Item 7. Management’s Discussion and Analysis
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the information contained in the consolidated financial statements and notes thereto included in Item 8, "Financial Statements and Supplementary Data." Our financial condition and results of operations are not necessarily indicative of what may be expected in future years.
(a). Business Overview and Summary
We are an exploration stage company as defined by rules issued by the SEC. We were incorporated in the state of Colorado on November 15, 1984. In July 1994, we became a publicly traded company on the TSX through our initial public offering. We have been actively involved in mineral exploration since 1993. Our primary focus is the acquisition and exploration of precious metals and zinc-related exploration mineral properties. We have historically held a portfolio of mineral exploration properties and assets for future sale, for joint venture or 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. Although our mineral properties may be developed in the future by us, through a joint venture or by a third party, we have never developed a mineral property. In addition to focusing on our current mineral exploration properties, we also from time to time evaluate potential strategic transactions for the acquisition of new precious and base metal properties and assets with exploration potential.
Our current geographic focus for the evaluation of potential mineral properties is in North and South America; however, we have conducted property evaluations for potential acquisition in other parts of the world. At December 31, 2023, we consider our Golden Crest project in South Dakota, 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. 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 in both North and South America.
As of December 31, 2023, we have balances of cash and short-term investments that we anticipate using, in part, to fund planned 2024 exploration, to further the exploration of our Lik and Golden Crest projects, conduct reconnaissance exploration and to potentially acquire additional mineral properties. The fluctuations in commodity prices of base and precious metals have 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.
In analyzing our activities, the most significant aspect relates to the results of our exploration and potential development activities and those of our joint venture partners on a property-by-property basis. When our exploration or potential development activities, including drilling, sampling and geologic testing, indicate a project may not be economically feasible or contain sufficient geologic or economic potential we may impair or completely write-off the property. Another significant factor in the success or failure of our activities is the price of commodities. For example, when the price of zinc or gold is down, the value of zinc, gold or other precious metal-bearing mineral properties decreases; however, when the price of zinc or gold is up it may become more difficult and expensive to locate and acquire new zinc, gold or other precious metal-bearing mineral properties with potential to have economic deposits.
The potential sale, joint venture or development of our mineral properties will occur, if at all, on an infrequent basis. Historically, we have recorded revenues and met our need for capital in the past through (i) the sale of our investments in, and interest on, money market accounts and our short-term treasury notes and bank certificates of deposit (“CDs”); (ii) issuances of common stock; (iii) sales of our shares of our held marketable equity securities; (iv) sales of covered call options on common stock of Kinross we hold; (v) sale of mineral property interests and assets; (vi) long-term debt secured by our mineral properties; (vii) short-term borrowing; and (viii) joint venture payments, including delay rental payments. During 2023 we issued a total of 13,298,485 shares of our common stock in private transactions for net proceeds of $7,352,000. During 2022 we issued a total of 2,650,724 shares of our common stock pursuant to our ATM Program for net proceeds of $2,023,000. We did not record any mineral property income from the sale of mineral properties during 2023 or 2022. 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.
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(b). Results of Operations
Comparison of the year ended December 31, 2023 to the year ended December 31, 2022
We had a net loss of $3,754,000 or $0.05 per basic and diluted share for the year ended December 31, 2023 compared to a net loss of $3,928,000 or $0.06 per basic and diluted share for the year ended December 31, 2022. As explained in more detail below, the primary reasons for the decrease in net loss during 2023 compared to 2022 was (i) an increase in interest income to $191,000 during 2023 compared to interest income of $131,000 during 2022; (ii) a recorded gain on derivative instruments of $31,000 during 2023 compared to a loss on derivative instruments of $4,000 during 2022; (iii) a loss on sale of marketable equity securities of $201,000 during 2022, compared with no sales of marketable equity securities during 2023; (iv) an unrealized gain on short-term investments of $56,000 during 2023 compared to an unrealized loss on short-term investments of $108,000 during 2022; and (v) an unrealized gain of $83,000 on marketable equity securities during 2023 compared to an unrealized loss on marketable equity securities of $94,000 during 2022. Partially offsetting these factors that contributed to the decrease in our net loss in 2023 were the following (i) an increase in our exploration expense to $2,378,000 during 2023 compared to exploration expense of $2,283,000 during 2022 and (ii) an increase in general and administrative expense to $1,712,000 during 2023 compared to general and administrative expense of $1,360,000 during 2022. Each of these items is discussed in greater detail below.
