Good morning. I'd like to welcome everyone to today's webcast for HIVE's Q3 Fiscal 2020 financial results for the quarter ending December 31st, 2019. My name is Darcy Daubaras, the Chief Financial Officer for HIVE. I'm joined on today's call by Frank Holmes, Interim Executive Chairman of HIVE. Before we begin, I'd like to remind you that during today's presentation, we will be making comments containing forward-looking information. I invite you to read our financial disclosure for some of the risks and uncertainties that may affect HIVE's performance in the future. As such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult our most recent MD&A and filings on SEDAR. We will also be referencing non-IFRS measures. Reconciliations of these measures are included in our MD&A. Unless otherwise indicated, please note all figures are in US dollars.
I'd like to now turn the call over to Frank Holmes.
Thank you, Darcy, and good morning, everyone. I want to thank all the shareholders who have been loyal through what they call the crypto winter, that basically bottomed in prices a year ago, approximately on February the 14th. It was a Valentine's gift from JPMorgan of February 14, 2019, when they rolled out the first US bank-backed cryptocurrency to transform payment to business. That seemed to be the big surge that we started seeing. Then comes out Libra, and we also then have a backlash against Libra from Facebook. What's interesting is that the currencies rally, but the enthusiasm for a lot of the stocks was really muted compared to the overall price change in the bottom. That's a classic bottom.
I think what we've seen in the beginning of this year is a lot of selling pressure for HIVE last year took place until the end of December, and that seemed to abate. Then we started seeing now we're back to following, tracking the price of particular Ethereum. As Darcy commented that I am this Interim CEO and this saves the company a fair amount of cash and money because the company's basically being run by three people. So it's very lean and that's important as that's how you survive through what's called the crypto winter. Let's talk about some of these highlights on slide four. During Q3, we generated $5 million in income from digital mining of both Ethereum and Bitcoin. Gross mining margin was $3.8 million.
However, as Darcy will discuss in more detail, excluding certain items, underlying gross mining margin was approximately $1.1 million. As I've noted previously, our priority since we assumed management in the latter part of 2018 has been on strengthening our operational control. That real control took place when we set an agreement signed in June of 2019. Since then, we've done everything to strengthen our operational control over HIVE, including improving transparency, accountability, and financial controls, and improving our operational efficiency, including optimizing cost structures to set the foundations for profitable growth. These efforts have begun to bear fruit.
For the first nine months of fiscal 2020, our gross mining margin was 26%, or 37% excluding upfront energy costs, compared to 24% in the same nine months of 2018, with an increase by improvements to the mining profitability of our facility in Sweden due to our assumption of direct control over relationships with the local energy suppliers and our move to a new service provider arrangement for our GPU mining facility in Sweden, which was completed in November. Our decision to prudently suspend Bitcoin mining in Q3 after a sharp increase in mining difficulty, that resulted in our cloud mining operations becoming unprofitable. This appeared to be because of the S17s, the new ASIC chip was being sold and being applied, and all of a sudden we had, what's it called, an increase in the difficulty or the cost of mining of Bitcoin.
The S9s were not as profitable unless you had extremely cheap electricity. What we want to go on with is talk about the post-quarter, and we entered into hedging agreements, and I think this is important related to our electricity prices in Sweden for 2020. Combined with our service provider change in November, we anticipate a 40% reduction in our operating and maintenance costs in 2020 versus under our previous service provider arrangement. We have much better control, setting up hedging and negotiating and Darcy, our CFO, and Tobias, our. Excuse me one second. Tobias Ekvall, who's been a very loyal director, is also a classical musician and tax lawyer. He has been very helpful in the whole transition and managing everything for us in Sweden and all the relationships.
That idea, that concept of being able to hedge your electrical cost is very vibrant in Sweden. We were able to take advantage when the warm What's called an unusual warm winter, the price of electricity fell to a couple of pennies approximately. We started the process of putting up capital necessary to lock in that hedge, so we have more stability in our cost structure for the next year. We ended the quarter with a $6.2 million cash position and cryptocurrency inventory of $3.4 million, with working capital of approximately $11.8 million. Our strength in balance sheet and greater cost certainty enables us to make appropriate investments to drive future growth. We continue to look at ways to optimize our other areas of operations, and we are assessing expansion opportunities and the best use of our capital going forward.
