(Mark
Colorado | 80033 | |
(State or other jurisdiction of incorporation or organization) | ||
Title of each class | Trading symbol | Name of exchange on which registered |
Common Stock, $0.01 par value | XPL | NYSE American |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Large accelerated filer [ ] | Accelerated filer [ ] | Non-accelerated filer [ ] | Smaller reporting company [X] | Emerging growth company [ ] |
$16,840,000.
2020.
Page | |||||
PART 1 | |||||
Item 1 | Business | 3 | |||
Item 1A | Risk Factors | 6 | |||
Item 1B | Unresolved Staff Comments | 10 | |||
Item 2 | Properties | 10 | |||
Item 3 | Legal Proceedings | 24 | |||
Item 4 | Mine Safety Disclosures | 24 | |||
PART II | |||||
Item 5 | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer | ||||
Purchases of Equity Securities | 25 | ||||
Item 6 �� | Selected Financial Data | 27 | |||
Item 7 | Management's Discussion and Analysis of Financial Condition and | ||||
Results of Operations | 28 | ||||
Item 7A | Quantitative and Qualitative Disclosures about Market Risk | 34 | |||
Item 8 | Financial Statements and Supplementary Data | 35 | |||
Item 9 | Changes in and Disagreements with Accountants on Accounting and | ||||
Financial Disclosure | |||||
Item 9A | Controls and Procedures | 54 | |||
Item 9B | Other Information | 54 | |||
PART III | |||||
Item 10 | Directors, Executive Officers and Corporate Governance | 55 | |||
Item 11 | Executive Compensation | 55 | |||
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 55 | |||
Item 13 | Certain Relationships and Related Transactions, and Director Independence | 55 | |||
Item 14 | Principal Accounting Fees and Services | 55 | |||
PART IV | |||||
Item 15 | Exhibits, Financial Statement Schedules | 56 | |||
Item 16 | Form 10-K Summary | 56 | |||
SIGNATURES |
57 |
distributions from the project. during 2019 and 2018. growth potential. 61,000 shares. The market price of our shares of common stock has historically fluctuated within a wide range. The price of our common stock may be affected by many factors, including an adverse change in our business, a decline in the price of zinc or other commodity prices, negative news on our projects, negative investment sentiment for mining and commodity equities and general economic trends. Bongará) future development costs, and / or repay loans from Nexa for future development costs at the Florida Canyon project. Dense jungle or forest vegetation covers the project area. With the exception of the partially completed access road and approximately 700 meters of tunneling, no infrastructure facilities have been constructed within the project area. successfully achieved. Lik.jpg four years. If required, payments may be made in lieu of work to allow retention of the property for a period of five consecutive years. The geographical coordinates of the Lik deposit are approximately 163o the Lik deposit suggests the potential for stacked deposits below the Lik deposit. filings: Technical Report; Zazu Metals Corporation, Lik Deposit, Alaska, USA; Report Date: April 23, 2014; Effective Date: March 3, 2014; prepared by JDS Energy and Mining Inc (“JDS”). 2020. $527,000. 2018 or 2019. vest on the schedule of 25% on date of approval of the grant (June 19, 2018) and 25% on each of the next three anniversary dates of the date of grant (September 1, 2018, 2019 and 2020). 2019. during 2019. 2018 during 2018. potential acquisition of mineral properties and other assets over the next several years. We may also use a portion of these assets to repurchase shares of our common stock, pursuant to the terms of a stock buy-back program discussed below. 2020. factors, including price, regulatory requirements and capital availability and in compliance with applicable state and federal securities laws. Purchases may also be made in accordance with Rule 10b-18 of the Exchange Act. The repurchase program does not require the purchase of any minimum number of shares of common stock by the Company, and may be suspended, modified or discontinued at any time without prior notice. No purchases have been or will be made outside of the United States, including on the TSX. Payments for shares of common stock repurchased under the program 2020. 2020. option payments, included in exploration expense, were subsequent years. 2018. We did sell certain royalty properties in the Royalty Sale during 2019, discussed above under “Recent Developments.” SHAREHOLDERS' EQUITY 2018 CASH FLOWS 2018 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2018 return on any of its sales recorded as revenue in its history and does not anticipate it will recognize any estimated returns on its current or future recorded revenues. securities; and (v) the collectability of the SilverStream Note. effect, subject to a transition period. Solitario will be required to comply with the new rules for fiscal years 2021 and after. Accordingly, future adjustment to estimates of mineralized material will occur due to the differing standards under the new requirements including, but not limited to, the replacement of any estimate of mineralized material with an estimate of “mineral resources.” 2019 or 2018. depreciation will be recorded on the related asset for the asset retirement obligation until the Lik project goes into operation, which cannot be assured. Assets 2019. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company currently has no profitable foreign subsidiaries. Therefore, this provision currently has no impact on the Company. sustained as of the adoption date, based on the technical merits of the position. As a result of the implementation of ASC 740, Solitario performed a comprehensive review of its material tax positions in accordance with recognition and measurement standards established by ASC 740. The provisions of ASC 740 had no effect on Solitario’s financial position, cash flows or results of operations at December 31, call options. 2019, Solitario recorded 2019 Vendetta Warrants at their fair value of $21,000 based upon a Black Scholes model with a stock price of Cdn$0.05, a term of 2.6 years, a volatility of 65%, and an interest rate of 1.6%. Solitario recorded a loss on derivative instruments related to the 2019 Vendetta Warrants of $47,000 during 2019. 2018: 2019.PARTItemUnited States Securities and Exchange Commission (“SEC”).SEC. Solitario was incorporated in the stateState of Colorado on November 15, 1984 as a wholly-ownedwholly owned subsidiary of Crown Resources Corporation ("Crown"). 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. Solitario’s primary business is to acquire exploration mineral properties 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.stage of the project. At that point, or sometime prior to that point, Solitario would likely attempt to sell its mineral properties, pursue their development either on its own, or through a joint venture with a partner that has expertise in mining operations, or create a royalty with a third party that continues to advance the property. Solitario has never developed a property. Although Solitario has owned exploration projects in both precious and base metals in the past, Solitario’s currentprimary focus is on the acquisition and exploration of zinc-related exploration mineral properties. However, Solitario may still evaluate and/orevaluates and will potentially acquire other base and precious metal projects as part of its overall mineral property activity.properties and assets. 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 ofas a means to acquire and interest in new precious and base metal properties and assets with exploration potential or business combinationsother potential corporate transactions that Solitario determines to be favorable to Solitario.In July 2017 Solitario completed the acquisition of Zazu Metals Corp. (“Zazu”) whereby Solitario issued 19,788,177 shares of its common stock for all the issued and outstanding common shares of Zazu (the “Acquisition”). Zazu had one primary asset, its interest in the Lik project, and the Acquisition was treated as an asset purchase.onof certain mineral royalties in January of 2019 and the sale in April 26,of 2018 of its interest in the royalty on the Yanacocha property, (discussed below), the sale in 2015 of its former interest in Mount Hamilton LLC the owner of Solitario’s former Mt. Hamilton project (the “Mt. Hamilton Transaction”), joint venture property payments and the sale of a royalty on the former Mt. Hamilton project.discussed below. Revenues from the sale or joint venture of properties or assets, although significant when they occur, have not been a consistent annual source of revenue and would only occur in the future, if at all, on an infrequent basis.initiatedcompleted a 17,000-meter39-hole 17,033-meter drilling program at Florida Canyon during the fourth quarter of 20182019 (discussed below), which is expected to be completed during 2019.. Solitario is working with its 50% joint venture partner, Teck American Inc., a wholly-owned subsidiary of Teck Resources Limited (both companies are referred to in this Annual Report as “Teck”) and completed a limited exploration program at the Lik project during 20182019 consisting of mapping, geophysical work, relogging of prior drilling core and environmental evaluation.2018,2019, Solitario has significant balances of cash and short-term investments that Solitario anticipates using, in part, to further the development of the Florida Canyon and Lik projects 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.3SolitarioTeck acting as the project manager.manager for 2018 and 2019. A Preliminary Economic Assessment (“PEA”) was completed on the Lik deposit in 2014.Solitario’s other core asset isSinceExcept for the 2018-2019 drilling program, discussed below, Nexa has funded 100% of project expenditures since the inception of the Florida Canyon joint venture in 2006, Nexa has funded 100% of project expenditures.2006. Nexa will earn a 70% interest in the project by continuing to solely fund all project expenditures excluding a portion of the 2018-2019 drilling program, discussed below, and committing to place the project into production based upon a positive feasibility study. After earning 70%, and at the request of Solitario, Nexa has further agreed to finance Solitario's 30% participating interest for construction. Solitario will repay the loan facility through 50% of its net cash flow distributions.Per the agreement, Solitario will fund up tofunded $1,580,000 of a planned 41-hole 17,000-meterthe 39-hole 17,033-meter drilling program, to be conducted through December 31,which was completed in the fourth quarter of 2019 (the “Drilling Program”). Upon Nexa completing the first 1,700 metersThe funding of the Drilling Program Solitario will pay Nexa $527,000, upon completion of the next 1,700 meters (3,400 meters total) of the Drilling Program, Solitario will pay Nexa $527,000, and upon completion of the third 1,700 meters (5,100 meters total) of the Drilling Program, Solitario will pay Nexa the balance remaining on its $1,580,000 funding commitment, or $526,000. Solitario has no obligation to pay Nexa prior to the attainment of the separate 1,700-meter thresholds. The funding commitments are in the form ofbe treated as an advance on Solitario’s commitment to fund 30% of any future construction and development costs of Florida Canyon under the original joint venture agreement discussed above. Accordingly, in the event the Florida Canyon project is developed, which cannot be assured at this time, anythe funds paid to Nexa under this agreement will reduce the amount of Solitario’s obligation to fund 30% of future development costs, and / or repay loans from Nexa for future development costs at the Florida Canyon project. As of December 31, 2018, Nexa had completed four holes and a total of 2,203 meters under the Drilling Program, and2019, Solitario has recorded an account payable topaid Nexa its entire funding commitment of $1,580,000, of which $1,053,000 and $527,000, and recorded a chargerespectively, were charged to exploration expense of $527,000.2018,2019, Solitario also owns the La Promesa gold exploration project. Solitario also holds an 85% interest in the Chambara exploration project in Peru (Nexa holds the remaining 15%), and a 9.9%9.8% equity interest in Vendetta Mining Corp. (“Vendetta”).4Subsequent to December 31, 2018, on January 22, 2019, we announced the sale of our interests in a retained royalty on the Pedra Branca project in Brazil, a retained royalty on non-producing exploration properties in Mexico, and an option to purchase a royalty on certain non-producing mineral claims in Montana to SilverStream SEZC (“SilverStream”), a private Cayman Island royalty and streaming company for Cdn$250,000 in cash and a one-year promissory note from SilverStream for Cdn$350,000.are conductingconduct exploration and property evaluation activities in Peru either on our own using contract geologists, or through joint ventures operated by our partners.formerly-heldformerly held Mt. Hamilton property. Proceeds from the sale or joint venture of properties and royalty sales, although potentially significant when they occur, have not been a consistent source of cash and may only occur in the future, if at all, on an infrequent basis. Accordingly, while we conduct exploration activities on our projects, we need to maintain and replenish our capital resources. Historically, we have met our need for capital through (i) the sale of mineral property royalties to SilverStream for $408,000 during 2019, (ii) the sale of our Yanacocha royalty to Newmont for $502,000 during 2018; (ii)(iii) proceeds received from the sale of our former Mt. Hamilton Transaction; (iii)project in 2015; (iv) sales of our shares of common stock of Vendetta and Kinross Gold Corporation (“Kinross”); (iv)(v) borrowing in the form of short-term margin debt secured by our investment in Kinross; (v)(vi) borrowing under long-term debt secured by our former Mt. Hamilton project (vi)(vii) joint venture delay rental payments, including payments on our Florida Canyon project; (vii)(viii) a royalty sale for $10,000,000 in 2012; (viii)(ix) issuances of common stock; (ix)(x) sales of covered call options on our Kinross common stock; and (x)(xi) interest on short term Treasury Notes and Bank CDs. In the past, weWe have reduced our exposure to the costs of our exploration activities through the use of joint ventures.2019,2020, we had fourthree full-time employees located in the United States and no full-time employees outside of the United States. We utilize contract managers, geologists, administrators and laborers to execute our Latin American and North American project work and acquisition evaluations.eithergreater resources, including more employees or employees with more specialized knowledge and experience.the licenses, permits and other authorizations in order to conduct our exploration programs.2018,2019, we had no material environmental incidents or non-compliance with any applicable environmental regulations.520182019 and 2017,2018, are total assets of $416,000$59,000 and $73,000,$416,000, respectively, related to Solitario's operations located outside of the United States.(http:(http://www.sec.gov)www.sec.gov) that contains periodic reports, proxy and information statements and other information regarding registrants, including the Company, that file electronically with the SEC.Item and be salable or joint ventured. Prior to completion of the feasibility study on our former Mt. Hamilton project, we had never established reserves on any of our properties. Significant additional expense and risks, including drilling and determining the feasibility of a project, are required prior to the establishment of reserves. It is impossible to ensure that the current or proposed exploration programs on properties in which we have an interest will be commercially viable or that we will be able to sell, joint venture or develop our properties. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are the particular attributes of the deposit, such as its size and grade, costs and efficiency of the recovery methods that can be employed, proximity to infrastructure, commodity prices, financing costs and governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure, land use, importing and exporting of mineral products and environmental protection.none of our current projects are likely to be monetized in the near future and any projects we may acquire are not likely to offer the opportunity for near term revenues or sale proceeds, and ifproceeds. If we are unsuccessful in identifying mineral reserves in the future, we may not be able to realize any profit from theseour property interests.62223 of our 2526 years of operations. We can provide no assurance that we will be able to operate profitably in the future or begin to generate significant and consistent sources of revenues or cash flows from operations. We have had net income in only three years in our history; during 2015, as a result of the sale of our former Mt. Hamilton Transaction,project, during 2003, as a result of a $5,438,000 gain on a derivative instrument related to our investment in certain Crown warrants and during 2000, when we sold our former Yanacocha property. We cannot predict when, if ever, we will be profitable again or able to begin generating consistent revenues or cash flows from our operations or assets. If we do not operate profitably or identify and execute on outside sources of funding, we may be unable to fund our current or contemplated exploration activities, acquire new assets, or otherwise further our business plan.acthave acted as operator on all of our mineral properties or assets that are not held in joint ventures or are royalty interests. The success of projects held under joint ventures or royalty interests that are not operated by us are substantially dependent on the joint venture partner, over which we have limited or no control.Mexico and Brazil and any other countries in which we may conduct business. Exploration and potential development activities in theseother countries we may conduct exploration are potentially subject to political and economic risks, including:··disadvantages of competing against companies from countries that are not subject to US laws and regulations, including the U.S. Foreign Corrupt Practices Act (“FCPA”);·····declinesa change in the U.S. dollar compared to local currencies);·foreign exchange controls;····risks of loss due to community opposition to our activities, civil strife, acts of war, guerrilla activities, insurrection and terrorism; and·
