendered by employees up to the reporting date.

Non-accumulating compensated absences are not recognised until the time of leave.

Retirement benefit schemes

No pension contributions were payable in the year. In 2010, the Company participated only in defined contribution pension schemes and paid contributions to independently administered funds on a mandatory or contractual basis. The assets of these schemes are held separately from those of the Company in independently administered funds. The retirement benefit schemes are generally funded by payments from employees and by the relevant Company. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense on an accruals basis.

Share-based employee compensation

The Company operates equity-settled share-based compensation plans to remunerate its Directors and key management.

All services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the fair value of the share options and warrants awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions.

All share-based compensation is ultimately recognised as an expense in the statement of comprehensive income unless it qualifies for recognition as an asset, with a corresponding credit to employee share-based compensation reserve in equity. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment to expense recognised in prior periods is made if fewer share options ultimately are exercised than vested.

Upon exercise of share options or warrants the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital and the amount previously recognised in employee share-based compensation reserve will be transferred out with any excess being recorded as share premium.

When the share options or warrants have vested and then lapsed, the amount previously recognised in the employee share-based compensation reserve is transferred to the retained profits or accumulated losses.

Bonus plans

The Company recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

(j) Provisions and contingent liabilities

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future uncertain events not wholly within control of the Company are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(k) Related parties

Parties are considered to be related to the Company if:

·; the party has the ability, directly, or indirectly through one or more intermediaries, to control the Company or exercise significant influence over the Company in making financial and operating policy decisions, or has joint control over the Company;

·; the Company and the party are subject to common control;

·; the party is an associate of the Company or a joint venture in which the Company is a venturer;

·; the party is a member of the key management personnel of the Company or its parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;

·; the party is a close family member of such a party referred to in the first bullet point or is an entity under the control, joint control or significant influence of such individuals.

(l) Segment reporting

The Company operated in the year in one segment, investment in equity instruments of mining operations based in the former Soviet Union. The management information received by the Board is prepared on this basis.

4. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The Company makes estimates and assumptions when preparing financial statements. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting year are:

Going concern

The financial statements have been prepared on going concern basis, the details of which are provided in note 3(a) to the financial statements.

Valuations of share options or warrants granted

The fair value of share options or warrants granted was calculated using the Black-Scholes Pricing Model which requires the input of highly subjective assumptions, including the volatility of the share price. Because changes in subjective input assumptions can materially affect the fair value estimate, in the opinion of the Directors of the Company, the existing model will not always necessarily provide a reliable single measure of the fair value of the share options. Details of the inputs are set out in note 16 to the financial statements.

Valuation of financial assets categorised as at fair-value through profit or loss:

The fair-value of listed investments classified as at fair-value through profit or loss is based on the listed share prices of the respective investments and translated to United States Dollars using the exchange rate ruling at the balance sheet date.

Valuation of liability and equity components of convertible debt:

The fair value of the liability component, included in non-current borrowings, was calculated using a market interest rate for an equivalent non-convertible loan note. The residual amount, representing the value of the equity conversion option, is included in shareholders' equity in other reserves.

5. Other income

6. Finance costs

7. Employee benefit expenses (including directors' remuneration)

Three Directors served during the current year. The remuneration of the highest paid Director was US$1,594,467 (2011: US$96,250). Details of Directors' benefit expense are disclosed in the report on remuneration contained in the Company's annual report.

8. Loss before taxation

9. Taxation

The Company is subject to Jersey income tax at the rate of 0% (2011 0%).

The Company has significant unrelieved tax losses, the utilisation of which is uncertain and consequently no deferred tax asset has been recognised.

10. Loss per share attributable to owners of the Company

Basic loss per share is calculated by dividing the loss attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year.

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares: convertible loans and share options/warrants.

The diluted loss per share for 2012 is US Cents 0.87 taking into account the existing warrants, share options and the convertible Loan Note (2011: US Cents 0.61).

11. Property, plant and equipment

12. Financial assets at fair value through profit or loss

The movement in financial assets at fair value through profit or loss during the period is as follows:

Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into level 1 to 3 based on the degree to which the fair value is observable:

·; level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets and liabilities;

·; level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

·; level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There were no transfers between level 1, 2 and 3 during the year (2011: none).

