Solitario Zinc Corp. Annual Report 2002

FY2002 Annual Report · Solitario Zinc Corp.

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Experienced Gold, PGM
and Base Metal
Exploration

2002 Annual Report
Solitario Resources

Highlights
of 2002

Anglo American Platinum Corporation,
the largest producer of platinum in the world, agreed to fund
exploration and development on Solitario’s Pedra Branca
platinum-palladium project in Brazil.

Anglo Platinum can earn a 51% interest

in Pedra Branca by funding US$7.0* million on exploration
and development work over a four-year period. Anglo Platinum
can earn a further 14% interest by completing a bankable feasibility

study and arranging 100% project financing.

Drilling on the advanced Pedra Branca exploration project
continues to produce favorable results. Completion of 4,200 meters (13,800
feet) of drilling is planned by mid-2003. Preliminary metallurgical studies
are also planned.

In Peru, Solitario joint ventured the drill-ready La Pampa
gold project with Bear Creek Exploration. Bear Creek can earn a 65%
interest in La Pampa by spending $4.5 million over five years and completing
a bankable feasibility study.

Newmont Mining will conduct an airborne geophysical survey
to identify future drilling targets over Solitario’s Yanacocha Royalty property
as part of Newmont’s $20 million district-wide Yanacocha exploration program.

Solitario invested $400,000 in early 2003 in Crown
Resources Corporation’s $2.7 million Convertible Note financing. With this
investment, Solitario maintains its 14% equity interest in Crown on a fully
diluted basis.

Crown Resources reported intersecting high-grade gold
mineralization in 34 out of 41 drill holes as part of an infill drilling campaign
in the important Southwest Zone of the Buckhorn Mtn. gold project.
Permitting and feasibility work is progressing rapidly on the project.

* Throughout this report, all monetary numbers are in U.S. dollars.

MESSAGE TO SHAREHOLDERS

Solitario signed significant new joint ventures with work commitments totaling

$11.5 million in 2002 and early 2003 on two of its exploration properties,

the Pedra Branca platinum-palladium (“PGM”) project in Brazil and the La

Pampa gold project in Peru. It also maintained its exposure to the advanced

high-grade Buckhorn Mtn. underground gold project in the United States. We

were very careful to fund only those projects and investments that have sound

economics at today’s commodity prices.

Solitario significantly advanced the Pedra Branca PGM project in northeastern

Brazil during 2002. At Pedra Branca, Solitario announced significant drilling

results on new, previously undrilled prospects in early 2002 that resulted in

exciting new geologic potential for the property. This drilling program was

instrumental in attracting Anglo Platinum to joint venture the project.

PEDRA BRANCA PROJECT

Pedra Branca is more than a single deposit or area of mineralization. Solitario

believes that Pedra Branca may host a series of PGM deposits that, in aggregate,

could constitute a significant new source of PGM production. This district currently

extends over 50 kilometers in a north-south direction, and 15

kilometers in an east-west direction.

The 85,400-hectare Pedra Branca project area is

situated in the state of Ceara in northeastern

Brazil. Solitario currently controls a 100%

Bongará

interest in the property, except for 10,000

hectares, where Solitario is earning a 70%

interest. Because of Solitario’s confidence in

the long-term potential of the project, Pedra

Branca was the focus of nearly all of

Solitario’s exploration efforts during 2002. Our

belief in the project’s potential and the
perseverance of our exploration team was rewarded
in early 2003 with the signing of a Letter Agreement with
Anglo Platinum.

La Pampa
PERU
Yanacocha
PERU

BOLIVIA

Pedra
Branca

BRAZIL

BOLIVIA

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Anglo Platinum Agreement
The Letter Agreement signed with Anglo Platinum in early 2003

represents a milestone for Solitario and the exciting Pedra Branca

PGM project. Terms of the agreement call for Anglo Platinum to

fund the following work programs to earn its interests:

For Period

First six months
Second six months
Second year
Third year
Fourth year
Total Expenditure

Expenditure
Commitment
Period

$ 500,000 – firm
$ 500,000 – optional
$1,250,000 – optional
$1,750,000 – optional
$3,000,000 – optional
$7,000,000

Anglo’s Earned
Interest At
End
Of Period

0%
0%
15%
30%
51%

Solitario will act as project manager for the newly formed venture during the first

three years, sharply reducing Solitario’s overall expenditures. Upon completion of

the staged $7.0 million work commitment, Anglo Platinum will have the right to earn

an additional 9% interest (to 60% total interest) by completing a bankable feasibility

study within 18 months of earning its 51% interest. Anglo Platinum can earn a

further 5% interest (to 65% total interest) by arranging 100% of the project

financing necessary to place the project into commercial production.

Defining Drill Targets: Magnetic Surveys
Ground magnetic surveys are the primary exploration tool Solitario utilizes to detect

shallowly buried ultramafic bodies that host PGM mineralization at Pedra Branca.

During the past 18-months, Solitario has collected magnetic data over a vast area on

the property. Although not all magnetic anomalies are caused by ultramafic bodies,

drilling has now proven the utility of ground magnetics to discover and define

shallowly buried ultramafic bodies. Many magnetic anomalies remain untested by

drilling and will be tested in the future.

Drilling: Late 2001 to Present
Drilling at Pedra Branca occurred in four phases from late 2001 to early 2003.

During this period, 54 drill holes were completed on eight different prospects
scattered along the 50-kilometer long Pedra Branca PGM trend. Mineralization was

Solitario signed

significant new

joint ventures with

work commitments

totaling $11.5

million in 2002

and early 2003

on two of its

exploration

properties.

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intersected in 30 of the drill holes, or 55% of all holes drilled. Significant

mineralization was encountered in six out of the eight drill-tested prospects.

(See Table 1: Pedra Branca Drilling Results)

By mid-2003, we hope to have the Esbarro and Curiu prospects drilled on 50 and

25-meter centers to better define the contained resources for each. In addition,

preliminary metallurgical studies will also be undertaken to investigate potential

PGM recoveries.

The following summarizes the status of Pedra Branca’s major prospects:

Cedro Prospects (100%-owned): The Cedro area consists of a cluster of six
neighboring prospects within a zone measuring 2.5 kilometers long and up to 1.0

kilometer wide situated about 3.0 kilometers west of the more extensively drilled

Esbarro deposit. Strong mineralization has been intersected at Cedro I and II, with

anomalous mineralization encountered at Cedro III and IV. Nine of the 17 holes

drilled by Solitario have intersected mineralization. Additional drilling will be

required to more fully evaluate the potential of this large prospective area.

Curiu (100%-owned): This prospect is situated three kilometers northeast of
Esbarro. Six of nine holes drilled at Curiu have intersected significant grades and

thicknesses of PGM-mineralization. This high-grade shallow zone has now

been traced over an area measuring 175 meters long, 80 meters

wide and averages 5 to 30 meters thick. Drill hole CU-03

appears to have intersected a separate lens of

mineralization situated approximately 100 meters

southwest of the main Curiu deposit. With drilling

results averaging well above 3.0 grams per tonne

(g/t) PGM, Curiu is the highest-grade area of

mineralization yet discovered at Pedra Branca.

Esbarro (100%-owned): The Esbarro deposit
is the most advanced Pedra Branca prospect. A

total of 80 drill holes have been completed at
Esbarro, with 56 of the holes intersecting
mineralization. In 2003, all six of Solitario’s drill holes
intersected strong PGM-mineralization. The main Esbarro
deposit is nearly 500 meters long, up to 200 meters wide and

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generally 5 to 50 meters in thickness, with an average grade of approximately 2.0

g/t PGM. A second smaller lens of mineralization is located 150 meters northwest

of the main deposit. Additional drilling is required to develop a resource estimate

at Esbarro.

Massape (earning 70%): Solitario drilled the first hole at Massape in early 2003
and intersected nearly 5 meters of mineralization in excess of 2.2 g/t PGM. The

Massape magnetic anomaly is at least several hundred meters long and over 100

meters wide, suggesting good tonnage potential.

Santo Amaro (100%-owned): Discovered by Solitario in the summer of 2001, this

prospect is situated approximately 18 kilometers north of the northernmost portion

of the main Pedra Branca trend. The discovery of Santo Amaro demonstrates that

numerous additional mineralized ultramafic bodies may yet be discovered. Of the

seven holes drilled at Santo Amaro, five are well mineralized. The Santo Amaro

zone now stands at 200 meters long and is open along strike to the east. It is

characterized by thick (+30 meter) intervals of mineralization at moderate grades

(1.2 to 1.8 g/t PGM).

Trapia 1 (earning 70%): Solitario’s two drill holes, combined with previous
drilling, trace impressive, thick intersections ranging from 10 to 45

meters of moderate-grade (1.5 g/t PGM) mineralization for

over 250 meters down-dip. With mineralization open in

three directions, the potential to add tonnage is

considered excellent.

Trapia West (earning 70%): One of four holes
at Trapia West intersected strong PGM values.

Drilling at Trapia West, including seven

previously drilled holes, indicates a moderate-

grade (1.5 g/t PGM) zone with limited

expansion potential.

