Solitario Resources Corp. (NYSE American: XPL) is a natural resource exploration company with a diverse portfolio of high-quality precious and base metal projects across North and South America. Founded in 1984 and headquartered in Denver, Colorado, Solitario has been actively involved in mineral exploration since 1993, steadily building a reputation for its disciplined approach to project acquisition and development.
Business Overview and Historical Background
Solitario Resources Corp. was incorporated in the state of Colorado on November 15, 1984 as a wholly-owned subsidiary of Crown Resources Corporation. In July 1994, Solitario became a publicly traded company on the Toronto Stock Exchange through its initial public offering. The company's primary business model revolves around the acquisition and exploration of mineral properties, with the ultimate goal of discovering economic deposits on its mineral properties, either independently or through joint ventures.
Throughout its history, Solitario has maintained a portfolio of mineral exploration properties and assets, which it has either sold, joint ventured, or maintained up to the development stage of the project. The company has never developed a mineral property itself, but rather aims to sell, joint venture, or create royalties on its properties once they reach a certain level of exploration and feasibility.
Solitario has recorded revenue in the past from the sale of mineral properties, including the sale of certain mineral royalties. However, these revenues and proceeds have not been a consistent annual source of cash and have only occurred on an infrequent basis. To meet its capital needs, Solitario has historically relied on the sale of investments, issuances of common stock, sales of marketable equity securities, and sale of mineral property interests and assets.
Over the years, Solitario has demonstrated its ability to identify and secure highly prospective mineral exploration projects, particularly in the precious metals and zinc sectors. The company's current core assets include the Golden Crest gold project in South Dakota, the Florida Canyon zinc project in Peru, and the Lik zinc project in Alaska, all of which have shown significant potential through Solitario's exploration efforts and joint venture partnerships.
To reduce its exposure to the costs of exploration activities, Solitario has utilized joint ventures in the past and anticipates continuing to use funding through its joint venture partners for some of its exploration activities. However, the company acknowledges that it cannot provide assurance that these or other sources of capital will be available in sufficient amounts to meet its needs, if at all. It's worth noting that Solitario has recorded losses in 28 of its 31 years of operations, and it cannot predict when, if ever, it will be profitable again or able to begin generating consistent revenues or cash flows from its operations or assets.
The Golden Crest project, acquired in 2021, has been the focus of Solitario's recent exploration activities. In 2024, the company completed an 11-hole, 4,345-meter drilling program that yielded highly promising results, with several holes intersecting multi-gram gold mineralization. These findings have strengthened Solitario's belief that the Golden Crest property shares geological similarities with the nearby prolific Homestake-Wharf gold district, which has produced over 95 million ounces of gold historically.
At the Florida Canyon zinc project in Peru, Solitario holds a 39% interest, with its joint venture partner, Nexa Resources, owning the remaining 61%. Nexa, one of the largest zinc producers in Peru, has been the operator of the project since 2006 and is responsible for funding 100% of the exploration and development costs. A Preliminary Economic Assessment (PEA) completed in 2017 outlined the potential for an underground mining operation with a 12.5-year mine life.
Solitario's third core asset, the Lik zinc project in Alaska, is a 50/50 joint venture with Teck Resources. The project hosts a significant high-grade zinc-lead-silver deposit, with a Preliminary Economic Assessment completed in 2014 envisioning an open-pit mining operation with a 9-year mine life.
Financial Position and Liquidity
As of December 31, 2024, Solitario reported a strong financial position, with $5.93 million in cash, cash equivalents, and short-term investments. The company also held $1.32 million in marketable equity securities, primarily consisting of shares in Kinross Gold, Vendetta Mining, and Vox Royalty.
Solitario's working capital stood at $5.62 million as of the end of 2024, providing the company with ample liquidity to fund its planned exploration activities, including the Phase-1 drilling program at the Golden Crest project, which is budgeted at $3.91 million for 2025.
During 2024, Solitario raised $1.22 million through its at-the-market (ATM) offering program, as well as $54,000 from the exercise of stock options. The company did not record any mineral property income from the sale of exploration assets during the year.
For the fiscal year ended December 31, 2024, Solitario reported a net loss of $5.37 million, or $0.07 per share, compared to a net loss of $3.75 million, or $0.05 per share, in the prior year. The increase in net loss was primarily due to higher exploration expenses, particularly at the Golden Crest project, as well as higher general and administrative costs. Additionally, the company experienced a loss on derivative instruments, which was partially offset by higher interest income and a gain on the sale of marketable equity securities.
Solitario did not generate any revenue in 2024 or 2023, which is consistent with its business model as an exploration stage company. The company's annual operating cash flow for 2024 was negative $5.1 million, while its annual free cash flow was negative $5.15 million.