are conducted.7profitabilityresults of operations and growth.Transactionproject in 2015, the utilization of joint venture arrangements with third parties (generally providing that the third party will obtain a specified percentage of our interest in a certain property or a subsidiary owning a property in exchange for the expenditure of a specified amount), the sale of other assets, the sale of marketable equity securities we hold, short-term margin loans, funds from the issuance of long-term debt, and the issuance of common stock. We may need to raise additional capital, or enter into new joint venture arrangements, in order to fund theour obligations with respect to our properties and our exploration activities required to determine whether mineral deposits on our projects are commercially viable. New financing or acceptable joint venture partners may or may not be available on a basis that is acceptable to us. The inability to obtain new financing or joint venture partners on acceptable terms may prohibit us from continued development or exploration of our mineral properties. Without the successful sale or future development of our mineral properties through joint ventures, or on our own, we will not be able to realize any profit from our interests in such properties, which could have a material adverse effect on our financial position and results of operations.will beare better able to withstand the uncertainties and fluctuations associated with sustained downturns in the market and to acquire high quality exploration and mining properties when market conditions are favorable. In addition, we compete with other companies in the mineral properties sector to attract and retain key executives and other employeespersonnel with technical skills and experience in the mineral exploration business. There can be no assurance that we will continue to attract and retain skilled and experienced employees or to acquire additional exploration projects. The realization of any of these risks from competitors could have a material adverse effect on our financial position or results of operations.8project, such as gold or zinc.project. Because our core assets are currently in zinc related projects, the spot price of zinc is particularly important to the value of our assets and future prospects. The price of commodities also affects the value of exploration projects we own or may wish to acquire or joint venture. These commodity prices fluctuate on a daily basis and are affected by numerous factors beyond our control. The supply and demand for commodities, the level of interest rates, the rate of inflation, investment decisions by large holders of these commodities, including governmental reserves, and stability of exchange rates can all cause significant fluctuations in prices. Currency exchange rates relative to the United States dollar can affect the cost of doing business in a foreign country in United States dollar terms, which is our functional currency. Consequently, the cost of conducting exploration in the countries where we operate, accounted for in United States dollars, can fluctuate based upon changes in currency exchange rates and may be higher than we anticipate in terms of United States dollars because of a decrease in the relative strength of the United States dollar to currencies of the countries where we operate. We currently do not hedge against currency or commodity fluctuations. The prices of commodities as well as currency exchange rates have fluctuated widely and future significant price declines in commodities or changes in currency exchange rates could have a material adverse effect on our financial position or results of operations.9is joint-venturedand our Lik project are joint ventured with anotherother mining companycompanies that managesmanage the exploration and development activities on the project and weprojects. We are the minority-interest party.party at Florida Canyon and a 50% partner at the Lik project, where Teck is the operator. Although our joint venture agreement providesagreements provide certain voting rights and other minority-interest safeguards, the majority partner and/or operator not only manages operations, but controls most decisions, including budgets and scope and pace of exploration and development activities. Consequently, we are highly dependent on the operational expertise and financial condition of our joint venture partner,partners, as well as its owntheir corporate priorities. For instance, even though our joint venture property may be highly prospective for exploration success, or economically viable based on feasibility studies, our partner may decide to not fund the further exploration or development of our project based on their respective financial condition or other corporate priorities. Therefore, our results are subject to the additional risks associated with the financial condition, operational expertise and corporate priorities of our joint venture partners, which could have a material adverse effect on our financial position or results of operations. Our Lik project is equally owned with another mining company andrequires unanimous consent by the joint venture partners is required for annual budgets in excess of $1.0 million. Consequently, development of the project could be delayed without the unanimous consent of both parties to certain proposed actions or transactions.one of our foreigncurrent or future projects; therefore, in the future, our results may become subject to additional risks associated with development and production of our foreign mining projects.suchour properties or interests outright at a profit; (2) form a joint venture for the project with a larger mining company with greater resources, both technical and financial, to further develop and/or operate a project at a profit;project; (3) develop and operate such projects at a profit on our own; or (4) create and retain a royalty interest in a property with a third party that agrees to advance the property toward development and mining. In the future, if our exploration results show sufficient promise in one of our foreign projects, not currently under joint venture, we may either look to form a joint venture with another mining company to develop and/or operate our projects or sell the property outright and retain partial ownership or a retained royalty based on the success of such project. Therefore, in the future, our results may become subject to the additional risks associated with development and production of mining projects in general.1020182019 was approximately 104,000certificates of deposit.accounts. The failure of the financial institutions that issued or hold these financial instruments or our cash could have a material adverse impact on the market price of our common stock and our liquidity and capital resources.2018,2019, we have invested approximately $500,000 in separate, FDIC insured certificates of deposit with the maximum individual bank exposure of $250,000. Further, as of December 31, 2018 we have invested $9,345,000$6,829,000 in United States Treasury securities, with maturities of between 1530 days and 2217 months and we have approximately $495,000$554,000 of our cash in uninsured deposit accounts and brokerage accounts including $378,000 in a US dollar bank savings account in Peru, none of which are covered by FDIC insurance. The failure of either Charles Schwab or thea financial institutionsinstitution holding these funds and assets could have a material impact on the market price of our common stock and our liquidity and capital resources.thesethe FCPA and other anti-bribery laws; however, we cannot assure you that our internal controls and procedures always will protect us from the reckless or criminal acts committed by our employees or agents. We can make no assurance that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices or we are found to be liable for FCPA violations, we could suffer severe criminal or civil penalties or other sanctions and other consequences that may have a material adverse effect on our business, financial condition and results of operations.ItemNone11Item Bongara)both(both companies are referred to in this Item 2 as "Nexa”) on Solitario's 100%-owned Florida Canyon zinc project (formerly called the Bongará project), On March 24, 2007, Solitario signed the Framework Agreement with Votorantim for the Exploration and Potential Development of Mining Properties, pursuant to, and replacing, the Florida Canyon Letter Agreement. In 2015 Votorantim transferred its interest in the Florida Canyon project to Compañía Minera Milpo S.A.A. (“Milpo”), an 80%-owned affiliate of Votorantim. In October of 2017, Milpo and Votorantim merged to form Nexa. Nexa completed an IPO raising $570 million and listed on the NYSE under the trading symbol NEXA and the TSX under the trading symbol NEXA. For the remainder of this Florida Canyon property section, all references to Votorantim, Milpo or Nexa will be collectively referred to as Nexa.company, however, as described above, funds provided bycompany. Solitario incompleted the funding of $1,580,000 of the Drilling Program may serveduring 2019. The paid funding of the Drilling Program will be treated as an advance on Solitario’s commitment to fund 30% of any future construction development costs of Florida Canyon under the original joint venture agreement. Accordingly, in the event the Florida Canyon project is developed, which cannot be assured at this time, the funds paid to Nexa under this agreement will reduce the amount of Solitario’s obligation to finance a portionfund 30% of its 30% participating interest.2019,2020, payments of approximately $289,000 to the Peruvian government will be due in order to maintain the Florida Canyon mineral rights of Minera Bongará. Nexa is responsible for paying these costs as part of its earn-in expenditures. Peru imposes a sliding scale royalty varying from 1% to 12% of the operating profit of a mining operation. The percentage royalty is determined by rule based on the operating margin; however, the minimum royalty is 1% of the revenues.2019.2020. Nexa maintains project field offices in Pedro Ruiz and a drill core processing facility and operations office in the nearby community of Shipasbamba. 12formations, promoting the passage offormations. It is believed that mineralizing fluids passed through thestructurally controlled vertical feeder zones and into adjacent near-horizontal rock formations formingto produce mineralized vertical replacement bodies and stratigraphically controlled near-horizontal manto deposits. Drilling of stratigraphic targets has shown that certain coarser-grained facies of the stratigraphy are the best hosts for manto mineralization. Stratigraphically controlled mineralization is typically one to several meters in thickness, but often attains thicknesses of five to ten meters.The laterally extensive manto deposits are strongly related to, and potentially originate from, structurally controlled near-vertical conduits for mineralizing solutions. Replacement deposits occur along these high-angle structures as well as in the stratigraphic mantos at Florida Canyon.13Breakout
Zone NameDrill Hole
NumberIntercepts
(meters)Zinc
%Lead
%Zinc+Lead
%Sam GC-17
FC-2358.8
81.512.0
4.82.8
0.814.8
5.6Karen A-1 36.2 12.8 2.7 15.5 North Zone V-21 92.0 5.5 1.7 7.2 South Zone V-44
V-16928.3
51.615.2
7.10.8
0.716.0
7.8San Jorge V-297 56.6 22.69 1.15 23.84 BreakoutZone Name Drill HoleNumber Intercepts(meters) Zinc% Lead% Zinc+Lead% Sam GC-17FC-23 58.881.5 12.04.8 2.80.8 14.85.6 Karen A-1 36.2 12.8 2.7 15.5 V-1021 V-21 92.0 5.5 1.7 7.2 South Zone V-44V-169 28.351.6 15.27.1 0.80.7 16.07.8 San Jorge V-297 56.6 22.69 1.15 23.84 The majority of Nexa’s surface drilling was infill drilling designed to demonstrate the continuity and geometry of mineralization, and to a lesser extent, test for extensions of known mineralization. From 2011-2013, Nexa completed 95 underground core holes totaling 15,144 meters. The underground drilling was conducted from 10 drill stations at generally 40-meter centers (two drill stations at 20-meter centers) and entirely within the San Jorge mineralized zone. Anywhere from three to 14 holes were drilled from each of the ten drill stations. The underground drilling was tightly spaced and designed to allow for feasibility-level reserve estimation.Inre-initiated drilling with twocompleted a 39-hole, 17,033-meter core rigs at Florida Canyon, as part of a 2018/2019 41-hole, 17,000-meter drilling program. The first phasemajority of this drilling campaign endedholes were drilled 2019. The program had three major objectives: 1) extend the San Jorge near-vertical replacement body to the south and the adjacent near-horizontal manto bodies to the east; 2) offset previously drilled hole V-21 in late-December 2018 upon the onsetnorthern part of Florida Canyon to determine if it represented a significant near-vertical replacement body with horizontal mantos similar to the San Jorge Zone; and 3) extend horizontal mantos in the central and northern parts of the rainy season when helicopter supportedFlorida Canyon drilling became operationally inefficient. Four holesfootprint. All three objectives were completed to planned target depth and a fifth hole was abandoned due to technical drilling problems. Total meterage completed was 2,203 meters. All holes were located at the northern and northeastern margin of the previous drilling footprint in the Karen-Milagros zone.20132018-2019 drill-hole intercepts are provided in the table below:Typical Mineralized Intersections Drill Hole Surface or Intercept Zinc Lead Zinc + Lead Silver Number Underground Meters (%) (%) (%) (grams/t) V-378 Surface 7.7 14.62 2.11 16.73 15.69 V-386 Surface 16.2 16.20 10.70 12.41 11.13 V-427 Surface 15.1 12.06 2.75 14.81 17.59 V-436 Surface 17.0 11.74 1.08 12.81 18.48 V-451 Surface 30.7 13.06 4.97 18.03 32.64 V-407 Underground 3.6 26.31 1.59 27.90 74.87 V-432 Underground 21.1 8.31 1.71 10.02 12.11 V-433 Underground 5.0 38.22 3.89 42.12 60.76 V-458 Underground 25.5 7.22 0.55 7.77 6.21 V-465 Underground 10.7 45.60 5.25 50.84 106.71 142018-2019 Mineralized Intersections Drill Hole Intercept Zinc Lead Silver ZnEq* Number Meters (%) (%) (grams/t) (%) PEBGD-03 1.3 42.7 15.0 83.0 56.9 PEBGD-04 1.3 40.5 0.0 4.8 40.6 PEBGD-08 4.4 16.8 1.1 32.1 18.3 PEBGD-10 48.9 5.2 1.0 11.5 6.2 including 17.5 11.3 2.2 25.4 13.7 PEBGD-15 12.4 14.9 0.0 8.9 15.1 PEBGD-24 4.1 18.6 0.9 5.7 19.5 PEBGD-25 6.3 7.7 0.5 3.2 8.2 and 8.8 5.2 1.5 18.1 6.9 PEBGD-30 6.7 18.4 0.0 10.6 18.7 PEBGD-31 7.4 11.3 1.7 14.5 13.1 PEBGD-32 9.3 23.5 2.8 18.1 26.5 PEBGD-33 9.9 5.9 1.6 12.9 7.7 PEBGD-36 6.1 20.1 5.6 42.4 25.6 and 1.8 35.2 0.5 69.7 37.1 PEBGD-38 9.7 22.8 0.2 11.8 23.2 PEBGD-39 3.3 37.7 9.6 65.5 47.1 feasibilityprefeasibility levels. These studies were generally performed between 2007 and 2014.152018,2019, 700 meters of tunneling were completed.planningcurrently working on a new NI-43101 compliant resource estimate incorporating the 2018-2019 drill hole assay results. This new estimate is expected to resume its 41-hole, 17,000-meter drilling program atbe completed by the end of the rainyfirst quarter of 2020. Nexa is also planning to permit 84 new drilling platforms and associated interconnecting roads scattered over an area approximately six kilometers by five kilometers in 2020. These proposed platforms are located immediately south and southeast of the current Florida Canyon drilling footprint. Permitting is expected to take approximately one year. Drilling may be possible for the 2021 field season, depending upon the grant of permits and funding approvals by Nexa. Nexa is also planning to conduct a new metallurgical study beginning in the second quarter of 2020. This study is expected sometimeto be completed in April 2019. At that time, Nexa plans to accelerate drilling operations utilizing up to four core rigs operating simultaneously to complete the remaining 37 drill holes.second quarter of 2020. In addition, Nexa plans to conduct additional road construction work in 2019 that includes completion of the2020 to access road into the mineralized area of Florida Canyon and also an access road to a local communitycommunities as part of their social commitment to the localthese communities.1620192020 are $7,000. Property holders are also required to perform assessment work with the amount dependent on the area of the State claims. Excess assessment expenditure credits may be carried forward for a maximum ofwholly-ownedwholly owned subsidiary of Solitario. Prior to that, Zazu acquired its 50% interest in the Lik property from GCO Minerals Company, a wholly-ownedwholly owned subsidiary of the International Paper Company (“GCO”), on June 28, 2007 by making a cash payment to GCO of $20,000,000 and granting GCO a 2% net proceeds interest. GCO also owns an additional 1% net profits interest in the Lik property from a 1997 agreement.Teck.Teck American Incorporated (50%), a wholly owned subsidiary of Teck Resources Limited (collectively “Teck”). The terms of the joint venture were governed by the Lik Block Agreement, made as of January 27, 1983, between Houston Oil & Minerals Exploration Company (“HOMEX”) and GCO. HOMEX assigned its interest in the Lik Block Agreement to Echo Bay Mines Ltd., which, in turn, assigned such interest to Teck.closed the Acquisition.acquired Zazu. As of January 27, 2018, we estimateestimated that approximately $22 million had been incurred towards the inflation adjusted $43 million expenditure required to earn an additional 30% interest in the property.2018,2019, Teck retains its 50% participating interest in the Lik property, and Teck and Solitario are negotiating a new a joint operating agreement that will governinggovern all further operations relating to the Lik property. We anticipate that under such joint operating agreement, Solitario, as successor to GCO, may be the operator and may have full and exclusive control of the Lik property, its facilities and production as well as the exploration, development and mining undertaken pursuant to the Lik Block Agreement. The current agreement requires unanimous approval by the parties for annual expenditures in excess of $1 million. In July 2018, the Company and Teck signed a Joint Exploration Agreement (“JEA”) whereby both parties agreed to fund a surface exploration program on a 50%-50% basis for 2018. In January 2019, the Company and Teck signed an Addendum to extend the JEA to January 31, 2020. However, pending the completion of a new joint operating agreement, an extension to the Joint Exploration AgreementJEA is expected to be signed in 2019prior to the end of the first quarter 2020 to further extend the terms of the JEA into early 2021 to provide for the planned 20192020 exploration program on the project. Teck was designated the operator for only the 2019 and 2018 programprograms and is expected to be the designated operator under the planned extensionextensions of the 2018 Joint Exploration AgreementJEA only for the upcoming 20192020 program.17Preliminary Economic AssessmentPEA in 2014.1820182019 Exploration Program20182019 exploration program consisted of geologic mapping, geochemical sampling, re-logging of old core, XRF analysis for trace elements in old core, reinterpretation of the stratigraphic and structural setting in the vicinity of the Lik deposit and ground gravity geophysical surveying. The geologic mapping program resulted in a better understanding of the stratigraphic and structural control of mineralization at Lik, and the potential trend of mineralization to the north. Geochemical sampling indicates an area of elevated geochemistry to the north that requires further investigation.could be proximal to zinc mineralization. The gravity survey results are somewhat uncertain, but may point to an area of interest, also to the north. Re-logging of old core is expected to be completedThe stratigraphic and structural reinterpretation in the second quartervicinity of 2019.19Typical Mineralized Intersections HoleNo. From(m) To(m) Length(m) Zn(%) Pb(%) Ag(g/t) 5 54.56 78.79 24.23 19.72 6.27 126.5 16 80.16 94.49 14.33 21.67 7.01 230.4 21 129.54 135.33 5.79 7.07 1.88 8.6 24 40.87 50.14 9.27 11.09 1.44 51.1 38 45.90 63.76 17.86 8.13 1.80 48.0 38 70.53 87.75 17.22 8.92 2.08 28.8 43 35.66 40.69 5.03 17.66 3.62 8.6 43 60.96 80.28 19.32 9.07 2.49 47.7 43 84.73 91.04 6.31 21.07 5.95 111.4 68 32.31 53.43 21.12 13.34 2.85 56.9 Historical Diamond Drilling Campaigns Year Number
of HolesAggregate
