Welcome to the Q2 Earnings Release Conference Call. My name is John. I'll be your operator for today's call. At this time, all participants are in a listen only mode. Please note the conference is being recorded.
And I will now turn the call over to Shane Downey.
Thanks, John. Good morning, everyone. Yes, so good morning to the 2021 Second Quarter Earnings Call for Hut 8 Mining Corp. I'm joined this morning by Jamie Leverton, CEO of Hut 8. We achieved and refined many reporting initiatives during my 1st full quarter as CFO.
As the digital asset industry is still very much in its infancy, IFRS Accounting Standards do not directly address digital asset reporting. As part of ongoing management review and analysis and in consultation with our auditors, We made an accounting estimate change as well as a balance sheet classification change in Q2, both of which I will address. Along with Jamie and Sue and the rest of our management team, I look forward to additional engagements with our active shareholder base. With that said, I'll start out with some short disclaimer language and then jump into a summary of our Q2 results. I'll then turn things over to Jamie and then we'll open up for for some Q and A.
In addition to the press release issued earlier today, you can find our financial statements and MD and A on both SEDAR and shortly on our website athuddatemining.com. Unless noted otherwise, all amounts are referred to are denominated in Canadian dollars. I'd like to remind you that comments made during this call may include forward looking statements within the meaning of applicable securities legislation regarding the future performance of Hudidemann and Clark and its subsidiaries. These statements are current expectations and as such are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include, but are not limited to, the factors described in the company's annual information form for the year ended December 31, 2020.
At this time, I will walk through our financial highlights for Q2 2021. Start with revenue, another record setting quarter with respect to revenue driven by strong mining activity. Total revenue for Q2 2021 was $33,500,000 compared with $9,200,000 in the prior year quarter. We earned $31,400,000 from mining activities as we mined 553 new bitcoin at an average of approximately $56,700 per Bitcoin. This result is up significantly versus Q2 2020 due to a combination of First, increased average hash rate, which is up by 65% year over year for Hut 8, 0.68 exahash in Q2 2020 to approximately 1.12 exahash in the Q2 of 2021, as well as, of course, Bitcoin price appreciation year over year.
Our hosting line of business continues to grow as well, adding over $2,000,000 of Revenue as we added a second customer in late May. Moving to operating costs. Cost of revenue for Q2 2021 was listen only mode. $15,800,000 compared to $15,500,000 in the prior year quarter. Modest increase is the net result of an increase in site operating costs, mostly electricity with a decrease in depreciation expense.
The decreased depreciation expense was largely a result of a revised Estimated useful life of the company's infrastructure assets from 4 to 10 years. Site operating costs increased due to Hut 8's continued expansion, specifically the addition of miners to our fleet. Cost of mining each Bitcoin for Q2 2021, excluding depreciation expense, was approximately $24,900 compared with approximately $27,000 in Q1 of this year. I want to bring emphasis to the fact that our cost to mine figures are fully loaded costs, inclusive of electricity, associated T and D and fees, as well as personnel, network monitoring, equipment repair and maintenance costs. Moving to general and administrative costs.
Excluding non cash share based compensation expense of $1,800,000 G and A costs were $6,900,000 compared with $1,300,000 in the prior year period. A portion of the increase stems from Strategic investment will be building out a larger and deeper pool of executives and managers. Much of the year over year increase is a result of various listen only mode. Capital markets initiatives and the new management team's commitments to best corporate practices. Both of these streams resulted in considerable involvement of external legal counsel.
Further, as our shareholders are aware, Hut 8 was the 1st Canadian digital asset miner to successfully uplist with NASDAQ, which also resulted in considerable listing fees, regulatory costs and legal fees. The fact that we are ultimately successful in not only uplisting to the NASDAQ, but The NASDAQ's top tier, the NASDAQ Global Select Market speaks to the company's commitment to excellence. We expect our G and A costs to normalize over the balance of 2021, though continued short term volatility is expected as the company continues to experience significant To comment quickly on finance income, the income earned from our Bitcoin lending arrangements are reported in Finance income, we signed a new lending arrangement with Galaxy Digital LLC during the quarter and now has 2 active lending agreements. These lending agreements allow the company to continue to leverage our Bitcoin holdings and generate additional fiat cash flow, while supporting our HODL strategy. We earned $800,000 of finance income during the quarter and have earned $1,300,000 year to date from these lending arrangements.