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TABLE I: PEDRA BRANCA DRILLING RESULTS

Hole
Number

From - To
meters

Cedro
CD-01
CD-03

CD-04
CD-05

incl.
CD-06
CD-09

CD-12
incl.
CD-13
CD-16
CD-17
Curiu
CU-01
CU-03
incl.
CU-04
CU-05
CU-07
incl.
Esbarro
ES-09
incl.
ES-10
incl.
ES-11
incl.
ES-12
incl.
ES-13
incl.
ES-14

16.0 - 17.9
4.9 - 14.0
45.7 - 63.9
20.3 - 25.5
60.0 - 64.0
82.5 -111.4
82.5 - 86.5
39.7 - 42.0
13.0 - 15.0
30.0 - 36.0
51.8 - 52.9
67.0 - 71.5
46.3 - 53.2
57.2 - 65.2
23.8 - 26.8

14.7 - 24.8
13.2 - 32.0
13.2 - 14.5
3.0 - 11.7
34.2 - 38.9
12.4 - 42.8
17.0 - 23.5

21.6 - 29.6
24.4 - 26.6
14.0 - 22.0
14.0 - 17.4
0.0 - 54.0
0.0 - 17.7
0.0 - 58.3
0.0 - 10.0
0.0 - 21.7
0.0 - 8.1
34.6 - 40.0

Interval

meters

feet

1.9
9.1
18.2
5.2
4.0
28.9
4.0
2.3
2.0
6.0
1.1
4.5
6.9
8.0
3.0

10.1
18.8
1.3
8.7
4.7
30.4
6.5

8.0
2.2
8.0
3.4
54.0
17.7
58.3
10.0
21.7
8.1
5.4

6.2
29.8
59.7
16.9
13.1
94.8
13.0
7.5
6.6
19.7
3.4
14.8
22.6
26.2
9.8

33.1
61.7
4.3
28.4
15.4
99.7
21.3

26.2
7.2
26.2
11.2
177.2
58.1
191.3
32.8
71.0
26.4
17.7

Pt
g/t

0.82
1.22
0.47
1.15
0.30
0.38
1.07
0.42
1.77
0.37
1.26
0.65
0.41
0.39
1.42

2.24
1.02
9.23
1.32
0.39
1.25
4.15

0.46
0.91
0.60
1.04
0.38
0.67
0.28
0.51
0.31
0.48
0.35

Pd
g/t

0.83
2.48
0.95
3.38
0.75
0.90
1.35
1.36
8.34
0.72
1.77
1.13
0.73
0.43
2.87

3.04
1.28
9.59
1.10
0.59
2.20
7.75

1.08
1.84
0.62
0.87
0.65
1.04
0.69
1.33
1.03
1.87
0.95

PGM
(+gold)

1.73
3.71
1.52
4.55
1.06
1.32
2.43
1.78
10.13
1.09
3.04
1.79
1.18
0.82
4.30

5.46
2.30
18.88
2.47
0.98
3.52
12.13

1.58
2.77
1.23
1.91
1.07
1.76
1.00
1.87
1.40
2.47
1.31

Solitario

believes that

Pedra Branca

may host a series

of PGM deposits

that, in aggregate,

could constitute

a significant

new source of

PGM production.

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From - To
Hole
meters
Number
Santo Amaro North
SA-01
incl.
SA-02
incl.
SA-04
SA-05

11.0 - 40.5
11.0 - 16.0
1.8 - 40.9
27.5 - 39.4
40.4 - 51.5
3.2 - 3.8
46.7 - 48.9
6.8 - 7.5
23.8 - 56.6
53.4 - 56.6

Interval

meters

feet

29.5
5.0
39.1
12.4
11.1
0.6
2.2
0.7
32.8
3.2

96.8
16.4
128.2
39.3
36.4
1.8
7.2
2.3
107.5
10.4

52.1 - 57.0

4.9

15.9

SA-06

incl.
Massape
MS-01
Trapia I
TU-02
incl.

TU-03

64.1 -112.0
84.2 - 86.1
120.0 -124.0
154.0 -157.8
116.4 -126.0
116.4 -118.0
136.0 -138.0

Trapia West
TW-10
incl.
incl.

16.0 - 43.6
34.9 - 38.8
42.3 - 43.6
50.9 - 56.0

47.9
1.9
4.0
3.8
9.6
1.6
2.0

27.6
3.9
1.3
5.1

157.1
6.2
13.1
12.5
31.5
5.2
6.6

90.5
12.8
4.3
16.7

Pt
g/t

0.67
1.98
0.69
1.15
0.80
0.78
1.00
1.28
0.51
0.62

0.38

0.37
0.87
0.44
0.81
0.91
3.45
0.47

0.57
0.69
0.72
0.20

Pd
g/t

1.14
1.77
0.86
1.51
0.59
3.29
2.21
0.42
0.68
1.54

1.74

1.09
2.68
0.78
0.67
1.63
7.02
0.57

0.77
1.89
3.04
0.77

PGM
(+gold)

1.84
3.78
1.57
2.71
1.39
4.20
3.35
1.70
1.21
2.21

2.22

1.53
3.58
1.24
1.50
2.57
10.54
1.07

1.41
2.86
3.88
1.01

Drill intervals were calculated utilizing a 0.7 g/t PGM+gold cutoff.

YANACOCHA ROYALTY, PERU

Solitario controls an exceptional net smelter return

(“NSR”) royalty on a strategically located 60,000-

hectare property position within the largest gold

producing district in South America – the

Yanacocha district. Although Solitario

currently receives no income from this

royalty, Minera Yanacocha (51%-owned by

Newmont Mining Corporation), manager of

Solitario’s royalty property, has earmarked

over $20 million for district-wide exploration.
This spring, Newmont will be using its proprietary
helicopter-borne electro-magnetic geophysical system

to identify future prospective drilling targets. Newmont

paid Solitario $6.0 million in 2000 to buy a 100% interest in the

SOLITARIO'S ROYALTY
HOLDINGS
ANOMALOUS AREA
(WITH DEPOSITS)

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property which is subject to Solitario’s NSR-royalty schedule

shown in the table below. There is no cap on payments

Solitario could receive on this royalty and no deductions for

mining or leaching costs.

Gold Price
less than $320/ounce
$320 to $360/ounce
$360 to $400/ounce
more than $400/ounce
Silver Production:

NSR Royalty
2%
3%
4%
5%
3%

Copper Production:

LA PAMPA (GOLD), PERU

In August 2002, Solitario signed a Letter of Intent giving Bear Creek Mining

Company the option to explore and acquire 51% of Solitario’s La Pampa gold

project in Peru by expending $4.5 million over a five-year period. The 1,900-

hectare La Pampa project, located near the port city of Chiclayo in

northwestern Peru, hosts significant gold mineralization at surface but has

never been drill tested.

Terms of the agreement include a firm commitment to spend $100,000 during

the first year including 1,000 meters of drilling. Further optional expenditures

include $300,000 in year two, $700,000 in year three, $1.3 million in year four

and $2.1 million in year five to earn a 51% interest in the project. Upon earning

its 51% initial interest, Bear Creek may elect to earn an additional 14% interest

(65% total) by completing a bankable feasibility study.

Solitario discovered the La Pampa prospect through a grass roots

exploration program. Strongly anomalous gold mineralization occurs in

silicified volcanic rocks over an area nearly three kilometers in length and

over one kilometer wide.

BONGARÁ (ZINC), PERU

The 100%-owned Bongará zinc project located in Peru continued on a care and
maintenance status for 2002. With the current price of zinc at $0.36 per pound,
we do not believe it would be prudent to seek a joint venture partner for this
advanced-staged zinc project at this time. We plan on continuing the care and
maintenance program until zinc prices improve.

Solitario

controls an

exceptional net

smelter return

(“NSR”) royalty

on a strategically

located 60,000-

hectare property

position within

the largest

gold producing

district in South

America – the

Yanacocha district.

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INVESTMENT IN CROWN RESOURCES

In October 2001, Solitario invested $1.0 million in a $3.6 million

10% Convertible Secured Note financing issued by Crown

Resources Corporation. The Secured Notes are fully secured

by all the assets of Crown, primarily consisting of its 100%

interest in the high-grade Buckhorn Mtn. gold project (formerly

called the Crown Jewel project) and 9.6 million shares of Solitario.

In February 2003, Solitario invested a further $400,000 in a $2.7

million 10% Convertible Subordinated Note Series B issued by Crown and

due in October 2006. The Notes are substantially the same as Crown’s existing $4.0

million Subordinated Notes. With this latest investment, Solitario maintains its 14%

equity interest in Crown on a fully diluted basis.

Crown reported impressive new high-grade drilling results from a 41-hole infill-

drilling program conducted in late 2002. A revised Plan of Operations for a low-

impact underground mining plan is expected to be filed with state and federal

regulatory agencies in April 2003.

SUMMARY

Solitario fulfilled the major objectives it laid out at the beginning of 2002. Namely,

secure a financially and technically strong partner for the Pedra Branca PGM

project and increase our exposure to gold assets. With the $11.5 million in joint

venture work commitments signed with Anglo Platinum and Bear Creek Mining,

Solitario has once again demonstrated its ability to generate and identify high

potential projects that other mining companies are seeking to invest in.

Solitario is well positioned to take advantage of the strong PGM commodity market that

exists today and that is expected to grow substantially over the next decade. We also

have taken significant positions in high-quality gold projects that are funded by other

With the $11.5

million in joint

venture work

commitments

signed with

Anglo Platinum

and Bear Creek

Mining, Solitario

has once again

demonstrated

its ability to

generate and

identify high

potential projects

that other mining

companies are

seeking to

companies. During 2003, we look forward to keeping you, our shareholders, informed

invest in.

of new developments concerning these and other projects throughout the year.

Sincerely,

Christopher E. Herald
President & Chief Executive Officer

Mark E. Jones, III
Chairman

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
consolidated financial statements of Solitario Resources Corporation
("Solitario") for the years ended December 31, 2002, 2001 and 2000,
included elsewhere in this report. Solitario's financial condition and
results of operations are not necessarily indicative of what may be
expected in future years. Unless otherwise indicated, all references to
dollars are to U.S. dollars.

Results of Operations
Solitario had a loss of $1,670,000 or $0.07 per share in 2002
compared with a loss of $3,657,000 or $0.16 per share in 2001 and
net income of $4,285,000 or $0.24 per share in 2000.

During 2002 Solitario continued its exploration program in Brazil on
its Pedra Branca platinum group metals project. In 2001, Solitario
conducted exploration activities on Pedra Branca as well as
Tocantinzinho in Brazil and Rincon del Tigre in Bolivia. This
resulted in a decrease in exploration expense and general and
administrative expenses for travel, legal, and exploration support
during 2002 compared to 2001. During 2002, Solitario recorded
$30,000 in exploration consulting fees paid to the former president of
Altoro for assistance with Brazilian and Bolivian activities compared
to $120,000 in consulting fees in 2001 and $30,000 in 2000. During
2001, Solitario wrote down its Tocantinzinho and Rincon del Tigre
properties with a charge of $1,274,000 to property abandonment
compared to no write-downs in 2002 and 2000.

