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Business and Summary of Significant Account Policies | 12 Months Ended
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Dec. 31, 2013
Accounting Policies [Abstract] |
Business and Summary of Significant Accounting Policies | 1. Business and Summary of Significant Accounting Policies: Business and company formation Solitario Exploration & Royalty Corp. (“Solitario”) is a development stage company at December 31, 2013 (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 the development of the Mt. Hamilton gold project located in Nevada. In December 2010 Solitario signed the Limited Liability Company Operating Agreement of Mt. Hamilton LLC (the “MH Agreement”) withy DHI Minerals (U.S.) Ltd., (“DHI”) and formed Mt. Hamilton LLC (“MH-LLC”), the owner of the Mt. Hamilton project. On February 22, 2012, Solitario earned an 80% interest in MH-LLC as a result of the completion of a feasibility study on the Mt. Hamilton project (the “Feasibility Study”) prepared by SRK Consulting (US), Inc. of Lakewood, Colorado (“SRK”). Solitario intends to develop the Mt. Hamilton project. However, Solitario has never developed a mineral property. In addition Solitario has a focus on the acquisition of precious and base metal properties with exploration potential and the development or purchase of royalty interests. Solitario acquires and holds a portfolio of exploration properties for future sale or joint venture or to create a royalty prior to the establishment of proven and probable reserves. Solitario has been actively involved in mineral exploration since 1993. During 2012, Solitario sold a royalty on its Mt. Hamilton Project for $10,000,000 and recorded a deferred gain on that sale of $7,000,000. Additionally, although, Solitario records joint venture property payments as revenue for standby delay rental payments, Solitario's previously significant revenues were in 2000 upon the sale of the Yanacocha property for $6,000,000. Future revenues from the sale of properties, if any, would also occur on an infrequent basis in the future. At December 31, 2013, in addition to the Mt. Hamilton project, Solitario had six mineral exploration properties in Peru and Mexico and its Yanacocha and Mercurio royalty properties in Peru and Brazil, respectively. Solitario is conducting limited exploration activities in these countries. Solitario was incorporated in the state of Colorado on November 15, 1984 as a wholly-owned subsidiary of Crown Resources Corporation ("Crown"). In July 1994, Solitario became a publicly traded company on the Toronto Stock Exchange (the "TSX") through its Initial Public Offering. Recent developments Augusta long-term debt On November 22, 2013 Solitario entered into a letter agreement, (the “Letter Agreement”) between Solitario, Ely and DHI , a wholly-owned subsidiary of Ely Gold & Minerals Inc.. Under the Letter Agreement, Solitario subscribed for $1,300,000 of shares of common stock of Ely at a price of Cdn$0.10 and upon approval by Ely and regulatory approvals we received 13,571,354 shares of Ely common stock. Ely used the$1,300,000 from the subscription to pay Augusta Resource Corporation (“Augusta”) $1,300,000 pursuant to the terms of an agreement between Ely and Augusta Resource Corporation (“Augusta”) dated November 20, 2013. Ely’s receipt of the $1,300,000 and payment to Augusta fully satisfied Solitario’s prior obligations to subscribe for an aggregate of US$1,750,000 of shares of Ely common stock (US$750,000 on or before May 1, 2014 and US$1,000,000 on or before May 1, 2015) and satisfied Solitario’s Augusta debt which was deemed fully paid upon Augusta’s receipt of the $1,300,000 from Ely. Solitario recorded a gain on early retirement of debt of $313,000 during 2013 as a result of the payoff of the Augusta long-term debt. Investment in Mt. Hamilton On November 22, 2013, Solitario and DHI also entered into the second amendment (the “Second Amendment”) to the MH Agreement. Pursuant to the terms of the Second Amendment, the parties agreed to modify Solitario’s payment obligation of US$250,000 and 50,000 shares of Solitario common stock due to DHI on August 21, 2014 previously contemplated under the terms of the MH Agreement to a payment of 327,777 shares of Solitario common stock which was paid on December 20, 2013. Investment in Kinross Solitario has a significant investment in Kinross Gold Corporation (“Kinross”), which consisted of the following at December 31, 2013 and 2012:
(in thousands) | Year ended December 31,
| 2013 | 2012
Shares | 600 | 670
Fair value |  |
Current assets | $1,577 | $3,110
Long term assets | $1,051 | $3,402
