Good morning and welcome to the Bitfarms fourth quarter and full year 2023 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then 0 on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Tracy Krumme, Senior Vice President, Head of Investor Relations at Bitfarms. Please go ahead.
Thank you. Good morning, everyone, and welcome to Bitfarms fourth quarter and year-end 2023 conference call. With me on the call today is Geoff Morphy, President and Chief Executive Officer; Jeff Lucas, Chief Financial Officer; and Ben Gagnon, Chief Mining Officer. Before we begin, please note that this call is being webcast with an accompanying presentation. Today's press release and our presentation can be accessed at our website, bitfarms.com, under the Investor section. Turning to slide two. I'll remind everyone that certain forward-looking statements will be made during the call and that future results could differ from those implied in the statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties, and I invite you to also consult Bitfarms MD&A for a complete list of those.
Please note that reference will be made to certain measures not recognized under IFRS and therefore may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our MD&A for definitions of the aforementioned non-IFRS measures and their reconciliations to IFRS measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted. Turning to slide three. It is now my pleasure to turn the call over to Geoff Morphy. Jeff, please go ahead.
Thank you, Tracy, and thank you, everyone, for joining us today. I am happy to present and discuss with you our Q4 and full year results at such an exciting time in the industry. Multiple converging catalysts are leading to a very bullish sentiment, which is sending the Bitcoin price soaring and the market cap of Bitcoin to over $1.3 trillion. The favorable industry tailwinds include an improving regulatory and macro backdrop, the recent Bitcoin ETF approvals by the SEC, which are leading to rapid retail and institutional adoption, the upcoming Halving, which Ben will speak to more in a minute, the positive impact of Bitcoin supply constraints with current daily demand exceeding five to 10 times the daily supply of newly mined coins, and there's prospect of a lower global interest rate environment, which has historically been very favorable to the Bitcoin sector.
Over the last two months, these catalysts have caused a surge in investment interest and investment in publicly traded Bitcoin miners and Bitcoin ETFs. The ETFs have charted unprecedented growth, with net inflows exceeding $8 billion. This is not just an anomaly but a paradigm shift for the industry. Partially as a result of this insatiable demand, earlier this week Bitcoin achieved a new all-time high price, which is exceptional as this is the first time Bitcoin has attained a new all-time high leading into a halving. With this demand-supply backdrop, 2024 looks to be a banner year for Bitfarms. Turning to slide four. I want to start off today's call with a quick reminder of what Bitcoin is, why we mine it, and how Bitfarms does it better. Bitcoin is a simple idea: flawlessly executed in code and organically adopted by people around the world at massive scale.
This powerful technology is empowering individuals, entrepreneurs, corporations, and even countries and governments to participate in the world's most open, fair, and secure financial system on the planet. As shown in the chart on the left, Bitcoin's ongoing adoption and organic growth has made it the best-performing financial asset of last year and over the last decade, outperforming the S&P 500, NASDAQ 100, MSCI World Index, and gold. In our opinion, and according to others, Bitcoin is the hardest monetary asset on the planet. Bitfarms is a vertically integrated global Bitcoin mining company that provides investors with high-quality exposure to Bitcoin. Through our publicly traded shares, we are democratizing and making available to investors exposure to some of the world's best-built, best-operated, and lowest-cost Bitcoin mining operations and the operating cash flows they generate.
What makes us a leveraged investment play is that every single day since Bitfarms was founded in 2017, we have produced Bitcoin at materially lower costs than what people, institutions, and ETFs can purchase it for in the open market. We have earned over 24,000 Bitcoin since inception. I am thrilled to report that in 2023, Bitfarms was the best-performing stock on the Toronto Stock Exchange and the eighth-best-performing stock on NASDAQ. A moment ago, I commented that our shares represent a high beta exposure to Bitcoin. As the chart on the right illustrates, in 2023, Bitfarms outperformed Bitcoin by 286% and outperformed the mining industry, represented by the Valkyrie Bitcoin Miners ETF, by 95%. Bitfarms' annual share price return of 592% compares to Bitcoin's annual price appreciation of 155%, which is a beta of approximately 3x . So how did we outperform Bitcoin in 2023?