We recorded a net loss of $20,400,000 for Q2 2021 compared to net income of $2,800,000 in Q2 2020. This result was driven by a combination of $22,900,000 unrealized revaluation loss related to Classification change of digital asset lending arrangements as well as the $6,000,000 deferred tax expense. And just to be clear, both of these amounts are non cash items and neither are of particular concern or interest to us as a management team, either being reflective of core operating results. The core reason for the mark to market losses in Q2 is simply the downward price action of Bitcoin for March 31 to June 30, which was a considerable move from approximately US59000 dollars at March 31 Down to approximately $35,000 at June 30. The $22,900,000 unrealized revaluation loss in Q2 serves to effectively unwind the unrealized gain recorded in Q1 2020, specifically related to digital assets subject to lending arrangements.
This was driven by an ongoing assessment by management and consultation with our auditors, whereby it was determined that classification of the lending arrangements consistent with our other digital assets, those held in custody, It is most appropriate, which results in any unrealized gain or loss being recorded through other comprehensive income, part of the equity box On a net of tax basis as opposed to through the P and L. Given the movement of the price in Bitcoin for year to date Q2, This is a modest $3,300,000 unrealized gain, of which $2,500,000 went through OCI, net of 800,000 of deferred tax recovery. So I would bring emphasis really to the fact that on a year to date basis, we have positive net income of $15,100,000 The $6,000,000 deferred tax expense referred to above, serves to effectively reverse the Q1 recovery of 6,800,000 net of the $800,000 deferred tax recovery I mentioned a moment ago. Turning to adjusted EBITDA, Hut 8 achieved Adjusted EBITDA of $14,400,000 for Q2 2021 compared to just $65,000 in Q2 2020, driven fundamentally by Bitcoin mining profitability in the period as well as our increased average hash rate as discussed previously. Turning to the balance sheet.
Fundamentally, our balance sheet remains healthy. We raised $115,000,000 of capital in June 2021, supplementing the $77,500,000 raised in January. Proceeds from this latest raise will continue to be invested in the growth of the company through the acquisition of new mining equipment, including the previously announced NVIDIA and MicroBT orders, as well as the build out of our 3rd mining location in Alberta. Our Bitcoin holdings are marked at fair value and totaled $166,100,000 reflecting 3,824 Bitcoin As of June 30th, this balance consists of 1824 Bitcoin held in custody and 2,000 Bitcoin subject to lending arrangements With Genesis and Galaxy, we continue to emphasize our long term HODL strategy and did not sell any Bitcoin during the quarter. And with that, I will turn things over to you, Jamie.
Thank you, Shane. So right off the top, I want to say I'm very excited about the Progress we've been making at Hut 8. We were obviously incredibly busy in Q2 executing on our diversified revenue strategy, Finalizing cutting edge power agreements, leveraging key relationships to procure new hardware, expanding our market reach and continuing to be the leaders in self mined Bitcoin held on the balance sheet. Our diversified revenue strategy matters. It helps us capture more upside in bull markets while offering some downside protection during bear markets.
Hut 8 continues to strategically emphasize its Auto strategy, taking active steps to generate Canadian and U. S. Dollars to help fund operating expenses and limit the selling of Bitcoin. As Shane mentioned, during the Q2, 100% of our self mined Bitcoin was deposited into custody. I also wanted to mention based on current network dynamics, we anticipate daily settlement once all contracted equipment attachments will equate to 20 to 25 bitcoin per day.
Of course, one of the main highlights for us this quarter was successfully becoming the first listen only mode. Canadian digital asset miner to list its common shares on Manazzic, a project the team has been head down on since very early in my tenure. This achievement gives the company access to a substantially increased pool of investors, both for purposes of future capital raises and providing improved liquidity to current and future shareholders. Concurrent with this listing, Hut 8 closed a public offering on June 15, As Shane mentioned, Ravenlo's proceeds of CAD115,000,000 to provide flexibility in the face of market uncertainty for the company to continue making strategic investments and executing on meaningful and cutting edge equipment opportunities. We were able to seize on an opportunity to pick up 1.08 exahash of equipment at an incredibly Competitive price of approximately $44 a terahash delivering in Q4 of this fiscal year.