The current assets represent Solitario's estimate of the portion of marketable equity securities that will be liquidated within one year. Solitario sold the following shares of Kinross during 2013 and 2012:
(in thousands) | Year ended December 31,
| 2013 | 2012
Shares sold | 70 | 180
Proceeds | $358 | $1,591
Gain on sale | $308 | $1,464
As of December 31, 2013 and 2012, Solitario has borrowed $802,000 and $1,500,000, respectively, in short-term margin loans, which are primarily secured by its investment in Kinross. The short-term margin loan is discussed below under Note 4, “Short-term debt.” At December 31, 2013 Solitario had sold two covered calls covering a total of 200,000 shares of its Kinross common stock, as further described below in Note 7 “Derivative instruments,” both of which expired unexercised in February 2014. As of February 28, 2014, Solitario owns 530,000 shares of Kinross common stock which have a value of approximately $2.8 million based upon the market price of $5.22 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 Solitario’s liquidity and capital resources. Investment in Ely As part of the Letter Agreement, discussed above, we received 13,571,354 shares of Ely common stock. During 2013 we sold 6,303,563 shares of Ely common stock for proceeds of $481,000, recording a loss on sale of marketable equity securities of $166,000. As of December 31, 2013 we own 15,732,274 shares of Ely common stock, representing approximately 19.5% of the outstanding shares of Ely with a fair value of $1,324,000. We have classified our holdings of Ely common stock as marketable equity shares available for sale and gains and losses on our holdings of Ely are recorded in accumulated other comprehensive income in the shareholders’ equity section of our Consolidated Balance Sheet. Financial reporting The consolidated financial statements include the accounts of Solitario and its wholly-owned subsidiaries, controlled non-wholly-owned subsidiaries and its equity investment in Pedra Branca Mineracao, Ltd “(PBM”), which owns the Pedra Branca project in Brazil. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"), and are expressed in US dollars. Revenue recognition Solitario records delay rental payments as revenue in the period received. Solitario recorded $300,000, in joint venture and property payments for both of the years ended December 31, 2013 and 2012. Any payments received for the sale of property interests are recorded as a reduction of the related property's capitalized cost. Proceeds which exceed the capitalized cost of the property without reserves are recognized as revenue. Payments received on the sale of properties with reserves are recognized as revenue to the extent the proceeds exceed the proportionate basis in the assets sold. Gain on the sale of a mineral property revenue stream is deferred to the extent there is a guarantee for the future revenue stream until such time as the potential funding obligation for the guarantee is reduced or released. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the more significant estimates included in the preparation of Solitario's financial statements pertain to: (i) the recoverability of mineral properties and their future exploration potential; (ii) the estimate of the fair value of Solitario's stock option grants to employees; (iii) the ability of Solitario to realize its deferred tax assets; (iv) the current portion of Solitario's investment in Kinross stock and other marketable equity securities; (v) the fair value of Solitario’s liability for warrants Solitario granted RMB Australia Holdings Limited (“RMBAH”) upon entering into the facility agreement, discussed below. In performing its activities, Solitario has incurred certain costs for mineral properties. The recovery of these costs is ultimately dependent upon the sale of mineral property interests or the development of economically recoverable ore reserves and the ability of Solitario to obtain the necessary permits and financing to successfully place the properties into production, and upon future profitable operations, none of which is assured. Cash equivalents Cash equivalents include investments in highly liquid money-market securities with original maturities of three months or less when purchased. As of December 31, 2013 and 2012 Solitario had concentrations of cash and cash equivalents in excess of federally insured amounts and cash in foreign banks, which are not covered under the federal deposit insurance rules for the United States. Mineral properties Solitario began capitalizing all of its expenditures on its Mt. Hamilton project, subsequent to the completion of the Feasibility Study. Solitario expenses all exploration