Now I'd like to turn it over to Darcy, for our deeper deep dive into the financial results.
Great. Thank you, Frank. As you can see on slide five, we generated income from digital currency mining in the third quarter of $5 million, with coin production of 23,000 Ethereum, 33,000 Ethereum Classic, and 127 Bitcoin. This decrease was driven by our suspension, as Frank had mentioned, of Bitcoin mining in the third quarter as part of our focus on improving mining profitability. The significant increase in Bitcoin mining difficulty resulting in our mining operations, which operated on a fixed cost basis, becoming unprofitable. Turning to slide six. Gross mining margin during the third quarter of fiscal 2020 was $3.8 million or 77% of income.
However, it was approximately $1.1 million, excluding the reversal of a value-added tax provision originally recorded in the second quarter of fiscal 2020, as well as upfront energy costs paid during the quarter in Sweden, for which the company anticipates receiving energy rebates in the future. This compares to $2.2 million or a negative 27% in the same quarter of fiscal 2019 in the prior year. The increase in gross mining margin was driven by an improvement in the profitability of our company's Ethereum mining operations in Sweden due to a change in its service provider relationship, as partially offset by a reduction in Bitcoin mining profitability. I will highlight that gross mining margin. It is a non-IFRS figure, which is calculated as the value of coins received at the time of mining, less operating and maintenance costs. Flipping forward to slide seven.
Net income for the third quarter was $3.4 million. The year-over-year increase was driven primarily by the improvement in gross mining margin, an impairment charge taken in Q3 of fiscal 2019, and a decrease in depreciation expenses in fiscal 2020 stemming from impairments taken in the prior fiscal year. Turning to slide eight, we increased our working capital during the quarter. Our cash position stood at $6.2 million at December 31st, 2019, along with an additional $3.4 million in digital currencies and $7.9 million in accounts receivable and prepaids, which includes the energy tax rebates in Sweden that I previously noted. We maintained a strong net cash position and healthy working capital to fund our operations and growth. Turning to slide nine, we outline our current coin inventory, which we hold in so-called cold storage. During the quarter, our inventory decreased as we suspended mining of Bitcoin during the quarter.
On slide 10, we outline the dollar value of our coin inventory at December 31st, 2019, which has decreased this fiscal year, partially due to the decline in Ethereum price from March 31st to December 31st, 2019. I would like to now turn the call back over to Frank Holmes.
Darcy, what's important in that visual you just showed is this the surge that has taken place since January the 1st of 2020. A leap year. Ethereum, I think closed roughly around $150 at year-end 2019 and is trading like $226. That idea, that inventory of carrying that through is really, we've seen a big appreciation coming this quarter. I think that that's what I've noticed is an important part, and I get contacts from investors. That inventory? Thanks for highlighting that. What is the blockchain? I like to turn to slide 11, as you can look into current future conditions for blockchain technology and its impact on the crypto mining, especially with the increasing attention being paid to this year.
The IDC defines blockchain as a digital distributor ledger. As Fidelity notes, it's essential as a database that does not store information at a single computer, server, or physical location compared with traditional information databases. Instead, a blockchain is hosted by all computers across the network that store information. This allows for publicly available and readily viable information. I gave a speech, I spoke at Harvard earlier this year to an MBA class, and it was on this sort of concept. I spoke to my fellow CEOs earlier in February, also out of Harvard. What I thought was interesting was the concept is still very difficult for people. If you want a quick visual, think of a safe, and a safe has usually three numbers. You have to twirl back and forth, and you can open up your safe, and inside is the goodies.
It could be a brick of gold, it could be documents, et cetera. What is important for people to realize is that this safe that in the blockchain, it's 64 numbers and letters. It's 64 digits, so it makes it very difficult to easily unlock unless you have high computational power to be able to lock and unlock. All the safes are for public to see, but the transaction, what are the goodies inside that safe, they're private. No one knows what's inside, who that transaction was between two people, but they know where the transaction took place in cyberspace. All those safes are locked up one on top of the other. That concept of being a bunch of safes, people have to come in and validate that there was nothing hurting that safe.