Our primary exploration activities during 2023 and 2022 were related to our Golden Crest project in South Dakota and our Lik project in Alaska. We recorded $1,798,000 of exploration costs at Golden Crest during 2023 compared to $1,505,000 during 2022. The Golden Crest expenditures during 2023 and 2022 consisted primarily of geologic evaluation of claims for staking, mapping and soil and rock sampling with related assay costs. In addition to these exploration costs, we also capitalized $340,000 of mineral acquisition costs at Golden Crest for our initial acquisition costs related to leasing, staking and filings on claims acquired during 2022 compared to 2023 when we had no staking, leasing or other initial acquisition costs and, accordingly we did not capitalize any initial acquisition costs during 2023. All future exploration and filing costs related to these claims will be expensed as incurred.
Solitario’s share of exploration expenses at our Lik project in Alaska was $404,000 during 2023 compared to exploration costs at our Lik project of $668,000 during 2022. Teck completed a single drill hole during 2022 compared to a three-hole drilling program during 2022 which accounted for the decrease in expenses during 2023 compared to 2022. In addition, Teck performed on-going geologic evaluation of the Lik project during both 2023 and 2022, which included on-site geophysics, mapping and analysis of prior drilling and permitting, as well as on-going site environmental monitoring, evaluation and clean-up as part of a 50/50 exploration program managed by Teck. The geophysical surveys were successful in defining a low-amplitude gravity anomaly that requires further follow-up work. We are evaluating, along with Teck, the completed 2023 and 2022 drilling programs for planned exploration in 2024. Given that the exploration program at our Florida Canyon project in Peru is fully funded by our joint venture partner, Nexa, we incurred relatively small exploration expenses at Florida Canyon of $41,000 during 2023 compared to $16,000 in 2022.
The remaining exploration expenditures during 2023 and 2022 were reconnaissance work, including the evaluation of potential mineral properties for acquisition. Our planned 2024 total exploration and development budget, excluding any new projects, in which we may acquire an interest, is approximately $3,927,000, which reflects planned work at the Golden Crest project, including $2,000,000 for drilling the Golden Crest project, depending on permitting. Our planned exploration activities in 2024 may be modified, as necessary for any drilling programs we may undertake at Golden Crest or projects we may acquire, changes related to any number of factors including, potential acquisition of new properties, joint venture funding, commodity prices and changes in the deployment of our capital.
Exploration expense (in thousands) by property consisted of the following:
(in thousands of dollars)
Year ended
December 31,
Property Name
2023
2022
Golden Crest
$ 1,798
$ 1,505
Florida Canyon
41
16
Lik project
404
668
Reconnaissance exploration activity
135
94
Total exploration expense
$ 2,378
$ 2,283
We believe a discussion of our general and administrative costs should be viewed without the non-cash stock option compensation expense (discussed below). Excluding these costs, general and administrative costs were $1,465,000 during 2023 compared to $1,022,000 during 2022. The major components of our general and administrative costs were (i) salary and benefits expense which increased to $795,000 during 2023 compared to $411,000 during 2022, as a result of increased salaries and an increase in bonuses to $382,000 in 2023 compared to a bonus of $57,000 during 2022; (ii) legal and accounting costs which decreased to $253,000 during 2023 compared to $287,000 during 2022 primarily due to increased accounting costs in 2022 to comply with initial SK-1300 disclosure requirements during 2022; (iii) travel and investor relation costs which increased to $287,000 during 2023 compared to $205,000 during 2022 as a result of additional travel and investor conferences attended during 2023 compared to 2022; and (iv) other costs related to office, insurance and miscellaneous costs which increased to $130,000 during 2023 compared to $119,000 during 2022 as a result of additional activity and general cost increases. We anticipate general and administrative costs for 2024 to be approximately $1,331,000 which will be somewhat lower than the costs incurred during 2023; however, this amount may vary significantly during 2024 depending on the outcome of our exploration activity at Golden Crest and Lik projects and any strategic transactions we may attempt to execute upon.
