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Derivative Instruments
 12 Months Ended
Dec. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments

8. Derivative Instruments:

 

RMB warrants

 

Pursuant to the Facility Agreement, the Company issued 1,624,748 RMB Warrants to RMBAH 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 at an exercise price of $1.5387 for a term of 36 months, subject to standard anti-dilution adjustments. Solitario recorded a discount to the RMB Loan for the fair value of the RMB Warrants. Solitario is amortizing this discount on a straight-line basis to interest cost over the three-year term of the RMB Loan and as of December 31, 2014 the remaining unamortized warrant discount was $139,000.

 

Solitario has recorded a liability for the fair value of the RMB Warrants based upon a Black-Scholes model and 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. The following tables summarize the RMB Warrants:

 

    Black Scholes model
 

Warrant

Liability

(in thousands)

Life

(months)

Stock price

Per share

Volatility

(%)

Risk-

Free interest rate

  Ending balance December 31, 2012 $1,138  32 1.68 62 0.35
   Loss (gain) on warrant liability (998)        
  Ending balance December 31, 2013 $  140  20 0.85 55 0.38
   Loss (gain) on warrant liability (85)        
  Ending balance December 31, 2014 $    55  8 0.92 57 0.19

 

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. Solitario has not designated its covered calls as hedging instruments as described in ASC 815, “Derivatives and Hedging,” and any changes in the fair value of its covered calls are recognized in the statement of operations in the period of the change. During 2014 and 2013, Solitario recorded the following liabilities and gain or loss on derivative instruments related to Kinross covered call options:

 

  (in thousands)

KGC

February

2013

$11 call

KGC

February

2014

$7 call

KGC

February

2014

$8 call

KGC

May

2014

$5 call

KGC

May

2014

$6 call

 Shares of Kinross 100  100  50  30  100 
  Ending liability balance December 31,2012 $    3  $   -    $  -    $   -    $   -   
   Sale of call -    55  35  -    -   
   (Gain) on derivative instrument (3) (53) (34) -    -   
  Ending liability balance December 31,2013 $   -    $   2  $   1  $   -    $   -   
   Sale of call -        16  20 
   (Gain) on derivative instrument -    (2) (1) (16) (20)
  Ending liability balance December 31,2014 $   -    $   -    $   -    $   -    $   -   

 

The following table provides the location and amount of the fair values of Solitario's derivative instruments presented in the consolidated balance sheet as of December 31, 2014 and 2013:

 

  Derivatives
(in thousands) Balance Sheet Location December 31, 2014 December 31, 2013
Derivatives not designated as hedging instruments under ASC 815      
 RMB warrants Long-term liabilities $55  $140 
 Kinross calls Other current liabilities $  -   $    3