It is protected, who did what transaction within it, then it goes along this sort of long chain that the public can see, and they can see if it went into the dark pools. They could see it was a bad safe. Immediately, with all the new security that's out there for KYC and AML software and corruption software, you can quickly isolate that. Like, software tries to isolate people that attack you with malware. So it's as important as, see that visual for me was everyone sort of then grasps the concept. When it comes to Ethereum, what you put in it is basically agreements. You put in there your will, your property title. You can have other information in that smart contract. Once again, everyone can see the safe where it's been, but they can't see what's inside the safe.
That's the easiest metaphor to grasp the concept for those that are trying to understand what HIVE's business is. It's important for you that we mine virgin coins. The other thing is when I was at Harvard, and also recently at a crypto event in Switzerland, this was the most used visual. It's a Gartner cycle, and it talks about where hype takes place and things go exponential, and then they fall. They call that fall can last a year, can last 10 years. For artificial intelligence, it was over a decade, that it was a decade of winter season, that there was hardly any developments. The crash of 2000, then the Googles came out, then came out other apps, et cetera, and the internet flourished after the big hype of eyeballs and click-throughs. We had a real sound business.
It appears that's what's taken place with the blockchain, Bitcoin whole phenomena of this exponential rise, this crash. As it slowly comes out of it, the digital landscape starts to change. I think for investors, it's important to recognize that we're in that transition right now, and it's a very wonderful opportunity to take a look at what takes place when you compare to other breakthroughs in technology and the adoption of a new technology. I think there's a great slide that was just given by Robert Friedland at the BMO Mining Conference, that's hard rock mining. He showed that was within a decade, there's a great photo of looking at Fifth Avenue, where there was only one car, and everything was horse and buggies. Within a decade, there was all cars, and there was only one horse and buggy.
These things take place, and that was very tangible, but now it's a digital world for investors to recognize. We've come out of this trough, and the new players will evolve with it. On slide 13, as you can see, more institutes adoptions that anticipated to result in more spending on blockchain. The IDC predicts that global spending on blockchain will grow at a 60% CAGR from $1.5 billion in 2018 to $15 billion in 2023. The banking industry is expected to be the largest adopter, followed by certain manufacturing industries. This whole idea, when I first got involved at looking, trying to launch a ETF in this space, and going to the biggest conference in New York City and seeing the CEO of Fidelity speak about blockchain and crypto, and she had own machine in the office, that was a big wake-up call.
As a CFA, she never speaks at investment conferences, but she's speaking at, here we are at the largest crypto conference, speaking about their push for it because they see it as a very significant factor for the back office. Now I'd like to go on to the next slide, as you see on 14. It outlines a wide variety of uses for blockchain technology that companies are undertaking. A recent survey by Deloitte indicated that leading uses include data validation, data access and sharing, identity protection, payments, and digital currency. These are driven by the inherent security and transparency of a distributed ledger technology.
For example, 95% of surveyed respondents see smart contracts as an important blockchain capability, something Ethereum is known for, and that's why we focus on Ethereum, from the launch of HIVE and then gone back to as being so important for us in generating revenue and cash flow. The next slide, please. Ethereum can help enable blockchain adoption. 45% of respondents to the Deloitte survey say their organization or project is focusing its activities on a public blockchain like Bitcoin and Ethereum, which is seen on slide 15, satisfying the five properties required of a distributed ledger technology system. A blockchain eliminates the need for an independent third party to validate transactions, as a blockchain is able to ensure transactions and information are correct.
What happens when you think of this in the cyber world, you have 10,000 nodes around the world that are validating the chain of all these safes, as I mentioned earlier, as a metaphor, or Ethereum even has more nodes around the world validating these transactions. There's not one major place doing it, like Mastercard or Visa. It's a distributed process. Next slide, please. In slide 16, we highlight that this is where HIVE comes into play. We are the record producers in DLT systems, also called miners, as we mine newly minted coins such as Ethereum, also known as in our process of creating that first coin is called the genesis coin or the virgin coin. We serve an essential function in the protocol by securing the distributed network consensus through proof of work.