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We account for our employee stock options under the provisions of Accounting Standards Codification No. 718 (“ASC No. 718”). We recognize stock option compensation expense on the date of grant for 25% of the grant date fair value, and subsequently, based upon a straight-line amortization of the grant date fair value of each of our outstanding options. During the year ended December 31, 2023, we recorded $247,000 of non-cash stock-based compensation expense for the amortization of our outstanding options grant date fair value with a credit to additional paid-in-capital compared to $338,000 of non-cash stock option compensation expense during 2022. The amount was higher during 2022 primarily due to the grant of 2,360,000 options with a total grant date fair value of $876,000, of which Solitario recognized 25% on the grant date or $218,000 compared 50,000options granted during 2023, with a grant date fair value of $16,000 of which Solitario recognized 25% or $4,000 during 2023. The remaining compensation expense was related to the straight-line amortization of our outstanding options in 2023 and 2022. See Note 10, “Employee Stock Compensation Plans,” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data to this Annual Report on 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.
We recorded an unrealized gain on marketable equity securities of $83,000 during 2023 compared to an unrealized loss on marketable equity securities of $94,000 during 2022. The net gain on marketable equity securities during 2023 was primarily related to a $196,000 unrealized gain related to an increase in the value of our holdings of Kinross common stock and an increase of $33,000 in the value of our holdings of Highlander Silver common stock, which was partially offset by an unrealized loss related to the decrease of $111,000 in the value of our holdings of Vendetta stock and a decrease in the value of our holdings of Vox common stock of $35,000 during 2023. The loss during 2022 was primarily related to an unrealized loss on marketable equity securities of $172,000 due to a decrease in the value of our holdings of shares of Kinross common stock and an unrealized loss on marketable equity securities of $59,000 on our holdings of Vox common stock, partially offset by an unrealized gain on marketable equity securities of $137,000 in the value of our holdings of Vendetta common stock. Changes in the unrealized value of our holdings of marketable equity securities are related to the changes in the fair values of those holdings which are dependent on the market prices of the individual securities.
During 2022 we sold 1,250,000 shares of Vendetta common stock for proceeds of $63,000 and recorded a realized loss on the sales of $201,000. We had no sales of marketable equity securities during 2023. See Note 3, “Marketable Equity Securities” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional discussion of our marketable equity securities. We may sell some of our marketable equity securities from time to time during 2024 for working capital needs; however, we do not expect to sell all of our holdings of marketable equity securities during 2024. Any proceeds we may receive from sales of marketable equity securities during 2024 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, 2023. See “Liquidity and Capital Resources” below.
We recorded a gain on derivative instruments of $31,000 during 2023 compared to a loss on derivative instruments of $4,000 during 2022. During 2023, we sold certain Kinross calls against our holdings of Kinross common stock for proceeds of $31,000. The calls expired unexercised during 2023 and we recorded a gain of $31,000 during 2023 related to those calls. During 2022, our warrants to acquire Vendetta common stock (“Vendetta Warrants”) expired unexercised, which resulted in the $4,000 loss on derivative instruments. See Note 7, “Derivative Instruments” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional discussion of our derivative instruments. We anticipate we may write calls against our holdings of Kinross common stock in 2024 to provide additional income on a limited portion of shares of Kinross that we may sell in the near term, which is generally defined as less than one year.
We recorded $25,000 of depreciation and amortization during 2023 compared to $29,000 of depreciation and amortization during 2022. The reduction in depreciation and amortization is primarily related to certain assets becoming fully depreciated during 2023 and 2022. We amortize our equipment over a five-year period. We anticipate our 2024 depreciation and amortization expense will be similar to our 2023 depreciation expense.
We recorded interest income of $191,000 during 2023 compared to interest income of $131,000 during 2022. The increase during 2023 was primarily related to an increase in the outstanding balances of our investments in our money market account and United States Treasury securities during the majority of the year as a result of the net proceeds of $7,352,000 received from private placement sales of our common stock during 2023. In addition, interest rates on short-term investments increased during 2023 compared to 2022.
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During 2023, we recorded an unrealized gain of $56,000 related to the value of our mark-to-market short term investments in United States Treasury securities compared to an unrealized loss of $108,000 during 2022 as a result of changing interest rates. We anticipate our unrealized gains and losses related to our mark-to-market short-term investments will decrease in 2024 compared to 2023 as a result of the use of money market funds rather than short-dated USTS during 2024, as well as a reduction in the balances 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.
Our other income of $20,000 during 2022 was from the sale of certain exploration data on a non-owned mineral property upon which Solitario had previously done exploration activities, with no similar item in 2023. We do not anticipate other income will be a significant source of cash in 2024, if at all.
