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Mineral Properties
 12 Months Ended
Dec. 31, 2014
Property, Plant and Equipment [Abstract]  
Mineral Properties

2. Mineral Properties:

 

The following table details Solitario’s investment in Mineral Property:

(in thousands) December 31,
  2014 2013
Development (United States)    
   Mt. Hamilton $14,641  $12,059 
Exploration    
   La Promesa (Peru) 5  5 
   Norcan (Mexico) 6  6 
   Aconchi (Mexico) 5  5 
   Canta Colorado (Mexico) 3  3 
   Pachuca (Mexico) -   20 
     Total exploration   19    39 
     Total mineral property $14,660  $12,098

 

Mt. Hamilton

 

MH-LLC joint venture of the Mt. Hamilton project

In December 2010 Solitario signed the MH Agreement with DHI and formed MH-LLC, the owner of the Mt. Hamilton project. Pursuant to the MH Agreement, the fair value of the DHI contribution was valued at $3,000,000 for its 90% interest and MH-LLC assumed $3,066,000 for the fair value of the Augusta debt, discussed below in Note 7, “Long-term Debt.”

 

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. In October 2014, Solitario completed an updated feasibility study on the Mt. Hamilton project (the “Updated Feasibility Study”).

 

As of December 31, 2014, pursuant to the MH Agreement as amended, Solitario had no further cash or share payments due to DHI. Solitario has annual advance royalty payments due to the underlying leaseholder of $300,000 per year. In addition Solitario has the option of making $5,000,000 in royalty reduction payments whereby Solitario may reduce the current royalty due the underlying leaseholder by paying $3,500,000 at any time prior to commercial production at Mt. Hamilton, to reduce the current royalty from 6.0% to 2.75% and, if that payment is made by Solitario, an additional option to make a further royalty reduction payment of $1,500,000 at any time within one year of commercial production at Mt. Hamilton to reduce the then royalty at Mt. Hamilton from 2.75% to 1.0%. However if Solitario fails to make these payments to the underlying leaseholder, per the MH Agreement, Solitario’s interest in MH-LLC will be reduced from 80% to 49% with a corresponding increase in the DHI’s interest in MH-LLC.

 

The MH Agreement provides that all costs for development at Mt. Hamilton after completion of the Feasibility Study will be shared by Solitario and DHI pro-rata. Upon completion of the Feasibility Study, DHI has the option of having Solitario contribute DHI’s share of costs through commercial completion as a loan, with such loan, plus interest at 8%, being repaid to Solitario from 80% of DHI’s share of distributions from MH-LLC. During 2012, Solitario loaned DHI $127,000 for its share of costs subsequent to the completion of the Feasibility Study. However, subsequently, DHI repaid Solitario $131,000 for the remaining balance due on the loan from Solitario, including interest, and has no balance due to Solitario as of December 31, 2014 or 2013.

 

During 2013, MH-LLC distributed $250,000 to its members, Solitario and DHI, in proportion to their interests. Solitario received $200,000 from this distribution which was eliminated in consolidation.

 

Sandstorm royalty sale

In June 2012, MH-LLC completed the sale of a 2.4% net smelter royalty on its Mt. Hamilton project to Sandstorm for $10 million. MH-LLC received an upfront payment of $6 million upon signing the agreement and received $4 million on January 15, 2013. The Sandstorm royalty agreement provides that in the event Sandstorm does not receive $10 million in royalty proceeds by December 31, 2022, MH-LLC will make up any shortfall. As a result of this guarantee, Solitario deferred the gain on sale, until such time as the potential funding obligation under the guarantee is reduced or eliminated. Solitario reduced mineral property $3,000,000 and recorded a deferred gain as a long-term liability on the sale of the Sandstorm royalty of $7,000,000.

 

As part of the Sandstorm agreement, MH-LLC has provided Sandstorm with a right of first refusal on any future royalty or gold stream financing for the Mt. Hamilton project. Pursuant to the Sandstorm agreement, Solitario is jointly and severally liable for all obligations of MH-LLC to Sandstorm.

 

Capitalized costs

Solitario has been capitalizing its development costs incurred at its Mt. Hamilton project subsequent to the completion of the Feasibility Study, in February 2012. The following table details the capitalization during 2014 and 2013:

 

(in thousands)

Year ended

December 31,

  2014 2013
Development expenditures $    1,678  $    1,854 
Capitalized interest   633    726 
Property payments 250  174 
Capitalized depreciation 21  30 
  Total capitalized costs $ 2,582  $ 2,784 

 

Included in the property payments during 2014 and 2013 are the issuance of 35,000 common shares of Solitario with fair values of $38,000 and $41,000 issued to underlying leaseholders which were recorded as an increase to additional paid-in-capital. Solitario also capitalized $300,000 during each of 2014 and 2013 of advance royalty payments to the underlying leaseholder as long-term other assets. See Note 4, “Other Assets,” below.

 

Exploration property

 

Solitario's exploration mineral properties at December 31, 2014 consist of use rights related to exploration stage properties, and the value of such assets is primarily driven by the nature and amount of economic mineral ore believed to be contained, or potentially contained, in such properties. The amounts capitalized as mineral properties include concession and lease or option acquisition costs. Capitalized costs related to a mineral property represent its fair value at the time it was acquired. At December 31, 2014, none of Solitario’s exploration properties have production (are operating) or contain proven or probable reserves. Solitario's exploration mineral properties represent interests in properties that Solitario believes have exploration and development potential. Solitario's mineral use rights generally are enforceable regardless of whether proven and probable reserves have been established.

 

In addition to its capitalized exploration properties, Solitario has an interest in its Bongará and Mercurio exploration concessions, which are currently subject to joint venture agreements where joint venture partners made payments to Solitario. Solitario records joint venture property payment revenue received in excess of capitalized costs and recorded $200,000 of joint venture property revenue on its Bongará project during 2014 and 2013 and recorded $100,000 of joint venture property revenue on its Mercurio project in Brazil during 2013. At December 31, 2014 and 2013, neither of these properties have any remaining capitalized costs.

 

Solitario previously sold its mineral interests in its Yanacocha exploration projects and retained a royalty interest. Solitario has no capitalized costs related to its Yanacocha royalty interest.

 

Pedra Branca

 

Solitario accounts for its investment in PBM, the owner of the Pedra Branca project under the equity method of accounting. During 2014 and 2013 recorded a reduction of $153,000 and $1,012,000, respectively, in its equity method investment for Solitario’s share of the loss of PBM during 2014 and 2013. During 2014, Solitario’s equity investment in PBM was reduced to zero and Solitario is no longer recognizing its share of losses in PBM in the statement of operations. Solitario’s unrecognized losses related to its 49% interest in PBM at December 31, 2014 were $652,000. During the years ended December 31, 2014 and 2013, PBM had no revenues and reported a net operating loss of approximately $1,643,000 and $2,065,000, respectively.

 

Discontinued projects

 

During 2014, Solitario recorded $20,000 of mineral property write-downs related to its Pachuca exploration project in Mexico. During 2013, Solitario recorded $13,000 of mineral property write-downs related to its Cerro Azul and Atico properties in Peru and its Jaripo property in Mexico.

 

Exploration Expense

 

The following items comprised exploration expense:

 

For the year ended

December 31,

(in thousands) 2014 2013
Geologic and field expenses $197  $311 
Administrative 82  486 
  Total exploration expense $279  $797