Particulars and valuation basis of principal financial assets held at fair value through profit or loss are as follows:

13. Trade and other payables

14. Borrowings

The Company issued an unsecured 1.0% interest bearing convertible loan note (Loan Note), at the par amount of £500,000 on 15 September 2012 (Issue Date) to be drawn down in two tranches of £250,000 each. The Loan Note matures three years from the issue date at the nominal value of £500,000 or at any time during the life of the Loan Note, can be converted into shares at the holder's option at the rate of 1 share per £0.023. The values of the liability component and the equity conversion component were determined at the issuance of the Loan Note.

The fair value of the liability component, included in non-current borrowings, was calculated using a market interest rate for an equivalent non-convertible loan note. The residual amount, representing the value of the equity conversion option, is included in shareholders' equity in other reserves.

During the year ended 31 December 2012, only the first tranche of £250,000 was drawn down by the Company.

The Loan Note is recognised in the statement of financial position as follows:

The fair value of the liability component of the Loan Note at 31 December 2012 amounted to US$345,583 (2011: US$nil). The fair value was calculated using cash flows discounted at a rate based on the borrowings rate of 6.64%.

15. Share capital

16. Share-based payments

Share options

The Company may only grant options up to a maximum of 25% of the Company's issued share capital. All shares issued in respect of the share options rank pari-passu in all respects with the ordinary shares.

At 31 December 2012, the Company had a total of 47,350,000 outstanding share options (2011: restated 7,350,000). Options which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding options and are available for re-use.

During the year ended 31 December 2012 a total of 40,000,000 share options were issued to the current Directors of the Company. No share options were granted during the year ended 31 December 2011.

Initial Share Options

The Company adopted an employee Share Option Scheme on 4 March 2005 (Share Option Scheme) in order to incentivise key management and staff. Pursuant to the Share Option Scheme, a duly authorised committee of the Board of Directors of the Company, at its discretion, granted options to eligible employees, including Directors, of the Company or any of its subsidiaries to subscribe for shares in the Company.

The following share options were granted to the former employees and directors of the Company under the Initial Share Option Scheme adopted on 4 March 2005 (Initial Share Options) and are still in existence:

The 7,350,000 Initial Share Options which were granted to then employees and directors of the Company between 2005 and 2008 were erroneously accounted for as lapsed in the year ended 31 December 2011 following change of ownership of the Company and departure of those employees and directors. Based on additional information obtained and confirmation from former directors, it has been determined these options are still in existence and as such have been re-instated in the statement of changes in equity. Correction of this error has not affected the statement of comprehensive income or statement of financial position as the full fair value had been spread over the three years to 31 December 2010 from the respective grant dates.

Share options granted under the Initial Share Option scheme were exercisable as follows:

·; the first 30% of the options between the first and tenth anniversary of the date of grant;

·; the next 30% of the options between the second and tenth anniversary of the date of grant; and

·; the remaining options between the third and tenth anniversary of the date of grant.

Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) as determined through use of the binomial option pricing model, at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest.

The binomial option pricing model applied to the grant of share options in respect of calculating the fair values. Key inputs to the model are as follows:

Volatility has been based on the historical trading performance of the Company and comparable companies. The risk free rate has been determined based on 10 year government bonds.

Total fair value as considered in the employee share-based compensation reserve for Initial Share Options was US$1,235,000 (2011: restated US$1,235,000).

Directors Share Options

Share options granted to the current Directors of the Company on 31 October 2012 (Directors Share Options) were exercisable at any time between the commencement of the option period and third anniversary of the date of grant. Share options granted under this scheme were as follows:

Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) as determined through use of the Black-Scholes technique, at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest.

The Black-Scholes formula is the option pricing model applied to the grant of share options in respect of calculating the fair values. Key inputs to the model are as follows:

Volatility has been based on the Company's trading performance from 1 January 2011. The risk free rate has been determined based on 5 year government bonds.

Total fair value as considered in the employee share-based compensation reserve for Directors Share Options was US$2,172,332 (2011: US$nil).

Warrants

In August 2011, the Company granted 10,550,000 warrants with an exercise price of 5.0 pence, vesting from 2 August 2011 to 2 August 2014. These were issued to the following:

All shares issued in respect of the warrants rank pari-passu in all respects with the ordinary shares.

Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) as determined through use of the Black-Scholes technique, at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest.