Let's turn to slide five. In 2023, we acted with strong discipline to dramatically transform our balance sheet by: growing the company's hash rate 44%, improving our energy efficiency by 12.5%, thereby reducing our operating cost per terahash, paying down 85% of our debt, increasing our Bitcoin in Treasury by 99%, ending the year with $118 million in liquidity, and, in November, announcing our transformative fleet upgrade with a contract to purchase up to 63,888 Bitmain T21 miners. These powerful new miners, combined with our new farms under development, are a game-changer and put Bitfarms on track to triple our hash rate to 21 exahash by year-end 2024 and improve energy efficiency up to 34% to 23 watts per terahash.
Not only does this represent the greatest growth in our six-year history, but importantly, our integrated strategic growth plan will drive what we believe will be the biggest relative improvement in energy efficiency in our industry this year. Turning to slide six. I would like to elaborate on the impact of our transformative and accretive fleet upgrade program while speaking to our financial discipline and cost-focused approach. This month, in Quebec, we will begin to upgrade our fleet, starting with the replacement of approximately 11,000 M31S and M31S+ miners with the first batch of new T21 miners. As a testimonial to our highly efficient operating structure, it is important to note that while these M31S miners are our least efficient and oldest miners, they were purchased around the time of the last halving in 2020, they are still profitable due to our low-cost energy and high operating efficiencies.
During these four years, these group of miners have paid for themselves over five times, demonstrating solid ROI returns. On a unit basis, upgrading the M31S to the new T21 miners will deliver a 2x improvement in energy efficiency, driving a 50% reduction in our operating cost per terahash. They will also generate a nearly threefold increase in hash rate and mining revenue. All other things remain constant. The relative improvements from upgrading these M31S miners will more than offset the impact of the upcoming halving on a per-unit basis. Turning to slide seven. Approximately 68% of our T21s on order will be installed in our existing farms, with the lion's share going to our Quebec farms. By utilizing our existing infrastructure, the upgrade is effectively a plug-and-play operation, significantly reducing CapEx requirements, risks, and complexity.
This low-risk and low-cost growth strategy provides immediate and tangible benefits to Bitfarms and our investors. With the first miners set to be upgraded this month, we are pleased to report that our transformative fleet upgrade is well underway, on time, and on budget. Turning to slide eight. I'll touch upon our progress in Paraguay, where most of our new site development is happening and where we will plan to deploy over 26,000 new miners this year. In Paraguay, we have two new farms under development and on track for energization this year. The first miners at our Paso Pe facility are scheduled to go online this month, with more miners coming online in April. Paraguay is an important area of growth for us.
Our two farms under development will generate many value-added corporate benefits, including: favorable fixed power contracts at $0.039 per kWh before VAT; power contracts with ANDE that are not subject to inflation; no requirements for power curtailment, providing up to 100% uptime; 100% renewable energy; fast development, construction, and deployment times; exceptionally low costs for construction and skilled labor; and lastly, first-mover advantage, securing Bitfarms with a meaningful amount of electricity allocated to the cryptocurrency sector, putting us on track to be the largest miner in Paraguay by year-end. My recent visit reinforced the merits of our decision to invest further in this country. There is abundant and low-priced hydropower, a skilled labor pool, supportive cryptocurrency and Bitcoin mining from the public, and most importantly, from the primary electricity utility, ANDE.
ANDE understands how Bitcoin mining functions as a digital electricity line for exporting their excess hydropower to a global marketplace. By signing power contracts with Bitfarms, they are able to monetize and make better use of their existing infrastructure assets. Additionally, they are able to use revenues from Bitcoin miners to finance the rebuilding and expansion of a significant portion of their domestic power infrastructure, which will bring benefits for generations to come and aligns the interests of Bitfarms, ANDE, and Paraguay. Turning to slide nine. With minor upgrades underway and the near completion of the initial phase of development at Paso Pe, we are on track and on schedule to deliver 12 exa hash by the end of June 2024. Importantly, with Bitcoin price and spot miner prices rising, the 28,000 miner option that we purchased in November is in the money.