We recorded no deferred tax expense or benefit in either 2023 or 2022 as we provide a valuation allowance for the tax benefit arising out of our net operating losses for all periods presented. See Note 6, “Income Taxes” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional discussion of our income tax valuation allowance, deferred tax assets and our net operating losses for 2023 and 2022. 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.
We regularly perform evaluations of our mineral property assets to assess the recoverability of our investments in these assets. All long-lived assets are reviewed for impairment whenever events or circumstances change which indicate the carrying amount of an asset may not be recoverable utilizing guidelines based upon future net cash flows from the asset as well as our estimates of the geologic potential of early-stage mineral property and its related value for future sale, joint venture or development by us or others. During 2023 and 2022 we recorded no mineral property impairments.
(c). Liquidity and Capital Resources
Cash
As of December 31, 2023, we had $200,000 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 for the potential acquisition of additional mineral properties and other assets over the next several years.
Short-term Investments
As of December 31, 2023, we have money market investments and USTS with maturities of 1 day to two months. At December 31, 2023 we had $7,738,000 in our money market account held in a brokerage account and USTS recorded at their fair value of $698,000. Solitario also held CDs during 2022 which matured during 2022. Solitario has no outstanding CDs at December 31, 2023. The USTS are recorded at their fair value based upon quoted market prices. Our short-term investments in the money market account and 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 short-term investments not used for operating costs or mineral property acquisitions as they mature during 2024.
Marketable Equity Securities
Our marketable equity securities are classified as available-for-sale and are carried at fair value, which is based upon market quotes of the underlying securities. We owned 100,000 shares of Kinross common stock as of December 31, 2023, which are recorded at their fair value of $605,000. As of December 31, 2023, we own 7,750,000 shares of Vendetta common stock recorded at their fair market value of $118,000, we own 134,055 shares of Vox common stock recorded at their fair market value of $276,000, and we own 100,000 shares of Highlander Silver Corp common stock recorded at their fair market value of $33,000. Changes in the fair value of marketable equity securities are recorded as gains and losses in the statements of operations.
Working Capital
We had working capital of $9,309,000 at December 31, 2023 compared to working capital of $4,991,000 as of December 31, 2022. Our working capital at December 31, 2023 consists primarily of our cash and cash equivalents, our investment in short-term investments and our marketable equity securities, less our current liabilities of $632,000. As of December 31, 2023, our cash balances along with our short-term investments and marketable equity securities are adequate to fund our expected expenditures over the next year.
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The nature of the mineral exploration business requires significant sources of capital to fund exploration, development and operation of mining projects. We anticipate using our working capital and any additional funds we might acquire to carry out our 2024 planned expenditures. Our existing resources are adequate to fund these expenditures. These expenditures include planned exploration for Golden Crest, including potential drilling, pending the receipt of required permits, as well as planned exploration at our Lik project where we are in discussions with our joint venture partner, Teck, regarding planned 2024 expenditures. We do not expect any significant exploration expenditures at our Florida Canyon project where Nexa is responsible for all 2024 planned expenditures. We expect we will need additional capital if we decide to develop or operate any of our current exploration projects or any projects or assets we may acquire. We anticipate we would finance any such development through the use of our cash reserves, short-term investments, joint ventures, issuance of debt or equity, or the sale of other exploration projects or assets.
Stock-Based Compensation Plans
As of December 31, 2023, options to acquire an aggregate of 3,828,500 shares of our common stock were outstanding. Of that amount there are 2,576,000 options that are vested and exercisable at December 31, 2023. As of December 31, 2023, our outstanding options include 1,278,000 options that are in the money with a weighted average exercise price of $0.34 per share, which is below the market price of a share of Solitario common stock at December 31, 2023 of $0.56 per share as quoted on the NYSE American exchange. During 2023, options for 1,486,500 shares were exercised for cash proceeds of $459,000. See Note 10, “Employee Stock Compensation Plans” to our consolidated financial statements in Item 8, “Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a discussion of the activity in our 2013 Plan and our 2023 Plan during 2023 and 2022. We do not anticipate that a significant portion of our outstanding stock options will be exercised during 2024.