We finalized our investment in 10,000 high performance NVIDIA C and Ps, which will initially be deployed, as we've discussed, to mine as the Ethereum network while settling in Bitcoin. These are cutting edge cards that were not available on the open market and will consume only 3.5 to 4 megawatts of power while operating at approximately 1600 gigahash. We anticipate settlement in Bitcoin will result in 2 to 3 bitcoins per day using this method. We also ordered new Dell server hardware to use in conjunction with the cards, all of which is enterprise grade, and we look forward to beginning installation of this new equipment later this month. The deal is significant for Hut 8 as it unlocks Enterprise quality hardware, technical support and a plethora of monitoring and control tools for the company, while we pursue Well, we pursue additional excellence in the technology capabilities of our on-site Our on-site staffing crew.
We also invested in a power purchase agreement, as previously discussed, building up a third facility in Alberta with incredibly compelling power rates. And finally, we launched several ESG related initiatives, including establishing a robust recycling program to limit waste volumes sent to landfill, the installation of low emission LED lighting throughout all of our facilities and the electrification of our fleet of on-site vehicles. Our focus for the second half is all about execution, Executing on the purchases that we've made, on the expansion of our facilities, continuing to bring down our average cost to mined Bitcoin and increasing our operational efficiency across the fleet. Our new power deal will be instrumental in reducing the costs associated with our Primary operating costs, of course, are being powered and continuing to expand and upgrade our fleet with new ASICs and GPUs portfolio installed will also provide Additional efficiency and further cost per coin reduction. So as always, we thank you so much for your support.
And we'll now turn it over to John to manage Q and A. Thank you so much.
Thank you. We'll now begin the question and answer listen
only mode.
And our first question is from over to Sutton.
Thank you. Congratulations on your uplift. So curious why 2,000 bitcoin are loaned out given the much larger size that you self mined. Is there a limiting factor to how much you can actually put into the market?
Great question, George, and good morning. We only started embarking on this yield strategy earlier this year, and it started in January with The opening of our initial yield account with Genesis, and we put 1,000 bitcoin into that account at that time. And then based on the success and our comfort with the execution of that program, we went on and entered into another arrangement in May with Galaxy with another 1,000 bitcoin. And then as we've talked about the remainder of our Bitcoin remains in custody. So this serves it really serves 2 purposes, obviously earning CFAs income for a portion of the bitcoin, we hold on our balance sheet while we continue to believe we'll take advantage of appreciation of the cost of the price of bitcoin over time.
It also diversifies the risk of where that bitcoin is being held. Historically, it was only held with our custodian. So we think this strategy is the right one for An incremental revenue stream as well as risk diversification of our holdings. We will continue to explore other avenues for potentially incremental yield opportunities. But at this point, we're still early days in this program and Very much interested to see where it may evolve over time.
So hopefully that
answers your question, George.
That does. Thank you. So as we look at and it's nice to see your cost per coin coming down quarter over quarter. Can you just give us a sense of directionally where do you see that ultimate cost per coin with the new power arrangements, with the new miners, With the new difficulty adjustments, where do we ultimately get to from a cost per coin?
George, I have not been able to go with spreadsheets big enough to solve for all of the variables listen only mode. I'd like to go into answering that question. But if you want to build one for me, we can come back to it. There's just so much at play, of course. And we don't want to it's really difficult to predict that.
And Shane did go into some detail about what goes into our cost per coin. It is a fully loaded cost per coin. And so I think that's Important for people to recognize all of the inputs that go into that number for us based on IFRS accounting. Shane, I don't know if you want to add anything?
Yes. No, I don't think much to add in terms of how we build up the calculation itself, which is to be extremely Simple, frankly, and in line with IFRS as Jamie just commented. And yes, I would echo The sentiment that the modeling and building out of specific assumptions as to where we expect price per bitcoin to land In the future is challenging, so it's difficult to put a specific number on it. But as Gene has commented earlier the combination of getting stood up at a second location In Alberta, where we've commented on a excuse me, a third location in Alberta, We'll be compelling from a power price perspective at that location for sure, relative to our other locations. And then the NVIDIA chips, I guess, just generally, the more efficient miners coming on board, which has been happening and will continue To accelerate throughout the year and really specifically, like the 3.5 to 4 megawatts of consumption that we expect From NVIDIA chips is extremely efficient from a power perspective relative to certainly any of our ASIC miners today.
Got you. I certainly appreciate the difficulty.
The other thing I'll add or just Remind you, George, we because we are one of the oldest publicly traded miners in this space, we've been around since early 2018 And we do have a diversified fleet, which means a significant portion of our fleet is of the previous generation and therefore, it's less efficient, but it is fully depreciated. And so from a margin perspective, That's something to be aware of and to note the difference. We have fully depreciated equipment that's very profitably mining today. And so it does play into the cost per Bitcoin because depreciation obviously isn't factored into that equation.
