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Business and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2023
Business and Summary of Significant Accounting Policies |
Business and Summary of Significant Accounting Policies | 1. Business and Summary of Significant Accounting Policies Business and company formation Solitario Resources Corp. (“Solitario,” or the “Company”) is an exploration stage company as defined by rules issued by the United States Securities and Exchange Commission (“SEC”). Solitario was incorporated in the state of Colorado on November 15, 1984 as a wholly-owned subsidiary of Crown Resources Corporation. In July 1994, Solitario became a publicly traded company on the Toronto Stock Exchange (the “TSX”) through its initial public offering. Solitario has been actively involved in mineral exploration since 1993. In June 2023, Solitario’s shareholders approved an amendment to the Company’s Articles of Incorporation to change the Company’s name from Solitario Zinc Corp. to Solitario Resources Corp., and that name change was effected in July 2023. Solitario’s primary business is to acquire exploration mineral properties or royalties and/or discover economic deposits on its mineral properties and advance these deposits, either on its own or through joint ventures, up to the development stage. At or prior to development, Solitario would likely attempt to sell its mineral properties, pursue their development either independently or through a joint venture with a partner that has expertise in mining operations, or create a royalty with a third party that would continue to advance the property. Solitario has never developed a property. Solitario is primarily focused on the acquisition and exploration of precious metal, zinc and other base metal exploration mineral properties. In addition to focusing on its mineral exploration properties and the evaluation of mineral properties for acquisition, Solitario also evaluates potential strategic transactions for the acquisition of new precious and base metal properties and assets with exploration potential or business combinations that Solitario determines to be favorable to Solitario. Solitario has recorded revenue in the past from the sale of mineral properties, including the sale of certain mineral royalties. Revenues and / or proceeds from the sale or joint venture of properties or assets, although potentially significant when they occur, have not been a consistent annual source of cash and would only occur in the future, if at all, on an infrequent basis. Solitario currently considers its carried interest in the Florida Canyon zinc project in Peru (the “Florida Canyon Project"), its interest in the Lik zinc project in Alaska (the “Lik Project”), and its Golden Crest project in South Dakota (the “Golden Crest Project”) to be its core mineral property assets. Nexa Resources, Ltd. (“Nexa”), Solitario’s joint venture partner, is continuing the exploration and furtherance of the Florida Canyon Project and Solitario is monitoring progress at Florida Canyon. Solitario is working with its 50% joint venture partner in the Lik Project, Teck American Incorporated, a wholly-owned subsidiary of Teck Resources Limited (both companies are referred to as “Teck”), to further the exploration and evaluate potential development plans for the Lik Project. Solitario is conducting mineral exploration on the Golden Crest Project on its own. As of December 31, 2023, Solitario has balances of cash and short-term investments that Solitario anticipates using, in part, to further the development of the Florida Canyon project, the Lik project and the Golden Crest project and to potentially acquire additional mineral property assets. The fluctuations in precious metal and other commodity prices contribute to a challenging environment for mineral exploration and development, which has created opportunities as well as challenges for the potential acquisition of early-stage and advanced mineral exploration projects or other related assets at potentially attractive terms. Financial reporting The consolidated financial statements include the accounts of Solitario and its wholly owned subsidiaries, the most significant of which are Zazu Metals Corporation, Zazu Metals (AK) Corp., and Minera Solitario Peru, S.A. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles") and are expressed in US dollars. Revenue recognition Solitario’s policy is to recognize revenue from the sale of its exploration mineral properties (those without reserves) on a property-by-property basis, computed as the cash received and / or collectable receivables less any capitalized cost. Payments received for the sale of exploration property interests that are less than the properties cost are recorded as a reduction of the related property's capitalized cost. In addition, Solitario’s policy is to recognize revenue on any receipts of joint venture property payments in excess of its capitalized costs on a property that Solitario may lease to another mining company. Solitario has not recorded revenue from the sale of exploration mineral properties or joint venture property payments during 2023 or 2022. