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Derivative Instruments
 6 Months Ended
Jun. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments

6.        Derivative Instruments

 

RMB Warrants

 

The RMB Warrants entitle the holder to purchase a total of 1,624,748 shares of Solitario common stock pursuant to the terms and conditions of the RMB Warrants. As amended, the RMB Warrants expire on August 21, 2016, and have an exercise price of $1.5387 per share, subject to customary anti-dilution adjustments. Solitario recorded a warrant discount at the time it entered into the Facility Agreement, which it amortized on a straight-line basis. See Note 5, short-term debt, above.

 

Solitario has recorded a zero liability for the fair value of the RMB Warrants as of June 30, 2016 as Solitario does not expect the exercise of the RMB Warrants prior to their expiration on August 25, 2016. Solitario recorded a $4,000 liability for the RMB Warrants as of December 31, 2015, 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.

 

Covered Call Options

 

From time to time Solitario has sold covered call options against its holdings of Kinross Gold Corporation (“Kinross”). The business purpose of selling covered calls is to provide additional liquidity 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 and records gains or loss on the covered call in the period of the change. As of June 30, 2016 Solitario had written two covered calls, one covering 50,000 shares, expiring January 20, 2017, with an exercise price of $4.00 per share and another covering 50,000 shares, expiring January 20, 2017 with an exercise price of $4.50 per share. Solitario has recorded a liability of $128,000 for the fair value of its Kinross covered call as of June 30, 2016, based on quoted market prices.

 

Solitario recorded the following gain loss on derivative instruments :

(in thousands)

Three months ended

June 30,

Six months ended

June 30,

  2016 2015 2016 2015
  (Loss) gain on Kinross calls $ (82) $  1   $ (83) $ 83 
  Gain on Vendetta Warrants 215  -   215  -  
Total $133  $  1  $132  $ 83