In April 2000 Solitario completed a transaction with an affiliate of
Newmont Mining Corporation (“Newmont”) and sold its interest in its
Yanacocha property for proceeds of $6,000,000 and a sliding scale net
smelter return royalty (“NSR”) that varies with the price of gold.
The cash consideration was $5,600,000 with $400,000 deferred and
recorded as a long-term note receivable due over a four-year period,
pending release of certain contingent liabilities. Solitario received
payments of $109,000 and $106,000 of the deferred proceeds,
including interest in April 2002 and 2001, respectively. Solitario
recorded a gain on the sale of the Yanacocha property of $5,809,000
during the second quarter of 2000.

In October 2000, Solitario completed a Plan of Arrangement (the
“Plan of Arrangement”) with Altoro Gold Corp. of Vancouver,
Canada (“Altoro”), whereby Altoro became a wholly owned subsidiary
of Solitario. In connection with the Plan of Arrangement, Solitario
issued an aggregate of 6,228,894 shares to Altoro shareholders and
option holders. Solitario also reserved 825,241 Solitario shares for
issuance upon the exercise of 825,241 warrants in exchange for Altoro
warrants. During 2000, Solitario issued 261,232 shares upon the
exercise of the above warrants and 302,898 of the warrants expired
unexercised. The remaining 261,111 warrants expired unexercised
during 2001. Primarily as a result of the issuance of Solitario shares
in connection with the Plan of Arrangement, Crown Resources
Corporation’s (“Crown”) indirect ownership percentage of Solitario
was reduced from 57.2% (immediately prior to the transaction) to
41.2% at December 31, 2002.

Interest income was $137,000, $236,000, and $360,000 in 2002, 2001
and 2000, respectively. The change in interest income was primarily
the result of larger cash balances related to the Yanacocha sale during
2000, compared to 2002 and 2001.

Exploration expense was $ 907,000 in 2002 compared to $1,464,000 in
2001 and $1,182,000 in 2000. The increase in 2001 was primarily as a
result of Solitario’s expansion of its exploration to include Brazil and
Bolivia as well as an expansion of the focus of exploration to include
platinum group metals subsequent to the 2000 Altoro acquisition. The

increased exploration during 2001 included two separate drilling
programs at Pedra Branca in Brazil as well as a drilling program at
Rincon del Tigre in Bolivia. Additionally, field geology, including
trenching and sampling, was conducted at Tocantinzinho during 2001.
During 2002 Solitario limited its exploration activities to Pedra Branca
that resulted in the lower costs.

During the year ended December 31, 2002, Solitario incurred
$372,000 of general and administrative expenses compared with
$511,000 in 2001, and $372,000 in 2000. General and administrative
expenses consist of administrative (office rent, payroll, insurance,
banking and automobile) legal, accounting and auditing, travel and
shareholder-related costs. The increased activities in Brazil and
Bolivia and increases in accounting and shareholder costs accounted
for the increase in general and administrative expenses during 2001
compared to 2000 and 2002.

Crown provides management and technical services to Solitario under a
management agreement originally signed in 1994 and modified in April
1999, in December 2000 and July 2002. The modified agreement, which
has a three year term, provides for reimbursement to Crown of direct
out-of-pocket costs; payment of between twenty-five percent and
seventy-five percent of executive and administrative salaries and
benefits, rent, insurance and investor relations costs (“Administrative
Costs”) and payment of certain allocated indirect costs and expenses
paid by Crown on behalf of Solitario. Prior to December 2000,
Administrative costs were reimbursed at fifty percent and a
management fee of 2% was charged on direct Solitario expenses paid by
Crown. Management service fees paid to Crown by Solitario in 2002,
2001 and 2000 were $449,000, $590,000 and $414,000, respectively. Net
amounts due to Crown as of December 31, 2002 and 2001 were $73,000
and $62,000, respectively, related to the management services and fee.

Depreciation, depletion, and amortization expense was $40,000 in
2002 compared to $49,000 in 2001 and $18,000 in 2000. The increase
in depreciation expenses during 2001 related to additions to property,
plant and equipment related to the Altoro transaction being
depreciated for the entire year as well as certain additional
equipment purchased during 2001. Certain equipment was retired
and sold during 2002 as Solitario narrowed its focus of exploration to
the Pedra Branca project during 2002.

Solitario regularly performs evaluations of its assets to assess the
recoverability of its investments in these assets. All long-lived assets
are reviewed for impairment whenever events or circumstances change
which indicate the carrying amount of an asset may not be recoverable
utilizing established guidelines based upon future net cash flows from
the asset. Write-downs relating to exploration properties amounted to
$1,274,000 in 2001. There were no property write-downs in 2002 and
2000. Solitario wrote-down $636,000, representing the investment in
the Rincon del Tigre property in Bolivia and $638,000, representing
the investment in the Tocantinzinho property in Brazil, after
exploration programs performed during 2000 and 2001 failed to
identify economic deposits on those properties. Both of these
properties were acquired from Altoro during 2000.

Liquidity and Capital Resources
Due to the nature of the mining business, the acquisition, exploration,
and development of mineral properties requires significant
expenditures prior to the commencement of production. Solitario has
in the past financed its activities through the sale of securities, joint
venture arrangements, and the sale of interests in its properties. To
the extent necessary, Solitario expects to continue to use similar
financing techniques, however there is no assurance that such
financing will be available to Solitario on acceptable terms, if at all.

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As a result of the Altoro transaction, Solitario's acquisition and
exploration programs since October 2000 have been devoted to
properties in Brazil and Bolivia as well as Peru. During 2002,
Solitario concentrated this exploration effort on its Pedra Branca
project in Brazil. Solitario also has approximately $3,000 of assets in
Canada, consisting primarily of marketable equity securities. Total
foreign assets, as reported in the consolidated balance sheet as of
December 31, 2002, amounted to $3,797,000. Solitario is exposed to
risks normally associated with foreign investments, including
political, economic, and social instabilities, as well as foreign
exchange controls and currency fluctuations. Foreign investments
may also be subject to laws and policies of the United States affecting
foreign trade, investment, and taxation, which could affect the
conduct or profitability of future operations.

Additions to mineral properties for land and leasehold costs during
2002 were $50,000, primarily for property and lease payments on
Pedra Branca and Bongará, compared to $52,000 during 2001 and
$4,820,000 during 2000. The additions during 2000 related primarily
to the acquisition of Altoro properties as follows: The Pedra Branca
property in Brazil of $3,627,000; the Tocantinzinho property in
Brazil of $621,000; and the Rincon del Tigre property in Bolivia of
$558,000. Solitario expenses all exploration costs on properties
without proven and probable reserves. There were no capitalized
exploration costs during 2002, 2001 and 2000.

During 2000, Solitario received $6,000,000 from the sale of its
Yanacocha property to Newmont. The cash consideration was
$5,600,000 with $400,000 deferred and recorded as a long-term note
receivable due over a four-year period, pending release of certain
contingent liabilities. Solitario received payments of $109,000 and
$106,000 of the deferred proceeds, including interest in April 2002
and 2001, respectively. Solitario recorded a gain on the sale of the
Yanacocha property of $5,809,000 during the second quarter of 2000.

Solitario recorded property acquisition costs of $42,000 and
$4,705,000 from the issuance of its shares during 2001 and 2000
respectively. The additions recorded during 2000 were in connection
with the acquisition of Altoro. No other shares were issued in 2002,
2001 or 2000. Primarily as a result of the issuance of shares in
connection with the acquisition of Altoro, Crown’s indirect ownership
percentage has been reduced from 57.2% (prior to the Altoro
transaction) to 41.2% as of December 31, 2002.

Cash and cash equivalents amounted to $1,405,000 at December 31,
2002. These funds are generally invested in short-term interest-
bearing deposits and securities, pending investment in current and
future projects. The note receivable from Newmont amounted to
$222,000 at December 31, 2002, including $111,000 in other (long-
term) assets. Working capital at December 31, 2002 was $1,853,000.

Solitario believes that its existing funds are sufficient to meet its
currently planned operating activities and mandatory property
payments through 2003. Solitario will need substantial additional
financing in order to bring its properties into production. There is no
assurance that such financing will be available when needed or that,
if available, it can be secured on favorable terms.

Related party transactions
Crown, through its wholly owned subsidiary, Crown Resource Corp.
of Colorado owns 41.2% of Solitario. Crown provides management
and technical services to Solitario under a management and technical
services agreement originally signed in April 1994 and modified in
April 1999, December 2000 and July 2002. Under the modified
agreement Solitario reimburses Crown for direct out-of-pocket

expenses; payment of between 25% and 75% of executive and
administrative salaries and benefits, rent, insurance and investor
relations costs and payment of certain indirect costs and expenses
paid by Crown on behalf of Solitario. Management service fees paid
by Solitario to Crown were $449,000 for 2002, $590,000 for 2001 and
$414,000 for 2000.

In October 2001, Solitario invested in two 10% convertible secured
promissory notes, (“Senior Notes”) totaling $1,000,000 of the
$3,600,000 Secured Notes issued by Crown. The proceeds from the
first Senior Note, (the “Solitario Note”), of $350,000 were delivered
to Crown. The proceeds from the second Senior Note, of $650,000
were placed in escrow pending the outcome of Crown’s voluntary
petition for bankruptcy, filed in United States Bankruptcy Court,
which was filed on March 8, 2002 (the “Bankruptcy”). In March
2002 an additional $200,000 was advanced to Crown out of escrow of
which Solitario's share of the advance was $56,000. Crown's plan was
confirmed on May 30, 2002 and the remaining balance of the
proceeds plus interest was released to Crown on the Effective Date.
The independent Board members of both Crown and Solitario
approved the transaction. The terms of the transaction on the
Escrowed Notes were the same as given to other senior lenders of
Crown (the "Senior Lenders") and, with regard to the terms of the
$350,000 Solitario Note, the terms were negotiated with and approved
by the other Senior Lenders. During 2002, Solitario was paid
182,440 Crown shares as interest under the Senior Notes.