Depth (m)Company 1977 10 1,603.3 Managed by WGM 1978 79 10,680.2 Managed by WGM 1979 14 4,931.1 Managed by GCO 1980 3 202.1 Managed by GCO 1983 1 835.2 Managed by GCO 1984 6 1,643.5 Managed by GCO 1985 16 4,883.1 Managed by Noranda 1987 1 696.5 Managed by GCO 1990 3 263.4 Managed by Moneta 1992 2 283.5 Managed by GCO 2007 11 1,393.5 Managed by Zazu 2008 58 6,827.5 Managed by Zazu 2011 25 3,871.0 Managed by Zazu Totals 229 38,328.6 20Historical Diamond Drilling Campaigns Year Number of Holes Aggregate Depth (m) Company 1977 10 1,603.3 Managed by WGM 1978 79 10,680.2 Managed by WGM 1979 14 4,931.1 Managed by GCO 1980 3 202.1 Managed by GCO 1983 1 835.2 Managed by GCO 1984 6 1,643.5 Managed by GCO 1985 16 4,883.1 Managed by Noranda 1987 1 696.5 Managed by GCO 1990 3 263.4 Managed by Moneta 1992 2 283.5 Managed by GCO 2007 11 1,393.5 Managed by Zazu 2008 58 6,827.5 Managed by Zazu 2011 25 3,871.0 Managed by Zazu Totals 229 38,328.6 and and to obtain samples for metallurgical testing. At the end of 2008, most of the Lik South deposit had been tested on lines spaced at 200 ft. with holes spaced at about 100 ft.21.Preliminary Economic AssessmentPEA in 2014 that incorporated a variety of prefeasibility level studies into the analysis. These studies included resource estimation, mining and processing recovery estimates, a preliminary mining and processing plan, infrastructure layout, environmental considerations and an economic analysis based on the base case parameters. The PEA envisioned an open pit mining operation with a 5,500 ton per day floatation mill for processing resulting in a nine-year mine life. Concentrates would be handled through the DMTS road and port system that currently handles all concentrate produced by the nearby Red Dog zinc mine of Teck. A summary of metallurgical testing and mineral processing is provided below. The PEA analyzed the Lik project as a stand-alone operation building its own independent processing, tailings and port facilities.Test Element Feed Lead Concentrate Zinc Concentrate Grade Grade Recovery Grade Recovery SGS 2010 Pb% 2.83 52.00 69.10 1.88 9.70 Zn% 9.56 7.39 2.91 54.60 83.10 Ag gpt 37 55 5.5 68 26.6 G&T 2008 Pb% 2.36 70.30 70.3 1.57 9.4 Zn% 8.47 4.17 1.20 52.20 86.9 Ag gpt 34 68 4.8 64 26.9 Average Used for Mass Balance and NSR Estimates Pb% 2.60 61.15 69.7 1.73 9.6 Zn% 9.02 5.78 2.06 53.40 85.0 Ag gpt 36 62 5.2 66 26.8 22planning to negotiatein discussions to jointly fund a 20192020 exploration program with Teck acting as project operator. The budgeted program, will have four components: 1) re-loggingif approved, consists of previous drill core; 2) XRF (x-ray fluorescence) – Tuscan TruScan continuous scanning analysisdrilling two or three core holes totaling approximately 1,000 meters. Drill targets under consideration include an area approximately one kilometer north of previous drill core to analyze for geochemical trends withinLik and also below the Lik deposit to test for stacked mineralized system; 3) continued geologic and geochemical investigations of an area north of the Lik deposit; and, 4) Remodeling of the Lik geology. These activities are scheduledhorizons. Drilling is expected to begin in April and be completed byduring the end2020 summer field season. We expect to reach a final decision on this program during the first quarter of September.jointly-heldjointly held joint venture. These properties were located within a large area of interest in northern Peru measuring approximately 200 by 85 kilometers, but outside of the Florida Canyon property position. Nexa originally contributed 52 mineral concessions within the area of interest totaling 52,000 hectares to Minera Chambara for a 15% interest in Minera Chambara. We contributed 9,600 hectares of mineral claims and an extensive exploration data base in our possession for an 85% interest in Minera Chambara. Existing and future acquired properties subject to the terms of the shareholders’ agreement will be controlled by Minera Chambara. Minera Chambara dropped selected concessions in 2013 and 2016 and acquired the rights to 13 new concessions totaling 11,600 hectares in 2017. This resulted in Minera Chambara holding 36,400 hectares of valid concessions that completely surround the Florida Canyon project area held by Minera Bongará. As of December 31, 2016,2019, Minera Chambara’s only assets are the properties and Minera Chambara has no debt. Nexa may increase its shareholding interest to 49% through cumulative spending of $6,250,000 and may further increase its interest to 70% by funding a feasibility study and providing for construction financing for Solitario's interest. If Nexa provides such construction financing, we would repay that financing, including interest, from 80% of Solitario's portion of the project cash flow.20192020 to be paid by Nexa are estimated to be $423,000.20182020 will be approximately $8,000.$34,000. A subsidiary of Newmont holds a 2% net smelter return (“NSR”) on the property.signed.signed and we are planning to conduct limited exploration activities on the property in 2020. In Peru, a community agreement is required in order to obtain drilling permits. During 20192020 our objectives are to complete an agreement with the local community, to conduct surface exploration, and if warranted, conduct a drilling program.23Royalty PropertiesYanacocha Royalty Property (Peru)The Yanacocha royalty property covered 43 concessions totaling 36,052 hectares. Solitario, through its wholly owned subsidiary Minera Solitario Perú S.A.C., sold the non-producing Yanacocha royalty to Minera Los Tapados S.A., a wholly owned subsidiary of Newmont for approximately $502,000 in cash. Prior to the sale, Solitario received a term sheet from a third-party to purchase the Yanacocha Royalty as part of discussions concerning the potential sale of Solitario’s entire portfolio of royalty properties. Newmont had a 30-day right of first refusal (“ROFR”) to match any third-party offer to purchase the Yanacocha Royalty from Solitario. Newmont exercised its ROFR and the transaction with Newmont closed on April 26, 2018.No resources or reserves have been reported by Newmont on the Yanacocha royalty property in Peru, nor has any mining been conducted on the property.Other Royalty Properties (Brazil, Mexico and USA)Subsequent to December 31, 2018, in January 2019, Solitario sold two royalties and an option to purchase a third royalty to SilverStream. Solitario received CDN $250,000 in cash and CDN $350,000 in a convertible note as payment for the royalties and option. The royalties cover the 125,000-acre polymetallic Pedra Branca palladium, platinum, gold, nickel, cobalt and chrome project in Brazil (1.0% NSR royalty) and the 3,880-acre Mexico royalty portfolio (1.0% NSR royalty). The purchase option covers 11 separate properties covering 16,500 acres in Montana (1.5% NSR royalty).The CDN $350,000 convertible note has a one-year term with a 5% per annum simple interest rate. The note is convertible into SilverStream stock should SilverStream complete an initial public offering before the end of the one-year term.2018.24tonmeasure that contains 2,204.6 pounds or 1,000 kilograms.ItemItem25PARTItemThe following table sets forth the high and low sales prices on NYSE American exchange for our common stock for the quarterly periods from January 1, 2017 to December 31, 2018: All prices are in US$ 2018 2017 Period High Low High Low First quarter $ 0.71 $ 0.46 $ 0.88 $ 0.64 Second quarter 0.49 0.40 0.85 0.65 Third quarter 0.44 0.36 0.79 0.65 Fourth quarter 0.36 0.21 0.73 0.55 The following table sets forth the high and low sales prices on the TSX for our common stock for the quarterly periods from January 1, 2017 to December 31, 2018: All prices are in CDN$ 2018 2017 Period High Low High Low First quarter $ 0.88 $ 0.59 $ 1.18 $ 0.87 Second quarter 0.64 0.50 1.15 0.81 Third quarter 0.60 0.46 1.03 0.81 Fourth quarter 0.46 0.32 0.88 0.70 In connection with the Acquisition, Solitario granted 1,782,428 replacement options to former officers and directors of Zazu (the “Replacement Options”). The exercise prices of the Replacement Options are between $2.24 per share and $0.70 per share with terms between 10 months and 18 months. In accordance with the terms of the Acquisition, the Replacement Options were fully vested upon grant. The Replacement Options had a grant date fair value of $164,000, based upon Black-Scholes models with an expected volatility of 67% and a risk-free interest rate of 1.00%. The grant date fair value was capitalized as part of the purchase price of the Zazu assets acquired. During 2018, 782,268 of the Replacement Options, expired unexercised, in accordance with their terms and as of December 31, 3018, 1,000,160 Replacement Options remain outstanding, all of which expired unexercised subsequent to December 31, 2018 on January 19, 2019.On September 1, 2017, the Board of Directors granted 200,000 stock options under the 2013 Plan. The options have a five-year life, vested 25% on the date of grant and vest 25% on each of the next three anniversary dates of the date of grant, and have an exercise price of $0.77 per share, and a grant date fair value of $84,000, based upon a Black-Scholes model with an expected volatility of 64%, and a risk free interest rate of 1.70%.26Equity Compensation Plan Information as of December 31, 2018: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights
(2013 Plan – US$) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) 2013 Plan (a) (b) (c) Equity compensation plans approved by
security holders 5,223,160 0.76 476,278 Equity compensation plans not approved
by security holders — N/A — Total 2013 Plan 5,223,160 0.76 476,278 Equity Compensation Plan Information as of December 31, 2019: Plan category 2013 Plan Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total 2013 Plan 2019,2020, we have approximately 3,3923,155 holders of our common stock.2018.Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) Maximum number of Shares that May Yet Be Purchased Under the Plans or Programs(1) October 1, 2017 – October 31, 2018 28,500 $0.31 28,500 1,130,500 November 1, 2017—November 30, 2018 18,000 $0.30 18,000 1,112,500 December 1, 2017—December 31, 2018 43,400 $0.26 43,400 1,069,100 Period October 1, 2019 – October 31, 2019 November 1, 2019—November 30, 2019 December 1, 2019—December 31, 2019 20182019 the Board of Directors extended the termination date of the repurchase program to December 31, 2019;2020; however, the repurchase program may be suspended or discontinued at any time and does not obligate Solitario to acquire any particular amount of our shares. During the years ended December 31, 20182019 and 2017,2018, we purchased 263,10038,400 and 47,200263,100 shares of Solitario common stock, respectively, for an aggregate purchase price of $101,000$13,000 and $32,000,$101,000, respectively. As of December 31, 2018,2019, we have purchased a total of 930,900969,300 shares of Solitario common stock for an aggregate purchase price of $449,000$462,000 under the share repurchase program since its inception.27Item2014.2015. This data has been derived from our audited consolidated statements of operations for each of the five years ended December 31, 20182019 and our audited consolidated balance sheets as of December 31, 2019, 2018, 2017, 2016 2015 and 2014.2015. You should read this information in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Solitario's historical consolidated financial statements and notes included in Item 8, "Financial Statements and Supplementary Data." The information set forth below is not necessarily indicative of future results.Balance sheet data: As of December 31, (in thousands) 2018 2017 2016 2015 2014 Total current assets $ 12,136 $ 14,613 $ 16,797 $ 17,990 $ 3,217 Total assets $ 27,903 $ 30,395 $ 17,614 $ 18,054 $ 19,040 Working capital (deficit)(1) $ 11,448 $ 14,472 $ 16,671 $ 17,811 $ (1,987 ) Long-term debt $ — $ — $ — $ — $ — Shareholders' equity $ 27,090 $ 30,129 $ 17,488 $ 17,875 $ 6,781 Statement of operations data: Year ended December 31, (in thousands, except per share amounts) 2018 2017 2016 2015 2014 Property and joint venture revenue $ — $ — $ — $ — $ 200 Net (loss) income $ (3,598 ) $ (942 ) $ (1,710 ) $ 8,872 $ (1,833 ) Per share information: Basic and diluted Net (loss) income $ (0.06 ) $ (0.02 ) $ (0.04 ) $ 0.23 $ (0.05 ) Balance sheet data: (in thousands) Total current assets Total assets Long-term debt Shareholders' equity Statement of operations data: (in thousands, except per share amounts) Revenue, net – mineral property sale Net (loss) income Per share information: Basic and diluted Net (loss) income 28ItemApril 26, 2018,January 22, 2019, we soldcompleted the Yanacochasale of our interest in certain royalties to SilverStream SEZC, a private Cayman Island royalty and streaming company (“SilverStream”), for Cdn$600,000 (the “Royalty Sale”). The Royalty toSale covered (i) a wholly owned subsidiaryroyalty on the formerly Solitario-owned 125,000-acre polymetallic Pedra Branca palladium, platinum, gold, nickel, cobalt and chrome project in Brazil, (ii) a royalty covering 3,880 acres of Newmont for approximately $502,000non-producing exploration properties in cash. The Yanacocha Royalty covered 43 concessions totaling 36,052 hectares. Newmont ownsMexico, and (iii) a purchase option on royalties covering 11 separate non-producing properties covering over 16,500 acres in Montana. At the underlying mineral concessions covered by the Yanacocha Royalty. Noneclosing of the concessions covered by the Yanacocha Royalty have any reported reserves or resources.Sale, Solitario had no mineral property capitalized costreceived Cdn$250,000 in cash and a convertible note from SilverStream in the Yanacocha Royalty and recorded Mineral Property Revenueprincipal amount of $502,000 during 2018.In August of 2018, Solitario agreed to fund a portion of a 2018 – 2019 drilling program at the Florida Canyon project. Per the agreement, Solitario will fund up to $1,580,000 of a planned 41-hole 17,000-meter drilling program to be conducted throughCdn$350,000 (the “SilverStream Note”). The SilverStream Note was originally due December 31, 2019, (the “Drilling Program”). Upon Nexa completingaccrued 5% per annum simple interest, payable on a quarterly basis, and is convertible into common shares of SilverStream, at the first 1,700 metersdiscretion of SilverStream, by providing a notice to us of conversion. In December of 2019, Solitario and SilverStream agreed to extend the due date of the Drilling Program, Solitario will pay Nexa $527,000, upon completionSilverStream Note to June 30, 2020, and to increase the interest rate to 8% per annum simple interest. All other terms of the next 1,700 meters (3,400 meters total)SilverStream Note remained the same. SilverStream may only provide a notice of conversion if SilverStream has completed an initial public offering during the term of the Drilling Program, SolitarioSilverStream Note for minimum proceeds of Cdn$5,000,000; otherwise the SilverStream Note will pay Nexa $527,000, and upon completionbe payable in cash at the maturity date. Pursuant to the terms of the next 1,700 meters (5,100 meters total)SilverStream Note, if SilverStream were to complete an initial public offering and the SilverStream Note was converted, we would receive common shares converted at 85% of the Drilling Program, Solitario will pay Nexaweighted average quoted price of a share of SilverStream common stock for the balance remaining on its $1,580,000 funding commitment, or $526,000. Solitario has no obligation to pay Nexamost recent 10-day period prior to the attainmentnotice of conversion. During 2019, we recorded mineral property revenue of $408,000 for the Royalty Sale, consisting of the separate 1,700-meter thresholds. The funding commitments are infair value of the formcash received on the date of an advancethe sale of $185,000 and the fair value of the SilverStream Note on Solitario’s commitment to fund 30%the date of any future developmentthe sale of Florida Canyon under$263,000 less the existing joint venture agreement with Nexa. Accordingly, incarrying value of the event Florida Canyon is developed, which cannot be assured at this time, any funds paid to Nexa under this agreement, will reduceroyalties sold of $40,000. We recorded interest income of $12,000 from the amount of Solitario’s obligation to fund 30% of future development costs, and / or repay loans from Nexa for future development costs at the Florida Canyon project.SilverStream Note during 2019. As of December 31, 2018, Nexa had completed four holes and a total of 2,203 meters under2019, the Drilling Program,SilverStream Note was recorded at $268,000, based upon the current US dollar / Canadian dollar exchange rate, and Solitario has recorded an account payable to Nexa of $527,000 and recorded a chargecredit to explorationexchange gain of $5,000, included in general and administrative expense of $527,000.20182019 under Industry Guide 7, as issued by the SEC. We were incorporated in the state of Colorado on November 15, 1984 as a wholly-ownedwholly owned subsidiary of Crown Resources Corporation ("Crown"). In July 1994, we became a publicly traded company on the Toronto Stock Exchange (the "TSX") through our initial public offering. We have been actively involved in mineral exploration since 1993. Our primary businessfocus is to acquirethe acquisition and exploration of zinc-related exploration mineral properties and/or discover economic deposits on ourproperties. However, we continue to evaluate other mineral properties for acquisition, and advance these deposits, either on our ownwe hold a portfolio of mineral exploration properties and assets for future sale, joint venture or through joint ventures,to create a royalty up to the development stage of the project (development activities include, among other things, completion of a feasibility study for the identification of proven and probable reserves, as well as permitting and preparing a deposit for mining). At that point, or sometime prior to that point, we would likely attempt to sell a given mineral property, pursue its development either on our own, or through a joint venture with a partner that has expertise in mining operations, or obtain a royalty from a third party that continues to advance the property. UponAlthough our mineral properties may be developed in the completion of the Acquisition,future by us, through a joint venture or by a third party, we shifted our primary focus to the acquisition and exploration of zinc-related explorationhave never developed a mineral properties.property. In addition to focusing on our current assetsits mineral exploration properties and the evaluation of mineral properties for acquisition, weSolitario also evaluateevaluates potential strategic corporate transactions for the acquisition ofas a means to acquire and interest in new precious and base metal properties and assets with exploration potential or businessas well as other potential corporate transactions and combinations we determinedetermined to be favorable to Solitario.In July 2017 we completed the acquisition of Zazu Metals Corp. (“Zazu”) whereby we issued 19,788,177 shares of our common stock for all the issued and outstanding common shares of Zazu (the “Acquisition”). Zazu had one primary asset, its interest in the Lik project, and the Acquisition was treated as an asset purchase. The total purchase price of $16,110,000 was recorded during 2017.in other parts of the world. Our exploration properties may be developed in the future by us or through a joint venture, although we have never developed a mineral property. At December 31, 2018,2019, we consider our carried interest in our Florida Canyon project in Peru and our interest in the Lik project in Alaska to be our core mineral property assets. In addition, at December 31, 2018,2019, we have one exploration property in Peru, and