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Mineral Property

9 Months Ended

Sep. 30, 2013

2. Mineral Property

The following table details Solitario’s investment in Mineral Property:

(in thousands)	September 30,	December 31,
	2013	2012
Development (United States)
Mt. Hamilton	$11,399	$9,275
Exploration
Pachuca (Mexico)	20	20
Norcan (Mexico)	6	6
Aconchi (Mexico)	5	5
Canta Colorado (Peru)	3	3
La Promesa (Peru)	5	5
Cerro Azul (Peru)	-	3
Atico (Peru)	-	5
Jaripo (Mexico)	-	5
Total exploration	39	52
Total mineral property	$11,438	$9,327

Mt. Hamilton

On February 22, 2012, Solitario announced the completion of a feasibility study related to its Mt. Hamilton project (the “Feasibility Study”) prepared by SRK Consulting (US), Inc. of Lakewood, Colorado (“SRK”). As a result of the completion of the Feasibility Study, Solitario earned an 80% interest in MH-LLC, owner of the Mt. Hamilton project, and intends to develop the Mt. Hamilton project, subject to a number of factors including obtaining necessary permits and availability of required capital, none of which is currently in place. Solitario began capitalizing its development costs incurred at its Mt. Hamilton project subsequent to the completion of the Feasibility Study.

(in thousands)	Three months ended September 30,		Nine months ended September 30,
	2013	2012	2013	2012
Development expenditures	$ 601	$ 1,448	$ 1,369	$ 2,211
Capitalized interest	184	-	557	-
Property payments	75	50	175	325
Capitalized depreciation	7	12	23	18
Total capitalized costs	$ 867	$ 1,510	$ 2,124	$ 2,554

On May 23, 2013, Solitario entered into an agreement to modify two of its mineral leases on mining claims included in the Mt. Hamilton project covered by the Feasibility Study, whereby Solitario acquired an additional 32 mining claims under one of the leases and reduced its cash payments to maintain the leases from $160,000 per year to the following payments:

	June 1, 2013	June 1, 2014	June 1, 2015(1)	Remaining years (2)
Solitario common stock shares	35,000	35,000	66,500	-
Target value of Solitario shares (3)(4)	$ 50,000	$ 50,000	$ 95,000	$ -
Cash	50,000	50,000	75,000	190,000
Minimum lease payment value	$100,000	$100,000	$170,000	$190,000
Annual work commitments	-	-	-	$150,000
(1) The leases may be terminated after June 1, 2015. (2) The annual payments accelerate $2,000 per year after June 1, 2016. (3) The target value is determined based upon the 20-day average price on the NYSE-MKT prior to the relevant payment date. (4) To the extent the market value of the shares delivered is below the target value, the difference is paid in cash.

During the nine months ended September 30, 2013, Solitario delivered 35,000 shares under the amended lease terms, with a target value of $41,000 and paid $59,000 in cash. The total amount of the payments in cash and shares were capitalized to mineral property. See Note 9, “Shareholders’ equity, comprehensive loss and noncontrolling interest.”

Exploration expense

Solitario capitalizes initial property acquisition costs on its exploration properties. All exploration costs on our exploration properties, none of which have proven and probable reserves, including any additional costs incurred for subsequent lease payments or exploration activities related to our projects are expensed as incurred. The following items comprised exploration expense:

(in thousands)	Three months ended September 30,		Nine months ended September 30,
	2013	2012	2013	2012
Geologic and field expenses	$ 28	$432	$ 521	$1,003
Administrative	48	81	253	274
Mt. Hamilton exploration and development	-	(6)	-	308
Total exploration costs	$ 76	$ 507	$774	$1,585

Discontinued projects

During the nine months ended September 30, 2013, Solitario recorded $13,000 of mineral property write-downs related to its Cerro Azul property in Peru, and its Atico and Jaripo projects in Mexico. During the three and nine months ended September 30, 2012, Solitario recorded $24,000 of mineral property write-downs related to its Triunfo and Espanola properties.