Exercising this option is a key element towards achieving 17 exahash per second, and through this exercise, we plan to take delivery of T21 miners in the third and fourth quarters of this year, in line with the construction schedule at Yguazu. While these carefully constructed plans increase our hash rate to 17 exahash per second, we are targeting more than a threefold growth this year to 21 exahash per second. Should market conditions continue to be favorable, we are actively considering additional farm expansions, new developments, acquisitions, and further miner redeployments to achieve this 21 exahash target by the end of 2024. With numerous actionable opportunities in our pipeline, we are well prepared to seize upon accretive growth opportunities to fill the remaining 4 exahash this year. Turning to slide 10.
Let's take a look at our pro forma portfolio based on the plans that I just discussed. After having successfully deployed 63,888 T21 miners through the transformative fleet upgrade plan and the new farm developments at Paso Pe and Yguazú, we will have completely rebalanced our portfolio both geographically and economically. The expected result is: One. Higher operating efficiencies, with 79% of our miners operating at 22 watts per terahash and no miners operating above 30 watts per terahash. Two. A competitive blend of low-cost electricity with high uptime. Three. Achieving greater geodiversification, with no single country contributing more than 50% of our hash rate and revenue. Four. Benefit from predominantly stable hydro power rates, which represent about 85% of our portfolio.
If you take away nothing else from this update, our transformative fleet upgrade is unique, both in terms of its scope and its ability to drive meaningful improvements across three key performance indicators: hash rate, energy efficiency, and our direct cost to mine, also known as hash cost. These improvements will take place across all existing farms and farms under construction, ensuring we are ready for the halving and the widely anticipated subsequent bull market. I will now turn the call over to Ben Gagnon, our Chief Mining Officer, to talk about our operating and financial metrics and the various assumptions post-halving.
Thanks, Geoff. I'm really happy to be here with all of you today. While this will be my third halving event and the company's second, for many investors listening in on today's call, it is likely going to be their first.
Accordingly, I think it's important to spend a few minutes discussing the halving, mining economics, and how we think about them. Put simply, halving events, as originally envisioned by Bitcoin's creator and how they have functioned historically, are catalysts for creating greater economic value. On the mining side, the 50% reduction in the block reward results in fewer Bitcoins mined, which, Ceteris Paribus, incentivizes miners to cut costs. Concurrently, this also means that the daily supply of new Bitcoins that would otherwise be liquidated to pay operating expenses is also cut in half, restricting supply relative to demand and, in turn, driving prices higher. Turning to slide 12. Historically, each halving epoch follows a similar pattern: one of Bitcoin prices rising faster than network hash rate can grow in the three to 18 months following a halving, resulting in quickly expanding mining revenue and margins, incentivizing further network growth.
Being on the right side of the cycle is crucial for miners to optimize returns and is a key part of our 2024 growth strategy. Despite each cycle producing 50% fewer Bitcoins in revenue than the cycle before it, due to rising BTC prices, the economic value of all mining revenue in dollar terms increases dramatically with every halving epoch, resulting in a materially larger industry with more economic activity despite the reduction in BTC terms. Notably, this cycle is marked by three very unique features not seen in previous halvings: the China mining ban in 2021, the emergence of ETFs in January, and the fact that Bitcoin has just hit a new all-time high leading into the halving.
This has never happened before, and with only 450 new Bitcoins expected to be mined per day after the halving, relative to current ETF demand of up to 10,000 Bitcoins a day, it may mean that this next cycle will be unprecedented in terms of its scale. But this is all revenue, and outside of hedging activities, miners have very limited control over revenue. However, we do have full control over our costs, which is why at Bitfarms we take a hash cost-first approach to mining. Turning to slide 13. Energy efficiency is meaningless without also considering electricity costs. That's why we look at the blended figure, hash cost. Calculating hash cost is easy and can be done by simply multiplying energy efficiency with energy price over 24 hours. This will calculate the direct energy cost to operate per unit of compute per day in dollar terms.