costs incurred on its mineral properties prior to the establishment of proven and probable reserves. Initial acquisition costs of its mineral properties are capitalized. Solitario regularly performs evaluations of its investment in mineral properties to assess the recoverability and/or the residual value of its investments in these assets. All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable, utilizing established guidelines based upon undiscounted future net cash flows from the asset or upon the determination that certain exploration properties do not have sufficient potential for economic mineralization. Derivative instruments Beginning in December 2008, Solitario sold covered calls on a limited basis covering its shares of Kinross common stock. Solitario also owned certain warrants issued by Ely, which expired unexercised during 2012. As explained in more detail in Note 5, “Long-term debt,” Solitario entered into a facility agreement (the “Facility Agreement”) with RMBAH , and RMB Resources, Inc., a Delaware corporation (“RMBR”) whereby Solitario may borrow up to $5,000,000 from RMBAH (with any amounts outstanding collectively being the “RMB Loan”). In connection with the Facility Agreement Solitario issued 1,624,748 warrants, (the “RMB Warrants”) as partial consideration for financing services provided in connection with the Facility Agreement. All of these derivative instruments are further discussed in Note 7, “Derivative instruments” below. Solitario accounts for its derivative instruments in accordance with ASC 815 "Accounting for Derivative Instruments and Hedging Activities" (“ASC 815”). Solitario has not designated its covered calls as hedging instruments and any changes in the fair market value of the covered calls and its warrants are recognized in the statement of operations in the period of the change. Fair value FASB ASC 820, “Fair Value Measurements and Disclosures” (“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. For certain of Solitario's financial instruments, including cash and cash equivalents, short-term margin loans and accounts payable, the carrying amounts approximate fair value due to their short-term maturities. Solitario's marketable equity securities and the Kinross calls are carried at their estimated fair value based on quoted market prices. See Note 8, “Fair value of financial instruments” below. 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. Solitario records investments in marketable equity securities as available-for-sale for investments in publicly traded marketable equity securities for which it does not exercise significant control; including owning less than 20% of the outstanding securities, and where Solitario has no representation on the Board of those companies and exercises no control over the management of those companies. 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 statements of operations. The following tables summarize Solitario’s marketable equity securities and accumulated other comprehensive income related to its marketable equity securities:
(in thousands) | December 31, 2013 | December 31, 2012
Marketable equity securities at fair value | $3,973 | $7,093
Cost | 1,954 | 851
Accumulated other comprehensive income for unrealized holding gains | 2,019 | 6,242
Deferred taxes on accumulated other comprehensive income for unrealized holding gains | (688) | (2,328)
Valuation allowance on deferred taxes on unrealized holding losses included in other comprehensive loss | (871) | -
Accumulated other comprehensive income | $ 460 | $3,914
The following table represents changes in marketable equity securities:
(in thousands) | Year ended December 31,
| 2013 | 2012
Gross cash proceeds | $839 | $1,664
Cost | 697 | 136
Gross gain on sale included in earnings during the period | 142 | 1,528
Deferred taxes on gross gain on sale included in earnings | (58) | (571)
Reclassification adjustment to unrealized gain in other comprehensive income for net gains included in earnings | (84) | (957)
Gross unrealized holding loss arising during the period included in other comprehensive loss. | (4,081) | (1,603)
Deferred taxes on unrealized holdings loss included in other comprehensive loss | 1,582 | 597
Valuation allowance on deferred taxes on unrealized holding losses included in other comprehensive loss | (871) | -
Net unrealized holding gain (loss) | (3,370) | (1,006)
Other comprehensive income (loss) from marketable equity securities | $(3,454) | $(1,963)
