Solitario Resources Corp. has a market cap of $67.53 million; its shares were traded at around $2.27 with and P/S ratio of 337.66.
Highlight of Business Operations:Solitario has a significant investment in Kinross at December 31, 2009, which consists of 1,050,000shares of Kinross common stock. Solitario received 1,942,920 shares in exchange for 6,071,626 shares of Crown common stock it owned on the date of the Crown - Kinross merger. During 2009 and 2008, subsequent to the Crown - Kinross merger, Solitario sold 100,000 and 192,920 shares, respectively, of Kinross common stock for net proceeds of $1,852,000 and $4,430,000, respectively. As of February 10, 2010, Solitario owns 1,050,000 shares of Kinross common stock. Solitario entered into the Kinross Collar which limits its ability to sell 500,000 of these shares. Accordingly, 550,000 shares are not subject to the Kinross Collar, discussed below. As of February 10, 2010, these 550,000 shares have a value of approximately $9.7 million based upon the market price of $17.55 per Kinross share. Any significant fluctuation in the market value of Kinross common shares could have a material impact on Solitario's liquidity and capital resources. As of December 31, 2009 we sold covered call options for 40,000 shares of Kinross common stock, discussed below, which expire May 22, 2010.
On October 12, 2007 Solitario entered into a Zero-Premium Equity Collar (the "Kinross Collar") pursuant to a Master Agreement for Equity Collars and a Pledge and Security Agreement between Solitario and UBS AG, London, England, an Affiliate of UBS Securities LLC (collectively "UBS") whereby Solitario has remaining pledged 500,000 shares of Kinross common stock to be sold (or delivered back to us with any differences settled in cash). As of December 31, 2009 the Kinross Collar pricing is (i) 400,000 shares due on April 13, 2010 for a lower threshold price of no less than $13.69 per share (the "Floor Price") and an upper threshold price of no more than $24.34 per share; and (ii) 100,000 shares due on April 12, 2011 for no less than the Floor Price and an upper threshold price of no more than $27.50 per share. On April 14, 2009, a tranche of the Kinross Collar due on that date expired, and 400,000 shares under the Kinross Collar were released. No shares were delivered to UBS under the Kinross Collar and no cash was paid or received upon the termination of that tranche of the Kinross Collar. Kinross' quoted closing price was $16.37 per share on October 12, 2007, the date of the initiation of the Kinross Collar.
The business purpose of the Kinross Collar is to provide downside price protection of the Floor Price on 500,000 shares of the total Kinross common stock we currently own, in the event Kinross stock were to drop significantly from the price on the date we entered into the Kinross Collar. In consideration for obtaining this price protection, we have given up the upside appreciation above the upper threshold during the term of the respective tranches. We have not designated the Kinross Collar as a hedging instrument (as described in ASC 815 "Derivative Instruments and Hedging Activities") and any changes in the fair market value of the Kinross Collar are recognized in the statement of operations in the period of the change. Solitario recorded a gain on derivative instrument of $522,000 and $1,189,000 during 2009 and 2008, respectively, and a loss of $1,702,000 during 2007 for the change in the fair market value of the Kinross Collar. As of December 31, 2009 we have recorded a derivative liability of $11,000 in current liabilities and an asset of $20,000 in other assets related to the fair value of the Kinross Collar.
On December 10, 2008 Solitario sold two covered call options covering 50,000 for proceeds of $104,000 both of which expired unexercised in February 2009. Solitario recorded a gain on sale of derivative instruments of $116,000 and a loss of $12,000, respectively, on these calls in the years ended December 31, 2009 and 2008. On March 31, 2009 Solitario sold a covered call option covering 50,000 shares of Kinross (the "April 09 Kinross Call") for $21,000. The call option had a strike price of $20.00 per share and expired unexercised on April 21, 2009. Solitario recorded a gain on derivative instruments of $21,000 on the April 09 Kinross Call during the year ended December 31, 2009. On April 16, 2009 Solitario sold a covered call option covering 40,000 shares of Kinross (the "August 09 Kinross Call") for net proceeds of $45,000. Solitario repurchased the option in July for $80,000 and concurrently sold a covered call option covering 40,000 shares with a strike price of $17.50 expiring on November 21, 2009 (the "November 09 Kinross Call") for $158,000. Solitario repurchased the November 09 Kinross call on November 13, 2009 for $77,000 and concurrently sold a covered call option covering 40,000 shares of Kinross with a strike price of $22.00 expiring on May 22, 2010 (the "May 10 Kinross Call") for $76,000. As of December 31, 2009, Solitario recorded a liability of $42,000 for the May 10 Kinross Call and has recorded a gain on derivative instrument of $34,000 during 2009 related to the May 10 Kinross Call.
Included in the consolidated balance sheet at December 31, 2009 and 2008 are total assets of $3,310,000 and $3,751,000, respectively, related to Solitario's foreign operations, located in Brazil, Peru, Mexico and Bolivia. Included in mineral properties in the consolidated balance sheet at December 31, 2009 and 2008 are net capitalized costs related to the Pedra Branca Property, located in Brazil, of $2,607,000, respectively.
We have reported losses in 14 of our 16 years of operations. We reported losses of $1,786,000, $617,000 and $5,440,000 for the years ended December 31, 2009, 2008, and 2007, respectively. We can provide no assurance that we will be able to operate profitably in the future. We have had net income in only two years in our history, during 2003, as a result of a $5,438,000 gain on derivative instrument related to our investment in certain Crown warrants and during 2000, when we sold our Yanacocha property. We cannot predict when, if ever, we will be profitable again. If we do not operate profitably, the trading price of our common shares will likely decline.
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