Got you. One last question, if I could. With the Chinese miners leaving the market, the difficulty adjustments didn't get adjusted right away. How much did that impact you negatively? And how much does that benefit you now?
Is there a way to quantify that?
The majority of the difficulty adjustments resulting from that exodus didn't happen until the beginning of July. So there really isn't much That is it, if any, shown in our results for Q2. The majority of Q2 was at that much higher global Hash rate level. So The benefit of that difficulty adjustment and obviously the increased production that we saw as a result of it will be Seen in our Q3 results, which will be in October.
Understand. Thanks, guys.
Our pleasure. Thanks, George.
Our next question is from Kevin Deaney. Please go ahead.
Good morning, Jamie. Good morning, Jamie. Hi, Jamie. Thank you. Thank you.
Hi, Shane.
Shane, thanks very much for your prepared remarks, Insight on the accounting and the fluidity in this environment is Graciously appreciated. Maybe you could just talk a little bit about the negotiations that you had with your attorneys and accountants in sort of rearranging the P and L and balance sheet.
Yes. I mean, happy to discuss comments a bit further. Happily, I can say Nothing none of that whatsoever had anything to do with discussion with attorneys or lawyers. And Jan, in terms of rearranging balance sheet, fundamentally, the change that we've made is To classify bitcoin subject to lending arrangements, so that's the is that June 30, 2000 bitcoin that As Jeremy commented on earlier, that's being classified now rather than The gains and losses associated with it flowing through the P and L, which is what happened in Q1, that new gains or losses associated with Bitcoin lending arrangement We'll flow through OCI, so through the equity box in the balance sheet on a net of tax basis, which is the exact same treatment that gets applied to all other digital assets that are held in custody. Well, I won't get too far into underneath that is an IFRS analysis, sort of the IFRS 9 world applies listen only mode.
Financial assets and liabilities, which in the fiat world would very much be where any kind of loan would get classified. The digital assets fundamentally do not fall into IFRS 9. And so accordingly, we're So it's staying conceptually within IAS 30 8 intangible asset accounting. So that explains it. It's really Truly an accounting classification change only, no impact on operations, no impact on cash.
And when you look at the year to date balance sheet, that sort of noise that's there listen only mode. From a Q1 perspective and then a Q2 perspective, goes away.
So as I understand you correctly, Shane, And thinking that your full Bitcoin holdings are treated that way, Not just the 2000 lent?
Correct. That's exactly right.
Okay. Jamie, Congrats on the Validius deal. I was wondering if you could add a little more color. You know me, I'm okay with tech things, not so good with energy things. So could you help me understand how your 3rd location will accumulate gas, We'll ensure my understanding it's flair, ensure that it's consistent in its quality, Ensure that it will be consistent in its delivery, give us some sort of idea on the number of wells that you needed to source.
Congratulations on the pricing there. But any more color that you can add on, I mean clearly, Drumheller and Medicine Hat are fine, right, because we've seen them operate for years. It's just not so clear what might happen with the new location. So any comfort you can give us on that, I think it would be gratefully appreciated.
So I'm trying to think through the best way to answer your question, Kevin. The site is a new site that It's built behind the fence, just meaning it's not a grid connected site. It will be a site set up Primarily using natural gas as the energy source and will be directly connected to the turbines that ultimately produce the power and then ours being produced specifically for our use and our use alone. The arrangement has had an uptime and commitment found out. This is of 95% uptime.
And again, because we're directly connected and the rates are well understood because they're part of the contract and They're fixed at CAD0.0274 plus or minus 10% based on an annual adjustment mechanism. So we know the cost. And again, the site is tramposcope specifically for our use. We'll We'll start with Phase 1 being 30 to 35 megawatts, which we expect to be stood up and operational by the end of Q4 of this year. And then, yes, the reliability and performance of the site is what Validus is contractually obligated to perform, and They have a long history of working in these environments.
With respect to the amount of flare gas included In the natural gas being used, that detail has not yet been disclosed as we're working through it. So It will predominantly be a source of natural gas, right, because it is behind the fence generated power using natural gas as its source.
Okay. I hope that answers your question. Yes. That helped tremendously. I mean, that was kind of we're trying to Clear up a black box, right?