The Black-Scholes formula is the option pricing model applied to the grant of warrants in respect of calculating the fair values. Key inputs to the model are as follows:

Volatility has been based on the Company's trading performance from 1 January 2011. The risk free rate has been determined based on 5 year government bonds.

Total fair value as considered in the employee share-based compensation reserve for warrants was US$498,943 (2011: US$498,943).

Total share options and warrants

Total fair value for both share options and warrants as considered in the employee share-based compensation reserve was US$3,906,275 (2011: restated US$1,733,943).

US$2,172,332 of the employee share-based compensation is included in the statement of comprehensive income for 2012 (2011: US$498,943).

No liabilities were recognised due to share-based payment transactions.

17. Operating leases

The Company had no operating lease commitments at 31 December 2012 (2011: none).

18. Capital commitments

The Company had no material capital commitments at 31 December 2012 (2011: none).

19. Contingencies

The Company had no material contingencies at 31 December 2012 (2011: none).

20. Financial risk management, objectives and policies

In common with other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

The significant accounting policies regarding financial instruments are disclosed in note 3 and the critical accounting estimates and judgements are set out in note 4.

The principal financial instruments used by the Company from which financial instrument risk arises, are as follows:

Details of financial assets at fair-value through profit and loss are set out in note 12. These financial assets are valued using market rates quoted on the relevant stock exchange.

General objectives, policies and processes

The Board has overall responsibility for the determination of the Company's risk management objectives and policies and, while retaining ultimate responsibility for them, it has delegated part of the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company's finance function.

The Board receives reports from financial personnel through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The risks to which the Company is exposed and the policies adopted by the Board have not changed significantly in the year. The overall objective of the Board is to set policies that seek to reduce on-going risk as far as possible without unduly affecting the Company's competitiveness and flexibility. Further details regarding these policies are set out below:

Credit risk

Credit risk arises principally from the Company's financial investments, trade and other receivables and cash and cash equivalents. It is the risk that the value of the Company's investments will not be recovered and the risk that the counterparty fails to discharge its obligation in respect of the Company's trade and other receivables and cash balances. The maximum exposure to credit risk equals the carrying value of these items in the financial statements.

Credit risk with cash and cash equivalents is reduced by placing funds with banks with acceptable credit ratings and indicated government support where applicable.

Liquidity risk

Liquidity risk arises from the Company's management of working capital and the amount of funding committed to its investment programme. It is the risk that the Company will encounter difficulties in meeting its financial obligations as they fall due.

The Company's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The principal liabilities of the Company arise in respect of the on-going administration. Trade and other payables are all payable within six months. The convertible Loan Note matures three years from the issue date at its full nominal value of £500,000 or at any time during the life of the Loan Note, can be converted into shares at the holder's option at the rate of 1 share per £0.023.

The Board receives cash flow projections on a regular basis as well as information on cash balances.

Interest rate risk

The Company is not currently exposed to material interest rate risk on borrowings as the interest rate on the Loan Notes is fixed; however, it is exposed to interest rate risk in respect of surplus funds held on deposit.

Market and price risk

The Company is exposed to equity securities price risk because investments are held by the Company and classified on the statement of financial position as investments at fair value through profit or loss.

Price risk, is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market.

The Company is exposed to market price risk arising from its investments in listed securities. The Company's Investment Advisors provide the Company with investment recommendations that are consistent with the Company's objectives. The Company's market risk exposure is managed through a series of investment restrictions, including limitations on the proportion of individual investment to the company's net assets (or total investments, jurisdiction of investment and liquidity of the investments.

The basis of the valuation is set out in notes 3 and 4. A 5% movement in the listed prices of the investments held would result in a change in fair value of US$20,000. Management considers 5% to represent a significant movement for the purposes of monitoring performance.

Currency risk

The Company does not currently enter into forward exchange contracts or otherwise hedge its potential foreign exchange exposure.

Currency risk (continued)

The Company is exposed to currency risks in respect of its investments (see note 12) which are at risk from movements in the US Dollar and Sterling. A 5% fall in the value of the Company's investments arising from currency movements would impact the carrying value of those investments by approximately $20,000. 5% represents management's assessment of a substantial movement in a given period.