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the more significant estimates included in the preparation of Solitario's financial statements pertain to: (i) the recoverability of its mineral properties related to its mineral exploration properties and their future exploration potential; (ii) the fair value of stock option grants to directors, officers, employees and consultants; and (iii) the ability of Solitario to realize its deferred tax assets. Cash and cash equivalents Cash equivalents generally include investments securities with original maturities of three months or less when purchased. Cash equivalents at December 31, 2023 include approximately $140,000 held in brokerage accounts and foreign banks, which are not covered under the Federal Deposit Insurance Corporation (“FDIC”) rules for the United States. Money Market Funds Solitario invests in money market funds that seek to maintain a stable net asset value. These funds invest in high-quality, short-term, diversified money market instruments, short-term treasury bills, federal agency securities, certificates of deposits, and commercial paper. Solitario includes its money market funds in short-term investments. Solitario believes the redemption value of these funds is likely to be the fair value, which is represented by the net asset value. Redemption is permitted daily without written notice. Short-term investments Solitario’s investments in short-term securities are classified as held for sale securities and recorded at their quoted fair market values. Interest income and unrealized gains or losses are recorded in the statement of operations in the period when they occur. At December 31, 2023, Solitario has United States Treasury securities (“USTS”) with maturities of less than two months, recorded at their fair value of $698,000 compared to USTS recorded at their fair value of $3,951,000 at December 31, 2022. Solitario has included $7,738,000 in a money market fund held in a brokerage account in short-term investments. The short-term investments are highly liquid and may be sold in their entirety at any time at their quoted market price and are classified as a current asset. During the year ended December 31, 2023 the unrealized gain on USTS (increase) in the fair value of its short-term investments, due primarily to changes in interest rates on held securities, was $56,000. During the year ended December 31, 2022 the unrealized loss (decrease) in the fair value of its short-term investments, due primarily to changes in interest rates on held securities, was $108,000. Mineral properties Solitario expenses all exploration costs incurred on its mineral properties prior to the establishment of proven and probable reserves through the completion of a feasibility study. Initial acquisition costs of its mineral properties are capitalized. Solitario regularly performs evaluations of its mineral properties to assess the recoverability and/or the residual value of its investments in these assets. All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable, utilizing established guidelines based upon undiscounted future net cash flows from the asset or upon the determination that certain exploration properties do not have sufficient potential for economic mineralization. Derivative instruments Solitario accounts for its derivative instruments in accordance with ASC 815, "Derivatives and Hedging” (“ASC 815”). Solitario has entered into covered calls from time to time on its investment in Kinross Gold Corporation (“Kinross”) marketable equity securities. Solitario has not designated its covered calls as hedging instruments and any changes in the fair value of the covered calls are recognized in the statements of operations in the period of the change as gain or loss on derivative instruments. Fair value Financial Accounting Standards Board ASC 820, “Fair Value Measurements” (“ASC 820”) establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: Level 1: Quoted prices in active markets for identical assets or liabilities; Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Solitario's short-term investments in USTS, money market investments, its marketable equity securities and any covered call options against those marketable equity securities are carried at their estimated fair value based on quoted market prices. See Note 8, “Fair Value of Financial Instruments,” below. Marketable equity securities Solitario's investments in marketable equity securities are carried at fair value, which is based upon quoted prices of the securities owned. Solitario records investments in marketable equity securities for investments in publicly traded marketable equity securities for which it does not exercise significant control and where Solitario has no representation on the board of directors of those companies and exercises no control over the management of those companies. The cost and realized gain or loss on marketable equity securities sold is determined by the specific identification method. Changes in fair value on Solitario’s holdings of marketable equity securities are recorded as unrealized gain or loss in the consolidated statement of operations. Mineral property joint ventures Solitario accounts for investments in companies and joint ventures in which we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and representation on governing bodies. Under the equity method of accounting, our share of the net earnings or losses of the investee are included in net income (loss) in the consolidated statements of operations. Solitario’s mineral property joint ventures represent cost sharing of project costs. Shared costs are expensed as incurred. Solitario does not apply equity-method accounting nor consolidate the operations of Lik, Florida Canyon or Bongara joint ventures as it does not exercise significant control over these projects. Foreign exchange The United States dollar is the functional currency for Solitario and all of Solitario's foreign subsidiaries. Foreign currency gains and losses are included in the results of operations in the period in which they occur. Income taxes Solitario accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, income tax expense or benefit are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to certain income and expenses recognized in different periods for financial and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses, carryovers and tax credits that are available to offset future taxable income and