one royalty property in each of Peru, Brazil, United States and Mexico. Subsequent to December 31, 2018, we sold our royalty property interests in Brazil, the United States and Mexico.Peru. We are conducting independent exploration activities in Peru and through joint ventures operated by our partners in Peru and the United States. We conduct potential acquisition evaluations in other countries of both South and North America.292018,2019, we have significant balances of cash and short-term investments that we anticipate using, in part, to fund planned 20192020 exploration, including our portion of the Drilling Program, discussed above, , to further the exploration of theour Lik project, conduct initial exploration on the La Promesa project in Peru, and to potentially acquire additional mineral property assets. The fluctuations in commodity prices of base and precious metals has contributed to a challenging environment for mineral exploration and development, which has created opportunities as well as challenges for the potential acquisition of advanced mineral exploration projects or other related assets at potentially attractive terms.properties;properties and assets; (ii) joint venture payments, including delay rental payments; (iii) a royalty sale on our former Mt. Hamilton property; (iv) the sale of our shares of Vendetta and Kinross common stock; (v) long-term debt secured by our mineral property; (vi) short-term margin borrowing; and (vii) issuances of common stock. During 2019 we recorded mineral property income of $408,000 from the Royalty Sale, discussed above. During 2018 we recorded mineral property income from the sale of our Yanacocha royaltyRoyalty of $502,000. In 2015 we recorded a gain on the sale of our interest in Mount Hamilton LLC of $12,309,000. During June 2012, we sold a royalty interest in our Mt. Hamilton project to Sandstorm Gold Ltd. for $10,000,000. Previous to the sale of our interest in Mt. Hamilton Transaction,LLC, our last significant cash proceeds from a property or asset sale were recorded in 2000 upon the sale of our former Yanacocha property for $6,000,000. Proceeds from the sale or joint venture of properties, although significant when they occur, have not been a consistent annual source of cash and would occur in the future, if at all, on an infrequent basis. We have reduced our exposure to the costs of our exploration activities in the past through the use of joint ventures. Although we anticipate the use of joint venture funding for some of our exploration activities will continue for the foreseeable future, we can provide no assurance that these or other sources of capital will be available in sufficient amounts to meet our needs, if at all.20182019 to the year ended December 31, 2017$3,528,000$3,289,000 or $0.06 per share for the year ended December 31, 20182019 compared to a loss of $942,000$3,598,000 or $0.02$0.06 per basic and diluted share for the year ended December 31, 2017.2018. As explained in more detail below, the primary reasons for the increasedecrease in net loss during 20182019 compared to 20172018 was an increasea decrease in (i) exploration expense to $1,254,000 during 2018 compared to exploration expense of $699,000 during 2017; (ii) an increased in general and administrative expense to $$1,884,000$1,368,000 during 20182019 compared to general and administrative expense of $1,202,000$1,954,000 during 2017, which was significantly related to2018; (ii) an increase in non-cash stock option expenseinterest income to $252,000 during 2019 compared to interest income of $660,000$192,000 during 2018 and (iii) a reduction in the unrealized loss on marketable equity securities to $711,000 during 2019 compared to $50,000 during 2017; (iii) the recording of ana unrealized loss on marketable equity securities of $1,058,000 during 2018 compared to a realized gain on the sale of marketable equity securities of $578,000 during 2017; and (iv) a gain on derivative instruments of $271,000 during 2017 with no similar item during 2018. Partially offsetting these factors that served contributed to increasethe decrease in our net loss in 2019 were (i) a reduction in mineral property sale revenue ofto $408,000 from the Royalty Sale during 2019 compared to $502,000 from the sale of our Yanacocha Royalty during 2018; (ii) an increase in exploration expense to $1,807,000 during 2019 compared to exploration expense of $1,254,000 during 2018 and (iii) a loss on derivative instruments of $38,000 during 2019 with no similar item during 2017; and (ii) an increase in interest income (net) to $192,000 during 2018 compared to interest income of $123,000 during 2017.2018. Each of these items is discussed in greater detail below.20182019 and 20172018 were related to exploration and evaluation of our mineral properties and as well as the evaluation of mineral properties held by other mining companies for possible acquisition and or corporate merger, with an increase in related reconnaissance exploration activities and expense. At the Florida Canyon project we recordeddrilling program, started in 2018 and completed in 2019. Solitario agreed to pay a total of $550,000$1,580,000 toward a 39-hole 17,033- meter drilling program at Florida Canyon in three tranches based upon Nexa completing a fixed number of meters of drilling (the “Drilling Program”). During the fourth quarter of 2018, Nexa completed the first tranche of drilling, and Solitario recorded $527,000 of exploration expense of which the largest single expense related to our agreement with Nexa, discussed above, whereby Solitario recorded $527,000 inthe Drilling Program during 2018 accrued as accounts payable at December 31, 2018. This compared to exploration expense forof $1,054,000 related to the Drilling Program during 2019 when Nexa completed the remaining drilling completedcommitment. In addition, we incurred other exploration expenses at the Florida Canyon projectof $18,000 and $24,000, respectively, during 2019 and 2018 this comparednot related to the completionDrilling Program. Nexa is evaluating the 2020 exploration program at Florida Canyon, however Solitario is not required to provide any of a preliminary economic analysis (“PEA”)the exploration funding at Florida Canyon during 2017. The total cost2020. Solitario incurred $199,000 of the 2017 PEA was approximately $243,000exploration expense during 2019 at its Lik project in Alaska as part of which oura 50/50 exploration program managed by its joint venture partner, Nexa paid one-half. We recorded a totalTeck. This compares to exploration expense of $125,000 of exploration expense at our Lik project of which the largest expense was related to approximately $234,000 of joint exploration expenses during 2018 at the Lik project during 2018. During 2019, Teck completed extensive re-logging, re-mapping and related field work at Lik which resulted in the increased costs during 2019 compared to 2018. We are evaluating, along with Teck, a modest drilling program. The program, if approved, consists of which we paid halfdrilling two or three core holes totaling approximately 1,000 meters. Drill targets under consideration include an area approximately one kilometer north of Lik and our joint venture partner, Teck paid the other half. During 2018 and 2017, we evaluated several projects for acquisition, in addition toalso below the Lik project acquired indeposit to test for stacked mineralized horizons. Solitario would be responsible for 50% of the Acquisitionexpenditures. During 2019 and 2018 we performed limitedincurred exploration activities, primarily related to permittingexpense of $92,000 and $86,000, respectively, at our La Promesa project in Peru. These expenditures primarily related to community agreements and general exploration activities. We did no drilling on anyare planning a very limited exploration effort at La Promesa during 2020 and expect our related expenditures there will be lower during 2020 than in 2019. The remaining exploration expenditures during 2019 and 2018 related to reconnaissance work, including the evaluation of potential mineral properties for acquisition. We anticipate our 2020 reconnaissance exploration projects in North or South America during 2017.expenditures will be reduced from our 2019 expenditures. Our 20192020 total exploration and development budget is approximately $2,345,000, of$976,000, which approximately $1,053,000 is related toreflects the significant reduction in the expenditures at Florida Canyon, project Drilling ProgramLa Promesa and approximately $210,000 is planned forreconnaissance exploration, and the anticipated increase in exploration at our Lik project in Alaska, the remainder of the 2019 budget is primarily related to our planned 2019 reconnaissance efforts as well as additional work planned for our La Promesa project. We also will be evaluating potential acquisition of new mineral exploration properties. This expenditure amount could increase significantly ifduring 2020. Although we decide to conduct exploration drilling on any of our other existing projects, which is not currently included in the 2019 budget. We cannot predict with certainty that we willmay acquire new mineral exploration properties during 2019; however,2020, our 2020 exploration budget does not reflect any costs for projects we expect to continue our early-stagedo not currently own. Our planned exploration activities. Our exploration activities in 2020 may be modified, as necessary for any drilling programs we may undertake, changes related to potential acquisition of new properties, joint venture funding, commodity prices and deployment of our capital.30Property Name 2018 2017 Florida Canyon $ 550 $ 124 Lik project 125 54 La Promesa 86 41 Reconnaissance exploration activity 493 480 Total exploration expense $ 1,254 $ 699 Property Name Florida Canyon Lik project La Promesa Reconnaissance exploration activity Total exploration expense 2018 compared to $1,152,000 during 2017.2018. We reduced salary and benefits expense to $427,000 during 2019 compared to $619,000 during 2018 compared to $639,000 during 2017 as a result of bonus reductions.reductions in staff and salaries. In addition, (i) legal and accounting costs increaseddecreased to $185,000 during 2019 compared to $208,000 during 2018, compared to $134,000 during 2017, primarily due to additional tax work related to the Acquisition;reduced activity; (ii) travel and investor relation costs increaseddecreased to $271,000 during 2019 compared to $308,000 during 2018 compared to $224,000 during 2017 as a result of expenses related to increased post-Acquisition disclosuresreductions in personnel and reduced market activities; (iii) we recorded directors and officer insurance expense of $53,000 during 2019 compared to $60,000 during 2018 compared to $55,000 during 2017;2018; and (iv) other costs related to office, insurance and miscellaneous costs remained essentially flat atdecreased to $89,000 during 2019 compared to $99,000 during 2018 compared to $98,000 during 2017.2018. We anticipate general and administrative costs for 20192020 will be lower thansimilar to the costs incurred during 2018 due to several management initiatives to reduce costs;2019; however, this amount may vary significantly during 20192020 depending on the outcome of our property evaluations and any strategic transactions we may attempt to execute upon. We have forecast 20192020 general and administrative costs to be approximately $1,122,000, excluding non-cash stock option compensation expense.2018,2019, we recorded $660,000$343,000 of non-cash stock option expense for the amortization of our outstanding options grant date fair value with a credit to additional paid-in-capital compared to $50,000$660,000 of non-cash stock option compensation expense during 2017. On2018. The amount was higher during 2018 primarily due to the amortization of 2,300,000 Conditional Options, which were approved on June 19, 2018 by our shareholders, approved 2,300,000 Conditional Options, and we recorded $422,000 of stock option compensation related to those options during 2018 for the vested portion of the grant date fair value of those options as of the date of approval. In addition, during 2018 we granted an additional 1,723,000 options and recorded $96,000The majority of our remaining stock option compensation expenseduring 2019 and 2018 related to the vested portion of the grant date fair value for those options. We recorded an additional $142,000 of stock option compensation expense related to the vested portionnormal vesting of other outstanding options during 2018.options. See Note 10,11, “Employee Stock Compensation Plans,” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data to this Form 10-K” for an analysis of the changes in the fair value of our outstanding stock options and the components that are used to determine the fair value.$1,058,000$711,000 during 20182019 in the statement of operations compared to an unrealized loss on marketable equity securities of $136,000$1,058,000 recorded as other comprehensive income in the statements of shareholders’ equity during 2017.2018. The loss during 2018in both periods was primarily related to a decrease in the value of our holdings of 11,000,000 shares of Vendetta common stock, which decreased from a fair value of $2,192,000 at December 31, 2017 to a fair value of $1,249,000 at December 31, 2018, to a fair value of $424,000 at December 31, 2019, based on quoted market prices. In addition, we acquired an additional 3,450,000 common shares of Vendetta as part of the acquisition of certain Vendetta units in July of 2019, which decreased in the allocated fair value from the date of acquisition of $165,000 to a fair value of $133,000 on December 31, 2019, each unit consisting of one common share and one warrant to acquire one common share (the 2019 Vendetta Warrants). In addition, we recorded an unrealized lossgain on marketable equity securities of $108,000$150,000 during 20182019 compared to an unrealized loss of $108,000 on our holdings of Kinross.Kinross during 2018. We adopted ASU 2016-01 in the first quarter of 2018. We recorded a cumulative-effect adjustment for the change in accounting principle to accumulated deficit of $576,000 related to the adoption of ASU 2016-01. See Note 10,12, “Shareholders’ Equity” to the consolidated financial statements.31During 2017 we received proceeds of $666,000 and recorded a realized gain on the sale of marketable equity securities of $578,000 from the sale of 3,480,000 Vendetta common shares. We used the bulk of the proceeds of $666,000 to exercise 7,240,000 warrants to acquire Vendetta common shares for $578,000. See Note 3, “Marketable Equity Securities,” to the consolidated financial statements in Item 8, “Financial Statements and Supplementary Data” of this Form 10-K for a discussion of the sale of Vendetta shares and the exercise of the Vendetta Warrants (defined below). 2018,2019, we have 11,000,000had 14,450,000 shares of Vendetta common stock and no remaining3,450,000 2019 Vendetta Warrants. There were no similar sales of shares during 2018. We may sell some of our marketable equity securities from time to time during 20192020 for working capital needs; however, we do not expect to sell all of our holdings of marketable equity securities during 2019.2020. Any proceeds we may receive from sales of marketable equity securities during 20192020 will be dependent on the quoted market price of the securities sold on the date of sale and may be at prices below the fair value at December 31, 2018.2019. See “Liquidity and Capital Resources” below.During 2017 wegainloss on derivative instruments of $271,000 with no similar item$38,000 during the year ended December 31, 2018. The gains during 2017 were2019 primarily related to a loss on our investment in2019 Vendetta Warrants which were purchased on May 2, 2016, as part of our strategic investment$47,000 based upon a Black-Scholes model. This loss in value of the 2019 Vendetta where we acquired 7,240,000 units for Cdn$0.05Warrants was primarily related to a reduction in the price per unit, with each unit consisting of one share of Vendetta common stock, and one Vendetta Warrant. Each Vendetta Warrant entitled Solitario the right to acquire one share of Vendetta common stock at a price ofwhich was Cdn$0.100.09 per share for a period of two years (“when Solitario acquired the 2019 Vendetta Warrant”). We recordedWarrants and was Cdn$0.05 on December 31, 2019. Partially offsetting this decrease was a gain of $9,000 on derivative instrumentscertain Kinross covered call options we sold during the third quarter of $216,000 during 2017 related to the Vendetta Warrants. These gains were primarily as a result of an increase in the price of the underlying Vendetta common shares during 2017. The remaining increase in the gain on derivative instruments was related to the sale of Kinross calls during 2017 of $55,000. We have sold covered calls on a limited portion of our Kinross common stock that we intend to sell within one year, to enhance our return on Kinross common stock in exchange for potential upside in those covered Kinross shares.2019. We may continue to sell covered Kinross call options during 2019. See Note 7, “Derivative Instruments,” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K for an analysis of the changes in ourThere were no outstanding derivative instruments and the components that are used to determine the fair value of our derivative instruments.20182019 compared to $13,000$25,000 of depreciation and amortization during 2017.2018. The increase is primarily as a resultmajority of a full year ofour depreciation relates to depreciation on the equipment acquired in 2017 as part of the Acquisitionacquisition at the Lik project during 2018.project. We amortize these assets over a five-year period. We anticipate our 20192020 depreciation and amortization expense will be similar to our 20182019 depreciation expense.$192,000$252,000 during 20182019 compared to interest income of $123,000$192,000 during 2017.2018. The increase during 20182019 was primarily related to an increase in the average interest rate earned onvalue of our mark-to-market investment in United States Treasury securities, during 2018 comparedwhich have a life of 30 days to 2017, which17 months, as a result of declining interest rates. The increase in interest income was partially offsetmitigated by a lower average investment during 2018 compared to 2017.reduction in our outstanding balance of United States Treasuries. We anticipate our interest income will decrease in 20192020 compared to 20182019 as a result of the use of our short-term investments and our cash balances for ordinary overhead, operational costs, and the exploration, evaluation and or acquisition of mineral properties discussed above. See “Liquidity and Capital Resources,” below, for further discussion of our cash and cash equivalent balances.20182019 or 20172018 as we provide a valuation allowance for the tax benefit arising out of our net operating losses for all periods presented. See Note 3, “Marketable Equity Securities” and Note 6,7, “Income Taxes” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary DataData” of this Form 10-K for additional discussion of our income tax valuation allowance, deferred tax assets and our net operating losses for 20182019 and 2017.2018. We anticipate we will continue to provide a valuation allowance for these net operating losses until we are in a net tax liability position with regards to those countries where we operate or until it is more likely than not that we will be able to realize those net operating losses in the future.20182019 or 2017.
