Derivative Instruments

6 Months Ended

Jun. 30, 2022

Derivative Instruments

Derivative Instruments

6. Derivative Instruments

Vendetta Warrants

                On July 31, 2019, Solitario purchased 3,450,000 Vendetta units for a total of $233,000. Each Vendetta unit consisted of one share of Vendetta common stock and one Vendetta warrant (the “Vendetta Warrants”). Each Vendetta Warrant entitles the holder to purchase one additional share of Vendetta common stock for a purchase price of Cdn$0.13 per share for a period of three years. On the purchase date Solitario recorded marketable equity securities of $165,000 for the Vendetta shares acquired and $68,000 for the Vendetta Warrants based upon an allocation of the purchase price of the Vendetta units, determined by (i) the fair value of the Vendetta common shares received based upon the quoted market price for Vendetta common shares. and (ii) the fair value of Vendetta Warrants based upon a Black Scholes model.  During the three and six months ended June 30, 2022, Solitario charged loss on derivative instruments of $3,000 and $4,000, respectively, for the change in the fair value of the Vendetta Warrants based on a Black Scholes model.  During the three and six months ended June 30, 2021, Solitario charged loss on derivative instruments of $37,000 and $40,000, respectively, for the change in the fair value of the Vendetta Warrants based on a Black Scholes model.

Covered call options

From time-to-time Solitario has sold covered call options against its holdings of shares of common stock of Kinross Gold Corporation (“Kinross”) included in marketable equity securities. The business purpose of selling covered calls is to provide additional income on a limited portion of shares of Kinross that Solitario may sell in the near term, which is generally defined as less than one 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. Solitario did not sell any covered calls during the three and six months ended June 30, 2022.  During the three months ended June 30, 2021, Solitario sold covered calls against its holdings of Kinross for cash proceeds of $8,000 and recorded a gain on derivative instruments related to those covered calls of $7,000.