Strong Balance Sheet, Stronger Development Pipeline

Solitario Exploration and Royalty Corp. (XPL) has issued 32.3 million shares, options and warrants for a fully diluted market capitalization of $79 million, and holds cash and publicly tradable equities of U.S. $15 million.

Solitario has a business plan which is built around the creation of net profit Interests in mining projects that are operated and financed by leading global mining companies such as Votorantim Metais, Buenaventura (BVN), Newmont Mining (NEM) and Anglo Platinum (AGPPY).

XPL has developed a pipeline of world class projects, based in Latin America, that have been ventured to these companies, who fund the development of a bankable feasibility study and assume the risk of mine finance and development at no cost to Solitario. This avoids equity dilution and provides higher returns than Net Smelter Royalties (NSR), and allows management to focus on the development of high quality mineral prospects and build strategic land positions.

Exploration expenditures in 2010 are expected to reach $11 million on venture projects and reach as high as $20 million in 2011. Major investors in the company include Sprott Asset Management with 14%, Newmont Mining with 9%, and insiders with 12%.

Solitario s key development is the Bongara Zinc Project in Northern Peru, which is in a joint venture with Votorantim, which can earn up to 70% with Solitario retaining 30%. Votorantim Metais is the largest zinc producer in South America and is ranked third in worldwide production.

Bongara is one of the world s largest and newest high grade zinc discoveries, and has major potential to exceed 20 million tonnes of zinc at 9%, lead at 1%, and 0.5 ounce per ton silver. The project has had 60,000 meters of drilling completed, and has advanced to the prefeasibility stage at a cost of $30 million.

Construction of a 23 kilometer access road, at a cost of $10 million, has commenced, 700 meters of underground workings are underway and 10,000 meters of drilling will be completed by the end of 2010. Votorantim invested $10 million in 2010, and expects to spend up to $18 million to complete a bankable feasibility study. Advanced permitting is in place and capital costs for the mine are estimated at $140 million.

The estimated production rate for the mine is 5,000 tonnes per day, which will produce 108,000 tonnes of zinc, 16,000 tonnes of lead and 400,000 ounces of silver on an annualized basis. This production will be in a concentrate that will be shipped to a refiner for final processing. Production is forecast to commence in the fourth quarter of 2014. Solitario is free carried for 30% of the project, and will reimburse 30% of mine finance costs from its share of profits once the mine is producing cash flow.

Solitario also has real quality in its Pachuca Real project, a Mexican high grade gold and silver project containing 31,000 hectares that abuts the world s greatest silver mining district with historical production of 1.4 billion ounces of silver and 7 million ounces of gold.

Recent exploration and drilling work confirms that the property has similar mineralization spread out over an area that mirrors the historic district. Buenaventura currently operates eight mines in Peru, and is the largest Latin American based producer of precious metals, and has joint ventured on the Pachuca Real for a 70% interest. A $2 million exploration program is currently underway to evaluate the potential of the property. Solitario is free carried for 30% of the project up to the commencement of production.

If zinc and silver isn t enough, Solitario also has the Pedra Branca platinum and palladium project in Brazil which has been joint ventured to Anglo Platinum up to a maximum 65% interest, with Solitario retaining the balance, free carried to production.

Anglo Platinum is the largest platinum miner in the world, and is part of Anglo American (AAUKY.PK) which is the fifth largest publicly listed mining group in the world. The project has potential for 2 million ounces of platinum and palladium. Grades are around 2 g/t of combined metal, with 90% of the resource in an open pit configuration located within 100 meters of the surface.

A 3,000 meter drilling program is underway with results expected shortly. Anglo Platinum has commenced resource estimates, metallurgical studies and scoping studies. It is worth noting that Pedra Branca is the only pure PGM project in South America that Anlgo Platinum is actively exploring.

Solitario additionally has two projects that are part of an alliance with Newmont Mining.

The La Promesa Project, located in Peru, contains high grade silver, zinc and lead veins over an area of 1,200 meters by 600 meters, where an 8 hole drill program for 1,200 meters is planned for 2011. The property contains an exposed Western Vein that is 1.2 meters wide and carries assayed values of 1975 g/t silver, 33.1% zinc, 5.6% lead and 430 g/t indium. The same vein is exposed at a lower elevation and carries a width of 2.8 meters and 758 g/t silver, 19.4% zinc, 7.2% lead and 150 g/t indium.

The Cerro Azul Project has exposed veins that cover an area of 3,500 m x 2,000 meters with high grade gold and silver values. A drilling program of 10 holes for 2,000 meters is planned in 2011.

If this wasn t enough for investors to digest, Solitario also recently acquired an 80% interest in the Mount Hamilton Gold Project from Ely Gold. This is an advanced stage exploration project, which is at the feasibility stage, and part of the southern end of prolific Battle Mountain Trend in Nevada.

The project has a NI 43-101 compliant Measured and Indicated Resource of 12,617,000 tons at 0.031 oz/ton gold, for 385,350 ounces, and 0.144 oz/ton silver for 1,818,065 ounces.

This was a very opportunistic purchase from a vendor that could not obtain finance. The operation will consist of a open pit and heap leach operation, with low operating cost. The feasibility study is expected to conclude in 6 months.

The property also contains a number of open pit resources with potential for an additional 300,000 ounces of gold. Two tungsten zones of 4.2 million tons grading 0.31% molybdenum and 0.37% tungsten in a non-compliant resource are located beneath this gold deposit.

Solitario can earn its interest by completing a bankable feasibility study, funding Ely Gold for $500,000 (completed), arranging project financing and making future property and royalty payments. This is the only property where the company will remain as operator, and expectations are that an expedited development timeline can be put in place with production commencing in late 2012 or early 2013.

Other interests held by Solitario include three Net Smelter Royalties over the Yanacocha and La Tola Projects in Peru, and Mercurio Gold Project in Brazil, with royalties ranging from 1 to 2.75%. There is no production or cash flow from these interests at this time.

At a recent presentation Solitario management indicated that the Mount Hamilton Gold Project has a ballpark profit of $20 per ton of gold ore treated, and the Bongara Zinc project is expected to produce an annual profit to Solitario of $40 million, before deduction of approximately $42 million in capital expenses.

Solitario is a well financed company with a solid pipeline of projects, predominately being advanced by significantly larger industry peers. One could argue that the company "suffers" from its broad range of projects and diversified commodity focus, which can often confuse would-be investors trying to "get a handle" on the company s prospects. On the flip side, patient investors with one eye on the horizon will note that the sum-of-parts potential of the company s projects suggest the valuation could be significantly higher if developments move ahead as planned.