2018.322018,2019, we have $117,000had $574,000 in cash. We intend to utilize a portion of this cash and a portion of our short-term investments, discussed below, to fund our ordinary overhead, operational costs, exploration activities and the2018,2019, we have $9,345,000$6,829,000 of our current assets in United States Treasury securities (“USTS”) with maturities of 1530 days to 2217 months. The USTS are recorded at their fair value, based upon quoted market prices. The USTS 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. We anticipate we will roll over that portion of our USTS not used for operating costs or mineral property acquisitions as they mature during 2019.As of December 31, 2018, we have two bank certificates of deposit (“CDs”) each with a maximum value of $250,000, maturities of three months, and each of which are covered by Federal Deposit Insurance Corporation insurance to the full-face value of the CDs. In addition, we have a US Dollar bank savings account in Peru with a fair value of $378,000. The CDs are recorded at their fair value, based upon quoted market prices. The CDs 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. We anticipate we will roll over that portion of our CDs not used for operating costs or mineral property acquisitions as they mature during 2019.2018.2019. The Kinross shares are recorded at their fair value of $324,000$474,000 at December 31, 2018.2019. As of December 31, 2018,2019, we own 11,000,00014,350,000 shares of Vendetta common stock recorded at their fair market value of $1,248,000$556,000 based upon quoted market prices. In addition, we own other marketable equity securities with a fair value of $13,000$9,000 as of December 31, 20182019 based upon quoted market prices. Changes in the fair value of marketable equity securities are recorded as gains and losses in the statements of operations.$11,448,000$8,487,000 at December 31, 20182019 compared to working capital of $14,472,000$11,448,000 as of December 31, 2017.2018. Our working capital at December 31, 20182019 consists primarily of our cash and cash equivalents, our investment in USTS, and CDs, discussed above, and our marketable equity securities, of $1,585,000, less our accounts payablecurrent liabilities of $688,000.$269,000. As of December 31, 2018,2019, our cash balances along with our short-term investments and marketable equity securities are adequate to fund our expected expenditures over the next year.2018,2019, options to acquire 5,223,1604,373,000 shares of our common stock were outstanding, of which 785,840 options were Replacement Options granted in connection with the Acquisition.outstanding. There are 2,770,9102,774,000 options that are vested and exercisable at December 31, 2018. None of2019. At December 31, 2019, our outstanding options include 150,000 options granted during 2019 that are in the money with an exercise price of $0.28 per share, which is below the market price of a share of Solitario common stock at December 31, 20182019 of $0.30 per share as quoted on the NYSE American exchange. See Note 10,11, “Employee Stock Compensation Plans” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data of this Form 10-K for a discussion of the activity in our 2013 Plan during 20182019 and 2017.2018. We do not anticipate that stock option exercises will be a significant source of cash during 2019.
2020.332018,2019, our Board of Directors extended the term of the share repurchase program until December 31, 2019.2020. All shares purchased to date have reduced the number of shares of outstanding common stock. The amount and timing of any shares purchased has been and will be determined by our management and the purchases will be effected in the open market or in privately negotiated transactions based upon market conditions and otherwill beare being funded using the Company’s working capital. As of December 31, 2018,2019, since the inception of the share repurchase program, we have purchased a total of 930,900969,300 shares for an aggregate purchase price of $449,000$462,000 and these shares are no longer included in our issued and outstanding shares. We anticipate we will continue to purchase shares under the share repurchase plan during 20192020 as determined by management.2018,2019, and 2017,2018, we have no off-balance sheet arrangements.2018 decreased2019 increased to $2,639,000 compared to $1,357,000 compared to $1,658,000 for 2017the year ended December 31, 2018 primarily as a result of (i) the Drilling Program, which included the use of cash of $1,580,000, during 2019, as discussed above, compared to no use of cash for the Drilling Program during 2018, as the payment of $527,000 for the first tranche of drilling completed during 2018, was accrued as an accounts payable in 2018 and paid in 2019 and (ii) a reduction in mineral property revenue to $408,000 during 2019 for the Royalty Sale, of which $186,000 was received in cash, compared to the sale of our Yanacocha Royalty for cash of $502,000 during 2018 with no similar sale during 2017; (ii) additional interest income of $192,000 during 2018 compared to $123,000 during 2017 and (iii) an increase in our account payable balance of $547,000 from December 31, 2017 to December 31, 2018, which is primarily related to the accrual of our required payment to Nexa of $527,000 at December 31, 2018 related to the portion of the drilling completed, but not yet paid, at our Florida Canyon project, discussed above under “Results of Operations.2018. Partially offsetting this decreasedincreased use of cash in operations was an increase in other exploration activities, including reconnaissance exploration to $727,000 during 2018 compared to $699,000 during 2017; and (ii) an increase(i) a decrease in general and administrative expense, excluding non-cash stock option compensation to $1,025,000 during 2019 compared to $1,294,000 during 2018 and (ii) additional interest income of $252,000 during 2019 compared to $1,102,000$192,000 during 2017 as2018. These items are discussed in further detail above under “Results of Operations.”decreasedincreased to $1,361,000$3,109,000 during 20182019 compared to net cash provided of $1,785,000$1,361,000 during 2017.2018. The primary source of cash was the sale of short-term investments of $3,338,000 during 2019 compared to $1,371,000 during 2018 compared2018. During 2019 we used $233,000 to $3,563,000 during 2017.purchase of Vendetta units. There were no other significant provisions or uses of cash during 2019 or 2018. However, during 2017, Solitario loaned Zazu $1,500,000, prior to the Acquisition, to assist Zazu with its cash needs in anticipation of the completion of the Acquisition. The remaining uses of cash during 2017 included the net costs to acquire Zazu of $417,000 and the purchase of the marketable equity securities through the exercise of Vendetta Warrants of $578,000. During 2017 we received proceeds of $666,000 from the sale of Vendetta common shares. Both the exercise of the Vendetta Warrants and the sale of Vendetta shares are discussed above under “Results of Operations.” We also received proceeds of $53,000 from the sale of derivative instruments, also discussed above under “Results of Operations.” We anticipate we will continue to utilize proceeds from the sale of our short-term investments to fund our operations during 2019. and $32,000 during 2017 were for the repurchase of common stock for cancellation, discussed above. We anticipate we will use a similarlimited amount of cash as we spentapproximating expenditures during 2018each of the past two years for the repurchase of shares during 2019.20182019 mineral and surface property rental and$10,000.$13,000. Our 20192020 total exploration property rentals and option payments for properties we own, have under joint venture, or operate are estimated to be approximately $729,000.$859,000. Assuming that our joint ventures continue in their current status and that we do not appreciably change our property positions on existing properties, we estimate that our joint venture partners will pay on our behalf or reimburse us approximately $712,000$816,000 of these annual payments. These obligations are detailed below under “Contractual Obligations.” In addition, we may be required to make further payments in the future if we elect to exercise our options under those agreements or if we enter into new agreements.3420182019 and 2017,2018, we have not capitalized any costs related to environmental control facilities. We do not anticipate our exploration activities will result in any material new or additional environmental expenditures or liabilities in the near future.(in thousands) As of December 31, 2018
Payments due by period Total Less than 1 year 1–3 years 4–5 years More than
5 yearsOperating Lease Obligations (1) $ 85 $ 43 $ 42 $ - $ - Mineral property option and lease payments (2) $ 17 $ 17 $ - $ - $ - (1)Lease obligation on our Wheat Ridge Colorado office.(2)Mineral property payments under lease and property claim and concession payments for the next year, net of joint venture payments.(in thousands) Operating Lease Obligations (1) Mineral property option and lease payments (2) 2018.2019. Please also see Note 2, “Mineral Properties,” to the consolidated financial statements in Item 8, “Financial Statements and Supplementary Data,” and our discussion of our properties under Item 2, “Properties” of this Annual Report on Form 10-K for a more complete discussion of all of our mineral properties.excellent potential to be developed into a mine over the next several years. The project is held in a joint venture between Nexa (61%) and Solitario (39%).the certain base case parameters. The PEA envisioned an underground mining operation with a 2,500 tonne per day floatation mill for processing, resulting in a 12.5-year mine life. Concentrates would be trucked to Nexa’s Cajamarquilla zinc smelter facility in Lima, Peru.352018 certain2019 limited work was undertaken on road access to the project, and Nexa expects to continue to work on completing the road access during 2020. During 2019, Nexa completed the Drilling Program and several significant drill intercepts were encountered. Solitario reported the results of the drill intercepts during 2019. UponNexa is evaluating the completionresults of the Drilling Program and Solitario anticipates Nexa will continue the exploration of Florida Canyon during 2020. Should Nexa complete the road, heavy equipment will be able to enter the project area and allow feasibility related activities to proceed more efficiently. Important future activities that willmay be facilitated by the completion of the road are the construction of an underground tunnel into the Karen-Milagros high-grade zinc zone, detailed underground resource/reserve definition drilling, surface drilling designed to increase the project resources and additional feasibility-related studies. Continuing road work is scheduled begin in May 2019 after the rainy season ends and continue until the road is completed.In August of 2018, Solitario agreed to fund a portion of a 2018 – 2019 drilling program at Florida Canyon. Per the agreement, Solitario will fund up to $1,580,000 of a planned 41-hole 17,000-meter drilling program to be conducted through December 31, 2019. Upon Nexa completing the first 1,700 meters of the Drilling Program Solitario will pay Nexa $527,000, upon completion of the next 1,700 meters (3,400 meters total) of the Drilling Program, Solitario will pay Nexa $527,000, and upon completion of the next 1,700 meters (5,100 meters total) of the Drilling Program, Solitario will pay Nexa the balance remaining on its $1,580,000 funding commitment, or $526,000. Solitario has no obligation to pay Nexa prior to the attainment of the separate 1,700-meter thresholds. The funding commitments are in the form of an advance on Solitario’s commitment to fund 30% of any future development of Florida Canyon under the original joint venture agreement between Solitario and Nexa. Accordingly, in the event Florida Canyon is developed, which cannot be assured at this time, anythe funds paid to Nexa under this agreement,related to the Drilling Program, will reduce the amount of Solitario’s obligation to fund 30% of future development costs, and / or repay any loans from Nexa for future development costs at Florida Canyon. As of December 31, 2018, Nexa had completed four holes and a total of 2,203 meters under the Drilling Program, and Solitario has recorded an account payable to Nexa of $527,000 and recorded a charge to exploration expense of $527,000. Our exploration budget at Florida Canyon for 2019 includes the remaining drilling of approximately $1,053,000.A summary of metallurgical testing and mineral processing is provided below. The PEA analyzed the Lik project as a stand-alone operation building its own independent processing, tailings and port facilities.20182019 Solitario and Teck jointly funded a gravity geophysical program, geologic mapping, geochemical sampling, an evaluation of past baseline environmental work for mine permitting previously initiated by Zazu, and rehabilitation work at the Lik camp. Based on this work, Teck and Solitario have agreed toare evaluating a 2019 joint exploration budget of $420,000modest drilling program at Lik (Solitario’s portion $210,000)for 2020. The program, if approved, consists of drilling two or three core holes totaling approximately 1,000 meters. Drill targets under consideration include an area approximately one kilometer north of Lik and anticipate exploration activitiesalso below the Lik deposit to be similar to the exploration activities during 2018.test for stacked mineralized horizons. It is anticipated Teck will manage the 20192020 exploration program as the designated operator during 2020, although Solitario will remain the manageroperator of the joint venture.Royalty PropertiesOn April 26, 2018, Solitario, through its wholly owned subsidiary Minera Solitario Perú S.A.C., sold the non-producing Yanacocha royalty to Minera Los Tapados S.A., a wholly owned subsidiary of Newmont for approximately $502,000venture in cash.Subsequent to December 31, 2018, on January 22, 2019, we announced the sale of our interests in a retained royalty on the Pedra Branca project in Brazil, a retained royalty on non-producing exploration properties in Mexico, and an option to purchase our royalty on certain non-producing mineral claims in Montana to SilverStream for Cdn$250,000 in cash and a one-year promissory note from SilverStream for Cdn$350,000.We have budgeted 2019expenditures of $667,000and development budget is approximately $976,000 for exploration and evaluation of existingthe Lik project as well as our La Promesa project and evaluation of potential new acquisitions of properties primarily in Peru and to a lesser extent in other regions of North and South America. We expect to carry out limitedour exploration activities during 20192020 utilizing Teck at Lik and our own employees and contract geologists.