As we execute on our upgrade and deployment plan throughout 2024, we expect to improve efficiency 11% from 35 watts per terahash today to 31 watts per terahash by the end of Q1, 29% to 25 watts per terahash by the end of Q2, and 34% to 23 watts per terahash by year-end, driving our hash cost down by similar amounts. Importantly, as Geoff mentioned earlier, we believe these will be the most significant improvements across energy efficiency and hash cost in our industry this year. When comparing that to the most efficient miner on the market, an S21, you can see that our anticipated hash cost will be lower than an S21 operating at $0.06 by the end of Q2 and virtually on par with an S21 operating at $0.05 by year-end, making our hash cost highly competitive.
When compared to the sensitivity table for hash price post-halving, it is hard to imagine a scenario where our hash cost would operate at a loss. On the contrary, it is very easy to see how our low hash cost relative to hash price scenarios positions us to capture the upside of rising Bitcoin prices with quickly expanding mining margins. In summary, the upcoming halving is not something to be afraid of. Our growth plan in 2024 is positioned to make us a leader in low-cost production that, at every stage in the deployment plan, results in anticipated direct costs to produce the Bitcoin well below current prices and with a relative growth that is anticipated to outpace the network, rapidly increasing our market share and revenues, all else remaining constant. With that, I will now hand the call over to Jeff Lucas for the financial review.
Thank you, Ben.
This is indeed one of the most exciting times in our company's history as we aggressively pursue our growth plans and make great strides toward 12x exahash per second in the second quarter and our 21x exahash per second target by year-end, more than a tripling of our hash rate. Turning now to slide 15. Fourth quarter total revenue was $46 million, up 34% over the third quarter and up 71% over the prior year. The quarter-over-quarter comparison reflects 30% higher average Bitcoin price and 5% more Bitcoin earned during the quarter. In the fourth quarter, we earned 1,236 Bitcoin compared to 1,172 in the third quarter. Our hash rate, which does not yet include the impact of our upgrade program, was 6.5% higher sequentially, offsetting an increase in average network difficulty of 19% over the third quarter 2023.
Fourth quarter gross mining profit was $23 million, or 52% of mining revenue, compared to $13 million, or 38% of mining revenue, in the third quarter. The gross mining profit reflects investment in advancing our growth to 21 exahash per second and other costs reflective of a larger product production operation as well as non-recurring expenses. G&A expenses for the quarter were $13.4 million in comparison to $8.4 million in the third quarter. This includes $4 million of non-cash compensation versus $2 million in the previous quarter. The increase also includes higher incentive compensation payments associated with the achievement of annual performance targets, non-capitalizable professional service fees that are associated with corporate development to advance our growth initiatives for the second half of 2024 and 2025, and other recurring and non-recurring expenses.
For the fourth quarter, our operating loss was $13 million, including non-cash depreciation expense of $22 million in comparison to a third quarter operating loss of $19 million, also including depreciation expense of $22 million. Our net loss for the fourth quarter was $57 million by $0.19 per basic and fully diluted share, compared to a net loss for the third quarter of $17 million or $0.06 per basic and fully diluted share. Included in the net loss are net financial expenses of $45 million that includes a $38 million non-cash charge for the revaluation of financial liability for warrants issued in earlier financings. For a background about these warrants, during the preparation of our annual financial statements, we reassessed the application of IFRS accounting standards when the accounting of private placement financings closed in the first six months of 2021, almost three years ago.
In consultation with our corporate counsel and accountants, it was determined that the warrants associated with the financings should be treated as a financial liability rather than as equity. Accordingly, the financial statements for 2022 were restated to reflect this accounting. It's important to bear in mind that these are non-cash adjustments and do not have any impact on our reported adjusted EBITDA. More information and details can be found in our 2023 financial statements and MD&A, which were filed today. Turning our attention now to per Bitcoin production cost and profitability. In the fourth quarter, Bitfarms' direct cost of production per Bitcoin, which is the all-in electricity cost to mine Bitcoin, was $16,200, down from $16,900 per Bitcoin in the third quarter of 2023. The approximate 4% lower cost per Bitcoin primarily reflects a reduction in the overall cost of electricity from $0.045 per kWh to $0.042 per kWh.
