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Long Term Debt

12 Months Ended

Dec. 31, 2013

5. Long-term debt:

Augusta long-term debt

In connection with the formation of MH-LLC, the Mt. Hamilton properties contributed by DHI to MH-LLC were subject to a security interest granted to Augusta related to Ely’s acquisition of the Mt. Hamilton properties. Pursuant to the MH Agreement, as part of its earn-in, Solitario agreed to make private placement investments totaling $2,500,000 in Ely common stock, all to provide Ely with the funds necessary for Ely to make the loan payments due to Augusta at the time of the formation of MH-LLC. The payments due to Augusta were non-interest bearing. Accordingly, upon formation and the contribution of the mineral properties by DHI to MH-LLC, MH-LLC recorded the discounted fair value of the payments due to Augusta, discounted at 7.5%, which was Solitario’s estimated cost of similar credit as of the formation of MH-LLC.

As discussed above under recent developments, on November 22, 2013, Solitario subscribed for 13,571,354 shares of Ely common stock for $1,300,000 and, pursuant to the Letter Agreement, Ely used the funds from the sale of their shares to fully pay off the Augusta long-term debt. 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.

In April 2013, Ely exercised its right to reduce to $500,000 Solitario’s required subscription of $750,000 for Ely common stock, funds from which Ely was required to pay the June 1, 2013 payment due to Augusta. Ely agreed to pay the remaining $250,000 due to Augusta from its own funds, for a total payment of $750,000 which was done in June 2013. As a result, Solitario received 5,131,150 shares of Ely common stock and recorded the fair value of the Ely stock received as marketable equity securities and an increase in additional paid-in-capital. Ely’s payment of the $250,000 portion of the Augusta debt was recorded as an increase in non-controlling interest in the equity section of Solitario’s balance sheet.

During 2013 and 2012 Solitario recorded $127,000 and $184,000, respectively, for accretion of interest related to the Augusta long-term debt and paid $1,800,000 and $750,000, respectively, in cash on the long-term note. All interest accreted on the Augusta long-term debt during 2013 was capitalized to mineral property. See Note 2, “Mineral properties,” above.

RMB Facility Agreement

On August 10, 2012, Solitario entered into a the Facility Agreement with RMBAH, and RMBR whereby Solitario may borrow up to $5,000,000 from RMBAH (with any amounts outstanding collectively being the “RMB Loan”) at any time during the 24 month period commencing on August 21, 2012, (the “Availability Period”), after which time any undrawn portion of the $5,000,000 commitment will be cancelled and will no longer be available for drawdown. Solitario recorded $588,000 of deferred offering costs related to the Facility Agreement in long-term assets, which are being amortized over the 36 month life of the Facility Agreement on a straight-line basis. See Note 3, “Other Assets,” above. In connection with the Facility Agreement, Solitario recorded a warrant discount related to the 1,624,748 warrants issued to RMBAH at the time Solitario entered into the Facility Agreement (the “RMB Warrants”) and recorded a debt discount of $650,000 for the fair value of the RMB warrants. The debt discount is being amortized to interest cost over 36 months, the term of the Facility Agreement. See Note 7, “Derivative instruments,” below. The RMB Loan amounts bear interest at the 90-day LIBOR rate plus 5%, payable in arrears on the last day of each quarterly interest period. The RMB Loan interest rate was 5.25% at December 31, 2013. The RMB Loan may be repaid at any time without penalty. Any amounts repaid may not be redrawn under the Facility Agreement. The RMB Loan is secured by a lien on Solitario’s 80% interest in MH-LLC as well as a general security interest in Solitario’s remaining assets.

The following table summarizes the RMB Loan:

	RMB	RMB	RMB
(in thousands)	Loan borrowing	Warrant discount	Long-term Debt
Beginning balance December 31, 2011	$ -	$ -	$ -
Initial borrowing, August 21, 2012	1,500	(650)	850
Amortization of discount to interest cost	-	77	77
Ending balance December 31, 2012	$1,500	$(573)	927
Borrowing	2,000	-	2,000
Amortization of discount to interest cost	-	217	217
Ending balance December 31, 2013	$3,500	$(356)	$3,144

Solitario recorded the following interest cost related to the RMB Loan:

(in thousands)	Year ended December 31,
	2013	2012
Interest paid in cash	$ 165	$ 30
Amortization of the RMB Warrants discount	217	77
Amortization of RMB deferred financing costs	196	70
Total interest expense related to the RMB Loan	$578	$177

Solitario capitalized all of its interest incurred during 2013 to mineral property. See Note 2, “Mineral properties,” above.