Capital

The Company considers its capital and reserves attributable to equity shareholders to be the Company's capital. In managing its capital, the Company's primary long-term objective is to provide a return for its equity shareholders through capital growth. Going forward the Company may seek additional investment funds and also maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Company to meet its working capital needs. Details of the Company's capital is disclosed in the statement of changes in equity.

There have been no other significant changes to the Company's management objectives, policies and processes in the year nor has there been any change in what the Company considers to be capital.

The Company is not subject to externally imposed capital requirements.

21. Material related party transactions

Remuneration for key management personnel of the Company, including amounts paid to the Company's Directors are disclosed in note 7. Details of the significant transactions between the Company and other related parties during the year ended 31 December 2012 are as follows:

22. Post-balance sheet events

On 9 January 2013, Zoltav Resources Holdings (Jersey) Limited (ZRH) was established in Jersey as the principal investment holding company for the Group.

On 10 January 2013, as a consequence of the appointment of Ogier Corporate Services (Jersey) Ltd as Company Secretary, announced on 12 October 2012, the address of its registered office has changed to 89 Nexus Way, Camana Bay, Grand Cayman, Cayman Islands, KY1-9007.

On 29 January 2013, ZRI Services (UK) Ltd (ZRI) was established in the United Kingdom as a platform to research, identify, analyse and arrange investments for ZRH and ZRI and to provide certain office and administrative support services for London-based staff and consultants for ZRH and ZRI in connection with their present and future investments.

On 5 February 2013, the second and final tranche of £250,000 of the £500,000 unsecured convertible loan to the Company provided by its largest shareholder, ARA Capital Limited, was drawn down and received by the Company.

On 13 February 2013 the deposit of £23,413 on the Company's former office at 4 Old Park Lane was released and payment of additional £3,630 was made in full settlement of lease obligations.

On 19 March 2013, John Grimshaw and Michael Lombardi were appointed as additional independent Non-Executive Directors of the Company.

On 20 March 2013, the Company announced the proposed acquisition of a private company CenGeo for US$26 million, satisfied through the issue of approximately 473,157,416 new Company shares. CenGeo, through its wholly owned subsidiary ZAO Siberian Geologicheskaya Kompanya (SibGeCo), holds the Koltogor Licence located in the Khantiy-Mansisk region of western Siberia. The Koltogor Licence contains the undeveloped Koltogor oil field. SibGeCo has also successfully obtained a 25 year exploration and production licence covering the Koltogor oil field. The Koltogor Licence was issued by the Russian Federal Agency for Subsoil Use (Rosnedra) on 15 February 2013. The Company has commissioned a competent person's report to assess the volume of contingent resources, the results of which will be included in the Circular.

The Company has also entered into a conditional agreement with its largest shareholder, ARA Capital Limited, to provide US$20 million of working capital to fund the future work programme on the Koltogor Licence. Under the terms of the agreement, ARA Capital Limited will subscribe for new ordinary shares in the Company at a price of 3.5 pence per share (ARA Subscription). ARA Capital Limited has also given an undertaking to convert its £500,000 convertible loan prior to publication of the Circular and to vote in favour of the resolutions at the General Meeting. Further details will be set out in the Circular which will be sent to shareholders in due course.

Following completion of the Acquisition and the full ARA Subscription and conversion of its loan it is expected that ARA Capital Limited will own 45.0% of the enlarged issued share capital of the Company and Mr Bukhtoyarov, through his company Bandbear Limited (beneficial majority owner of CenGeo), will own 29.1%.

On 9 April 2013, the Company entered into an unsecured loan agreement in the amount of £250,000 with ARA Capital Limited (Additional Loan Note) to provide additional working capital to the Company prior to the proposed acquisition of CenGeo. The Additional Loan Note bears interest at an annual rate of 50 basis points over LIBOR. The Additional Loan Note can be repaid by the Company at any time in cash or in shares but is expected to be repaid out of the proceeds of the ARA Subscription. The Additional Loan Note was drawn down in full on 12 April 2013.

23. Date of approval of financial statements

The financial statements were approved by the Board of Directors on 21 May 2013.

24. Availability of annual report and financial statements and General Meeting

Copies of the Company's annual report and financial statements will be sent to Registered Shareholders but will not be sent to holders of Depository Interests. The annual report and financial statements will be available for inspection at the Company's registered office and may also be viewed at the Company's website at: www.zoltav.com. A notice of General Meeting will be sent to shareholders in due course.