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Ely Gold Investment and the Mt. Hamilton Joint Venture | 12 Months Ended
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Dec. 31, 2012
Notes to Financial Statements |
Ely Gold Investment and the Mt. Hamilton Joint Venture | 10. Ely Gold investment and the Mt. Hamilton joint venture: On August 26, 2010, Solitario signed a letter of intent (the “LOI”) with Ely to make certain equity investments into Ely and to joint venture Ely’s Mt. Hamilton gold project through the formation of MH-LLC. The formation of MH-LLC and certain property investments are described above in Note 2 “Mineral property.” The terms of the joint venture are set forth in the MH Agreement (“MH-LLC”) between us and DHI-US . Initial investment in Ely During 2010, in connection with the acquisition of Mt. Hamilton and the formation of MH-LLC, Solitario paid $500,000 in cash for a series of equity investments in Ely. Solitario acquired 3,333,333 shares of Ely (the “Ely Shares”) and warrants to purchase 1,666,666 shares of Ely stock for Cdn$0.25 per share, with warrants for 833,333 shares that expired on August 30, 2012 and warrants for 833,333 that expired on October 19, 2012. Solitario allocated its investment in Ely based upon the fair values of the assets purchased using quoted market prices for the Ely Shares and a Black-Scholes option pricing model for the Ely warrants. As of December 31, 2012, and 2011 the Ely Shares are recorded at their fair value based upon quoted prices of $532,000 and $588,000, respectively, with an unrealized gain included in other comprehensive income of $174,000 and $231,000, respectively, net of deferred taxes of $65,000 and $86,000, respectively. Additional tranches of Ely common stock for payment of MH-LLC long-term debt The LOI, as amended, provides that Solitario subscribe for three additional tranches of shares of Ely: (i) $750,000 in shares of Ely common stock on May 1, 2013 at a price equal to the greater of (a) the 20-day weighted moving average price on the TSXV (the “WMAP”) immediately preceding May 1, 2013 and (b) the price of Ely’s shares on the TSXV on the day before May 1, 2013 (the “Third Tranche”), the entire amount of which Ely is required to utilize to make the $750,000 payment due to Augusta for the long-term debt in Note 4 above; (ii) $750,000 in shares of Ely common stock on or before May 1, 2014 at a price equal to the greater of (a) the WMAP immediately preceding the date that Solitario subscribes for such shares and (b) the price of Ely’s shares on the TSXV on the trading day immediately preceding the date that Solitario subscribes for such shares (the “Fourth Tranche”), the entire amount of which Ely is required to utilize to make the $750,000 payment due to Augusta for the long-term debt in Note 4 above; and (iii) $1,000,000 in shares of Ely common stock on or before May 1, 2015 at a price equal to the greater of (a) the WMAP immediately preceding the date that Solitario subscribes for such shares and (b) the price of Ely’s shares on the TSXV on the trading day immediately preceding the date that Solitario subscribes for such shares (the “Fifth Tranche”), the entire amount of which Ely is required to utilize to make the $1,000,000 payment due to Augusta for the long-term debt in Note 4 above. Although the MH Agreement provides that Solitario would have no obligation to subscribe for any of the shares if Solitario chooses to cease earning an additional interest in MH-LLC, discussed below, prior to the subscription for the shares, as a result of the completion of the Feasibility Study, Solitario intends to develop the Mt. Hamilton project and would be subject to dilution to a 49% interest in MH-LLC if it does not complete all of the payments to DHI-US and the subscription of Ely required in the LOI.

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