So any light on it is great. The 30 to 35 you'll have by the year end will get you how much of that additional 1.3 ex The hash that you plan on adding to your network. And then how much more power will you need to get this to the full 2.7?
So it will be we've ordered 1.08 incremental Esterhaj, as we mentioned, From Michael Boutique, the 80 petahash is already on Right now, and then the Equihash will deliver between October December. That's the expected delivery of that Equihash. And at Equihash, we'll use the full 30 to 35 megawatts. It's about 35 megawatts for an Equihash of compute for Microbeating, using the equipment that we've ordered. So with what we have gone Actively in production today and then coming online with that one Equihash ordered for MicroDuty as well as the NVIDIA Cards that are coming online, just that contracted equipment alone gets us to the 2.7 exahash.
Okay. So with I guess just to sort of sum up And my little brain, with that new 35 megawatts, you'll be able to support your Full 2.7 target.
That's right.
Okay. Okay. And it seems that you'll have the 35 up by the end of the year. And then would it be fair to assume the full 2.7% could be fully deployed by the end of the March quarter? Is that a fair assumption?
That is a fair assumption. Certainly, by the grace of God and supply chain, really, that isn't That is our target.
I think more by the grace of an Alberta winter, Jamie.
We love Alberta winters, Kevin. That's how we take advantage of our free air cooling. The miners absolutely rip During Alberta winners, we love Alberta winners.
Okay. So the for full deployment at that site, you'll need to supply the infrastructure Down transformer or is all that yes, is all that to Lidius or is that on you?
That's all. So we are working to develop it as a partner in building out the site, and all of that infrastructure has already been ordered. All the long lead items are already ordered and we've got a full work back schedule in progress.
Okay. Sounds great. Thank you for indulging me. I'll jump back in the queue.
Anytime, Kevin.
And our next question is from Ali Althouvay.
Hi. Good to hear your voices, Jamie, Shay and so on the other team I was just concentrating on the question of the previous colleague around Validus and One to two questions. Now the site setup cost is €25,000,000 So if I may ask, The cost per watt or per kilowatt would be in addition to the overall setup of $25,000,000 For how long the site They're going to be operating under Hut 8. Is there a lease agreement? Or would the site be owned by Hut 8, individually?
So the $25,000,000 that you're referring to, I believe, is the amount related to the rate fly So that's how we have the rate that we do, which then is an ongoing operating cost. The agreement is an initial 5 year term and then it has 2, 5 year renewal options after that. We do not own the land that the site will be on, nor do we own the land that Any of our sites are on the land is leased, but the infrastructure being, as we just discussed with Kevin, the downstream The data center containers that infrastructure is all owned by Hut 8.
Great. So if we are to renew for another 5 years term, would that mean another 25,000,000? No. Is this something that can be disclosed, will you disclose or Because again, I do see the agreement on the cost basis need to be a little bit clarified around What does it include, what it does not include? Because again, there seems to be a set of costs that need to be put.
You just clarified to the previous caller that It is part of the overall setup that Validus is going to provide eventually. On the previous call, we discussed would there be a need for another set of black boxes that will be procured. I assume that As part of the setup, office sites are going to be covered by the $25,000,000 will be covered. So if we want to continue on this site, given the fact that Economically, given the numbers that are published thus far, Drumheller is becoming our most expensive operating site, operating by Liberty's own power. So Correct.
What would be the cost of continuing to validate later on and maybe looking at more Economic efficient mining sites between Drumheller, Mitzenhat and the Validezwan, all in Alberta given the English question?
Well, I think the best way to answer that is we're Always having conversations about potential opportunities for future growth.
That's a very diplomatic answer. The next question
is with regards to Very true. Yes.
The next question is with regard to NVIDIA. If you recall in our previous call, when this was announced, I think the initial time line was to fill the light. The network expanded to August. Now on the news today, It's being split into 2 trends, August a subset and September another subset. On the initial justification or value of the deal, you said that there was a commitment from NVIDIA for timelines of delivery.
Is the delay because of the logistic reasons of our on our side or on VBS side, If this can be explained, this
one? It's actually the supply chain related to the infrastructure, the Our infrastructure required to support the equipment. So the and we did use And our strategic partner, Amulet Hockney, working with Dow to have everything assembled at an off-site location so that when they arrive to our site, they're fully assembled and the Team just needs to pump them into the appropriate data center container with the appropriate power source. So the cards arrived essentially on time, on schedule, and they've spent the last 6 weeks going through the assembly process. And then as I mentioned, we'll be delivered are in the process of being delivered over the next few weeks.