Public and enterprise blockchains are secured and maintained by miners, which are nodes of computers that validate and process the transactions of the blockchain. Validation and processing requires substantial computational power. I think it's also really important for understanding that there's like 30,000 people employed around the world in this ecosystem of Ethereum. We just saw that part of Consensys is merging with JPMorgan and putting their blockchain technology together, and they had one of the highest concentration of coders and scientists that were working on Ethereum and uses of Ethereum. I think that this thought process is so important to recognize. It will continue. When we look at, coming back to these visuals for you, the miners update the blockchain by adding the transaction to the immutable blockchain. Miners are rewarded with newly minted cryptocurrency, such as Ethereum, for participating.
For those that are aware, that's how we get paid. When we go validate a transaction, we earn new Ethereum coins. That's how the algorithm has been set. It was also for Bitcoin set that way, and Bitcoin is going to go through what's called a halving, where the reward is going to halve in June of this year, late May. That will be a big game changer for the Bitcoin space. Slide number 17, factors impacting HIVE's gross margin profitability. HIVE's gross mining profitability is impacted in three ways. Our hash rate or mining capacity and power consumption, which we aim to optimize, as I mentioned earlier, and market factors that we cannot control, such as the price of coins we mine and the network hash rate or mining difficulty, and that means how many people are actually coming in to mine.
The more people that want to come in and mine, the less you get, because it's basically a fixed number of coins every 14 minutes that you get an opportunity to go and compete and earn coins for. To recognize that there's less players, then we get a bigger market share, and that's what happened earlier this year, that the coders in that ecosystem had basically made it difficult for ASIC chips to come in and mine Ethereum, and it's predominantly GPU chips. Immediately, the number of people mining Ethereum dropped off. That really helped us in expansion in the number of coins we're competing for each 14 minutes. Slide number 18. Since current management has assumed control the latter part of the calendar year in 2018, which is really sort of our year was 2019, fiscal year.
We are focused on improving our operational efficiency by entering into new service provider relationships to optimize our facilities and lowering our operating expenses through direct contracts with local energy suppliers, which Tobias has done a great job in facilitating for us. We also want to thank Vlado Senic with Blockbase Group, who's done a wonderful job in giving us the transparency and the information and so that we can make quick decisions, such as for a short period of time, we started mining more Ethereum Classic because the profit margins were 10% greater. As soon as those margins went away, we went back to Ethereum. We're much more fluid, and we are able to go and optimize what coins have the highest profit margin, and sometimes it can last months, other times it can last weeks or days.
The ability to turn on a dime is much more easy for us to, and for Vlado and his group to facilitate this. Also, Marin Baksa, who's been with the company originally, and he's with the Farage group out of Croatia, and he's doing a great job in helping us to get control of our costs to optimize our efficiencies. It's been a great team effort. We have not had control of the external mining market factors, and that's what's really important for everybody, just to recognize what do we control. The price volatility is also important. With this volatility, we are going to comment later, but just the regulatory and taxation when you go global is very complex and moving and changing by the quarter.
These are some other factors that we have to adapt to, just like we've had to adapt this past year when you basically have a mark-to-market coming back in all your balance sheet and income statement, how they sort of bleed together. That's what we want to make sure investors are aware of, that we're doing everything with a lean machine to navigate many of these external forces. 21. What you're seeing here is important, is that the price rise in Ethereum has been correlated with HIVE share price rise. You can really see this with the 50-day moving average. It's not here, but the 50-day basically broke out in mid-January.
Ethereum went above the 50-day, sorry, there at 21, it went above the 50-day, and our volume started to explode, and the same thing with sort of the interest in HIVE as Ethereum went up. What's interesting is that our cost structure, where it was, all of a sudden, anything above $165 really had a big kick to our profit expansion. With Ethereum running up to $280, I think that this is one reason why the selling pressure had basically gone away as people were tax-loss selling at year-end of last year. Ethereum now breaks out, and our profit margins start to expand. The adoption and the following that we have, the global following of HIVE showed up in almost an exponential increase in daily trading volume.
