XML 96 R12.htm IDEA: XBRL DOCUMENT v2.4.0.8
Derivative Instruments
 6 Months Ended
Jun. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments

6.        Derivative instruments

 

RMB Warrants

 

          In August 2012, pursuant to the Facility Agreement, the Company issued the RMB Warrants to RMBAH as partial consideration for financing services provided in connection with the Facility Agreement. Each RMB Warrant entitles the holder to purchase one share of Solitario common stock pursuant to the terms and conditions of the RMB Warrants (a “Warrant Share”). The RMB Warrants expire 36 months from their date of issuance and have an exercise price of $1.5387 per Warrant Share, subject to customary anti-dilution adjustments. Solitario has recorded a liability as of June 30, 2013 and December 31, 2012 of $282,000 and $1,138,000, respectively, for the fair value of the RMB Warrants based upon a Black-Scholes model. Solitario adjusts the fair value of the warrants at each balance sheet date, with changes in value recorded in other income (loss) in the statement of operations. Solitario recorded a gain on the RMB Warrants of $758,000 and $857,000, respectively, during the three months and six months ended June 30, 2013 based upon a Black-Scholes model as of June 30, 2013 using a 26 month-life, a volatility of 62% a stock price of $0.90 per share and a risk free interest rate of 0.36%.

 

Ely Warrants

 

          In connection with the equity investment in Ely during 2010, Solitario acquired warrants to purchase 1,666,666 shares of Ely common stock at Cdn$0.25 per share for a period of two years. The warrants expired unexercised during 2012. Solitario recorded an unrealized loss on derivative instrument of $117,000 and $51,000, respectively for the three and six months ended June 30, 2012. Solitario also recorded a loss on International Lithium Corp. warrants of $3,000 during the three and six months ended June 30, 2012.

 

Covered Call Options

 

          From time to time Solitario has sold covered call options against its holdings of Kinross. The business purpose of selling covered calls is to provide additional income on a limited portion of shares of Kinross that Solitario may sell in the near term, which is generally defined as less than one year. At December 31, 2012 Solitario had sold options covering 50,000 shares of Kinross, recorded as a $3,000 current liability, which expired unexercised in February 2013. Solitario recorded a gain of $3,000 on these covered call options during the six months ended June 30, 2013. As of June 30, 2013 Solitario has no outstanding covered call options. Solitario has not designated its covered calls as hedging instruments as described in ASC 815, “Derivatives and Hedging,” and any changes in the fair value of its covered calls are recognized in the statement of operations in the period of the change.