This, in turn, was driven by a six-month contract with Argentina's power producer entered into in November that lowered our electricity cost to $0.021 per kWh, the lowest in our network. This gave Argentina a direct mining cost of less than $7,700 per Bitcoin. With Argentina representing about 22% of our overall Bitcoin production, the benefit to our corporate electricity rate and the direct cost of production will be even greater in the first quarter of 2024, as we'll have had the lower rate in effect for the full quarter. Our direct cost in February of 2022 includes a 15% value-added tax on Canadian energy costs as a result of legislation enacted last year. We firmly believe that we are exempt from this incremental tax and are pursuing a revenue ruling with the Canadian and Quebec tax authorities to formalize our exempt status.
With Canada representing about two-thirds of our productive capacity, our corporate electricity rate during the quarter without this tax would have been $0.37 per kWh in comparison to our reported rate of $0.42 per kWh, and our direct cost to BTC would have been approximately $14,600, $1,600 lower than that we reported. Now on to adjusted EBITDA on slide 16. Adjusted EBITDA for the fourth quarter effectively doubled over the third quarter to $14 million, for a 30% adjusted EBITDA margin in comparison to 9% in the previous quarter. The adjusted EBITDA equates to cash profitability per Bitcoin in the fourth quarter of $11,200, more than double the $5,400 profitability per Bitcoin in the third quarter. I would like now to take a minute here to discuss how our adjusted EBITDA reporting is different than that of our peers.
As a Canadian company, we follow international financial reporting standards, otherwise known as IFRS. Under IFRS, we do not mark to market our Bitcoin holdings, and accordingly, we do not reflect the unrealized gains and losses from our Bitcoin holdings in our income statement and our profitability. Similarly, we do not include these unrealized gains and losses in our Adjusted EBITDA. Adjusted EBITDA for us is purely and consistently a measure of the cash profitability of our operations and does not reflect the change in value of our assets and liabilities. It's a very straightforward and transparent calculation. Based simply on our cash profit of $11,200 for each of the 1,236 Bitcoin earned, plus roughly $200,000 profits generated at our Volta subsidiaries, that's it. It is that straightforward.
We believe, by the way, that the exclusion of balance sheet changes in our Adjusted EBITDA, including our Bitcoin treasury, is a truer measure of the financial performance and the cash-generating capability of our operating activities. Turning now to slide 17 in our liquidity. At December 31st, we held cash of $84 million and Bitcoin valued at $34 million for total liquidity of $118 million. This compares to $47 million cash and $56 million of liquidity at September 30th. During the fourth quarter of 2023, of the 1,236 Bitcoin earned, we sold 1,135 to generate $42 million of proceeds to fund our operating and debt service requirements.
In the fourth quarter of 2023, we raised a total of $52 million in net proceeds from finance activities, $41 million through a private placement completed in November, and an additional $11 million in December from the exercise of warrants related to the private placement. These funds were specifically earmarked for our growth initiatives and our fleet upgrade plans. During the quarter, we paid down $6 million in debt, leaving us with a remaining balance of $4 million at December 31st. In the current quarter, we paid down the remaining balance, I am very pleased to say. In February, we met our stated target of having no debt on our balance sheet in advance of the halving. Lastly, I want to speak of the accretive nature of our mining upgrade program. The 36,000 miner purchase we announced in November represents a very accretive application of our invested capital.
For an incremental capital deployment of about $100 million, we plan to increase our hash rate from 6.5 exahash per second to 12 exahash per second. This represents a marginal cost of about $18,000 per petahash. I'll note that a commonly used valuation metric for public miners is enterprise value per petahash. While this metric can vary among miners, the average for our sector overall is about $66,000 per petahash. By extension of this industry metric, we are deploying about $100 million of capital to create $360 million of incremental shareholder value. Looking ahead, we expect to achieve a similar return on our invested capital with our purchase option for 28,000 additional T21 miners. With that, I will now hand the call over to Geoff for concluding remarks.
Thank you, Jeff. Let's turn to slide 18.
