Solitario Exploration & Royalty Corp. is an exploration stage company
at December 31, 2016 under Industry Guide 7, as issued by the SEC. Solitario
was incorporated in the state of Colorado on November 15, 1984 as a wholly-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. We have been actively
involved in mineral exploration since 1993. Our primary business is to acquire
exploration mineral properties or royalties on mineral properties, and/or to
discover economic deposits on our mineral properties and advance these deposits,
either on our own or through joint ventures, up to the development stage (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. In addition to focusing on our current assets and the
evaluation of mineral properties for acquisition or purchase of royalty interests,
we also evaluate potential strategic corporate transactions for the potential
acquisition of new precious and base metal properties and assets with exploration
potential or business combinations we determine to be favorable to Solitario.
On August 25, 2015, we, along with DHI Minerals (US) Ltd. (“DHI”),
sold our combined interests in the Mt. Hamilton gold project to Waterton Nevada
Splitter, LLC, (“Waterton”) for total cash proceeds of US$30 million
(the “Transaction”) pursuant to a definitive agreement entered into
on June 10, 2015 (the “Agreement”). We sold our 80% interest in
Mt. Hamilton LLC (“MH-LLC”), a limited liability company which held
100% of the Mt. Hamilton project assets, and DHI sold its 20% interest in MH-LLC.
DHI is a wholly-owned subsidiary of Ely Gold and Minerals, Inc. (“Ely”).
We received gross cash proceeds of US$24 million and Ely received gross cash
proceeds of US$6 million. Our costs and fees related to the Transaction, including
broker fees and professional service fees, were $439,000. The Transaction was
structured as the sale of DHI’s and our combined membership interests
in MH-LLC. We recorded a gain on sale related to the Transaction of $12,309,000.
Concurrent with the closing of the Transaction, we paid $5,000,000 plus $7,000
of interest and fees to fully repay the funds we had borrowed (the “RMB
Loan”) pursuant to a facility agreement (the “Facility Agreement”)
with RMB Australia Holdings Limited (“RMBAH”) and RMB Resources,
Inc. (“RMBR”).
The exploration and development of mineral properties is subject to federal,
state, provincial and local laws and regulations in the countries in which we
operate in a variety of ways, including regulation of mineral exploration and
land ownership, environmental regulation and taxation. These laws and regulations,
as well as future interpretation of or changes to existing laws and regulations,
may require substantial increases in capital and operating costs to us and delays,
interruptions, or a termination of operations.
In the United States and the other countries in which we operate, in order to
obtain permits for exploration or potential future development of mineral properties,
environmental regulations generally require a description of the existing environment,
including but not limited to natural, archeological and socio-economic environments,
at the project site and in the region; an interpretation of the nature and magnitude
of potential environmental impacts that might result from such activities; and
a description and evaluation of the effectiveness of the operational measures
planned to mitigate the environmental impacts. Currently the expenditures to
obtain exploration permits to conduct our exploration activities are not material
to our total exploration cost.
The laws and regulations in all the countries in which we operate are continually
changing and are generally becoming more restrictive, especially environmental
laws and regulations. As part of our ongoing exploration activities, we have
made expenditures to comply with such laws and regulations, but such expenditures
could substantially increase our costs to achieve compliance in the future.
Delays in obtaining or failure to obtain government permits and approvals or
significant changes in regulation could have a material adverse effect on our
exploration activities, our ability to locate economic mineral deposits, and
our potential to sell, joint venture or eventually develop our properties, which
could have a material adverse effect on our financial position or results of
operations.
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