income taxes, respectively. A valuation allowance is provided if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accounting for uncertainty in income taxes ASC 740 clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. ASC 740 provides that a company's tax position will be considered settled if the taxing authority has completed its examination, the company does not plan to appeal, and it is remote that the taxing authority would reexamine the tax position in the future. These provisions of ASC 740 had no effect on Solitario's financial position or results of operations. See Note 6, “Income Taxes,” below. Earnings per share The calculation of basic and diluted earnings (loss) per share is based on the weighted average number of shares of common stock outstanding during the years ended December 31, 2023 and 2022. Potentially dilutive shares, consisting of outstanding common stock options of 3,828,500 and 5,390,000, respectively, exercisable for Solitario common shares were excluded from the calculation of diluted loss per share for the year ended December 31, 2023 and 2022 because the effects were anti-dilutive. Employee stock compensation and incentive plans Solitario classifies all of its stock options as equity options in accordance with the provisions of ASC 718, “Compensation – Stock Compensation.” Solitario calculates grant date fair value of options based upon a Black-Scholes model utilizing the vesting term of the option, the grant date historical volatility and the risk-free interest rate on the date of grant. The grant date fair value is amortized on a straight-line basis over the vesting term of the option, and the stock-based compensation is charged to the statement of operations and credited to additional-paid-in-capital. See Note 10, “Employee Stock Compensation Plans,” below. Reclamation and asset retirement obligations Reclamation obligations associated with Solitario’s exploration activities are recognized when an obligation is incurred, can be reasonably estimated and not concurrently remediated. Expected reclamation costs are periodically reviewed and adjusted to reflect changes related to on-going exploration activities, inflation and on-going activities that reduce potential future reclamation liabilities. Solitario does not apply a discount rate to its asset retirement obligation as the estimated time frame for reclamation on its exploration projects is not currently known, as reclamation is not expected to occur until the end of 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 project goes into operation, which cannot be assured. Recent accounting pronouncements In August 2023, the FASB issued ASU 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which clarifies the business combination accounting for joint venture formations. The amendments in the ASU seek to reduce diversity in practice that has resulted from a lack of authoritative guidance regarding the accounting for the formation of joint ventures in separate financial statements. The amendments also seek to clarify the initial measurement of joint venture net assets, including businesses contributed to a joint venture. The guidance is applicable to all entities involved in the formation of a joint venture. The amendments are effective for all joint venture formations with a formation date on or after January 1, 2025. Early adoption and retrospective application of the amendments are permitted. Solitario does not anticipate early adoption. Solitario is evaluating the new guidance and has not determined the impact of ASU No. 2023-05 on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. Solitario does not anticipate early adoption. Solitario does not expect the adoption of ASU No. 2023-09 to have a material impact on its consolidated financial position or results of operations. Risks and Uncertainties Solitario is subject to various risks and uncertainties that are specific to the nature of its business and the exploration of its mineral properties. Solitario also faces various macro risks and uncertainties, such as risks related to health epidemics, pandemics, and other outbreaks or resurgences of communicable diseases, the occurrence of natural disasters, environmental impacts including compliance with environmental laws and permitting requirements, rising geopolitical tension and instability, acts of war or terrorism, global economic uncertainty, inflationary pressures, increased interest rates, and volatility and disruption in national and international financial markets. These risks and uncertainties could significantly disrupt Solitario’s operations and may materially and adversely affect its business and financial condition. Solitario will continue taking proactive steps to monitor and address the impacts of these risks and uncertainties on its operations, financial condition, and liquidity. Such steps may include, for example, modifying the scope of exploration projects to the extent necessary to respond to public-health emergencies, a step Solitario and its joint venture partners took to address the impacts of the COVID-19 pandemic; reducing costs and increasing operational efficiency in response to inflationary stress and economic downturn; and performing ongoing evaluations of the potential impacts of market volatility, general economic uncertainty, and rising geopolitical tension on Solitario’s ability to access future traditional funding sources on the same or reasonably similar terms as in past periods. While Solitario will continue to monitor and address the effects of these risks and uncertainties, the extent to which they ultimately impact Solitario’s business, including its exploration and other activities and the market for its securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time.

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