Obviously, in phases, they get delivered to sites. And then because they're fully assembled in the chassis, they go right into production. But the delays have been on Some of the downstream kind of infrastructure items related to the That will support the equipment as we plug it in on-site.
That's clear. The next question is around the hosting business. First of all, thank you For the great performance on this year on the hosting side, quarter 1 and quarter 2 are amazing. Securing the new client is really amazing. Would we have a target for this kind of business line to offset the overall Fiat Costs associated with running the business, because again, I could see that we are investing so far around 13 megawatts, 13 plus On this and if I do a simple mental cancellation, if we invested more than What would be the percentage that we are targeting?
On one interview or media interlock, I think the number 30% of the overall power Available was put as a challenge, but again, it was not put in any solid material that we can forecast on our model on the modeling for the company. So was there a targeted number for the hosting business?
There is not a targeted number. It is a Conversation that is fluid and it's really fluid based on the market conditions and market dynamics. Right now, we're comfortable with the mix we're at right now based on The split between South Mining and Hosting and of course, we're at absolutely maximum, maximum available power capacity, hence our Excitement to get a new site set up and ultimately, we'll continue to look for future expansion because it is power that's the limiting factor. And without kind of Unlimited built out power, it's really hard to put a number on what the right mix will look like. But suffice it to say, Our diversified strategy that has fiat based revenue streams to help support our self Mining activities and allow us to huddle more Bitcoin is critical and one that will continue to be important to us.
Great. With regard to the target capacity for H1 2022 And the current cash position, available warrants and available loans given the The yield account because I think it came with another €20,000,000 potential loan almost in 16% interest. Do you see a need for more cash on the business for the remainder of the year.
Well, look, we it's something that It's an interesting balance, right? We haven't sold Bitcoin since early January based on market conditions and kind of our belief of where Bitcoin is in its cycle. But We have an incredibly healthy balance sheet between Bitcoin and cash. So it's before January and And certainly during the bear market, we were selling the majority of Bitcoin you were mining, we were selling to fund operations and growth. So I think just the cyclicality and volatility associated with this market has put us in a position where We're always thinking balance sheet first and we'll continue to do so.
That's super. One final question. And again, I've thrown this before in a previous call. The remaining 4 The remaining 2,000 bitcoin plus on the balance, when are they going to work for us? I know that they are
I love this because when we first Kind of even as a leadership team started talking about opening the initial yield account back in January, we really struggled with How the market would react to it and would it be seen favorably? And so we thought it Obviously, we thought it was the right thing to do for the business, and we made that move. And then and now you kind Forward 8 months later and people are just looking for more and more. And so it's quite it's been quite an evolution in sentiment Around that strategy and if one will continue to aggressively pursue with Shane now in his chair And comfortably with the full quarter under his belt, we'll spend more time looking at that time of the business. But I absolutely I find it fascinating that there's so much positive commentary coming about that yield program.
On hold. And both you and Kevin, the previous question asker, looking for more from us on yield. So that's great
Thank you, Jamie, personally, Sue and Sean For being there for us, for clarifying a lot of things, for being interactive. Again, I would thank the IR team for being responsive to investors' Enquiries during the period, it was a tough Bitcoin volatility period. And I think the performance of the company is evident that you are on sale count under your leadership. So thanks, Todd.
Thank you so much. We really appreciate it. It was certainly a nail biter of a quarter with that
And our next question is from Brad Brechtel.
Hello. Thank you guys for your time today. I really appreciate the work that you guys have done this last Quarter, of course, for all the business that you're doing. It's kind of funny, the last caller had more than 9 questions About your revenue sources of having this new customer that came on in May, Is that Celsius network? Or if you can't say, are you looking to get more customers like that for you?
Go sorry, expanding into Potentially new relationships around you?
Yes. I mean, when you say customer, Are you looking for customers that are providing hosting? Or is a customer someone you're doing yield farming with?
Yes. From a true customer sense of the word, we only have 2 Customers, we have 2 hosting clients. And then the yield relationships that we have are with strategic partners. But I think technically, we're the customer in those relationships.
Okay. I got you. And then the other part of my question really is a different Subject where you're getting these machines to do efiring to pay fiat expenses around the company. Have you considered at all maybe taking it to the next level where you actually pay some of these expenses with your relationships or to your employees in E or some other Crypto?