Solitario entered into a Voting Agreement dated as of April 15, 2002
among Zoloto Investor's, LP ("Zoloto") and Crown. Solitario and
Zoloto are both shareholders of Crown (the "Signing Shareholders").
Pursuant to the Voting Agreement, Solitario and Zoloto agree that
they will each vote their owned shares during the term of the Voting
Agreement for the election of three designees of Zoloto and one
designee of Solitario (the "Designee Directors") to the Board of
Directors of Crown. The Signing Shareholders agreed that any
shares received by either Signing Shareholder would be subject to the
Voting Agreement during its term and any successor, assignee or
transferee of shares from either Signing Shareholder would be subject
to the terms of the Voting Agreement during its term. The Voting
Agreement terminates on the third anniversary from the date of the
first annual meeting of shareholders after the date of the Voting
Agreement. As of December 31, 2002, the Signing Shareholders
collectively held 523,418 shares or approximately 13.6% of the
outstanding shares of Crown. As of December 31, 2002, Solitario
owns 182,440 shares of Crown common stock, received as interest on
its Senior Notes, has warrants to acquire 3,057,143 shares of Crown
common stock at between $0.60 and $0.75 per share and could also
acquire up to 3,057,143 additional shares of Crown common stock
through conversion of its Senior Notes.

On June 26, 2001, Solitario agreed to acquire 200,000 shares of Canyon
Resources Corporation common stock from Crown at its fair market
value of $200,000 at that date. Solitario sold the shares for $245,000 in
February 2002, the fair market value at that date. The transaction
provided additional working capital to Crown, and was approved by
independent Board members of both Crown and Solitario.

On February 21, 2003, Solitario invested $400,000 in Crown’s 10%
convertible subordinated promissory notes due 2006 Series B (The
“Subordinated B Notes”). The issuance of up to $3 million of the
Subordinated B Notes was authorized by Crown on February 7, 2003
by Crown’s Board of Directors. On February 21, 2003, Crown closed
the financing by issuing $2.7 million of the Subordinated B Notes.
The Subordinated B Notes are convertible into common stock of
Crown at $0.75 per share. The Subordinated B Notes pay interest at

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10% in stock or cash at Crown’s option, and mature on October 19,
2006, the same date as Crown’s Senior Notes. Solitario’s investment
was on the same terms as all other investors.

Joint Ventures
Solitario acquired the Pedra Branca platinum-palladium (“PGM”)
Project located in Ceará State, Brazil, as part of the Altoro acquisition in
October 2000. Altoro signed an agreement in 1999, which was modified
in 2000, with Eldorado Gold Corporation (“Eldorado”) whereby
Solitario can earn a 70% interest in concessions covering approximately
10,000 hectares, by spending $2,000,000 on exploration by August 2003.
Solitario can earn an additional 20% (90% total) by spending an extra
$1,000,000 by August 2005. Should Eldorado be diluted to 10%,
Eldorado may convert its interest to a 2% NSR. Additionally, Solitario
controls concessions in its own name covering approximately 75,000
hectares for a total of 85,000 hectares at the Pedra Branca Project. In
February 2000, Altoro signed a letter of intent, which was subsequently
assigned to Rockwell Ventures, Inc., of Vancouver Canada (“Rockwell”),
granting Rockwell an option to earn a 60% interest in Altoro’s share of
the Pedra Branca Project. Under the terms of the agreement, Rockwell
was required to spend $7,000,000 on exploration within four years from
July 2000, with a minimum expenditure of $1,000,000 during the first
year. In addition, Rockwell issued to Solitario a total of 125,433 shares
and $50,000 in cash in May 2000 upon regulatory approval of the
agreement. In June of 2001, Rockwell terminated its option under the
agreement. At December 31, 2002, Solitario owns 100% of the Pedra
Branca project, subject to the Eldorado Lease above and the Anglo
Platinum agreement discussed below.

On January 28, 2003 Solitario entered into an agreement with Anglo
American Platinum Corporation, Ltd. (“Anglo Platinum”) whereby
Anglo Platinum may earn a 51% interest in the Pedra Branca Project,
by spending $7 million on exploration at Pedra Branca over a four-
year period. Anglo agreed to a minimum expenditure of $500,000
during the first six months of the agreement. Anglo can earn an
additional 9% interest in Pedra Branca (for a total of 60%) by
completing a bankable feasibility study. Anglo can also earn an
additional 5% interest in Pedra Branca (for a total of 65%) by
arranging for financing to put the project into commercial production.

In July 2002, Solitario signed an agreement with Bear Creek Mining
Company (“Bear Creek”) whereby Bear Creek can earn 51% interest
in the La Pampa property by expending $4.5 million on exploration
of La Pampa over a five-year period. As part of the agreement, Bear
Creek will pay all costs to maintain the concessions. As part of the
agreement Bear Creek must complete a minimum of 1,000 meters of
drilling on the property. Bear Creek may earn an additional 14%
interest (for a total of 65%) by completing a bankable feasibility
study on the property within two years of earning its 51% interest.

In December 1996, Solitario signed an agreement regarding the
Bongará project with a subsidiary of Cominco Ltd. (“Cominco”) of
Vancouver, B.C., Canada. Cominco had the right to earn a 65%
interest in the Bongará project by (among other things) spending a
minimum of $17,000,000 over a five-year period from January 2000
forward. Cominco paid Solitario $118,000, including value added
taxes of 18% in January 2000 and 1999. In February 2001,
Cominco terminated their option to acquire an interest in the
Bongará project. Solitario currently holds a 100% interest in the
project covering approximately 28,500 hectares and may seek a new
joint venture partner to explore and develop this property.

Solitario’s exploration and development activities, funding
opportunities and joint ventures may be materially affected by
commodity prices and fluctuations. Commodity market prices are

determined in world markets and are affected by numerous factors
beyond Solitario’s control.

Exploration Activities
A significant part of Solitario's business involves the review of
potential property acquisitions and continuing review and analysis of
properties in which it has an interest, to determine the exploration
and development potential of the properties. In analyzing expected
levels of expenditures for work commitments and property payments,
Solitario’s obligations to make such payments fluctuate greatly
depending on whether, among other things, Solitario makes a decision
to sell a property interest, convey a property interest to a joint
venture, or allow its interest in a property to lapse by not making the
work commitment or payment required.

In acquiring its interests in mining claims and leases, Solitario has
entered into agreements, which generally may be canceled at its
option. Solitario is required to make minimum rental and option
payments in order to maintain its interests in certain claims and
leases. Solitario estimates its 2003 mineral property rental and
option payments to be approximately $77,000 of which Solitario’s
portion is estimated to be approximately $52,000.

Solitario charged operations $907,000 during 2002 compared to
$1,464,000 during 2001 and $1,182,000 in 2000 for exploration
expenditures on mineral properties. The increase in the expenditures
in 2001 is related specifically to drilling programs at both the Pedra
Branca property in Brazil and the Rincon del Tigre property in
Bolivia as well a general expansion of the focus of Solitario’s
exploration activities to include platinum group metals related to
Altoro which increased the number and scope of properties to be
evaluated and the number and cost of exploration personnel.
Exploration charged to operations is exclusive of amounts spent on its
properties by third parties.

Solitario has budgeted $120,000 for exploration expenditures, to be
charged to operations, during 2003 which would be in addition to any
expenditures by joint venture partners.

New Accounting Pronouncements
In December 2002, the Financial Accounting Standards Board (the
“FASB”) issued Statement of Financial Accounting Standards No.
148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement No. 123" (“SFAS No.
148”). SFAS No. 148 amends Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation"
(SFAS No. 123) to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.
SFAS No. 148 is effective for financial statements for fiscal years
ending after December 15, 2002. Solitario will continue to account for
stock based compensation using the methods detailed in the stock-
based compensation accounting policy.

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criteria of Accounting Principles Board Opinion 30. This Statement
also amends existing authoritative pronouncements to make various
technical corrections, clarify meanings or describe their meanings
under changed conditions. Solitario has adopted SFAS 145 as of
January 1, 2003. The adoption of this Statement has not had a
material effect on its financial position or results of operations.

In June of 2002, the FASB issued SFAS No. 146, “Accounting for
Costs Associated with Exit or Disposal Activities”, which addresses
financial accounting and reporting for costs associated with these
costs and generally requires that a liability for a cost associated with
an exit or disposal activity shall be recognized and measured initially
at its fair value in the period in which the liability is incurred. SFAS
does not apply to costs associated with the retirement of long-lived
assets covered by FASB Statement No. 143. SFAS 146 will be applied
prospectively and is effective for exit or disposal activities initiated
after December 31, 2002.

In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". Under SFAS 143, the fair value of a liability
for an asset retirement obligation covered under the scope of SFAS
143 would be recognized in the period in which the liability is
incurred, with an offsetting increase in the carrying amount of the
related long-lived asset. Over time, the liability would be accreted to
its present value, and the capitalized cost would be depreciated over
the useful life of the related asset. Upon settlement of the liability, an
entity would either settle the obligation for its recorded amount or
incur a gain or loss upon settlement. Solitario is still studying this
newly-issued standard to determine, among other things, whether it
has any asset retirement obligations, which are covered, under the
scope of SFAS 143. Solitario has adopted Statement 143 as of
January 1, 2003. The effect to Solitario of adopting this standard is
not material.

Differences between Canadian and U.S. GAAP
The consolidated financial statements have been prepared in
accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”), which differ in some respects from Canadian GAAP. The
material differences, in respect to these financial statements between
U.S. and Canadian GAAP, and their effect on Solitario’s financial
statements, are summarized in Note 10 to the audited financial
statements included elsewhere in this report.

Risks
Solitario’s mineral properties are located in South America and
consist primarily of mineral concessions granted by national
governmental agencies and are held 100% by Solitario or under lease
or option or purchase agreements. The properties are been located
in Peru and Brazil. Solitario acts as operator on all of its properties
that are not held in joint ventures. The success of projects held
under joint ventures that are not operated by Solitario is
substantially dependent on the joint venture partner.

Properties held by Solitario are subject to the laws of Peru and
Brazil, where it operates. These countries have, from time to time,
experienced periods of political and economic instability. Foreign
properties, operations and investments may be adversely affected by
local political and economic developments, including nationalization,
exchange controls, currency fluctuations, taxation and laws or
policies as well as, bylaws and policies of the United States affecting
foreign trade, investment and taxation. Certain other regions in
which Solitario may conduct operations have also been subject to
political and economic instability, creating uncertainty and the
potential for a loss of resources located in these regions.