geologists on our other projects.3620182019 or 2017.Item37Item Page Consolidated Financial Statements ReportsReport of Independent Registered Public Accounting Firm3936 Consolidated Balance Sheets as of December 31, 20182019 and 2017 20184137 Consolidated Statements of Operations for the years ended December 31, 20182019 and 2017201842Consolidated Statements of Other Comprehensive Income for the years endedDecember 31, 2018 and 20174338 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2019 and 2018 and20174439 Consolidated Statements of Cash Flows for the years ended December 31, 20182019 and 201720184540 Notes to Consolidated Financial Statements 463841 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMsheetsheets of Solitario Zinc Corp. (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’shareholders' equity, and cash flows for each of the yearyears in the two-year period ended December 31, 2018,2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the yearyears in the two-year period ended December 31, 20182019, in conformity with accounting principles generally accepted in the United States of America.audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our auditaudits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.auditaudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.Plante & Moran, PLLC2019
202039Report of Independent Public Accounting FirmTo the Shareholders and Board of Directors ofSolitario Zinc Corp.Wheat Ridge, ColoradoOPINIONS ON THE CONSOLIDATED FINANCIAL STATEMENTSWe have audited the accompanying consolidated balance sheets of Solitario Zinc Corp. (the “Company”) as of December 31, 2017, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for each year in the two-year period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for each year in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.BASIS FOR OPINIONSWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.EKS&H LLLPMarch 14, 2018Denver, Colorado40(in thousands of U.S. dollars, except share and per share amounts) December 31, December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $ 117 $ 214 Short-term investments, at fair value 10,223 11,642 Investments in marketable equity securities, at fair value 1,585 2,643 Prepaid expenses and other 211 114 Total current assets 12,136 14,613 Mineral properties 15,657 15,657 Other assets 110 125 Total assets $ 27,903 $ 30,395 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 688 $ 141 Long-term liabilities Asset retirement obligation - Lik 125 125 Commitments and contingencies (Note 9) Shareholders’ equity: Solitario shareholders’ equity Preferred stock, $0.01 par value, authorized 10,000,000 shares (none issued
and outstanding at December 31, 2018 and 2017) — — Common stock, $0.01 par value, authorized, 100,000,000 shares
(58,171,466 and 58,434,566, respectively, shares issued and outstanding
at December 31, 2018 and 2017) 582 584 Additional paid-in capital 69,873 69,312 Accumulated deficit (43,365 ) (40,343 ) Accumulated Other Comprehensive Income 576 Total shareholders' equity 27,090 30,129 Total liabilities and shareholders' equity $ 27,903 $ 30,395 (in thousands of U.S. dollars, except share and per share amounts) Assets Current assets: Cash and cash equivalents Short-term investments, at fair value Investments in marketable equity securities, at fair value SilverStream note receivable Prepaid expenses and other Total current assets Mineral properties Other assets Total assets Liabilities and Shareholders’ Equity Current liabilities: Accounts payable Operating lease liability Long-term liabilities Asset retirement obligation - Lik Operating lease liability Commitments and contingencies (Note 10) Shareholders’ equity: Preferred stock, $0.01 par value, authorized 10,000,000 shares (none issued and outstanding at December 31, 2019 and 2018) Common stock, $0.01 par value, authorized, 100,000,000 shares (58,133,066 and 58,171,466, respectively, shares issued and outstanding at December 31, 2019 and 2018) Additional paid-in capital Accumulated deficit Total shareholders' equity Total liabilities and shareholders' equity 41(in thousands, except share and per share amounts) For the years ended December 31, 2018 2017 Revenue – mineral property sale $ 502 $ — Costs, expenses and other Exploration expense 1,254 699 Depreciation and amortization 25 13 General and administrative 1,954 1,202 Total costs, expenses and other 3,233 1,914 Other (expense) income Interest and dividend income (net) 192 123 Gain on sale of marketable equity securities — 578 Unrealized loss on marketable equity securities (1,058 ) — Gain on derivative instruments — 271 Loss on sale of assets (1 ) — Total other income (expense) (867 ) 972 Net loss $ (3,598 ) $ (942 ) Loss per common share basic and diluted $ (0.06 ) $ (0.02 ) Weighted average shares outstanding Basic and diluted 58,360 47,990 (in thousands, except share and per share amounts) Revenue, net – mineral property sale Costs, expenses and other Exploration expense Depreciation and amortization General and administrative Total costs, expenses and other Other (expense) income Interest and dividend income (net) Unrealized loss on marketable equity securities Loss on derivative instruments Loss on sale of assets Total other income (expense) Net loss Loss per common share basic and diluted Weighted average shares outstanding Basic and diluted 42COMPREHENSIVE LOSS20182019 AND 2017(in thousands of U.S. Dollars) For the year ended December 31, 2018 2017 Net loss for the period, before other comprehensive loss $ (3,598 ) $ (942 ) Other comprehensive loss: Unrealized gain (loss) on marketable equity securities, net of deferred taxes — (136 ) Comprehensive loss $ (3,598 ) $ (1,078 ) (in thousands, of U.S. Dollars except share amounts) Balance at December 31, 2017 Adjusted balance – January 1, 2018 Stock option expense Net loss Balance at December 31, 2018 Stock option expense Net loss Balance at December 31, 2019 43SHAREHOLDERS' EQUITY20182019 AND 2017(in thousands, of U.S. Dollars Accumulated except share amounts) Additional Other Total Common Stock Paid-in Accumulated Comprehensive Shareholders’ Shares Amount Capital Deficit Income Equity Balance at December 31, 2016 38,693,589 $ 387 $ 55,790 $ (39,401 ) $ 712 $ 17,488 Issuance of shares - Acquisition 19,788,177 198 13,456 13,654 Stock issuance costs - Acquisition (117 ) (117 ) Replacement options — — 164 — — 164 Stock option expense — — 50 — — 50 Repurchase of shares for
cancellation (47,200 ) (1 ) (31 ) (32 ) Net loss — — — (942 ) — (942 ) Net unrealized loss
on marketable equity
securities (net of deferred taxes) — — — — (136 ) (136 ) Balance at December 31, 2017 58,434,566 584 69,312 (40,343 ) 576 30,129 Cumulative-effect adjustment
change in accounting principle — — — 576 (576 ) — Adjusted balance – January 1, 2018 58,434,566 584 $ 69,312 $ (39,767 ) — $ 30,129 Stock option expense — — 660 — — 660 Repurchase of shares for
cancellation (263,100 ) (2 ) (99 ) (101 ) Net loss — — — (3,598 ) — (3,598 ) Balance at December 31, 2018 58,171,466 582 $ 69,873 $ (43,365 ) $ — $ 27,090 (in thousands of U.S. Dollars) Operating activities: Net loss Adjustments to reconcile net loss to net cash used in operating activities: Unrealized loss on marketable equity securities Loss on derivative instruments Employee stock option expense Depreciation Amortization of right of use lease asset Loss on sale of assets Changes in operating assets and liabilities: Prepaid expenses and other current assets Note receivable, net of mineral property sold Accounts payable and other current liabilities Net cash (used in) operating activities Investing activities: Sale of short-term investments - net Purchase of Vendetta units Sale of Kinross calls Additions to other assets Net cash provided by investing activities Financing activities: Repurchase of Solitario common stock for cancellation Net cash used in financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 44CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017(in thousands of U.S. Dollars) For the year ended
December 31, 2018 2017 Operating activities: Net loss $ (3,598 ) $ (942 ) Adjustments to reconcile net loss to net cash used in operating activities: Unrealized loss on marketable equity securities 1,058 — Gain on sale of marketable equity securities — (578 ) Gain on derivative instruments �� (271 ) Employee stock option expense 660 50 Depreciation and amortization 25 13 Loss on sale of assets 1 — Changes in operating assets and liabilities: Prepaid expenses and other current assets (50 ) 52 Accounts payable and other current liabilities 547 18 Net cash (used in) operating activities (1,357 ) (1,658 ) Investing activities: Sale of short-term investments - net 1,371 3,563 Loan to Zazu — (1,500 ) Purchase of Zazu, net of cash acquired — (417 ) Purchase of marketable equity securities — (578 ) Proceeds from sale of marketable equity securities — 666 Sale of derivative instrument, net — 53 Additions to other assets (10 ) (2 ) Net cash provided by investing activities 1,361 1,785 Financing activities: Repurchase of Solitario common stock for cancellation (101 ) (32 ) Net cash used in financing activities (101 ) (32 ) Net (decrease) increase in cash and cash equivalents (97 ) 95 Cash and cash equivalents, beginning of year 214 119 Cash and cash equivalents, end of year $ 117 $ 214 Supplemental disclosure of non-cash activities: Additions to mining equipment –Zazu, through issuance of stock in Acquisition — $ (100 ) Additions to mineral property- Zazu, through issuance of stock in Acquisition — $ (15,611 ) Additions to current assets, net – Zazu, through issuance of stock in Acquisition — $ (42 ) Issuance of common stock – Zazu acquisition — $ 13,654 Convertible debenture – due from Zazu cancelled — $ 1,510 Asset retirement obligation - Lik — $ 125 Issuance of replacement options – Zazu — $ 164 Transfer of warrant value to marketable equity securities on exercise of
Vendetta Warrants — $ 949 See Notes to Consolidated Financial Statements.45SOLITARIO ZINC CORP.20182019 and 2017wholly-ownedwholly owned subsidiary of Crown Resources Corporation ("Crown"). 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. Solitario’s primary business is to acquire exploration mineral properties 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 that point, or sometime prior to that point, Solitario would likely attempt to sell its mineral properties, pursue their development either on its own, or through a joint venture with a partner that has expertise in mining operations, or create a royalty with a third party that continues to advance the property. As a result of the Acquisition (defined below), Solitario is now primarily focused on the acquisition and exploration of zinc-related 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 corporate transactions for the potential acquisition ofas a means to acquire an interest in new precious and base metal properties and assets with exploration potential oras well as other potential corporate transactions and business combinations that Solitario determines to be favorable to Solitario.Purchase of ZazuOn July 12, 2017, Solitario completed the acquisition of Zazu Metals Corp. (“Zazu”) pursuant to a definitive arrangement agreement between Solitario and Zazu (the "Arrangement Agreement") whereby Solitario agreed to acquire all of the issued and outstanding common shares of Zazu (the "Zazu Shares") by way of a statutory plan of arrangement (the "Arrangement") under theCanada Business Corporations Act (the “Acquisition”). The Arrangement was approved by the Ontario (Canada) Superior Court of Justice on July 7, 2017. Per the Arrangement, Solitario issued 19,788,177 shares of its common stock on July 12, 2017 in exchange for all of the issued and outstanding Zazu Shares, which represented 0.3572 shares of Solitario common stock for each outstanding Zazu Share. Solitario granted stock options to acquire an aggregate of 1,782,428 shares of Solitario common stock to Zazu option holders the (“Replacement Options”) in connection with the Acquisition. The total purchase price of $16,110,000, recorded during the year ended December 31, 2017, is detailed below. Results of operations for Zazu are included in Solitario’s consolidated financial statements from the date of the Acquisition.(in thousands) July 12, 2017 Issuance of 19,788,177 shares of Solitario common stock $ 13,654 Replacement options 164 Investment banking and transaction costs 782 Convertible debenture due Solitario, cancelled 1,510 Total purchase price $ 16,110 The Acquisition was treated as an asset purchase. Accordingly, as the purchase of an asset (essentially the interest in the Lik project in Alaska) Solitario capitalized related transaction costs associated with the Acquisition, including the following costs:(in thousands) July 12, 2017 Investment banking fees $ 552 Legal and accounting costs 196 Other costs and fees 34 Total capitalized transaction costs $ 782 46The purchase price was allocated to the assets and liabilities acquired from Zazu on the date of the Acquisition as follows:(in thousands) July 12, 2017 Cash $ 974 Other current assets 42 Equipment 100 Mineral property 15,611 Accounts payable (492 ) Asset retirement obligation – Lik (125 ) Total purchase price $ 16,110 The cash transaction costs less the cash acquired are shown as the cash transaction costs for the year ended December 31, 2017 on the consolidated statement of cash flows. Solitario also incurred stock issuance costs of $117,000, related to the Acquisition, which were charged to equity.property,properties, including the sale on April 26,of certain mineral royalty properties in January 2019, discussed below, and the sale in June 2018 of its interest in the royalty on the Yanacocha property (discussed below)property. Revenues and the sale in 2015 of its former interest in Mount Hamilton LLC the owner of its former Mt. Hamilton project (the “Mt. Hamilton Transaction”), and joint venture property payments and the sale of a royalty on its former Mt. Hamilton project. Revenues/ or proceeds from the sale or joint venture of properties although significant when they occur,or assets have not been a consistent annual source of revenuecash and would only occur in the future, if at all, on an infrequent basis.expected to continuecontinuing the developmentexploration and furtherance of the Florida Canyon project and Solitario is monitoring progress at Florida Canyon. Solitario is working with its 50% joint venture partner, Teck American Incorporated, a wholly-ownedwholly owned subsidiary of Teck Resources Limited (both companies are referred to as “Teck”), in the Lik deposit to further the exploration of the Lik project, and to evaluate potential development plans for the Lik project.wholly-ownedwholly owned subsidiaries. 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.Solitario adopted ASU 2014-09 (defined below under “Recent accounting pronouncements”) on January 1, 2018. ASU 2014-09 primarily impacts revenue recognition based upon the timing of transfer of control of goods and services sold. Historically 2018 for2019 of $408,000 related to the first time in more than five yearsRoyalty Sale, discussed above, and of $502,000 during 2018 from the sale of anits former Yanacocha exploration mineral property, andproperty. Solitario expects any property sales in the future to also be on an infrequent basis. ThePrior to the Yanacocha sale, the last proceeds from joint venture property payments was in 2015 and Solitario does not expect to record joint venture property payments on any of its currently held properties for the foreseeable future. Historically, Solitario’s revenues have been infrequent and significant individual transactions and have only been from sales to well known or vetted mining companies. Solitario has never had a The adoption of ASU 2014-09 had no impact on Solitario’s recorded revenues for the year ended December 31, 2018 or 2017. Solitario recorded the revenue of $502,000 from the sale of the Yanacocha Royalty in accordance with ASU 2014-09.47Solitario’s carrying value of short-term investments; (ii) the recoverability of mineral properties related to its mineral exploration properties and their future exploration potential; (iii)(ii) the fair value of stock option grants to employees; (iv)(iii) the ability of Solitario to realize its deferred tax assets; and (v)(iv) Solitario's investment in marketable equity securities.2018,2019, approximately $113,000$554,000 of Solitario’s cash and cash equivalents are held in brokerage accounts and foreign banks, which are not covered under the Federal Deposit Insurance Corporation (“FDIC”) rules for the United States.2018,2019, Solitario has United States Treasury securities (“USTS”) with maturities of 1530 days to 2217 months recorded at their fair value of $9,345,000. At December 31, 2018, Solitario has $500,000 in separate bank certificates of deposit (“CDs”) each with a maximum value of $250,000, and each of which are covered by Federal Deposit Insurance Corporation insurance to the full-face value of the CDs. At December 31, 2018, the CDs have maturities of three months. In addition, Solitario has a US dollar bank savings account in Peru with a fair value of $378,000.