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Derivative Instruments
 3 Months Ended
Mar. 31, 2014
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 1,624,748 warrants to RMBAH (the “RMB Warrants”) 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. The RMB Warrants expire 36 months from their date of issuance and have an exercise price of $1.5387 per share, subject to customary anti-dilution adjustments. Solitario recorded a warrant discount, which it is amortizing on a straight-line basis. See Note 5, long-term debt, above.

 

Solitario has recorded a liability as of March 31, 2014 and December 31, 2013 of $400,000 and $140,000, 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 loss on the RMB Warrants of $260,000 during the three months ended March 31, 2014 based upon a Black-Scholes model as of March 31, 2014 using a 17 month-life, a volatility of 56% a stock price of $1.27 per share and a risk free interest rate of 0.38%. Solitario recorded a gain on the RMB Warrants of $99,000 during the three months ended March 31, 2013 based upon a Black-Scholes model as of March 31, 2013 using a 29 month-life, a volatility of 65% a stock price of $1.60 per share and a risk free interest rate of 0.29%.

 

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. During the three months ended March 31, 2014, Solitario sold covered calls covering 130,000 shares for proceeds of $36,000. At March 31, 2014 these covered calls had a fair value of $7,000 and Solitario recorded a gain of $29,000 on these covered calls during the three months ended March 31, 2014. At December 31, 2013 Solitario had sold options covering 200,000 shares of Kinross, recorded as a $3,000 current liability, which expired unexercised in February 2014. Solitario recorded a gain of $3,000 on these covered call options during the three months ended March 31, 2014. Solitario has not designated its covered calls as hedging instruments and records gains or loss on the covered call in the period of the change.