Equity offering private placements
On July 31, 2023, we entered into a Stock Purchase Agreement (the “SPA”) with Newmont Overseas Exploration Ltd. (“Newmont”), for the purchase and sale of 4,166,667 shares of Solitario common stock (the “Newmont Shares”), at a price of $0.60 per share for net proceeds of $2,422,000 after certain legal and regulatory offering costs of $78,000. In connection with the sale of the Newmont Shares, we entered into an Investor Rights Agreement with Newmont, which granted Newmont certain additional rights, including a preemptive right, certain anti-dilution protections and certain other rights and notice provisions related to our Gold Crest mineral property assets.
On October 13, 2023, we completed a private placement of 8,631,818 shares of our common stock (the “Shares”) at a price of $0.55 per share for net proceeds of $4,727,000 after certain legal and regulatory offering costs of $21,000. The sale of the Shares was made through a subscription agreement between Solitario and each respective investor. The Shares were issued pursuant to an exemption from registration under United States and Canadian securities laws. No officers, directors or other of our affiliates participated in the private placement. Investors in the private placement were provided certain registration rights with respect to the Shares they purchased. We did not engage an underwriter or placement agent for the private placement, and therefore there were no underwriter discounts or commissions or placement agent fees.
On November 16, 2023, we entered into a consulting and capital markets advisory contract (the “Consulting Contract”) with an independent advisory firm, in exchange for the issuance of 500,000 shares which were issued on December 6, 2023 at a price of $0.51 per share. The sale of the shares was made through a subscription agreement between us and the advisory firm. The shares were issued pursuant to an exemption from registration under United States and Canadian securities laws. We recorded a pre-paid expense of $255,000 for the issuance of the shares. The pre-paid expense is being amortized over the one-year term of the Consulting Contract and we recorded $32,000 in general and administrative expense during 2023 related to the Consulting Contract.
At the Market Offering
On February 2, 2021, we put an ATM (“At the Market”) program, in place, which was amended in 2023, to allow us to sell shares of our common stock under that program from time to time through H.C Wainwright and Co. (“Wainwright”) as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $10.0 million (the “ATM Program”). The common stock is distributed at the market prices prevailing at the time of sale. As a result, prices of the common stock sold under the ATM Program may vary as between purchasers and during the period of distribution. The ATM Agreement provides that Wainwright is entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold. We did not sell any shares under the ATM Program during 2023. During 2022, we sold 2,650,724 shares of our common stock under the ATM Program at a price of $0.79 per share for net proceeds of $2,023,000 after commissions and sale expenses.
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Off-balance sheet arrangements
As of December 31, 2023 and 2022, we have no off-balance sheet arrangements.
(d). Cash Flows
Net cash used in operations during the year ended December 31, 2023 increased to $3,263,000 compared to $2,900,000 for the year ended December 31, 2022 primarily as a result of (i) the increase in exploration expense at our Golden Crest project to $1,798,000 during 2023 compared to $1,505,000 of exploration expense incurred at our Golden Crest project during 2022; (ii) an increase in our reconnaissance exploration expenditures to $135,000 during 2023 compared to reconnaissance exploration expenditures of $94,000 during 2022; (iii) an increase in general and administrative expense to $1,712,000 during 2023 compared to general and administrative expense of $1,360,000 during 2022; (iv) a decrease in the cash provided from a reduction in prepaid expenses and other current assets to $20,000 during 2023 compared to cash provided from a reduction in prepaid expenses and other current assets of $265,000 during 2022; and (v) other income of $20,000 during 2022, with no similar item during 2023. Partially offsetting these additional expenditures and the overall uses of cash in operations during 2023 compared to 2022 were (i) a reduction in the exploration expenditures at our Lik project to $404,000 during 2023 compared to exploration expenditures of $668,000 during 2022; (ii) an increase in accounts payable and other current liabilities of $328,000 during 2023 compared to an decrease in accounts payable and other current liabilities as a use of cash of $51,000 during 2022; and (iii) an increase in interest and dividend income to $191,000 during 2023 compared to interest and dividend income of $131,000 during 2022. These items are discussed in further detail above under “Results of Operations.”
