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Business and Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2013
Accounting Policies [Abstract]  
1. Business and Significant Accounting Policies

1.       Business and Significant Accounting Policies

 

Business

 

           Solitario Exploration & Royalty Corp. (“Solitario”) is a development stage company (but not a company in the “Development Stage”) under Industry Guide 7, as issued by the United States Securities and Exchange Commission, with a focus on developing the Mt. Hamilton project located in Nevada. In addition to its Mt. Hamilton project, Solitario acquires and holds a portfolio of precious and base metal exploration properties for future sale, joint venture or to create a royalty prior to the establishment of proven and probable reserves. Although Solitario intends to develop the Mt. Hamilton project, Solitario has never developed a mineral property. At March 31, 2013, Solitario's mineral properties are located in the United States, Mexico, Brazil and Peru.

 

          The accompanying interim condensed consolidated financial statements of Solitario for the three months ended March 31, 2013 and 2012 are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America. They do not include all disclosures required by generally accepted accounting principles for annual financial statements, but in the opinion of management, include all adjustments, consisting only of normal recurring items, necessary for a fair presentation. Interim results are not necessarily indicative of results, which may be achieved in the future or for the full year ending December 31, 2013.

 

          These financial statements should be read in conjunction with the financial statements and notes thereto which are included in Solitario’s Annual Report on Form 10-K for the year ended December 31, 2012. The accounting policies set forth in those annual financial statements are the same as the accounting policies utilized in the preparation of these financial statements, except as modified for appropriate interim financial statement presentation.
Investment in Kinross

Investment in Kinross

 

          Solitario has a significant investment in Kinross Gold Corporation (“Kinross”) at March 31, 2013, which consists of 670,000 shares of Kinross common stock. Solitario did not sell any of its shares of Kinross during the three months ended March 31, 2013. During the three months ended March 31, 2012 Solitario sold 30,000 shares of Kinross for net proceeds of $353,000 and recorded a gain on sale of $332,000. As of March 31, 2013 and December 31, 2012, Solitario has borrowed $1,500,000 in short-term margin loans against its holdings of Kinross shares. The short-term margin loans are discussed below under, “Short-term debt.” Subsequent to March 31, 2013 Solitario sold 10,000 shares of Kinross for proceeds of $54,000 and as of May 7, 2013 we own 660,000 shares of Kinross common stock which have a value of approximately $3.48 million based upon the market price of $5.38 per Kinross share. Solitario’s investment in Kinross common stock represents a significant concentration of assets, with the inherent risk that entails. Any significant fluctuation in the market value of Kinross common shares could have a material impact on our liquidity and capital resources.
Equity method investments

Equity method investments

 

          Solitario accounts for its investment in Pedra Branca do Mineracao, Ltd. (“PBM”) under the equity method as of July 21, 2010, when Anglo Platinum Limited (“Anglo”) earned a 51% interest in PBM. Solitario elected not to record its investment in PBM at fair value after July 21, 2010 and during the three months ended March 31, 2013 and 2012 recorded a reduction of $313,000 and $109,000, respectively, in its equity method investment for Solitario’s share of the loss of PBM during 2012 and 2011.
Employee stock compensation plans

Employee stock compensation plans

 

          Solitario’s outstanding options on the date of grant have a five year term, and vest 25% on date of grant and 25% on each of the next three anniversary dates. Solitario recognizes stock option compensation expense on the date of grant for 25% of the grant date fair value, and subsequently, based upon a straight line amortization of the unvested grant date fair value of each of its outstanding options. During the three months ended March 31, 2013 and 2012, Solitario recorded $125,000 and $174,000, respectively, of stock option expense for the amortization of grant date fair value with a credit to additional paid-in-capital.

 

          On June 27, 2006 Solitario’s shareholders approved the 2006 Stock Option Incentive Plan (the “2006 Plan”). Under the terms of the 2006 Plan, the Board of Directors may grant up to 2,800,000 options to Directors, officers and employees with exercise prices equal to the market price of Solitario’s common stock at the date of grant.

 

          There were no new options granted during the three months ended March 31, 2013 and 2012. During the three months ended March 31, 2013 options for 112,500 shares were exercised at a price of Cdn$1.55 per share for proceeds of $176,000 and 5,000 options were exercised at a price of Cdn$1.49 per share for proceeds of $7,000. No options were exercised during the three months ended March 31, 2012.
Earnings per share

Earnings per share

 

          The calculation of basic and diluted earnings and loss per share is based on the weighted average number of common shares outstanding during the three months ended March 31, 2013 and 2012. During the three months ended March 31, 2013 and 2012, Solitario excluded 2,480,900 and 2,433,400, respectively, potentially dilutive shares related to outstanding common stock options from the calculation because the effects were anti-dilutive. During the three months ended March 31, 2013, Solitario excluded an additional 1,624,748 shares related to warrants from the calculation because the effects were anti-dilutive.
Marketable equity securities

Marketable equity securities

 

          Solitario's investments in marketable equity securities are classified as available-for-sale and are carried at fair value, which is based upon quoted prices of the securities owned. The cost of marketable equity securities sold is determined by the specific identification method. Changes in market value are recorded in accumulated other comprehensive income within shareholders' equity, unless a decline in market value is considered other than temporary, in which case the decline is recognized as a loss in the consolidated statement of operations.

 

The following tables summarize Solitario’s marketable equity securities and accumulated other comprehensive income related to its marketable equity securities:

(in thousands)     March  31,     2013     December 31,     2012
  Marketable equity securities at fair value $5,683  $7,093 
  Cost   851     851 
  Accumulated other comprehensive income for
    unrealized holding gains		 4,832  6,242  
  Deferred taxes on accumulated other comprehensive
    income for unrealized holding gains		  1,802  2,328 
Accumulated other comprehensive income $3,030  $3,914 

         

The following table represents changes in marketable equity securities.

 

(in thousands) Three months ended
March 31,
  2013 2012
Gross cash proceeds $   -    $    353 
Cost  -      21 
Gross gain on sale included in earnings during the period  - 332 
Deferred taxes on gross gain on sale included in earnings  - (124)
Reclassification adjustment to unrealized gain in other
   comprehensive income for net gains included in earnings		 -    (208)
Gross unrealized holding loss arising during the period
   included in other comprehensive loss		 (1,410) (1,086)
Deferred taxes on unrealized holding loss included in
   other comprehensive loss		  526  405 
Net unrealized holding (loss) gain (884) (681)
Other comprehensive (loss) income from marketable equity securities $(884) $(889)