$6,829,000. Solitario’s short-term investments are recorded at their fair value, based upon quoted market prices. 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 2016.. During 2017, Solitario exercised all of itsthe 2016 Vendetta Warrants. During 2019, Solitario acquired additional Vendetta units, which included 2019 Vendetta Warrants and at December 31, 2018 and 2017 has no Vendetta Warrants.(defined below). Changes in fair value of the 2019 Vendetta Warrants are recognized in the statements of operations in the period of change as gain or loss on derivative instruments. Solitario has entered into covered calls from time to time on its investment in 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 and its warrants are recognized in the statements of operations in the period of the change as gain or loss on derivative instruments.48and accounts payable and the SilverStream Note, the carrying amounts approximate fair value due to their short-term maturities. Solitario's short-term investments in USTS, and CDs, 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 8,9, “Fair Value of Financial Instruments,” below. A decline in fair value that is considered other than temporary is recognized as a loss in the consolidated statements of operations.20182019 and 20172018 were conducted primarily in Peru, a portion of the payments for the land, leasehold and exploration agreements as well as certain exploration activities are denominated in United States dollars. Foreign currency gains and losses are included in the results of operations in the period in which they occur.6,7, “Income Taxes,” below.20182019 and 2017.2018. Potentially dilutive shares, consisting of outstanding common stock options for 5,223,1604,373,000 and 1,982,428,5,223,160, respectively, Solitario common shares were excluded from the calculation of diluted earnings (loss) per share for the year ended December 31, 20182019 and 20172018 because the effects were anti-dilutive.4910,11, “Employee Stock Compensation Plans,” below.In2016 the FASB issued ASU 2016-01, “Financial Instruments – Overall (subtopic 825-10) Recognition and Measurement of Financial Assets and Liabilities,” (“ASU 2016-01”). ASU 2016-01 revises the classification and measurement of investment in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU 2016-01 requires the change in fair value of many equity investments to be recognized in net income. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted.1, 2019, Solitario adopted ASU 2016-01 in the first quarter of 2018. Solitario recorded a cumulative-effect adjustment for the change in accounting principle to accumulated deficit of $576,000 related to the adoption of ASU 2016-01. See also Note 9, “Shareholders’ Equity and Accumulated Other Comprehensive Income,” below.In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606):Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. This includes significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Solitario adopted ASU No. 2014-09 in 2018 and it had no impact on Solitario’s financial position or results of operations.Recently issued accounting pronouncementsIn February 2016, the FASB issued Accounting Standards Updated (“ASU”)Update No. 2016-02 “Leases”Leases (“ASU 2016-02”). The new standard establishes a which requires the application of ASC 842 and the recognition of right-of-use (ROU) model that requires a lessee to record a ROU assetassets and a lease liability on the balance sheet forrelated liabilities associated with all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the patternthat are not short-term in nature. As a result of expense recognition in the income statement. The new standard is effective for interim and annual periods beginning after December 15, 2018. The new rules will be effective for Solitario in the first quarter of 2019. Solitario expect the adoption of ASU 2016-02, to materially change net income or total expense in the statementSolitario recorded both an operating lease asset for its Wheat Ridge, Colorado office of operations from its current accounting methods$82,000 and has estimated it will record an asset and offsettingoperating lease liability of approximately $80,000 in$82,000 related to the consolidated balance sheet uponsame lease. The adoption of ASU 2016-02 did not require the recording of any other assets or liabilities on our condensed consolidated balance sheets and had an immaterial effect on Solitario’s consolidated statement of operations for 2019 and its consolidated statement of cash flows for 2019. Solitario has elected the practical expedient option to use January 1, 2019, the effective date of adoption, as the initial date of transition and not to restate comparative prior periods and to carry forward historical lease classification. See Note 4, “Operating Leases” for more information and disclosures regarding Solitario’s leases.January 2019.In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02”), which allows for a reclassification from accumulated other comprehensive income or loss to retained earnings or accumulated deficit for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“TCJA”). ASU 2018-02 also requires certain related disclosures. ASU 2018-02 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. Early adoption is permitted. Solitario does not expect the adoption of ASU 2018-02 will have a material effect on Solitario’s financial position or results of operations.(in thousands) December 31, 2018 2017 Exploration Lik project (Alaska – US) $ 15,611 $ 15,611 La Promesa (Peru) 6 6 Montana Royalty property (US) 40 40 Total exploration mineral property $ 15,657 $ 15,657 50(in thousands) Exploration Lik project (Alaska – US) La Promesa (Peru) Montana Royalty property (US) Total exploration mineral property 20182019 and 20172018 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. At December 31, 2018,2019, 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. Solitario acquired the Lik project during 2017 in the Acquisition; see Note 1 above.2018,2019, no further standby joint-venture payments are due to Solitario on the Florida Canyon project. At December 31, 20182019 and 2017,2018, Solitario has no remaining capitalized costs related to its Florida Canyon joint venture. a Newmont for $502,000 in cash. Newmont owns the underlying mineral concessions covered by the Yanacocha Royalty. None of the concessions covered by the Yanacocha Royalty have any reported reserves or resources. Solitario had no mineral property capitalized cost in the Yanacocha Royalty and recorded Mineral Property Revenue of $502,000 during 2018.During 2017, abandoneddid not abandon or impair any of its interests in the Aconchiproperties during 2019 or 2018 and Norcan exploration properties in Mexico and Solitario no longer holds any interest in those properties. However, there were no capitalized mineral property costs related to these properties and Solitario did not record any mineral property write-downs during the yearyears ended December 31, 2017. For the year ended
December 31,(in thousands) 2018 2017 Geologic and field expenses $ 1,165 $ 447 Administrative 89 252 Total exploration expense $ 1,254 $ 699 (in thousands) Geologic and field expenses Administrative Total exploration expense Acquisition,acquisition of Zazu, 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.51“Vendetta“2016 Vendetta Warrants”). The purchase price of the units of $289,000 was allocated between the Vendetta common shares and the 2016 Vendetta Warrants based upon total fair values on the date of purchase. The Vendetta common stock was allocated a purchase cost of $186,000 and the 2016 Vendetta Warrants were allocated a purchase cost of $103,000. As discussed below, duringDuring 2017 Solitario exercised all of its 2016 Vendetta Warrants and sold 3,480,000 shares of Vendetta common stock.2018,2019, Solitario owns 11,000,000owned 14,500,000 shares of Vendetta common stock which are carried at their fair value based upon the quoted market price of Vendetta, a publicly traded companywhose common shares are listed on the TSX venture exchange, and included in marketable equity securities.(in thousands) Year ended
December 31, 2018 2017 Marketable equity securities at cost $ 1,714 $ 1,714 Cumulative unrealized (loss) gain on marketable equity securities (129 ) 929 Marketable equity securities at fair value $ 1,585 $ 2,643 The following table represents changes(in thousands) Marketable equity securities at cost Cumulative unrealized (loss) gain on marketable equity securities Marketable equity securities at fair value securities:(in thousands) Year ended
December 31, 2018 2017 Cost of marketable equity securities sold $ — $ 88 Realized gain on marketable equity securities sold — 578 Proceeds from the sale of marketable equity securities sold — (666 ) Purchase of marketable equity securities — 1,528 Gross (loss) gain on marketable equity securities (1,058 ) 442 Change in marketable equity securities at fair value $ (1,058 ) $ 1,304 The following table represents the realized and unrealized gain (loss)securities of $165,000. Solitario did not acquire any marketable equity securities during 2018. Solitairo did not sell any marketable equity securities during 2019 or 2018. Solitario recorded a loss on marketable equity securities:(in thousands) Year ended
December 31, 2018 2017 Gross (loss) gain on marketable securities $ (1,058 ) $ 442 Realized gain on marketable equity securities sold — (578 ) Unrealized (loss) on marketable equity securities $ (1,058 ) $ (136 ) During 2017, Solitario sold 3,480,000 Vendetta common shares,securities of $711,000 and $1,058,000, respectively, during 2019 and 2018 for cash proceeds of $666,000. In addition, during 2017, Solitario exercised its Vendetta Warrants, also discussed belowthe change in Note 4, “Other Assets” and received 7,240,000 common shares of Vendetta. Solitario transferred the fair value of its marketable equity securities.Vendetta Warrantsright-of-use office lease asset for the WR Lease is classified as other assets and the related liability separated between current and non-current office lease liabilities in the consolidated balance sheet. Lease expense is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. During 2019, Solitario recognized $40,000 of non-cash lease expense for the WR Lease included in general and administrative expense. Cash lease payments of $37,000 were made on the dateWR Lease during 2019 and this amount, less $3,000 of exerciseimputed interest during 2019, reduced the related liability on the WR Lease. The discount rate within the WR Lease is not determinable and Solitario applied a discount rate of $950,000, along with the cash paid to exercise the Vendetta Warrants5% based upon Solitario’s estimate of $578,000 to marketable equity securities as theits cost of capital in recording the 7,240,000 common sharesWR Lease.Vendetta acquired.Solitario’s lease liability for its WR Lease are as follows at December 31, 2019:(in thousands) Lease payments per year 2020 2021 Total lease payments Less amount of payments representing interest Present value of lease payments (in thousands) 52Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from WR Lease payments Non-cash amounts related to the WR lease Right of use assets recorded in exchange for new operating lease liabilities 4. Assets:(in thousands) December 31, 2018 2017 Furniture and fixtures, net of accumulated depreciation $ 36 $ 31 Lik project equipment, net of accumulated depreciation 70 90 Exploration bonds and other assets 4 4 Total other assets $ 110 $ 125 (in thousands) Furniture and fixtures, net of accumulated depreciation Lik project equipment, net of accumulated depreciation Office lease asset Vendetta warrants Exploration bonds and other assets Total other assets Acquisition.acquisition of the Lik project. The equipment is being depreciated over a five-year life on a straight-line basis and Solitario recorded depreciation expense of $20,000 during 2019 and $10,000, respectively, during 2018 and 2017 related to this equipment.During 2017,exercised 7,240,000 of itsacquired the 2019 Vendetta Warrants and received 7,240,000 Vendetta common shares, by paying $578,000 in cash to Vendetta. As a result, as of December 31, 2017, Solitario no longer owns any Vendetta Warrants. Upon the exercise of the Vendetta Warrants, Solitario transferredrecorded $68,000 for the fair value of the 2019 Vendetta Warrants, discussed above, and recorded a loss on derivative instruments related to the 2019 Vendetta Warrants of $47,000, see Note 8, “Derivative Instruments,” below.exercisethe sale of $950,000 along with$185,000 and the cash paid to exercise the Vendetta Warrants of $578,000 to marketable equity securities as the costfair value of the 7,240,000 common sharesSilverStream Note on the date of Vendetta acquired. During the year endedsale of $263,000 less the carrying value of the royalties sold of $40,000.2017,2019, the SilverStream Note is due June 30, 2020 and accrues interest at 8% per annum simple interest. Solitario recorded interest income of $12,000 from the SilverStream Note during 2019. As of December 31, 2019, the SilverStream Note was recorded at $268,000, based upon the current US dollar / Canadian dollar exchange rate, and Solitario recorded a credit to exchange gain on derivative instruments of $216,000$5,000 related to the Vendetta Warrants, with no similar itemSilverStream Note, included in general and administrative expense during 2018; see Note 7, “Derivative Instruments,” below.5.Revenue mineral property sale(the “Yanacocha Royalty”) to a wholly owned subsidiary of Newmont Mining Corporation (“Newmont”) for approximately $502,000 in cash. The Yanacocha Royalty covered 43 concessions totaling 36,052 hectares. Newmont owns the underlying mineral concessions covered by the Yanacocha Royalty. None of the concessions covered by the Yanacocha Royalty had any reported reserves or resources. Solitario had no mineral property capitalized cost in the Yanacocha Royalty and recorded Mineral Property Revenue of $502,000 during 2018.6.$322,000 in 2018, and 2017, respectively.20182019 and 20172018 consolidated balance sheets include the following components:(in thousands) 2018 2017 Deferred tax assets: Loss carryovers $ 12,432 $ 12,178 Investment in Mineral Property 1,669 1,952 Capitalized Exploration Costs 877 1,205 Stock option compensation expense 150 13 Royalty — 989 Unrealized loss on derivative securities 60 28 Other 135 135 Valuation allowance (15,099 ) (16,249 ) Total deferred tax assets 224 251 Deferred tax liabilities: Unrealized gain on derivative securities — — Unrealized gains on marketable equity securities 209 230 Other 15 21 Total deferred tax liabilities 224 251 Net deferred tax liabilities $ — $ — 53(in thousands) Deferred tax assets: Loss carryovers Investment in Mineral Property Capitalized Exploration Costs Stock option compensation expense Unrealized loss on derivative securities Other Valuation allowance Total deferred tax assets Deferred tax liabilities: Unrealized gains on marketable equity securities Other Total deferred tax liabilities Net deferred tax liabilities (in thousands) 2018 2017 Expected income tax benefit $ (756 ) $ (355 ) Equity based compensation — — Foreign tax rate differences (27 ) 17 State income tax (143 ) (27 ) Impact of Tax Legislation — 4,494 Adjustment to Deferred Taxes 2,058 — Change in Tax Rate 53 — Change in valuation allowance (1,164 ) (4,120 ) Permanent differences and other (21 ) (9 ) Income tax (benefit) expense $ — $ — (in thousands) Expected income tax benefit Equity based compensation Foreign tax rate differences State income tax Expiration of Capital Loss Carryovers Adjustment to Deferred Taxes Change in Tax Rate Change in valuation allowance Permanent differences and other Income tax (benefit) expense In accordance with ASC 740, Income Taxes, the impact of a change in tax law is recorded in the period of enactment. Consequently, Solitario recorded a decrease to its net deferred tax assets of $4,494,000 with a corresponding net adjustment to the valuation allowance for the year ended December 31, 2017. 20182019 and 2017.As a result of the acquisition of Zazu during the year ended December 31, 2017, Solitario acquired deferred tax assets totaling $10,366,000 primarily related to US federal and state net operating losses, mineral properties and exploration costs, and Canadian net operating losses. These deferred tax assets were fully offset by a valuation allowance. Solitario does not believe it is more likely than not that the assets will be utilized in the future. 2018. During 2017, the valuation allowance was increased primarily due to the acquisition of Zazu and the impact of the Tax Act.2018,2019, Solitario has unused US NOLFederal Net Operating Loss carryovers of $15,404,000$17,576,000 and unused US State NOLNet Operating Loss carryovers of $15,980,000$18,174,000 which begin expiring in 2027. As a result of the ownership change of Zazu Metals (Alaska) Corp, utilization of some of these federal and state losses will be limited due to the annual limitation provided by Section 382 of the Internal Revenue Code. Solitario has unused Capital Loss carryovers of $11,132,000$10,416,000 for US Federal and US State purposes which begin expiring in 2019.2020. Solitario has Canadian loss carryforwards of $9,205,000$9,611,000 which begin expiring in 2027. Other foreign loss carryforwards for which Solitario has provided a full valuation allowance related to Solitario’s exploration activities in Peru. The Peru losses do not expire.5420182019 or December 31, 2017,2018, or for the years then ended as Solitario had no unrecognized tax benefits.20162017 and forward and Solitario’s Peru and State of Colorado returns for tax years 20142015 and forward are subject to examination. Solitario’s policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. Solitario has no accrued interest or penalties related to uncertain tax positions as of December 31, 2018,2019, or December 31, 20172018 or for the years then ended.7.year. Solitario has not designated its covered calls as hedging instruments as described in ASC 815, “Derivatives and Hedging,”year and any changes in the fair value of its covered calls are recognized in the statement of operations in the period of the change. During 2019 Solitario sold covered calls against its holdings of Kinross for $9,000 in cash, all of which expired unexercised during 2019. As of December 31, 2018, all of the covered calls had expired unexercised and2019, there were no remaining liabilities related to those calls entered during the year.Thewere exercised during 2017 and there are none remaining atwhich give Solitario the right to purchase 3,450,000 Vendetta common shares for Cdn$0.13 per share through July 31, 2022. At December 31, 2018; see Note 4, “Other Assets” above.(in thousands) Year ended