Net cash used by investing activities was $4,409,000 during 2023 compared to net cash provided by investing activities of $701,000 during 2022. The primary reasons for the increase in cash used by investing activities are (i) an increase in the cash used to purchase short-term investments of $4,429,000 during 2023 compared to the provision of cash from the sale of short-term investments of $1,028,000 during 2022; and (ii) cash from the sale of marketable equity securities of $63,000 during 2022 compared with no sales of marketable equity securities during 2023. Partially offsetting these items were (i) no additions to mineral properties for initial acquisition costs during 2023 compared to the use of cash of $340,000 capitalized as mineral properties for initial acquisition costs during 2022; (ii) the sale of calls on the shares of Kinross common stock we own for cash proceeds of $31,000 with no similar sales of derivative instruments during 2022; and (iii) a reduction in cash used for additions to other assets to $11,000 during 2023 compared to cash used for additions to other assets of $50,000 during 2022. We anticipate we will continue to utilize proceeds from the sale of our short-term investments and any proceeds we may derive from potential sales of marketable equity securities to fund our operations during 2024.
Our net cash provided by financing activities during 2023 was from (i) the sale of 12,798,485 shares of our common stock from private placements for net cash of $7,097,000 discussed above under “Equity offering private placements,” after certain direct costs related to the amendment of certain terms of the ATM Program of $46,000 and entering into the Consulting Contract of $6,000, discussed above; and (ii) the exercise of options for 1,486,500 shares of our common stock for net proceeds of $459,000. Our net cash provided by financing activities during 2022 was from (i) the sale of 2,650,724 shares of our common stock under the ATM Program at a price of $0.79 per share for net proceeds of $2,023,000, and (ii) the exercise of options for 114,250 shares of our common stock for net proceeds of $30,000. We may utilize the ATM Program during 2024 to supplement our existing cash resources, however we will only use the ATM Program when we believe the market conditions based upon the quoted price of a share of our common stock is appropriate. We do not expect the exercise of options nor the issuance of shares in private placements to be a significant source of cash during 2024.
(e). Development Activities, Exploration Activities, Environmental Compliance and Contractual Obligations
Development Activities
We do not have any ongoing mineral development activities, which are activities for the development of mineral properties with reserves for potential mining.
Exploration Activities
A historically significant part of our business involves the review of potential property acquisitions and continuing review and analysis of properties in which we have an interest to determine the exploration and development potential of the properties. In analyzing expected levels of expenditures for work commitments and property payments, our obligations to make such payments fluctuate greatly depending on whether, among other things, we make a decision to sell a property interest, convey a property interest to a joint venture, or allow our interest in a property to lapse by not making the work commitment or a required lease or claim payment. In acquiring many of our interests in mining claims and leases, we have entered into agreements, which generally may be canceled at our option. We are often required to make minimum rental and option payments in order to maintain our interest in certain claims and leases. Our net 2023 mineral and surface property filing rental and option payments, included in exploration expense, were $392,000. Our 2024 total exploration property rentals and option payments for properties we own, have under joint venture, or operate are estimated to be approximately $1,606,000. 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 $1,219,000 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.
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Environmental Compliance
We are subject to various federal, state and local environmental laws and regulations in the countries where we operate. We are required to obtain permits in advance of initiating certain of our exploration activities, to monitor and report on certain activities to appropriate authorities, and to perform remediation of environmental disturbance as a result of certain of our activities. Historically, the nature of our activities of review, acquisition and exploration of properties prior to the establishment of reserves, which may include mapping, sampling, geochemistry and geophysical studies as well as some limited exploration drilling, has not resulted in significant environmental impacts in the past. We have historically carried on our required environmental remediation expenditures and activities, if any, concurrently with our exploration activities and expenditures. The expenditures to comply with our environmental obligations are included in our exploration expenditures in the statement of operations and have not been material to our capital or exploration expenditures and have not had a material effect on our financial position. For the years ended December 31, 2023 and 2022, 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.
Contractual Obligations
The following table provides an analysis of our contractual obligations:
(in thousands)
As of December 31, 2023
Payments due by period
Total
Less than 1 year
1–3 years
4–5 years
More than 5 years
Operating Lease Obligations (1)
$ 96
$ 44
$ 52
$ -
$ -
Mineral property option and lease payments (2)
$ 387
$ 387
$ -
$ -
$ -
(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.
(f). Exploration Joint Ventures, Royalty and Other Properties
The following discussion relates to an analysis of our anticipated property exploration plans as of December 31, 2023. 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.
Golden Crest
The Golden Crest project is 100%-owned early-stage exploration project located in the northern Black Hills of western South Dakota in Lawrence County. The Golden Crest project is comprised of 1724 unpatented lode claims, with an associated area of approximately 33,000 acres. Solitario acquired its initial interest in the Golden Crest project during 2021.