The capital required for exploration and development of
properties is substantial. Solitario has financed operations
through utilization of joint venture arrangements with third
parties (generally providing that the third party will obtain a
specified percentage of Solitario’s interest in a certain property in
exchange for the expenditure of a specified amount), the sale by
Solitario of interests in properties or other assets, and the issuance
of debt and common stock. Solitario will need to raise additional
cash, or enter into a joint venture arrangement, in order to fund
the development and initial operation of any property it desires to
develop. New financing or acceptable joint venture partners may
or may not be available on a basis that is acceptable to Solitario.
Accordingly, there is no assurance that Solitario will be successful
in its attempt to develop any projects it now has or may discover
in the future.

A large number of companies are engaged in the exploration and
development of mineral properties, many of which have substantially
greater technical and financial resources than Solitario. Therefore,
Solitario may be at a disadvantage with respect to many of its
competitors in the acquisition, exploration and development of
mining properties. The marketing of minerals is affected by
numerous factors, many of which are beyond the control of Solitario.
These include the price of the raw or refined minerals in the
marketplace, imports of minerals from other countries, the
availability of adequate milling and smelting facilities, the price of
fuel, the availability and the cost of labor, and the market price of
competitive minerals.

In connection with the acquisition of Solitario’s properties, Solitario
conducts limited reviews of title and related matters, and obtains
certain representations regarding ownership. Although Solitario
believes it has conducted reasonable investigations (in accordance
with standard mining practice) of the validity of ownership, there can
be no assurance that it holds good and marketable title to all of its
properties.

The development, production and sale of minerals is subject to
federal, state, provincial and local regulation in a variety of ways,
including environmental regulation and taxation. Federal, state,
and local environmental regulations generally have a significant
effect on all companies, including Solitario, engaged in mining or
other extractive activities, particularly with respect to the
permitting requirements imposed on such companies, the
possibilities of project delays, and the increased expense required
to comply with such regulations. Solitario believes it is in
substantial compliance with all such regulations in all the
jurisdictions in which it operates.

Future legislation and regulations are expected to continue to
emphasize the protection of the environment and, as a consequence,
the activities of Solitario may be more closely regulated to further the
cause of environmental protection. Such legislation and regulations,
as well as future interpretation of existing laws, may require
substantial increases in capital and operating costs to Solitario and
delays, interruptions, or a termination of operations, the extent of
which cannot be predicted.

The mining industry is subject to risks of human injury,
environmental liability and loss of assets. Solitario maintains
insurance coverage consistent with industry practice, but can
give no assurance that this level of insurance can cover all risks
of harm to Solitario associated with being involved in the
mining business.

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INDEPENDENT AUDITORS’ REPORT AND COMMENTS BY INDEPENDENT
AUDITORS FOR CANADIAN READERS ON U.S.- CANADA REPORTING CONFLICT

To the Board of Directors and Stockholders of Solitario Resources Corporation
Wheat Ridge, Colorado

We have audited the consolidated balance sheets of Solitario Resources Corporation and subsidiaries (Solitario) as of December 31, 2002 and
2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended
December 31, 2002. These financial statements are the responsibility of Solitario's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Solitario as of December
31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in
conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the consolidated balance sheet at December 31, 2002 includes land and
leasehold costs of $3,743,000. Note 1 to the consolidated financial statements emphasizes that the recovery of these costs is ultimately
dependent upon the development of economically recoverable ore reserves, the ability of Solitario to obtain the necessary permits and financing
to successfully place the properties into production, and upon future profitable operations.

Deloitte & Touche LLP
Denver, Colorado
March 24, 2003

To the Board of Directors and Stockholders of Solitario Resources Corporation
Wheat Ridge, Colorado

In Canada, reporting standards for auditors do not permit the addition of explanatory paragraphs in the auditors’ report to emphasize a
matter when such matter is adequately disclosed in the notes to the financial statements. Our report to the Board of Directors and
Stockholders dated March 24, 2003 is expressed in accordance with auditing standards generally accepted in the United States of America,
which permits the inclusion of an explanatory paragraphs in the auditors’ report to emphasize a matter regarding the financial statements.

Deloitte & Touche LLP
Denver, Colorado
March 24, 2003

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CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. Dollars, except per share amounts)

Assets
Current assets:

Cash and cash equivalents
Note receivable
Investments in marketable equity securities, at fair value
Prepaid expenses and other

Total current assets

Mineral properties, net
Note receivable from Crown, net of discount
Other assets

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable
Due to Crown

Total current liabilities

Commitments and contingencies (Notes 2 and 4)

Stockholders’ equity:

Preferred stock, $0.01 par value, authorized 10,000,000
(none issued and outstanding December 31, 2002 and 2001)
Common stock, $0.01 par value, authorized, 50,000,000
(23,407,134 issued and outstanding at December 31, 2002 and 2001)
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income (loss)

Total liabilities and stockholders’ equity

December 31,

2002

2001

1,405
111
409
27
1,952

3,743
915
293
6,903

26
73
99

2,723
108
268
69
3,168

3,693
893
349
8,103

44
62
106

–

234
21,189
(14,837)
218
6,804
6,903

234
21,189
(13,167)
(259)
7,997
8,103

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of U.S. dollars except per share amounts)

Revenues:

Mineral property option proceeds
Gain on sale of assets
Interest income

Costs and expenses:

Exploration expense
Depreciation, depletion and amortization
General and administrative
Management fees
Asset write-downs
Loss on sale of assets
Other (net)

Net loss
Earnings (loss) per common share:

Basic
Diluted

Weighted average shares outstanding:

Basic
Diluted

Years ended December 31,
2000

2001

2002

$
$

–
–
137
137

907
40
372
449
–
39
–
1,807

(1,670)

(0.07)
(0.07)

23,407
23,407

$
$

–
–
236
236

1,464
49
511
590
1,274
–
5
3,893

(3,657)

(0.16)
(0.16)

23,387
23,387

$
$

100
5,811
360
6,271

1,182
18
372
414
–
–
–
1,986

4,285

0.24
0.23

18,163
18,350

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Additional

Accumulated
Other

(in thousands of U.S. dollars,

except per share amounts),

Common Stock
Shares Amount

Paid-in Accumulated Comprehensive
Capital

Deficit

Income (loss) Total

Balance at

January 1, 2000

Comprehensive income (loss):
Shares issued:

Acquisition of Altoro
Exercise of warrants
Comprehensive income (loss):

Net income
Net unrealized gain on
marketable equity
securities
Comprehensive income

Balance at

16,854,521

$ 169

$ 16,507

$ (13,795)

$ (131)

$ 2,750

6,228,894
261,232

–

–
–

62
3

–

–
–

4,464
176

–

–
–

4,285

–
–

–

69
–

4,526
179

4,285

69
4,354

December 31, 2000

23,344,647

234

21,147

(9,510)

(62)

11,809

Shares issued:

For mineral property

62,487

–

–
–

–

–
–

–

(3,657)

–

–
–

(197)
–

(3,657)

(197)
(3,854)

–

–
–

23,407,134
–

234
–

21,189
–

(13,167)
(1,670)

(259)
–

7,997
(1,670)

–
–

477
–

477
(1,193)

Comprehensive loss:
Net loss
Net unrealized loss on

marketable equity
securities
Comprehensive income

Balance at

December 31, 2001

Net loss
Net unrealized gain on
marketable equity
securities
Comprehensive income

Balance at

December 31, 2002

23,407,134

$ 234

$ 21,189

$ (14,837)

$ 218

$ 6,804

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31,
2000

2001

2002

(1,670)

(3,657)

4,285

(in thousands of U.S. dollars)

Operating activities:

Net income (loss)
Adjustments:

Depreciation, depletion and amortization
Asset write-downs
(Gain) loss on asset sales
Interest income received in stock
Other
Changes in operating assets and liabilities, excluding

effects of acquisition:
Prepaid expenses and other current assets
Accounts payable
Due to CRCC

Net cash used in operating activities

Investing activities:

Payments for acquisition, net of cash acquired
Investment in Crown promissory notes and warrants
Additions to mineral properties and other
Proceeds from asset and mineral property sales
Proceeds from note receivable
Purchase of securities
Other assets

Net cash provided by (used in) investing activities

Financing activities:

Issuance of common stock

Net cash provided by financing activities

40
–
39
(74)
–

18
(18)
11
(1,654)

–
–
(50)
407
109
(130)
–
336

–
–

49
1,274
–
–
2

(38)
(26)
(19)
(2,415)

–
(1,000)
(52)
13
106
(200)
(63)
(1,196)

–
–

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year

(1,318)
2,723
1,405

(3,611)
6,334
2,723

Supplemental disclosure of cash flow information:
Issuance of stock for property acquisitions

–

See Notes to Consolidated Financial Statements.

18
–
(5,811)
–
99

(77)
(73)
42
(1,517)

(374)
–
(55)
5,715
–
–
–
5,286

179
179

3,948
2,386
6,334

4,705

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Summary of Significant

Accounting Policies:
Business and company formation
Solitario Resources Corporation (“Solitario”) engages principally
in the acquisition, exploration, and development of mineral
properties. Solitario’s mineral properties are located in Brazil and
Peru. Solitario was incorporated in the state of Colorado on
November 15, 1984 as a wholly owned subsidiary of Crown
Resource Corp. of Colorado (“CRCC”). In October 2000 Solitario
completed a Plan of Arrangement (“the Plan”) whereby Solitario
issued 6,228,894 shares of its common stock to the shareholders of
Altoro Gold Corp. (“Altoro”) in exchange for 100% of the
outstanding shares of Altoro. Primarily as a result of the issuance
of shares in connection with the Plan, CRCC’s ownership of
Solitario’s shares was reduced from 57.3% (just prior to the
transaction) to 41.2% as of December 31, 2002. See Note 9.

Financial reporting
The consolidated financial statements include the accounts of
Solitario and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in
consolidation. The consolidated financial statements are prepared
in accordance with accounting principles generally accepted in the
United States of America, and are expressed in U.S. dollars. See
Note 10 for differences between Canadian and U.S. generally
accepted accounting principles.

In performing its activities, Solitario has incurred certain costs for
land and leasehold interests. The recovery of these costs is
ultimately dependent upon the development of economically
recoverable ore reserves, the ability of Solitario to obtain the
necessary permits and financing to successfully place the properties
into production, and upon future profitable operations, none of
which is assured.

Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and the differences
could be material.

Cash equivalents
Cash equivalents include investment in highly-liquid debt securities
with maturities of three months or less when purchased.

Note receivable
Note receivable consists of $200,000, plus interest, held by
Newmont Mining Company and due Solitario in two annual
payments, pending the release of certain contingent liabilities, see
Note 2. The long-term portion of the note receivable, of $100,000,
plus interest, is included in other assets.

Mineral properties
Land and leasehold costs are capitalized in cost centers and will be
depleted on the basis of economic reserves using the units-of-
production method. If there are insufficient economic reserves to

use as a basis for depleting such costs, a mineral property write-off
will be made in the period in which the determination is made.

Solitario records the proceeds from the sale of property interests to
joint ventures as a reduction of the related property’s capitalized
cost. Proceeds that exceed the capitalized cost of property are
recognized as revenue over the period that the joint venture
remains active as a result of the payment. When such proceeds are
associated with properties subject to a joint venture, they are
recorded as revenue in accordance with the terms of the joint
venture and the transfer of the property interest to the joint
venture partner during the term of the joint venture.

Solitario expenses all exploration costs incurred on properties
other than acquisition costs prior to the establishment of proven
and probable reserves. Solitario regularly performs evaluations of
its assets to assess the recoverability of its investments in these
assets. All long-lived assets are reviewed for impairment whenever
events or circumstances change which indicate the carrying amount
of an asset may not be recoverable utilizing established guidelines
based upon discounted future net cash flows from the asset or upon
the determination that certain exploration properties do not have
sufficient potential for economic mineralization.

Write-downs relating to mineral properties were to $1,274,000 in
2001. There were no mineral property write-downs in 2002 or
2000. The write-down for 2001 related to the Rincon del Tigre
Property located in Bolivia and the Tocantinzinho property located
in Brazil. At December 31, 2002 and 2001, Solitario’s capitalized
costs of $3,743,000 and $3,693,000, respectfully, related to the
land, leasehold and acquisition costs, as Solitario has not yet
identified any proven and probable reserves on its mineral
properties. The recoverability of these costs is dependent on,
among other things, the successful identification of proven and
probable reserves, and permitting and development of the
properties.

Marketable equity securities
Solitario's equity securities are classified as available-for-sale and
are carried at fair value, which is based upon market quotes of the
underlying securities. The cost of marketable equity securities sold
is determined by the specific identification method.

Foreign exchange
The United States dollar is the functional currency for all of
Solitario’s foreign subsidiaries. Although Solitario’s exploration
activities have been conducted primarily in Brazil, Bolivia and
Peru, substantially all of the land, leasehold, and exploration
agreements of Solitario are denominated in United States dollars.
Solitario expects that a significant portion of its required and
discretionary expenditures in the foreseeable future will also be
denominated in United States dollars. Foreign currency gains and
losses are included in the results of operations in the period in
which they occur.

Income taxes
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently
due plus deferred taxes related to certain income and expenses
recognized in different periods for financial and income tax

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reporting purposes. Deferred tax assets and liabilities represent
the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes are also recognized for
operating losses and tax credits that are available to offset future
taxable income and income taxes, respectively. A valuation
allowance is provided, if it is more likely than not that some
portion or all of the deferred tax assets will not be realized.

Earnings per share
The calculation of basic earnings per share, “Earnings Per Share”,
is based on the weighted average number of common shares
outstanding during the years ended December 31, 2002, 2001 and
2000. The calculation of diluted earnings per share includes the
effect of common stock equivalents, which include employee stock
options and warrants, unless inclusion would be anti-dilutive. The
potentially dilutive securities, stock options, were 3,372,000,
2,282,000 and 1,615,000 at December 31, 2002, 2001 and 2000,
respectively. Diluted earnings per share for the year ended
December 31, 2000 included the effect of stock options, which are
dilutive. The proceeds from the issuance of shares are assumed to
be used to purchase common stock in accordance with the treasury
stock method. Weighted average number of shares outstanding
increased from 18,162,549 to 18,350,069 as a result of the
assumption of the exercise of options, which are dilutive common
stock equivalents. There was no change to the income available to
common shareholders as a result of the assumption of conversion of
dilutive common stock equivalents. The effects of these securities
are not included in the computation of diluted earnings per share
in 2002 or 2001 as their inclusion would be anti-dilutive.

Employee stock compensation plans
Solitario follows Accounting Principles Board Opinion (“APBO”)
No. 25, “Accounting for Stock Issued to Employees”. Under
Solitario’s stock option plans, the exercise price of stock options
issued to employees equals the market price of the stock on the
measurement date. As a result of repricing of its options in 1999,
Solitario accounts for all grants which have been repriced as
variable awards and records increases and decreases in
compensation expense during the period based upon changes in the
market price of Solitario’s stock as required by APBO 25.

Pro forma information has been computed as if Solitario had
accounted for its stock options under the fair value method of
SFAS No. 123. The fair values of these options were estimated at
the date of grant using a Black-Scholes option pricing model with
the following assumptions for 2002, 2001 and 2000, respectively:
risk-free interest rate of 4.34%, 4.74% and 6.10%; dividend yield
of 0 percent; volatility factor of the expected market price of
Solitario’s common stock of 60%, 65% and 65%; and a weighted
average expected life of the options of 4.3 years, 4.4 years and 4.0
year. The weighted average fair value of the options granted is
estimated at $0.25, $0.34 and $0.48 per share in 2002, 2001 and
2000, respectively.

Had Solitario accounted for its stock options under the fair
value method of SFAS No. 123, the following results would have
been reported:

(in thousands, except
per share amounts)
Net income (loss)
As reported
Pro forma
Net income (loss)
per share
As reported
Pro forma

2002

2001

2000

$(1,670)
(1,902)

$(3,659)
(3,984)

$4,285
4,264

$ (0.07)
$ (0.08)

$ (0.16)
$ (0.17)

$ 0.23
$ 0.23

Segment reporting
Solitario operates in one segment, minerals exploration. All of
Solitario’s operations are located in South America as further
described in note 2 to these financial statements. Solitario’s United
States assets consist primarily of cash and cash equivalents at
December 31, 2002 of $1,385,000. Solitario conducts certain
administrative functions in the United States. Solitario holds
certain Canadian and South American assets through its Canadian
wholly owned subsidiary, Altoro.

New accounting pronouncements
In December 2002, the Financial Accounting Standards Board (the
“FASB”) issued Statement of Financial Accounting Standards No.
148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement No. 123" (“SFAS
No. 148”). SFAS No. 148 amends Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123) to provide alternative methods of
transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
SFAS No. 148 amends the disclosure requirements of SFAS No. 123
to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-
based employee compensation and the effect of the method used on
reported results. SFAS No. 148 is effective for financial statements
for fiscal years ending after December 15, 2002. Solitario will
continue to account for stock based compensation using the
methods detailed in the stock-based compensation accounting
policy.

In April 2002, the FASB issued SFAS No. 145, “Recission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No.
13, and Technical Corrections”. SFAS No. 145 eliminates
inconsistencies between the accounting for sale-leaseback
transactions and the required accounting for certain lease
modifications. This statement requires that gains and losses from
debt extinguishment should be classified as extraordinary items
only if they meet the criteria of Accounting Principles Board
Opinion 30. This Statement also amends existing authoritative
pronouncements to make various technical corrections, clarify
meanings or describe their meanings under changed conditions.
Solitario has adopted SFAS 145 as of January 1, 2003. The
adoption of this Statement has not had a material effect on its
financial position or results of operations.

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with an exit or disposal activity shall be recognized and measured
initially at its fair value in the period in which the liability is
incurred. SFAS does not apply to costs associated with the
retirement of long-lived assets covered by FASB Statement No. 143.
SFAS 146 will be applied prospectively and is effective for exit or
disposal activities initiated after December 31, 2002.

In June 2001, the FASB issued SFAS No. 143 "Accounting for
Asset Retirement Obligations". Under SFAS 143, the fair value of a
liability for an asset retirement obligation covered under the scope
of SFAS 143 would be recognized in the period in which the
liability is incurred, with an offsetting increase in the carrying
amount of the related long-lived asset. Over time, the liability
would be accreted to its present value, and the capitalized cost
would be depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity would either settle the
obligation for its recorded amount or incur a gain or loss upon
settlement. Solitario is still studying this newly-issued standard to
determine, among other things, whether it has any asset retirement
obligations, which are covered, under the scope of SFAS 143.
Solitario has adopted Statement 143 as of January 1, 2003. The
effect to Solitario of adopting this standard is not material.

2. Mineral Properties:
Peru
Solitario holds exploration concessions or has filed applications for
concessions covering approximately 26,000 acres in Peru. These
applications are subject to normal administrative approvals and
the properties are subject to an annual rental of $3.00 per hectare
(approximately 2.477 acres per hectare) in June of each year.

Bongará: Solitario acquired the initial Bongará exploration
concessions in 1993. The current landholdings consist of
concessions covering approximately 16,000 acres in northern Peru
(the “Bongará project”).

In December 1996, Solitario signed an agreement regarding the
Bongará project with a subsidiary of Cominco Ltd. (“Cominco”) of
Vancouver, B.C., Canada. After a modification signed in 1999,
Cominco had the right to earn a 65% interest in the Bongará
project by spending a minimum of $17,000,000 over a five-year
period. Cominco paid Solitario $118,000, including value added
taxes of 18%, in January 2000. In February 2001 Cominco
terminated their option to acquire an interest in the Bongará
project. Solitario currently holds 100% interest in the property
and may seek a new joint venture partner to explore and develop
this property.

Yanacocha: On April 26, 2000 Solitario completed a transaction
with an affiliate of Newmont Mining Corporation (“Newmont”) and
sold its interest in its Yanacocha property for $6 million and a
sliding scale net smelter return royalty (“NSR”) that varies with
the price of gold. Newmont retained $400,000 of the $6 million
purchase price to be paid in four annual installments plus interest
pending release of certain contingent liabilities. Solitario received
the first two payments of $109,000 and $106,000 (including
interest) in April 2002 and 2001, respectively. Solitario recorded a
gain on the sale of the Yanacocha property of $5.8 million during

the second quarter of 2000. The NSR royalty applies to
exploration concessions covering approximately 150,000 acres.

