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Mineral Properties

12 Months Ended

Dec. 31, 2021

Mineral Properties

Mineral Properties

2. Mineral Properties:

The following table details Solitario’s capitalized investment in exploration mineral property:

(in thousands)		December 31,
		2021				2020
Exploration
Lik project (Alaska – US)		$	15,611			$	15,611
Golden Crest (South Dakota – US)			695				-
Gold Coin (Arizona – US)			-				17
Total exploration mineral property		$	16,306			$	15,628

Exploration property

Solitario's exploration mineral properties at December 31, 2021 and 2020 consist of use rights related to its exploration 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 or the cost to acquire the property, as appropriate. At December 31, 2021, 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.

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 2021 related to these required payments. In addition, to continue the lease, Solitario has agreed to pay, at its option, the underlying owner escalating annual payments over five years that total $340,000 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 retained a 2.0% 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 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 $570,000 capitalized as initial acquisition costs related to the SRC Claims and the GC Claims.

Lik Property

Solitario holds a 50% operating interest in the Lik zinc-lead sliver property in northwest Alaska, which we acquired as part of the acquisition of Zazu metals corporation (“Zazu”) in July 2017. Solitario recorded its acquisition cost of $15,611,000 as mineral property at the date of acquisition. Teck is Solitario’s 50% partner on the Lik Project and acted as the project manager during 2021 and 2020.

Florida Canyon

In addition to its capitalized exploration properties, Solitario has an interest in its Florida Canyon exploration concessions, which are currently subject to a joint venture agreement where joint venture partners made stand-by joint venture payments to Solitario prior to January 1, 2015. Solitario previously recorded joint venture property payment revenue received in excess of capitalized costs. Per the joint venture agreement, as of December 31, 2021, no further standby joint-venture payments are due to Solitario on the Florida Canyon project. At December 31, 2021 and 2020, Solitario has no remaining capitalized costs related to its Florida Canyon joint venture. Per the joint venture agreement with Nexa covering the Florida Canyon project, Solitario currently holds a 39% interest in the Florida Canyon zinc project. Nexa is required to fund 100% of exploration expenditures at Florida Canyon, until Nexa commits to put the project into production based upon a positive feasibility study, at which time Nexa’s interest will increase from its current 61% interest to a 70% interest.

Royalty sale

On January 22, 2019, Solitario completed a sale of certain royalties to SilverStream SEZC (“SilverStream”), for Cdn$600,000. On closing of the sale, 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 and was convertible into common shares of SilverStream, at the option of SilverStream, by providing Solitario a notice of conversion. 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. In accordance with the terms of the SilverStream Note, the 137,255 Vox shares were issued at a price of Cdn$2.55 per share, which was at a 15% discount to the initial public offering price of Cdn$3.00 per share. 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 2020. Solitario recorded interest income from the SilverStream Note of $7,000 during 2020.

Discontinued projects

During 2021 Solitario recorded $17,000 of mineral property impairment related to its decision to abandon its Gold Coin project in Arizona. During 2020 Solitario recorded $6,000 of mineral property impairment related to its decision to abandon its La Promesa project in Peru.

Exploration Expense

The following items comprised exploration expense:

		For the year ended December 31,
(in thousands)		2021				2020
Geologic and field expenses		$	1,092			$	326
Administrative			106				87
Total exploration expense		$	1,198			$	413

Asset Retirement Obligation

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 retained 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.

As of December 31, 2021, Solitario has no reclamation liability at its Florida Canyon project as Nexa is responsible for the costs at Florida Canyon, including reclamation, if any. In addition, the activities to date at Solitario’s Golden Crest project of staking claims and mapping, soil sampling, and assaying have not created any material environmental or other disturbances. Historically Solitario’s exploration activities have not resulted in any long-term environmental disturbances or liabilities and where there have been required restoration of disturbances, these have been completed contemporaneously with the completion of our mineral exploration activities.