December 31, 2018 2017 Gain on Kinross calls $ — $ 55 Gain on Vendetta Warrants — 216 $ — $ 271 8.(in thousands) Gain on Kinross calls – realized Loss on Vendetta Warrants – unrealized primarily based on publicly available quoted market prices.20182019 and 2017,2018, there were no reclassifications in financial assets or liabilities between Level 1, 2 or 3 categories.55(in thousands) Assets Short-term investments Marketable equity securities 2019 Vendetta Warrants (in thousands) Level 1 Level 2 Level 3 Total Assets Short-term investments $ 10,223 $ — $ — $ 10,223 Marketable equity securities $ 1,585 $ — $ — $ 1,585 The following is a listing of Solitario’s financial assets and liabilities required to be measured at fair value on a recurring basis and where they are classified within the hierarchy as of December 31, 2017:(in thousands) Level 1 Level 2 Level 3 Total Assets Short-term investments $ 11,642 $ — $ — $ 11,642 Marketable equity securities $ 2,643 $ — $ — $ 2,643 (in thousands) Assets Short-term investments Marketable equity securities 20182019 and 2017,2018, Solitario’s holdings of short-term investments consist of USTS and CD’s and are recorded at their fair value based upon quoted market prices.20182019 and 2017,2018, the fair value of Solitario’s holdings in shares of Vendetta, Kinross, and TNR marketable equity securities and the Kinross calls are based upon quoted market prices.2018,2019, Solitario did not change any of the valuation techniques used to measure its financial assets and liabilities at fair value.9.20192020 property rentals and option payments for properties Solitario owns, has under joint venture or operateSolitario operates to be approximately $729,000.$859,000. Assuming that Solitario’s joint ventures continue in their current status and that Solitario does not appreciably change its property positions on existing properties, approximately $712,000$816,000 of these annual payments are paid or are reimbursable to us by Solitario’s joint venture partners. In addition, Solitario may be required to make further payments in the future if it acquires new properties or enters into new agreements.In August of 2018, Solitario agreed to fund a portion of a 2018 – 2019 drilling program at the Florida Canyon project. Per the agreement, Solitario will fund up to $1,580,000 of a planned 41-hole 17,000-meter drilling program to be conducted through December 31, 2019 (the “Drilling Program”). Upon Nexa completing the first 1,700 meters of the Drilling Program, Solitario will pay Nexa $527,000, upon completion of the next 1,700 meters (3,400 meters total) of the Drilling Program, Solitario will pay Nexa $527,000, and upon completion of the next 1,700 meters (5,100 meters total) of the Drilling Program, Solitario will pay Nexa the balance remaining on its $1,580,000 funding commitment, or $526,000. Solitario has no obligation to pay Nexa prior to the attainment of the separate 1,700-meter thresholds. The funding commitments are in the form of an advance on Solitario’s commitment to fund 30% of any future development of Florida Canyon under the existing joint venture agreement with Nexa. Accordingly, in the event Florida Canyon is developed, which cannot be assured at this time, any funds paid to Nexa under this agreement, will reduce the amount of Solitario’s obligation to fund 30% of future development costs, and / or repay loans from Nexa for future development costs at the Florida Canyon project. As of December 31, 2018, Nexa had completed four holes and a total of 2,203 meters under the Drilling Program, and Solitario has recorded an account payable to Nexa of $527,000 and recorded a charge to exploration expense of $527,000, should Nexa complete the remaining 2,897 meters (5,100 meters less the completed 2,203 meters) during 2019, Solitario will be obligated to pay Nexa $1,053,000 in addition to its currently recorded account payable of $527,000 during 2019.5610.Grant Date Option – grant date price Options granted Expected life years Expected volatility Risk free interest rate Weighted average fair value Grant date fair value Grant Date 1 /02/18(1) 11 /01/18(2) Option – grant date price $ 0.62 $ 0.31 Options granted 100,000 1,623,000 Expected life years 0.80 5.00 Expected volatility 66 % 64 % Risk free interest rate 1.0 % 3.0 % Weighted average fair value $ 0.12 $ 0.17 Grant date fair value $ 12,000 $ 282,000 (1)Grant Date Option – grant date price Options granted Expected life years Expected volatility Risk free interest rate Weighted average fair value Grant date fair value grant date and was fully vested during 2018. Option remains vested for a maximum of five years from date of grant or termination of the consulting contract.(2)Option grants have a five-year term, and vest 25% on date of grant and 25% on each of the next three anniversary dates.The following table shows the grant date fair valueand was fully vested during 2018. Option remains vested for a maximum of Solitario’s awards during 2017 pursuant tofive years from date of grant or termination of the 2013 Plan:Grant Date 7 /12/17(1) 7 /12/17(1) 7 /12/17(1) 7 /12/17(1) 9 /01/17(2) 9 /01/17(3) Option – grant date price $ 1.74 $ 1.52 $ 1.30 $ 0.54 $ 0.77 $ 0.77 Options granted 357,200 425,068 785,840 214,320 200,000 2,300,000 Expected life years 0.84 1.35 1.50 1.50 5.0 5.0 Expected volatility 67 % 67 % 67 % 67 % 64 % 64 % Risk free interest rate 1.0 % 1.0 % 1.0 % 1.0 % 1.7 % 1.7 % Weighted average fair value $ 0.02 $ 0.08 $ 0.12 $ 0.36 $ 0.42 $ 0.42 Grant date fair value $ 7,000 $ 26,000 $ 72,000 $ 59,000 $ 126,000 $ 970,000 (1)Replacement Options had terms of May 15, 2018, November 15, 2018, January 12, 2019 and January 12, 2019. The Replacement Options were fully vested on the date of grant. Replacement Options were priced in Canadian Dollars, the grant day prices reflect the US Dollar price exchange rate of .07749 Cdn$/US$ on the date of grant.(2)Options grants have a five-year term, and vest 25% on date of grant and 25% on each of the next three anniversary dates.(3)Conditional Options, (defined below) approved by Solitario shareholders on June 19, 2018.
consulting contract.5720182019 and 20172018 no options granted from the 2013 Plan were exercised. The following table summarizes the activity for stock options outstanding under the 2013 Plan for the years ended December 31, 20182019 and 2017: 2018 2017 Weighted Weighted Average Aggregate Average Aggregate RSUs/ Exercise Intrinsic RSUs/ Exercise Intrinsic Options Price Value(1) Options Price Value(2) Outstanding, beginning of year 1,982,428 $ 1.29 — — Granted(3) 4,023,000 $ 0.58 1,982,428 $ 1.29 Exercised — — — — Expired (782,268 ) $ 2.09 — — Forfeited — — — — Outstanding, end of year 5,223,160 $ 0.76 $ — 1,982,428 $ 1.29 $ 9,000 Exercisable, end of year 2,770,910 $ 0.95 $ — 1,832,428 $ 1.33 $ 9,000 Outstanding, beginning of year Exercised Expired Forfeited Outstanding, end of year Exercisable, end of year (2) Intrinsic value based upon December 31, 2017 price of a share of Solitario common stock as quoted on the NYSE American exchange of $0.60 per share.20182019 and 2017,2018, Solitario recorded $660,000$343,000 and $50,000,$660,000, respectively, of stock option expense under the 2013 Plan for the amortization of the grant date fair value of each of its outstanding options with a credit to additional paid-in-capital. At December 31, 2018,2019, the total unrecognized stock option compensation cost related to non-vested options is $639,000$317,000 and is expected to be recognized over a weighted average period of 2414 months.11.WeSolitario recorded a cumulative-effect adjustment for the change in accounting principle to from other comprehensive income in the equity section of the consolidated balance sheet to accumulated deficit of $576,000 related to the adoption of ASU 2016-01. During 2017 we recorded an unrealized loss on marketable equity securities of $136,000 as other comprehensive income in the statement of shareholders equity for the year ended December 31, 2017.12.20182019 Solitario’s Board of Directors extended the expiration date of the share repurchase program through December 31, 2019.2020. During the years ended December 31, 20182019 and 2017,2018, Solitario purchased 263,10038,400 and 47,200263,100 shares of Solitario common stock, respectively, for an aggregate purchase price of $101,000$13,000 and $32,000,$101,000, respectively. As of December 31, 2018,2019, Solitario has purchased a total of 930,900969,300 shares for an aggregate purchase price of $449,000$462,000 under the share repurchase program since its inception.EventThe financial statements and related disclosures include an evaluation ofeventsleading upsubsequent to December 31, 2019 to assess the need for potential recognition or disclosure in this report. Such events were evaluated through and including February 28, 2019, which is the date thethese financial statements were available to be issued. On January 22, 2019, Solitario announcedBased upon this evaluation, it was determined that no subsequent events occurred that require recognition or disclosure in the sale of its interests in a retained royalty on the Pedra Branca project in Brazil, a retained royalty on non-producing exploration properties in Mexico, and a royalty on certain non-producing mineral claims in Montana to SilverStream for Cdn$250,000 in cash and a one-year note from SilverStream for Cdn$350,000.
financial statements.58ItemItem2018,2019, Solitario’s internal control over financial reporting is effective and that its disclosure controls and procedures are effective to ensure that information required to be disclosed by Solitario in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods and are designed to ensure that information required to be disclosed in its reports is accumulated and communicated to Solitario’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There were no changes in internal control over financial reporting during the three months ended December 31, 2018.Item59PARTIIIItem20182019 pursuant to Section 14(a) of the Exchange Act (the "2019"2020 Proxy").Item20192020 Proxy.Item20192020 Proxy.Item20192020 Proxy.Item20192020 Proxy.60Item20182019 and 2017
201820182019 and 2017Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018 and 201720182019 and 2017
201820182019 and 2017
2019ItemNone.61SOLITARIO ZINC CORP. By:By: Chief Financial Officer Date:James R. MaronickFebruary 28, 2019 Chief Financial Officer Signature Title Date /s/ Principal Executive Officer and Director February 28, 20192020 /s/ James R. Maronick,
Chief Financial Officer Principal Financial and Accounting Officer February 28, 20192020 | | | | | | | | | | | | | || /s/ John Labate A majority of/s/the February 28, 2019Brian LabadieDirectors2020 /s/ Brian Labadie February 28, 2020 /s/ James Hesketh February 28, 2020 /s/ Gil Atzmon /s/ Joshua D. Crumb /s/ James R. Maronick, Attorney-in-fact Description /s/Gil Atzmon/s/Joshua D. CrumbBy: /s/ James R. Maronick, Attorney-in-fact
3.162INDEX TO EXHIBITSDescription2.1Arrangement Agreement and Plan of Arrangement dated April 26, 2017, among Solitario Exploration & Royalty Corp. and Zazu Metals Corporation (incorporated by reference to Exhibit 2.1 to Solitario’s Current Report on Form 8-K filed on July 14, 2017)3.1Amended and Restated Articles of Incorporation of Solitario Exploration & Royalty Corp., as Amended (incorporated by reference to Exhibit 3.1 to Solitario’s Form 10-Q filed on August 10, 2010) Articles of Amendment to Restated Articles of Incorporation of Solitario Zinc Corp. (incorporated by reference to Exhibit 3.1 to Solitario’s Current Report on Form 8-K filed on July 14, 2017) Amended and Restated By-laws of Solitario Exploration & Royalty Corp. (incorporated by reference to Exhibit 99.1 to Solitario’s Form 8-K filed on March 22, 2013) Form of Common Stock Certificate of Solitario Zinc (incorporated by reference to Exhibit 4.1 to Solitario’s Form 10-Q filed on November 8, 2017) 10.1#Description of Common Stock 2013 Solitario Exploration & Royalty Corp. Omnibus Stock and Incentive Plan (incorporated by reference to Exhibit 10.2 to Solitario’s Form 8-K filed on June 20, 2013) Alliance Agreement, dated January 18, 2005, between Solitario Resources Corporation and Newmont Overseas Exploration Limited (incorporated by reference to Exhibit 99.1 to Solitario's Form 8-K filed on January 20, 2005) Change in Control Severance Benefits Agreement between Solitario Resources Corporation and Christopher E. Herald, dated as of March 14, 2007 (incorporated by reference to Exhibit 99.1 to Solitario's Form 8-K filed on March 14, 2007) Change in Control Severance Benefits Agreement between Solitario Resources Corporation and James R. Maronick, dated as of March 14, 2007 (incorporated by reference to Exhibit 99.2 to Solitario's Form 8-K filed on March 14, 2007) Change in Control Severance Benefits Agreement between Solitario Resources Corporation and Walter W. Hunt, dated as of March 14, 2007 (incorporated by reference to Exhibit 99.3 to Solitario's Form 8-K filed on March 14, 2007) Framework Agreement for the Exploration and Development of Potential Mining Properties, related to Solitario's 100% owned Florida Canyon project in Peru between Minera Florida Canyon S.A., Minera Solitario Peru S.A.C., Solitario Resources Corporation, and Votorantim Metais – Cajamarquilla S.A., dated March 24, 2007 (incorporated by reference to Exhibit 10.2 to Solitario's Form 8-K filed on October 4, 2007) 10.7#Performance Agreement for Funding of Drilling Program between Compañía Minera Milpo, S.A.A. and Minera Solitario Peru S.A.C, related to the Framework Agreement for the Development of Mining Properties dated August 1, 2019 First Amendment to the 2013 Solitario Exploration & Royalty Corp. Omnibus Stock and Incentive Plan (incorporated by reference to Exhibit 10.1 to Solitario’s Form 8-K filed on June 29, 2017) Code of Ethics for the Chief Executive Officer and Senior Financial Officer (incorporated by reference to Exhibit 99.1 to Solitario's Form 8-K filed on July 18, 2006) 21.1*Subsidiaries of Solitario Zinc Corp. 23.1*Consent of EKS&H LLLP23.2*Consent of Plante Moran PLLC Consent of Plante & Moran, PLLC 6324.1*Power of Attorney Power of Attorney 31.1* Certification of Chief Executive Officer pursuant to SEC Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2*Certification of Chief Financial Officer pursuant to SEC Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1*Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101* 101*20182019 and 2017;2018; (ii) Consolidated Statements of Operations for the years ended December 31, 20182019 and 2017;2018; (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018 and 2017; (iv) Consolidated Statements of Shareholders’ Equity for the years ended December 31, 20182019 and 2017; (v)2018; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 20182019 and 2017;2018; and (vi)(v) Notes to the Consolidated Financial Statements.