Foreign exchange The United States dollar is the functional currency for all of Solitario's foreign subsidiaries. Although Solitario's South American exploration activities have been conducted primarily in Brazil, Peru and Mexico, a portion of the payments under the land, leasehold and exploration agreements of Solitario are denominated in United States dollars. Foreign currency gains and losses are included in the results of operations in the period in which they occur. During 2013 and 2012, Solitario recorded foreign exchange losses of $21,000 and $32,000, respectively. Solitario's cash accounts in foreign subsidiaries not denominated in United States dollars represent the only significant foreign currency denominated assets. Foreign currency denominated cash accounts totaled $64,000 and $36,000, respectively, at December 31, 2013 and 2012. Equity method investments Solitario records its share of income or loss of unconsolidated subsidiaries where it has a significant influence over the unconsolidated subsidiary, under the equity method of accounting, as an increase or decrease in its investment in the unconsolidated subsidiary.Solitario accounts for its investment in Pedra Branca do Mineracao, Ltd. (“PBM”) under the equity method since July 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 2010 and during 2013 and 2012 recorded a reduction of $1,012,000 and $488,000, respectively, in its equity method investment for Solitario’s share of the loss of PBM during 2013 and 2012. During the years ended December 31, 2013 and 2012, PBM had no revenues and reported a net operating loss of approximately $2,065,000 and $996,000, respectively. Income taxes Solitario accounts for income taxes in accordance with ASC 740, “Accounting for Income Taxes.” Under ASC 740, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses and tax credits that are available to offset future taxable income and income taxes, respectively. A valuation allowance is provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accounting for uncertainty in income taxes ASC 740 clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. ASC 740 provides that a company's tax position will be considered settled if the taxing authority has completed its examination, the company does not plan to appeal, and it is remote that the taxing authority would reexamine the tax position in the future. These provisions of ASC 740 had no effect on Solitario's financial position or results of operations. See Note 6, “Income taxes” below. Earnings per share The calculation of basic and diluted loss per share is based on the weighted average number of shares of common stock outstanding during the years ended December 31, 2013 and 2012. Potentially dilutive shares related to outstanding common stock options of 3,819,000 and 2,598,400 for the years ended December 31, 2013 and 2012, respectively, and RMB warrants of 1,624,748 for the years ended December 31, 2013 and 2012 were excluded from the calculation of diluted loss per share because the effects were anti-dilutive. Employee stock compensation and incentive plans Solitario classifies all of its stock options as equity options in accordance with the provisions of ASC 718 “Compensation – Stock Compensation”. See Note 10, “Employee stock compensation plans” below. 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 anniversary date. Solitario recognizes stock option compensation expense based upon the grant date fair value of the awards and as the stock options vest by multiplying the estimated grant date fair value determined using the Black-Scholes model by a vesting percentage, with 25% recognized immediately, and the remaining 75% recognized over three years on a straight line basis. Solitario may also grant Restricted Stock Units and Restricted stock in connection with its 2013 Plan. Segment reporting With the completion of the Feasibility Study on February 22, 2012, Solitario now operates in two segments, (i) mineral exploration and (ii) mining development and operations. Solitario is capitalizing Mt. Hamilton development and operations costs subsequent to February 22, 2012. Solitario’s Mt. Hamilton project is located in Nevada and all of Solitario's remaining operations are located in Peru, Brazil and Mexico as further described in Note 2 to these consolidated financial statements. Included in the consolidated balance sheet at December 31, 2013 and 2012 are total assets of $412,000 and $1,433,000, respectively, related to Solitario's foreign operations located in Brazil, Peru and Mexico. Solitario is not aware of any foreign exchange restrictions on its subsidiaries located in foreign countries. Recent accounting pronouncements There are no recently issued accounting standards for which Solitario expects a material impact on its consolidated financial statements

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