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Derivative Instruments
 9 Months Ended
Sep. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments

6.        Derivative instruments

 

RMB Warrants

 

In August 2012, pursuant to the Facility Agreement, Solitario 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 September 30, 2014 and December 31, 2013 of $282,000 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 the following gain (loss) in the statement of operations related to the RMB Warrants:

 

Three months ended

September 30,

Nine months ended

September 30,

  2014 2013 2014 2013
Gain (loss) in thousands $ 77  $ 96  $(142) $ 953 
         
Life (in months) 11  23  11  23 
Volatility 62% 57% 62% 57%
Stock price (per share) $1.20  $0.86  $1.20  $0.86 
Risk free interest rate 0.10% 0.30% 0.10% 0.30%

 

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 nine months ended September 30, 2014, Solitario sold covered calls covering 130,000 shares for proceeds of $36,000. At September 30, 2014 these covered calls had expired unexercised and Solitario recorded a gain of $36,000 on these covered calls during the nine months ended September 30, 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 nine months ended September 30, 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.