So actually, our initial intention in mining the Ethereum network Is to settle in Bitcoin versus Fiat. So that's one kind of clarify there. As for paying employees in crypto, unfortunately, there isn't a mechanism to do that within Current Canadian income guidelines and income tax guidelines, although I would love to be paid in Bitcoin. So, okay, I hope that's something that could become possible. But at this point, There isn't a rational way to make that happen.
And then I guess the last thing is, have you talked out Nizinski or Celsius Network are all about either hosting, which they're doing now for mining bitcoin or For new farming, because they do both.
No. No, we haven't had any conversations.
Okay. Yes. Okay. So those are the end of my questions. Thank you very much.
Anytime. Thanks so much.
And we have another question from Kevin. Please go ahead.
Sorry, Jamie, I'm back.
Hi, Kevin. You're speaking with Jeff? He missed you.
Of course, I missed you. I especially missed you in Miami for the record.
I know. That's very true, very true. I owe you a special trip.
We'll catch up. We will catch up. Okay. Apologies again for haranguing you on SpotX, the 3rd location. Maybe we should call
it tray.
It does not have a location name as of yet.
Spot expert trade. Can you take that agreement beyond 35 And then sort of in the same vein
So the initial agreement is up to $100,000,000 and then it has a We do have the ability to go beyond that, yes.
Okay.
Then So the same question on Medicine Hat and Drumheller. I know the agreements are different there, but is there a chance you work with your power suppliers, I know they're both different to increase capacity there. It's all about power navigation.
Yes. No, I know. And you can know that equipment not all about power. We are at maximum currently available capacity at both Medicine Hat and Drug Corp. Okay.
But as I say, one of the things about Alberta, of course, it's incredibly energy rich. I think there's a lot of really exciting innovation happening In the power market and really just in particular with respect to reducing the carbon footprint Associated with natural gas significantly, I know we're having a lot of exploratory conversations about what the future of Hydrogen could look like, but what the future of nuclear could look like. So there's an absolute We have a really exciting innovation happening in this space. And Alberta is incredibly focused on greening up Their grid, as we've talked about before, the upward grid is about 20% renewables right now, and they've got a very aggressive target to continue to increase that between now and 2,030. They've made significant investments in wind farms and solar farms around the province.
So We're really happy that we're in that community and we're partnered on how we can drive innovation with us being A significant stable off taker, both for grid connected locations and For operator behind the fence locations like the new one that we're building with Alex. So we do think there's a ton of learning mode. Opportunity for really exciting strategic conversations and growth in this space over the next 1, 2, 5, 10 years. It's I think the power space is definitely one to watch where new innovation is concerned. And this mining is We're a critical part of that, right, Kevin?
Like we're the most stable off taker that is Completely able to put power back to the grid when it's needed for peak. So It's such a natural symbiotic relationship between power producers and Bitcoin miners. And the more we all start working together and really thinking outside the box, that's where 1 plus 1 equals 5.
Well, that was the comment I was going to add.
I mean, I suppose the
extension of that is Your relationships with the assortment of power suppliers through the province and whether or not you can serve a function in load balancing, It just seems to me that there is plenty of power capacity visavis demand. But I suppose that changes as you and competitors ramp up mining activities. So the next question
I think it evolves. I think it evolves.
Okay. The next question and I promise this will be my last official last one. I too echo sentiments. Any way that you can maximize use of assets, shareholders love it. Yes, but I was hoping you might take us through the mechanics Of mining Ethereum and the conversion of Bitcoin, what are the ratios you use?
Is there any set Contract there, how should we think about that function as Ethereum prices change, Mining difficulty changes there visavis Bitcoin prices?
So we actually have the detail of How those calculations are made so that anybody can look at how we're making them in our FAQ on our website. We published the frequently asked questions associated with this NVIDIA project and the details are all there. So I will point if you haven't seen that, that's where I'll point you to that detail.
Thank you. Thank you. I apologize for the oversight, Jamie. Thank you for the guidance and the color on power in Alberta. Appreciate that too.
No problem. Anytime. Thanks, We
have no further questions at this time.
Okay. Well, once again, we want to thank everyone so much for their time, attention and support. It's always a pleasure to be able to connect directly with our shareholders. So again, thank you so much, and we look forward to talking to you again soon.
Thank you, ladies and gentlemen. That concludes today's call. Thank you for participating and you may now disconnect.