Solitario Resources Corp. — Q3 2023 Form 10-Q Summary
Business context and reporting period
Solitario Resources Corp. is an exploration-stage mineral company focused on precious metals, zinc and other base-metal properties. The company has never developed a mineral property and generated no revenue during the periods presented. Core assets are the Lik project in Alaska, the Florida Canyon project in Peru and the Golden Crest project in South Dakota. The filing covers the three and nine months ended September 30, 2023, compared with the corresponding 2022 periods.
In July 2023, the company changed its name from Solitario Zinc Corp. to Solitario Resources Corp.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Exploration expense | $0.918 million | $0.655 million | $1.748 million | $1.832 million |
| General and administrative expense | $0.282 million | $0.435 million | $1.073 million | $1.099 million |
| Net loss | $1.292 million | $1.057 million | $2.712 million | $3.262 million |
| Loss per share | $0.02 | $0.02 | $0.04 | $0.05 |
| Cash used in operating activities | Not separately provided | Not separately provided | $2.684 million | $1.948 million |
There is no meaningful operating margin because the company reported no revenue and remains in the exploration stage. Q3 net loss increased primarily because exploration expense rose and marketable equity securities generated a $141,000 unrealized loss, compared with a $13,000 unrealized gain in Q3 2022.
At September 30, 2023, cash and cash equivalents were $168,000, short-term investments were $3.964 million, and marketable equity securities were $910,000. Total current assets were $5.279 million and working capital was $4.952 million. Management stated that cash, short-term investments and marketable securities were adequate to fund expected expenditures over the next year.
The company had no conventional debt. Liabilities included $91,000 of operating lease liabilities, a $125,000 asset retirement obligation related to Lik, $295,000 of accounts payable and a $1,000 Kinross call-option liability. Total liabilities were $512,000.
Material changes versus the prior comparable period
- Q3 exploration expense increased 40% to $918,000, primarily due to higher Golden Crest claim fees and surface exploration. Golden Crest spending was $731,000 versus $354,000 in Q3 2022.
- Nine-month exploration expense declined 5% to $1.748 million. Lower Lik and reconnaissance spending more than offset increased Golden Crest activity.
- Q3 general and administrative expense declined 35% to $282,000, largely because stock-option compensation fell to $58,000 from $245,000.
- Nine-month net loss improved by $550,000, or 17%, to $2.712 million, helped by lower exploration and administrative costs, a $30,000 derivative gain, and favorable changes in short-term investment values.
- Operating cash use increased $736,000 to $2.684 million, partly because the company prepaid $350,000 to Teck for Lik exploration, of which $193,000 remained prepaid at quarter-end.
- In July, the company issued 4,166,667 shares to Newmont at $0.60 per share for net proceeds of $2.422 million. Newmont received preemptive, anti-dilution and other investor rights related to Golden Crest assets.
- Shares outstanding increased from 64.8 million at December 31, 2022 to 69.2 million at September 30, 2023. The cover page reported 79.1 million shares outstanding as of November 7, 2023, reflecting subsequent issuance.
Guidance, outlook, risks and unusual items
- Management budgeted approximately $2.0 million of 2023 exploration spending: approximately $1.426 million at Golden Crest and $574,000 for Solitario’s share of the Lik joint-venture drilling program. Full-year exploration spending was expected to exceed 2022 levels.
- Management expected 2023 general and administrative costs to be comparable with 2022 and interest income to increase because of additional private-placement proceeds and higher short-term investment rates.
- The Lik 2023 drilling program was delayed until the fourth quarter. Nexa continued work at Florida Canyon, while Teck is Solitario’s 50% partner at Lik.
- On October 13, 2023, after quarter-end, the company completed an additional private placement of 8,631,818 shares at $0.55 per share for net proceeds of $4.748 million. Proceeds are intended for core-project exploration and general corporate purposes.
- Principal risks include exploration and permitting uncertainty, commodity-price volatility, inability to establish economic reserves, dependence on joint-venture partners, need for future financing, marketable-security price volatility, inflation, interest rates, geopolitical and regulatory risks, natural disasters and cybersecurity risks.
- The company recorded no mineral-property impairment during the periods presented. Its deferred tax assets were fully offset by a valuation allowance, and no income-tax expense was recorded.
- Management reported effective disclosure controls as of September 30, 2023, with no material changes in internal control over financial reporting and no legal proceedings reported.
Most important facts for investors to verify
- Whether exploration results at Golden Crest and Lik support continued spending or future development potential.
- The timing, scope and results of the delayed Lik drilling program and Teck’s ongoing funding and operating role.
- The company’s cash runway after incorporating the $4.748 million October financing, planned exploration spending and ongoing operating cash use.
- The dilution and investor-rights implications of the Newmont and October private placements, including the reported 79.1 million shares outstanding as of November 7, 2023.
- The carrying values and liquidity of the $910,000 marketable-equity portfolio, which is subject to significant market-price volatility.
- Future financing requirements if the company advances projects toward development, acquires additional assets or incurs higher exploration costs.