In summary, Bitfarms is a prominent player in the Bitcoin mining sector, offering investors high-quality leverage exposure to Bitcoin via our advanced operational capabilities and mining infrastructure. With an industry-leading yield per Exahash, Bitfarms distinguishes itself through exceptional margin to performance, demonstrating operational efficiency and profitability in a highly competitive industry, and we are well prepared to navigate the upcoming Bitcoin halving. This preparation is underpinned by our robust balance sheet and strong liquidity, which are crucial for sustaining growth and capitalizing on new opportunities in this volatile market. Led by a strong leadership team with a proven track record of driving profitable growth, our expertise and strategic vision have been instrumental in our success over the past six years, including a previous halving event. Furthermore, Bitfarms's commitment to ESG reflects our dedication to sustainable and responsible mining practices.
It's gratifying that our largest projects, now under development, will draw power from the Itaipu Dam, the third-largest hydropower facility in the world. Overall, our strategic positioning, operational excellence, and commitment to sustainability position us for continued growth and success in 2024 and beyond. With that, I'll turn the call over to the operator to begin the question-and-answer session.
We will now begin the question-and-answer session. To ask a question, you may press star, then one, on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Again, it is star, then one, to ask a question. At this time, we will pause momentarily to assemble our roster. The first question comes from Bill Papanastasiou with Stifel. Please go ahead.
Yeah, good morning, everyone. Thank you for taking my questions. I just wanted to dial in on the salaries expense line. Obviously, it's increased this quarter, but from my understanding, a large portion of this headcount is obviously coming from Latin America, where expansion plans are happening in Paraguay. Can you speak to the cost of labor in the region, and how should we be forecasting this expense line item going forward?
Good morning, Bill. Let's move that over to Jeff Lucas, our CFO, to take that question. Thank you.
Sure. So good morning as well, Bill. A couple of comments to keep in mind here. Actually, one of the benefits of being in Latin America is that the compensation costs relative to North America are dramatically lower.
So we are certainly experiencing and going to expect to get a bit of an increase here as we're building out our team and our professional staff down there as well. Not overly material, I think, going forward here. I think what's more important is to understand that in the quarter that just ended, we actually had about $2.1 million of compensation associated with achieving goals and targets that were set, actually, in 2023, much of which is realized, actually, in the fourth quarter here. So I think what's important here is that we actually showed cash compensation around $5.1 million in the quarter that just ended. To normalize this going forward, it'd be more like around $3.1 million, reflecting merit increases that we have in place for this year versus in the fourth quarter and also the build-out of our organization overall.
Great. Thank you.
And then how's the team kind of positioning, and how's the decision-making changing given the spot price appreciation and transaction fees moving higher in the market? How do you forecast incremental market opportunities following the halving at this point?
There's a few things there. Ben, why don't you jump in and talk about the transaction fees and sort of how we account for those and how we plan for them?
Sure. I'll have to take that question. We take a conservative approach when it comes to modeling transaction fees and potential revenue, which is why we take a look at our hash cost first. By positioning ourselves on that lower end of the operating cost curve, we basically make ourselves in a position where, regardless of what happens with mining revenues or transaction fees, we're going to be in a position that's going to be profitable.
For modeling purposes, we look at a hash cost of $0.06 per terahash, and that's something that we've had in place for the halving for about 18 months now in our models. As we are at around $67,000 now, where the halving happened tomorrow, we'd be at roughly $0.056 per terahash, so right about on the money for where we anticipated us to be. As we're looking forward, we're going to continue to evaluate where hash price is, where mining prices are, and try and look at opportunities in that framework. But certainly, we're always open to creative opportunities for us to increase our footprint and increase our hash rate in cost-effective ways.
Bill, was that sufficient for your question, or was there a little more to it?
Yeah, I mean, maybe you can just provide a little bit more color, Jeff, in terms of how you think market opportunities, looking at potential M&A in the space following the Halving, just given the better, favorable market outlook.
