Solitario Zinc Corp. — Form 10-Q Summary
Business Context and Reporting Period
The filing covers the unaudited quarter ended March 31, 2021, filed May 6, 2021. The registrant is identified in the filing as Solitario Zinc Corp. and trades on NYSE American under XPL. It is an exploration-stage company focused primarily on zinc and other precious- and base-metal properties, royalties, joint ventures, and potential strategic acquisitions. Core assets include the Lik project in Alaska and the Florida Canyon project in Peru, with an additional Gold Coin project in Arizona.
Financial Results and Position
| Metric | Q1 2021 | Comparable period or date |
|---|---|---|
| Revenue | No operating revenue reported | No operating revenue reported in Q1 2020 |
| Net loss | $528,000 | $607,000 in Q1 2020 |
| Basic and diluted loss per share | $0.01 loss | $0.01 loss in Q1 2020 |
| Exploration expense | $147,000 | $113,000 in Q1 2020 |
| General and administrative expense | $280,000 | $336,000 in Q1 2020 |
| Cash used in operating activities | $382,000 | $238,000 in Q1 2020 |
| Cash and cash equivalents | $1.404 million | $605,000 at December 31, 2020 |
| Short-term investments | $4.835 million | $5.798 million at December 31, 2020 |
| Marketable equity securities | $1.433 million | $1.620 million at December 31, 2020 |
| Working capital | $7.521 million | $7.875 million at December 31, 2020 |
| Total assets | $23.529 million | $23.801 million at December 31, 2020 |
| Total liabilities | $362,000 | $299,000 at December 31, 2020 |
There is no conventional debt outstanding at March 31, 2021. The remaining $10,000 Paycheck Protection Program loan was forgiven during the quarter. Liabilities primarily comprise accounts payable, operating lease liabilities, and a $125,000 asset retirement obligation related to the Lik project.
Investing activities provided $1.016 million of cash, primarily from net sales of short-term investments. Financing activities provided $165,000, including $98,000 from common-stock issuance under the ATM program and $67,000 from stock-option exercises. Cash increased by $799,000 during the quarter to $1.404 million.
Material Changes Versus the Prior Comparable Period
- Net loss improved by $79,000, or approximately 13%, primarily because of lower general and administrative expense, a $10,000 PPP-loan forgiveness gain, lower derivative losses, and a smaller unrealized loss on marketable securities.
- Exploration expense increased $34,000, or approximately 30%, driven by $50,000 of Florida Canyon expenditures and $9,000 of initial Gold Coin evaluation costs. Reconnaissance and Lik expenditures declined.
- Interest and dividend income declined to $6,000 from $81,000, reflecting lower investment balances, very low short-term rates, and related fair-value effects.
- The unrealized loss on marketable equity securities decreased to $122,000 from $233,000. The portfolio’s fair value declined by $187,000 during the quarter, while the company realized $13,000 of gains on sales generating $78,000 of proceeds.
- Operating cash usage increased to $382,000 from $238,000, despite the lower net loss, mainly because of higher exploration spending, lower interest income, and a reduction in accounts payable and other current liabilities.
- The company issued 150,400 shares under a newly established ATM program for approximately $177,000 of net proceeds. The ATM program permits aggregate sales of up to $9.0 million and may result in future dilution.
Guidance, Outlook, Risks, and Unusual Items
- Management budgeted approximately $1.642 million of exploration expenditures for full-year 2021, including approximately $500,000 for Solitario’s share of a joint drilling program with Teck at Lik. Most spending is planned for the third and fourth quarters.
- Management expects full-year 2021 exploration spending to exceed 2020 levels and general and administrative costs to be higher than in 2020.
- Management expects existing cash, short-term investments, and marketable securities to fund expected expenditures over the next year. Additional capital would be required for project development or operations and could come from cash, joint ventures, debt, equity issuance, or asset sales.
- The company expects to continue using short-term investments to fund operations and potential mineral-property acquisitions. Marketable-security sales may occur but are not expected to be a significant 2021 cash source.
- Management stated that COVID-19 was not expected to materially affect planned Lik and Florida Canyon exploration as of March 31, 2021, but emphasized that future effects remain uncertain.
- The company has no proven or probable mineral reserves and has never developed a mineral property. Project returns depend on exploration success, commodity prices, permitting, joint-venture performance, financing availability, and potential future transactions.
- The marketable-equity portfolio is exposed to price volatility. At March 31, 2021, holdings included Kinross, Vendetta, Vox Royalty, and TNR Gold securities with a combined fair value of $1.433 million.
- The company adopted SEC mineral-property disclosure modernization rules on January 1, 2021. The filing states that the adoption had no material interim impact, but additional disclosures will be required in the 2021 annual report.
- The filing reports no material legal proceedings, no off-balance-sheet obligations, no material changes to previously disclosed risk factors, and effective disclosure controls as of March 31, 2021.
Important Facts for Investors to Verify
- Confirm the company and registrant name: the supplied metadata refers to Solitario Resources Corp., while the filing identifies the registrant as Solitario Zinc Corp.
- Review the status, resource update, permitting, exploration results, and funding obligations for the Lik and Florida Canyon projects.
- Assess whether the planned $1.642 million 2021 exploration budget and Lik drilling program remain on schedule and within budget.
- Monitor cash burn, investment liquidations, and the adequacy of the $6.239 million cash and short-term-investment balance for planned activities.
- Evaluate potential dilution from the $9.0 million ATM program and approximately 5.4 million outstanding stock options.
- Track changes in the fair value and liquidity of the marketable-equity portfolio and the potential effect on quarterly earnings.
- Review COVID-19, commodity-price, permitting, political, joint-venture, financing, and mineral-exploration risks in the company’s Form 10-K risk factors.