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Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2012
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

7. Fair value of financial instruments:

 

          For certain of Solitario's financial instruments, including cash and cash equivalents, the Sandstorm royalty sale receivable, payables and short-term debt, the carrying amounts approximate fair value due to their short maturities. Solitario's marketable equity securities, including its investment in Kinross common stock, TNR Gold and Ely equity investments are carried at their estimated fair value primarily based on publicly available quoted market prices.

 

       Solitario applies ASC 820, "Fair Value Measurements." ASC 820 establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

 

Level 1: Quoted prices in active markets for identical assets or liabilities;
Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

          The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. During 2011 Solitario reclassified a portion of its investment in Ely shares from Level 2 to Level 1 upon the expiration of statutory holding requirements. During the years ended December 31, 2012 and 2011, there were no other reclassifications in financial assets or liabilities between Level 1, 2 or 3 categories.

 

          The following is a listing of Solitario’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of December 31, 2012:

 

(in thousands) Level 1   Level 2   Level 3 Total  
Assets        
  Marketable equity securities $7,093  $     -    $    -    $7,093 
Liabilities        
  RMB warrants -    1,138  -    1,138 

 

          The following is a listing of Solitario’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of December 31, 2011:

 

(in thousands) Level 1   Level 2   Level 3 Total  
Assets        
  Marketable equity securities $10,361  $     -    $     -    $10,361
  Other current assets - Ely warrants -    74  -    74  
  Other current assets - ILC warrants -    4  -    4 
         

 

Items measured at fair value on a recurring basis:

 

Marketable equity securities: At December 31, 2012 and 2011, the fair value of Solitario’s investment in Kinross, TNR and Ely marketable equity securities is based upon quoted market prices.

RMB warrants: The RMB warrants issued by Solitario are not traded on any public exchange. Solitario determines the fair value of the RMB warrants using a Black-Scholes pricing model, using inputs, including share price, volatility of Solitario common stock and discount rates that include an assessment of performance risk, that are readily available from public markets therefore they are classified as Level 2 inputs as of December 31, 2011.

Ely and ILC warrants: The Ely and ILC warrants are not traded on any public exchange. Solitario determines the fair value of the Ely and ILC warrants using a Black-Scholes pricing model, using inputs, including share price, volatility of Ely common stock and discount rates that include an assessment of performance risk, that are readily available from public markets therefore they are classified as Level 2 inputs as of December 31, 2011.

 

Items measured at fair value on a nonrecurring basis:

 

RMB long-term debt: In 2012 the long-term debt associated with the RMB Facility Agreement was discounted for the fair value of the RMB Warrants, discussed above. The RMB warrants are not traded on any public exchange. Solitario determined the fair value of the RMB warrants, associated with the discount to the RMB Loan, using a Black-Scholes pricing model, using inputs, including share price, volatility of Solitario common stock and discount rates that include an assessment of performance risk, that are readily available from public markets therefore they were classified as Level 2 inputs. See Note 4, “Long-term debt”

 

          During the year ended December 31, 2012, Solitario did not change any of the valuation techniques used to measure its financial assets and liabilities at fair value.