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Mineral Property

9 Months Ended

Sep. 30, 2021

Mineral Property

2. Mineral Property

2. Mineral Property

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

(in thousands)		September 30,				December 31,
		2021				2020
Exploration
Lik project (Alaska – US)		$	15,611			$	15,611
Golden Crest (South Dakota – US)			518				-
Gold Coin (Arizona – US)			-				17
Total exploration mineral property		$	16,129			$	15,628

All exploration costs on our exploration properties, none of which have proven and probable reserves, including any additional costs incurred for subsequent lease payments or exploration activities related to our projects, are expensed as incurred.

Golden Crest

On May 27, 2021 Solitario entered into a lease agreement (the “Golden Crest Agreement”) whereby Solitario acquired exclusive exploration rights in certain claims (the “GC Claims”) in the Black Hills region of South Dakota. The GC Claims are part of Solitario’s Golden Crest project. Terms of the Golden Crest Agreement include scheduled payments to the underlying owner of $65,000 paid upon signing and an obligation to pay the underlying owner $60,000 at the first anniversary date. Solitario recorded an initial acquisition cost of $125,000 during the nine months ended September 30, 2021 related to these required payments. In addition, to continue the lease, Solitario has agreed to pay, at its option, the underlying owner annual payments totaling $340,000 over a five-year period and annual payments of $150,000 thereafter, which will be expensed as paid. Solitario has agreed to pay the underlying owner an additional success fee of $1.00 per ounce of gold in the event Solitario files a 43-101 qualified resource of up to 1.5 million ounces of gold or a maximum of $1,500,000. Solitario has agreed to escalating work commitments, at Solitario’s option, on the GC Claims totaling $3,000,000 during the first five years of the lease, with the first year totaling $200,000. The term of the Golden Crest Agreement is for twenty years and is automatically extended as long as Solitario is performing any exploration, development or mining activities on the GC Claims. The underlying owner will retain a2.0% Net Smelter Return royalty. Solitario will have the option, but not the obligation, to reduce the Net Smelter Return royalty to 1.0% by paying the owner $1,000,000.

In addition, during the nine months ended September 30, 2021, Solitario staked additional mineral claims, including some claims included in the area of interest of the GC Claims and claims not related to the GC Claims (the “SRC Claims”), as part of the Golden Crest project. Solitario incurred costs for staking, filing fees, legal and other costs totaling $393,000 capitalized as initial acquisition costs related to the SRC Claims and the GC Claims.

Lik

Teck and Solitario have agreed to an exploration program for 2021 on our jointly-funded Lik project, which includes up to three exploration holes to test the continuity and potential expansion of the current Lik deposit. The total planned exploration is approximately $1.24 million of which Solitario will be responsible for 50% or approximately $622,000. Through September 30, 2021 Solitario has incurred approximately $290,000 in exploration expense at Lik during 2021. Solitario has recorded a current asset of $294,000 for cash advanced to Teck for the 2021 Lik exploration program as of September 30, 2021.

Gold Coin

Solitario recorded a mineral property write-down of $17,000 during the three and nine months ended September 30, 2021 related to the Gold Coin project. Solitario did not record any mineral property write-downs during the three and nine months ended September 30, 2020.

Royalty sale

As part of the Royalty Sale to SilverStream in 2019, Solitario received Cdn$250,000 in cash and a convertible note from SilverStream in the principal amount of Cdn$350,000 (the “SilverStream Note”). The SilverStream Note, as amended, was due on June 30, 2020, accrued 8% per annum simple interest, payable on a quarterly basis, and was convertible into common shares of SilverStream, at the discretion of SilverStream, by providing Solitario a notice of conversion. During the nine months ended September 30, 2020 Solitario recorded interest income of $7,000 from the SilverStream Note.

On May 19, 2020, SilverStream completed an initial public offering, including changing its name to Vox Royalty Corp. (“Vox”), and, in accordance with the terms of the SilverStream Note, issued Solitario 137,255 shares of common stock of Vox in full satisfaction of obligations owed under the SilverStream Note. Solitario recorded its initial investment in the Vox common shares at the initial public offering price, or a total of Cdn$412,000 or $294,000. Solitario recorded other income of $44,000 for the gain on the conversion of the SilverStream Note during the nine months ended September 30, 2020.

Exploration expense

The following items comprised exploration expense:

(in thousands)		Three months ended September 30,								Nine months ended September 30,
		2021				2020				2021				2020
Geologic and field expenses		$	413			$	91			$	751			$	204
Administrative			29				21				75				65
Total exploration costs		$	442			$	112			$	826			$	269

Asset Retirement Obligation

In connection with the acquisition of its interest in the Lik project in 2017, Solitario recorded an asset retirement obligation of $125,000 for Solitario’s estimated reclamation cost of the existing disturbance at the Lik project. This disturbance consists of an exploration camp including certain drill sites and access roads at the camp. The estimate was based upon estimated cash costs for reclamation as determined by the permitting bond required by the State of Alaska for which Solitario has purchased a reclamation bond insurance policy in the event Solitario or its 50% partner, Teck, do not complete required reclamation.

Solitario has not applied a discount rate to the recorded asset retirement obligation as the estimated time frame for reclamation is not currently known, as reclamation is not expected to occur until the end of the Lik project life, which would follow future development and operations, the start of which cannot be estimated or assured at this time. Additionally, no depreciation will be recorded on the related asset for the asset retirement obligation until the Lik project goes into operation, which cannot be assured.