From a liquidity perspective, Solitario maintains a strong balance sheet with a debt-to-equity ratio of 0.0025 and a current ratio of 10.48. The company does not have any disclosed available credit lines, relying instead on its cash reserves and ability to raise capital through equity offerings to fund its operations and exploration activities.
Exploration and Development Highlights
Golden Crest Project, South Dakota Solitario's 2024 drilling program at the Golden Crest project was a resounding success, with six of the 11 holes drilled intersecting gold grades exceeding 1 gram per tonne (g/t). Significant mineralization was encountered in four different areas, including the discovery of high-grade paleo-placer gold and Wharf-style gold mineralization in the Lower Deadwood Formation.
These results have bolstered Solitario's confidence that the Golden Crest property shares geological similarities with the nearby Homestake-Wharf gold district, which has produced over 95 million ounces of gold historically. The company plans to continue its exploration efforts at Golden Crest in 2025, with a Phase-1 drilling program of approximately 15 holes totaling 4,000 meters, pending receipt of required permits.
Florida Canyon Zinc Project, Peru Solitario's joint venture partner, Nexa Resources, continued to advance the Florida Canyon project in 2024, spending approximately $2 million on exploration and development activities. This included upgrading the project's access road and implementing various social and community initiatives.
Nexa also initiated a comprehensive re-evaluation of the Florida Canyon resource model, which is expected to be completed in 2025. This work is aimed at identifying new high-priority drill targets within the current footprint of the deposit. The Florida Canyon project is an advanced-stage high-grade zinc project, with a 2017 Preliminary Economic Assessment envisioning an underground mining operation with a 2,500 tonne per day floatation mill.
Lik Zinc Project, Alaska At the Lik zinc project, Solitario's 50/50 joint venture partner, Teck Resources, completed a three-hole, 737-meter drilling program in 2022, which intersected significant mineralization. In 2024, Teck focused on technical studies, including a ZTEM geophysical survey and the development of a 3D geological model.
While no drilling is planned for Lik in 2025, Solitario and Teck are in discussions to finalize the upcoming work program, with Teck continuing to serve as the project manager. The work program may include additional geophysical surveys and environmental work.
Cat Creek Project, Colorado Solitario leased the Cat Creek project, an early-stage exploration property in Colorado, in 2023. The company has conducted limited work on the project to date, securing permits for two drill hole locations. Solitario has not yet decided whether to drill the property in 2025, highlighting the company's disciplined approach to allocating exploration resources.
Risks and Challenges
Solitario's business model as a mineral exploration company inherently carries a high degree of risk. The company's success is heavily dependent on its ability to identify, acquire, and successfully explore mineral properties that have the potential for economic viability. Additionally, Solitario's financial performance can be significantly influenced by fluctuations in commodity prices, particularly gold and zinc, which are the primary focus of its current project portfolio.
The company's reliance on joint venture partnerships to advance its projects also introduces additional risks, as Solitario must align its interests and objectives with those of its partners. Any potential disagreements or changes in strategic priorities could impact the progress and development of Solitario's projects.
Furthermore, Solitario's exploration activities are subject to various regulatory and environmental requirements, which can introduce delays and additional costs. The company's ability to obtain the necessary permits and approvals in a timely manner is crucial for the successful execution of its exploration programs.
The fluctuations in precious metal and other commodity prices have contributed to a challenging environment for mineral exploration and development. While this has created opportunities for the potential acquisition of early-stage and advanced mineral exploration projects, it has also introduced challenges in terms of project valuation and funding.
Outlook and Conclusion
Solitario Resources Corp. enters 2025 with a renewed sense of optimism, buoyed by the promising results from its 2024 drilling campaign at the Golden Crest project and the continued advancement of its other core assets, the Florida Canyon and Lik projects. The company's strong financial position, with ample liquidity to fund its planned exploration activities, positions it well to capitalize on the potential of its diverse portfolio of high-quality mineral properties.
As Solitario continues to unlock the value of its projects through disciplined exploration and strategic partnerships, investors will be closely watching the company's progress, particularly at the Golden Crest project, where the discovery of Homestake-style gold mineralization could significantly enhance the asset's long-term prospects. The company's focus on advancing its core projects while maintaining a lean operational structure demonstrates its commitment to creating shareholder value in a challenging market environment.
With a seasoned management team and a track record of value creation, Solitario Resources remains well-equipped to navigate the challenges of the mineral exploration industry and deliver value for its shareholders. The company's strategy of leveraging joint ventures and strategic partnerships to advance its projects while minimizing financial risk positions it well for future growth and potential discoveries across its portfolio of precious and base metal exploration properties.