During 2023 and 2022 Solitario conducted exploration activities on the Golden Crest project including grid soil and grab rock sampling, hand trenching, mapping, induced polarization ground geophysics, permitting and geotechnical work. Over twenty gold-enriched target areas have been identified, with fourteen of these areas containing multi-gram gold per tonne assays.
In December 2023, the USFS issued a Draft Decision Notice and Finding of No Significant Impact. Pending the issuance of a final FONSI, and if permits to drill are received during 2024 field season, Solitario is planning to conduct a 5,000-meter drilling program consisting of approximately eight to twelve exploration core holes. In addition, we will be continuing a surface exploration program during 2024 consisting of prospecting for new areas of mineralization through the collection of select rock grab samples, systematic soil sampling and, potentially, geophysics.
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Florida Canyon
The Florida Canyon project is an advanced-stage high-grade zinc project in Peru. Based on extensive exploration and development work conducted to date, we believe the property has potential to be developed into a mine in the future. The project is held in a joint venture between Nexa (61%) and Solitario (39%).
Solitario and Nexa jointly completed a PEA in 2017 that incorporated resource estimation, mining and processing recovery estimates, a preliminary mining and processing plan, infrastructure layout, environmental considerations and an economic analysis based on 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.
During 2023, Nexa advanced the project through (i) the completion and upgrade of the road access to the property and local communities; (ii) completion of a phase 5 permit for additional drilling platforms as well as underground workings; (iii) signing a two-year exploration agreement with local communities; and (iv) initial drilling in the Florida Sur area which resulted in two core holes totaling 1,362 meters to test for potential extensions of the San Jorge zone to the south.
Nexa’s planned 2024 expenditures include a comprehensive evaluation of all its geologic data to develop a future drilling program. Future drilling is expected to test extensions of the Florida Canyon area, but more importantly as many as four new totally un-drill tested prospects to the east and south.
Lik project
The Lik project is an advanced-staged high-grade zinc project consisting of 47 contiguous Alaska state mining claims. The project is held in a joint venture between Teck (50%) and Solitario (50%).
During 2023 and 2022 Teck completed a total of four core drill holes.
Solitario and Teck are in final discussions to fund a 2024 work program, with Teck acting as project manager. Currently, no drilling is anticipated for 2024 at the Lik project.
Other Properties
Chambara
The current claim holdings of Minera Chambara are 48 concessions totaling 40,583 hectares of valid concessions that surround the Florida Canyon project area held by Minera Bongará. A limited amount of surface exploration has been conducted in recent years. Significant geochemical anomalies and outcropping mineralization have been identified at several locations on the Chambara property. Nexa is responsible for maintaining the property in good standing and making all concession payments to the Peruvian government.
2024 Planned Expenditures
Our 2024 total exploration budget is approximately $3,927,000 for our planned exploration expenditures. This amount does not include any significant expenditures for our Florida Canyon project where our joint venture partner, Nexa, is responsible for 100% of exploration costs. It includes $3,500,000 planned exploration expense at our Golden Crest project, including approximately $2,000,000 for drilling, pending permitting. We will continue the evaluation of potential new acquisitions of properties primarily in the United States around the Golden Crest project as well as other regions of North and South America. We expect to carry out our exploration activities during 2024 utilizing Teck at Lik, Nexa at Florida Canyon, and our own employees and contract geologists at Golden Crest and other projects.
(g). Discontinued Projects
We recorded no mineral property impairments during 2023 or 2022.
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( h). Significant Accounting Policies and Critical Accounting Estimates
See Note 1, “Business and Summary of Significant Accounting Policies,” in Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for a discussion of our significant accounting policies.
Solitario’s valuation of mineral properties is a critical accounting estimate. We review and evaluate our mineral properties for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Significant negative industry or economic trends, adverse social or political developments, geologic results, geo-technical difficulties, or other disruptions to our business are a few examples of events that we monitor, as they could indicate that the carrying value of the mineral properties may not be recoverable. In such cases, a recoverability test may be necessary to determine if an impairment charge is required. There has been no change to our assumptions, estimates or calculations during the year ended December 31, 2023.
(i). Related Party Transactions
None
(j). Recent Accounting Pronouncements
See Note 1, “Business and Summary of Significant Accounting Policies,” in Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Smaller reporting companies are not required to provide the information required by this item.
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