La Pampa: Solitario holds concessions comprising approximately
4,700 acres on the La Pampa exploration property. In July 2002,
Solitario signed an agreement with Bear Creek Mining Company
(“Bear Creek”) whereby Bear Creek can earn 51% interest in the
La Pampa property by expending $4.5 million on exploration of La
Pampa over a five-year period. As part of the agreement, Bear
Creek will pay all costs to maintain the concessions. As part of the
agreement Bear Creek must complete a minimum of 1,000 meters of
drilling on the property. Bear Creek may earn an additional 14%
interest (for a total of 65%) by completing a bankable feasibility
study on the property within two years of earning its 51% interest.

Other Peruvian properties: Solitario holds concessions comprising
approximately 4,400 acres on the Sapalache exploration property.
Solitario will conduct limited exploration activities while it seeks
joint venture partners to explore and develop this property.

Brazil
Pedra Branca: Solitario acquired the Pedra Branca platinum-
palladium (PGM) Project located in Ceará State, Brazil, as part of
the Altoro acquisition in October 2000. Altoro signed an agreement
in May of 1999 with Eldorado Gold Corporation (“Eldorado”)
whereby Solitario can earn a 70% interest in concessions covering
approximately 24,000 acres, by spending $2 million on exploration
over three years. Solitario can earn an additional 20% (90% total)
by spending an extra $1 million within five years of the signature
date. Should Eldorado be diluted to 10% this interest converts to
a 2% NSR. Additionally, Solitario controls concessions in its own
name covering approximately 185,000 acres for a total of 209,000
acres at the Pedra Branca Project.

In February 2000, Altoro signed a letter of intent, which was
subsequently assigned to Rockwell Ventures, Inc., of Vancouver,
Canada (“Rockwell”), granting Rockwell an option to earn a 60%
interest in Altoro’s share of the Pedra Branca Project. Under the
terms of the agreement, Rockwell was required to spend $7
million on exploration within four years from July 2000, with a
minimum expenditure of $1 million during the first year. In
addition, Rockwell issued to Solitario a total of 125,433 shares
and $50,000 in cash in May 2000 upon regulatory approval of the
agreement. In June of 2001, Rockwell terminated its option
under the agreement. At December 31, 2002, Solitario owns 100%
of the Pedra Branca project subject to the Eldorado Lease
discussed above.

On January 28, 2003 Solitario entered into an agreement with
Anglo American Platinum Corporation, Ltd. (“Anglo Platinum”)
whereby Anglo Platinum may earn a 51% interest in the Pedra
Branca Project, by spending $7 million on exploration at Pedra
Branca over a four-year period. Anglo agreed to a minimum
expenditure of $500,000 during the first six months of the
agreement. Anglo can earn an additional 9% interest in Pedra
Branca (for a total of 60%) by completing a bankable feasibility
study. Anglo can also earn an additional 5% interest in Pedra
Branca (for a total of 65%) by arranging for financing to put the
project into commercial production.

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In October 2000, Solitario recorded $3,627,000 in mineral
property additions for the Pedra Branca project in connection with
the acquisition of Altoro.

Tocantinzinho: In November 1998 Altoro entered into an option
agreement (subsequently modified) to acquire a 100% interest in
the Tocantinzinho gold property in Brazil. The agreement covered
washing licenses for approximately 10,000 acres located in the Para
State in Brazil. Solitario terminated the agreement in December of
2001 and recorded a property-write down of $639,000.

Bolivia
Rincon del Tigre: Since April 1999 Altoro entered into a series of
agreements that allow Solitario to earn a 100% interest in
concessions covering 127,000 acres at the Rincon del Tigre PGM
property located in Santa Cruz State, Bolivia. The agreements
required Solitario to spend $3.15 million on exploration over six
years and to issue 800,000 shares of Altoro, 100,000 shares of
which were issued in 1999 and 2000. The remaining 700,000 shares
of Altoro were to be issued as 233,333 shares of Solitario. Solitario
issued 70,834 shares under these agreements during 2001. In
December 2001, Solitario terminated these agreements, made a
cash payment to the owner of the Rincon del Tigre concessions of
$35,000 and recorded a mineral property write-down of $636,000.
Solitario’s remaining share payment requirements were canceled
upon termination.

Land and leasehold and exploration costs
Mineral property costs for all Solitario’s properties are comprised
of land and leasehold costs at December 31, 2002 and 2001. The
following items comprised the additions to exploration costs:

(in thousands)
Geologic, drilling

Exploration Expense
2001

2000

2002

and assay
Field expenses
Administrative

$ 335
164
408
Total exploration costs $ 907

$ 707
243
514
$1,464

$ 284
394
504
$1,182

Included in the consolidated balance sheet at December 31, 2002
are total assets of $3,797,000 related to Solitario’s foreign
operations. Assets totaling $3,794,000 are located in South America
in Brazil and Peru. Assets totaling $3,000 are located in Canada.

3. Acquisitions:
As described in Note 9, in October 2000, Solitario acquired 100%
of the outstanding common stock of Altoro (the “Transaction”).
Solitario accounted for the Transaction using the purchase method
of accounting. The purchase price was $4,996,000, which included
the issuance of 6,228,884 shares valued at $4,526,000. The
purchase cost of mineral properties acquired was $4,466,000. This
amount was allocated as follows: Pedra Branca in Brazil,
$3,573,000; Tocantinzinho in Brazil, $447,000; and Rincon del
Tigre in Bolivia, $447,000. The fair value of the remaining assets
acquired was $666,000 and the fair value of the liabilities assumed
was $136,000. The pro forma results, assuming the transaction
occurred as of January 1, 2000 are as follows:

(in thousands)
Revenues
Net income (loss)
Basic and diluted income

(loss) per share

Year ended December 31, 2000
$ 6,278
$ 3,410

$ 0.15

4. Related party transactions:
Crown, through its wholly owned subsidiary, Crown Resource
Corp. of Colorado owns 41.2% of Solitario. Crown provides
management and technical services to Solitario under a
management and technical services agreement originally signed in
April 1994 and modified in April 1999, December 2000 and July
2002. Under the modified agreement Solitario reimburses Crown
for direct out-of-pocket expenses; payment of between 25% and
75% of executive and administrative salaries and benefits, rent,
insurance and investor relations costs and payment of certain
indirect costs and expenses paid by Crown on behalf of Solitario.
Management service fees paid by Solitario to Crown were $449,000
for 2002, $590,000 for 2001 and $414,000 for 2000.

In October 2001, Solitario invested in two 10% convertible secured
promissory notes, (“Senior Notes”) totaling $1,000,000 of the
$3,600,000 Secured Notes issued by Crown. The proceeds from the
first Senior Note, (the “Solitario Note”), of $350,000 were
delivered to Crown. The proceeds from the second Senior Note, of
$650,000 were placed in escrow pending the outcome of the
Crown’s voluntary petition for bankruptcy, filed in United States
Bankruptcy Court, which was filed on March 8, 2002 (the
“Bankruptcy”). In March 2002 an additional $200,000 was
advanced to Crown out of escrow of which Solitario's share of the
advance was $56,000. Crown's plan was confirmed on May 30,
2002 and the remaining balance of the proceeds plus interest was
released to Crown on the Effective Date. The independent Board
members of both Crown and Solitario approved the transaction.
The terms of the transaction on the escrowed Senior Notes were the
same as given to other senior lenders of Crown (the "Senior
Lenders") and, with regard to the terms of the $350,000 Solitario
Note, the terms were negotiated with and approved by the other
Senior Lenders. During 2002, Solitario was paid 182,440 Crown
shares as interest under the Senior Notes.

Solitario entered into a Voting Agreement dated as of April 15, 2002
among Zoloto Investor's, LP ("Zoloto") and Crown. Solitario and
Zoloto are both stockholders of Crown (the "Signing Shareholders").
Pursuant to the Voting Agreement, Solitario and Zoloto agree that
they will each vote their owned shares during the term of the Voting
Agreement for the election of three designees of Zoloto and one
designee of Solitario (the "Designee Directors") to the Board of
Directors of Crown. The Signing Shareholders agreed that any
shares received by either Signing Shareholder would be subject to the
Voting Agreement during its term and any successor, assignee or
transferee of shares from either Signing Shareholder would be subject
to the terms of the Voting Agreement during its term. The Voting
Agreement terminates on the third anniversary from the date of the
first annual meeting of shareholders after the date of the Voting
Agreement. As of December 31, 2002, the Signing Shareholders
collectively held 523,418 shares or approximately 13.6% of the

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outstanding shares of Crown. As of December 31, 2002, Solitario
owns 182,440 shares of Crown common stock, received as interest on
its Senior Notes, has warrants to acquire 3,057,143 shares of Crown
common stock at between $0.60 and $0.75 per share and could also
acquire up to 3,057,143 additional shares of Crown common stock
through conversion of its Senior Notes.

On June 26, 2001, Solitario agreed to acquire 200,000 shares of
Canyon Resources Corporation common stock from Crown at its
fair market value of $200,000 at that date. Solitario sold the
shares for $245,000 in February 2002, the fair market value at that
date. The transaction provided additional working capital to
Crown, and was approved by independent Board members of both
Crown and Solitario.

On February 21, 2003, Solitario invested $400,000 in Crown’s 10%
convertible subordinated promissory notes due 2006 Series B (The
“Subordinated B Notes”). The issuance of up to $3 million of the
Subordinated B Notes was authorized by Crown on February 7,
2003 by Crown’s Board of Directors. On February 21, 2003, Crown
closed the financing by issuing $2.7 million of the Subordinated B
Notes. The Subordinated B Notes are convertible into common
stock of Crown at $0.75 per share. The Subordinated B Notes pay
interest at 10% in stock or cash at Crown’s option, and mature on
October 19, 2006, the same date as Crown’s Senior Notes.
Solitario’s investment was on the same terms as all other investors.