We will move, and we're moving, I think, I believe, at 82% correlation with Ethereum prices today. On slide number 22, it illustrates the increase in HIVE share price has been mirrored through a surge in trading volumes. We see this not only just in Canada, when you look at the U.S., and you look at Germany, when you start putting them all together, we had some days, I think Darcy, was it 30 million share days?
Yeah. No, it was around $30 million across all of the exchanges in Canada.
When you start adding that, we are, I believe, the go-to fluid name. That's where we want to thank all those shareholders that stuck with us throughout the whole decline and believed in our vision, and had faith that we would be able to come back, and that's what we're doing today. Slide number 23. HIVE has outperformed the coins in competition. I think the other part was that during the bear market, we continued to do presentations to our shareholders and conferences explaining, especially was in the U.S. and in Europe, meeting with institutions, meeting with what we call registered investment advisors, explaining to them what was taking place, how we were weathering the storm. As Ethereum has come back, so have these investors.
I think that's been really shown with the people having faith in the company as HIVE has outperformed the coins and the competition. It reminds me of what they call a marginal gold mine company. As the price of gold goes higher, all of a sudden, there's explosive moves in gold stocks. It used to always be South Africans because they were the high-cost marginal producer. They had massive gold production, but they had a higher cost structure. Once gold went through that magic number, they went up exponential relative to the Barrick or the Newmont. You can see, as I said earlier, that when Ethereum broke above its 50-day moving average, it showed up in HIVE. Next slide, please. This is important before I turn it over to Q&A and to Darcy. Crypto assets remain very, very volatile.
This is a 10-day standard deviation known as One Sigma looking over last year. It's a non-event for the S&P 500 over a rolling 10-day period, that's a 2-week period, to go ±2%. Gold is basically the same as the S&P 500, ±2%. Bitcoin is 14%, seven times greater volatility, and Ethereum is six times greater volatility. Not only do you have the price volatility we have to try to manage, we have to manage with all these global taxation and regulatory pronouncements. When you go through Europe, each country has a different, it appears like a different definition of what a Bitcoin is or what Ethereum is. So we're trying to navigate through those waters, and we've employed a lot of top tax lawyers, largest law firm in the world.
We've major audit firms, to try to make sure that we're always keeping up to speed with changes in regulations. I'd like to turn it over to Darcy.
Yeah, just to follow up with Frank in terms of just the advantages and just the growth that we've had since we've come on in 2018 has just been incredible. It's a very volatile market that we deal with it, but we're doing the right things by hiring these international tax and accounting firms to assist us with our global reach that we've got in the countries that we operate in. Sorry, go ahead, Frank.
I'd just like to add, Darcy, we were the first really to take the more conservative role in taking charges on the depreciation. For investors, there's a straight line depreciation for these equipment that you buy. You buy ASIC chips or you buy GPU chips. It seems that the Chinese with their ASIC chips cannibalize themselves much faster than the normal decline you're allowed to on depreciation. With the crypto winter, the prices fell and so did the chips, and the chips fell 90%. We thought it was just best because of the new chips that were coming out with the S17, that we took last year a much more conservative stance and took write-downs against the value of those chips and those investments we made.
I think that that's what we're trying to do because these factors outside of us are volatile and we're trying to adapt and adjust to them.
That's great, Frank. I think with that and with the market starting to open, I think we'd like to thank our investors, as Frank had mentioned at the beginning, for your ongoing support. We can't do it without you. We feel that we're doing the right thing, reducing costs, controlling those things that we can control, and we're going to continue to do that and make it through this time of the industry trying to come together and get some standards and just try to become that lowest cost, best company out there for investors to use as a proxy for Bitcoin and Ethereum. Perfect. With that, I think unless there's something that's popped up, probably like to end the call.
Thank you.
Thank you very much, everybody. Have a great day.