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Long Term Debt

12 Months Ended

Dec. 31, 2011

4. Long-term debt

In connection with the formation of MH-LLC, the Mt. Hamilton properties contributed by DHI-US to MH-LLC were subject to a security interest granted to Augusta related to Ely’s acquisition of the Mt. Hamilton properties. Pursuant to the MH Agreement, as part of its earn-in, Solitario agreed to make payments to provide Ely with the funds necessary for Ely to make the loan payments due to Augusta. As of December 31, 2011, these payments total $3,250,000. Solitario will pay DHI-US $750,000 in cash in June 2012, and will make private placement investments totaling $2,500,000 in Ely common stock, all to provide Ely with the funds necessary for Ely to make the loan payments due to Augusta. The payments due to Augusta are non-interest bearing. Accordingly, upon formation and the contribution of the mineral properties by DHI-US to MH-LLC, MH-LLC recorded discounted fair value of the payments due to Augusta, discounted at 7.5%, which was Solitario’s estimated cost of similar credit as of the formation of MH-LLC. The following is the schedule of debt payments due to Augusta as of December 31, 2011 and 2010:

Payment date	December 31, 2011	December 31, 2010
June 1, 2011	$ -	$ 500,000
June 1, 2012	750,000	750,000
June 1, 2013	750,000	750,000
June 1, 2014	750,000	750,000
June 1,2015	1,000,000	1,000,000
Unamortized discount	(448,000)	(665,000)
Total	2,802,000	3,085,000
Current portion	727,000	481,000
Long-term debt	$2,075,000	$2,604,000

During 2011 Solitario recorded $217,000 for accretion of interest expense related to the Augusta note and paid $500,000 on the long-term note. During 2010 Solitario recorded $19,000 for accretion of interest expense related to the Augusta note which increased the outstanding long-term debt balance to $3,085,000 at December 31, 2010 from the balance of $3,066,000 upon formation of MH-LLC.