5. Income Taxes:
Solitario’s income tax expense (benefit) consists of the following:

(in thousands)
Deferred
U.S.
Foreign
Operating loss and
credit carryovers:

U.S.
Foreign
Income tax benefit

2002

2001

2000

$ 286
(3)

$ (359)
(312)

$ -
(347)

(286)
3
$ -

359
312
$ -

-
347
$ -

Consolidated loss before income taxes includes losses from foreign
operations of $1,063,000, $3,057,000 and $1,275,000 in 2002, 2001
and 2000, respectively.

The net deferred tax assets/liabilities in the December 31, 2002 and
2001 balance sheets include the following components:

(in thousands)
Deferred tax assets:
Net operating loss (NOL) carryovers

Capital loss carryovers
Royalty

Other
Valuation allowance
Deferred tax assets
Deferred tax liabilities:
Exploration and development costs
Net deferred tax assets/liabilities

2002

2001

$ 3,848
622
1,560
(105)
(4,678)
1,247

$ 3,464
622
1,560
91
(4,792)
945

1,247
$ -

945
$ -

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A reconciliation of expected federal income taxes on income (loss)
from operations at statutory rates, with the expense (benefit) for
income taxes is as follows:

(in thousands)
Expected income tax

2002

2001

2000

(benefit)

$ (568)

$ (1,243)

$ 1,457

Non-deductible foreign

expenses

Disposition of investment

in Peru

Foreign tax rate
differences
State income tax
Valuation allowance
Other
Income tax benefit

495

109

1,818

(14)
12
73
2
$ -

(7)
(76)
1,221
12
$ -

12
351
(3,727)
(20)
$ -

At December 31, 2002, Solitario has unused U.S. Net Operating
Loss (“NOL”) and capital loss carryovers of $3,715,000 and
$1,594,000, respectively, which begin to expire commencing 2008
and 2004, respectively. Solitario also has foreign NOL carryovers
at December 31, 2002 of $6,978,000 that begin to expire four years
after the first year in which taxable income arises.

6. Fair Value of Financial Instruments:
For certain of Solitario’s financial instruments, including cash and
cash equivalents, the carrying amounts approximate fair value due
to their short maturities. Solitario’s marketable equity securities
are carried at their estimated fair value based on quoted market
prices.

The fair value of the Secured Notes is estimated at December 31,
2002 and 2001 to be 1,250,000 and 1,000,000, per quoted market
prices. The fair value of the Crown warrants held by Solitario is
$153,000 per quoted market prices as of December 31, 2002. The
valuation credit for the fair value is included as other
comprehensive income in stockholders’ equity as of December 31,
2002. The valuation allowance was calculated as $47,000 as of
December 31, 2001 utilizing a Black-Scholes model and was
charged to other comprehensive loss in stockholders’ equity as of
December 31, 2001.

7. Commitments and Contingencies:
In acquiring its interests in mineral claims and leases, Solitario has
entered into lease agreements, which generally may be canceled at
its option. Solitario is required to make minimum rental and
option payments in order to maintain its interests in certain claims
and leases. See Note 2. Solitario estimates its 2003 mineral
property rental and option payments to be $77,000 of which
Solitario’s portion is estimated to be approximately $52,000.

8. Stock Option Plan:
On March 4, 1994, Solitario’s Board of Directors (the “Board”) adopted the 1994 Stock Option Plan (the “Plan”). Up to 1,100,000 shares
of Solitario’s common stock were authorized for issuance under the Plan. The Board voted for, and shareholders approved, amendments
that have increased the authorized shares under the Plan to 3,736,000 as of June 2002.

All options have been granted at exercise prices that are determined by the Board to be the fair market value on the date of grant. The
options expire five years from the date of grant, and are subject to certain vesting provisions, as determined by the Board.

The activity in the Plan for the three years ended December 31, 2002 is as follows:

2002
Weighted
Average
Price (Cdn$)1
1.10
0.73
-
1.16
0.96
1.00

Options

2,282,000
1,140,000
-
(50,000)
3,372,000
2,742,000

2001

Weighted
Average
Price (Cdn$)1
1.22
0.94
-
1.31
1.08
1.10

Options
1,724,750
980,000

-
(422,750)
2,282,000
1,812,500

Outstanding, beginning of year
Granted
Forfeited
Expired
Outstanding, end of year
Exercisable, end of year

2000
Weighted
Average
Price (Cdn$)1
1.23
1.30
1.17
-
1.22
1.22

Options

1,704,750
45,000
(25,000)
-
1,724,750
1,472,750

(1) In March 1999, the shareholders of Solitario approved a repricing of existing options for current employees, officers and directors to
Cdn$1.16 per share, which was the market price of Solitario’s stock.

The options outstanding at December 31, 2002 have a range of exercise prices of between Cdn$1.30 and Cdn$0.94 and a weighted average
remaining contractual life of 3.06 years.

As a result of the repricing of existing options in 1999, Solitario began to account for the awards as variable as of July 1, 2000, in
accordance with FASB Interpretation No. 44, “Accounting for Certain Transactions involving Stock Compensation” (an interpretation of
APB 25). Accordingly, an increase in the current market price of Solitario common stock above the higher of the option strike price and
the market price of Solitario’s common stock as of July 1, 2000, multiplied by vested options outstanding will be recorded as compensation
expense in the period of the price increase. A subsequent reduction in the current market price, to the extent of previously recorded
compensation expense will be credited as a reduction of compensation expense. There was no compensation expense recorded during
2002, 2001 or 2000 as a result of variable accounting for the repriced options.

The following table summarizes Solitario’s stock options as of December 31, 2002

Exercise Price
Cdn$

$0.73
$0.94
$1.16
$1.19 to $1.22
$1.30
Total

Number

1,140,000
980,000
747,000
395,000
110,000
3,372,000

Options Outstanding

Weighted Average
Remaining Contractual
Life (in years)

3.3
2.3
1.3
1.5
1.9

Weighted Average
Exercise Price
Cdn$
$0.73
$0.94
$1.16
$1.22
$1.30

Options Exerciseable

Number
Exercisable

742,500
755,000
747,000
395,000
102,500
2,742,000

Weighted Average
Exercise Price
Cdn$
$0.73
$0.94
$1.16
$1.22
$1.30

9. Stockholders' Equity:
In October 2000, Solitario completed a Plan of Arrangement (“the Plan”) with Altoro Gold Corp. of Vancouver, Canada (“Altoro”),
whereby Altoro became a wholly owned subsidiary of Solitario. In connection with the Plan, Solitario issued 6,228,894 shares to Altoro
shareholders and option holders. Solitario also reserved 825,241 Solitario shares for issuance upon the exercise of 825,241 warrants in
exchange for Altoro warrants. During 2000, Solitario issued 261,232 shares upon the exercise of the above warrants and 302,898 of the
warrants expired unexercised. The remaining 261,111 warrants expired unexercised during 2001. Primarily as a result of the issuance of
Solitario shares in connection with the Plan, CRCC’s ownership percentage of Solitario was reduced from 57.2% (prior to the transaction)
to 41.2% at December 31, 2002.

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10. Differences between Canadian and U.S. GAAP:
The consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”)
which differ in some respects from Canadian GAAP. The material differences, in respect to these financial statements between U.S. and
Canadian GAAP, and their effect on Solitario’s financial statements, are summarized below:

Marketable equity securities - Under Canadian GAAP, investments in marketable securities are valued at cost, unless a decline in value is
considered to be other than a temporary impairment.

As a result of the above, under Canadian GAAP, the following line items in the consolidated balance sheets would be presented as follows:

(in thousands)
Marketable equity securities
Other assets
Total assets
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity

$
$
$
$
$
$

2002
234
110
6,685
-
6,586
6,685

$
$
$
$
$
$

2001
527
349
8,362
-
8,256
8,362

11. Selected Quarterly Financial Data (Unaudited):
(in thousands)

2002

2001

Revenues
Net income (loss)
Basic and fully diluted
earnings (loss) per
common and common
equivalent share:

March 31,
$ 31
$ (483)

June 30,
$ 25
$ (430)

Sept. 30,
$ 44
$ (442)

Dec. 31, March 31,
$ 87
$ (535)

$
37
$ (315)

June 30,
$ 63
$ (590)

Sept. 30,
$ 47
$ (1,863)

Dec. 31,
$ 39
$ (669)

$(0.02)

$(0.01)

$(0.02)

$(0.03)

$(0.08)

$(0.03)

The information set forth includes “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and is subject to the safe harbor created by those sections. Factors that could cause
results to differ materially from those projected in the forward-looking statements include, but are not limited to, the timing of receipt
of necessary governmental permits, the results of judicial proceedings, commodity prices, results of current exploration activities and
other risks as described in greater detail in the Company’s 2002 Annual Information Form.

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CORPORATE INFORMATION

OFFICERS & DIRECTORS

Legal Counsel

Christopher E. Herald

Solomon, Pearl, Blum Heymann & Stich, LLP

President and Chief Executive Officer

Walter H. Hunt

Vice President – Operations

James R. Maronick

Chief Financial Officer

Debbie W. Mino

Vice President – Investor Relations

Mark E. Jones, III

Chairman

John Hainey

Director

Leonard Harris

Director

Dan Leonard

Director

Denver, Colorado

Fogler, Rubinoff, Toronto, Ontario

Auditors

Deloitte & Touche LLP, Denver, Colorado

Transfer Agents

Computershare, Toronto, Ontario

800-564-6253

Corporate Offices

4251 Kipling Street, Suite 390

Wheat Ridge, Colorado 80033

Telephone: 303-534-1030

Fax: 303-534-1809

Investor Relations

Questions and requests for information should

be directed to Debbie W. Mino, Vice President-

Investor Relations at 800-229-6827 or via email

at dwmino@solitarioresources.com

Website

www.solitarioresources.com

Notice of Annual Meeting

The Annual Meeting of Shareholders will be at

10 a.m. MDT on June 18, 2003 at the

Company’s corporate offices.

Stock Exchange Listing

Toronto: SLR

Common Stock Data

The Company’s common stock has been listed and

traded in Canada on The Toronto Stock Exchange

since July 19, 1994 under the symbol SLR.

Design: Pite Creative
www.pitecreative.com

Toronto Stock

Exchange: SLR

Solitario Resources Corporation
4251 Kipling Street, Suite 390

Wheat Ridge, Colorado 80033

Tel: 303-534-1030

Fax: 303-534-1809