Happy to do that. Well, I've been asked a similar question, I think, quarterly for the last year and a half, and my answer really hasn't changed. We are excited about continuing to grow Bitfarms. We're in it for the long term. We have a corporate development team that specializes in looking for organic and inorganic opportunities for us. We have quite a system for evaluating these opportunities. We are out there and looking for good assets, good people, and opportunities to grow, whether that's in the United States, whether it's in Canada, whether it's in Latin America, or elsewhere.
We believe that finding surplus, low-cost electricity, preferably renewable, is the long-term benefit to the company. So if somebody else has developed something that makes sense to us and we can get it at the right price strategically, then we're happy to layer it in. And frankly, we've looked at a number of opportunities, but we remain disciplined. We do not want to overpay. There's probably opportunities, very much so in the United States right now in some of the demand response areas. They are attractive, but it has to fit within our regime. It needs to be at the right cost, and it needs to add strategic value. So we continue to look. The halving, everybody says there's going to be consolidation. We expect there probably will be, too.
We have our eyes wide open, and this company this time around in the four-year epoch is so much stronger and more able to react to these types of good opportunities than we were four years ago. So this is an exciting time, not just for our growth this year, but for the opportunities that might present themselves.
Okay. Great. Appreciate the color. That's all the questions I have now.
Thanks, Bill.
The next question comes from Kevin Dede with H.C. Wainwright. Please go ahead.
Good morning, gentlemen. Thanks for having me on the call. Appreciate the presentation, Ben, on hash cost. I think it's only you and Harry that look at things that way, so I appreciated you peeling the onion back there on that. Jeff, would you mind talking a little about Argentina? I think Mr. Lucas mentioned a $0.021 cost there on a six-month contract.
Are you sort of scratching your head and thinking about executing on taking your 54 MW to 200 MW there and maybe add your perception of what you've seen of the drastic change in government in Argentina and how that might lead you one way or the other?
Thanks, Kevin. Lots of good content there. Argentina has turned out to be quite an opportunity for us. That $0.021 contract that we fixed for six months in November, which represents the summertime in Argentina, was certainly a coup for us and really illustrates the exciting potential for Argentina in terms of low cost. They have all this shut-in natural gas, and to be able to monetize it because it's not really able to push it into a pipeline and send it to other countries, they don't have an LNG port. So it's there.
We've now got a government there, the Milei government, that is pro-business, that wants to reduce government bureaucracy and really transform the country. It's exactly what is really, frankly, needed there. They've been plagued with high inflation for a lot of years, and it needs this type of corrective action. About a year ago, we made the strategic decision to take our Río Cuarto place and stop at one warehouse, at least for the time being. We've got that 210 MW contract. It's there. We think that things are starting to settle out in Argentina and give us the confidence that we might be able to invest again. There's that location. Frankly, there's other locations in Argentina, too, that are very attractive and might actually offer a lower-cost solution than what we have in Río Cuarto. But Río Cuarto is one that we've developed.
We've got a substation that's able to basically supply at least one more warehouse. We've got government approvals that could allow us for one more warehouse. So that's some of the dry powder we have. But as stewards of capital, we need to be prudent. And when we went through that government change, we just didn't know. So we decided to take our foot off the pedal, relax. We found alternative opportunities in Paraguay that are completely green, and we're building that out. But certainly, Argentina represents a very attractive opportunity, especially at these prices for later this year, next year, and beyond. So very exciting.
Can we talk a little bit about your commentary regarding Paraguay? I understood your comments to, I guess, imply that you are not subject to curtailment restrictions.
I'm wondering how you think about that longer term and any recourse you might have in dealing with ANDE should they decide that they're going to need that power that they've allocated to you.
Okay. Well, ANDE, we've got a very open dialogue on the go with. And our first contract for the 10-MW facility was with a private company on a private franchise called CLYFSA. And there is some curtailment there because of infrastructure issues. And we get an adjustment to our power rate there. With ANDE, though, it's more robust contracts. They're bigger. We've located very close to their high-voltage substations, and they have carefully allocated MW to the crypto mining sector. They haven't overdone it. They haven't put themselves into a position where they're going to be short on power. They've been very conservative.
So the ANDE contracts are not subject to curtailment unless there's an emergency situation. But these guys have these two large hydro power projects, including the Itaipu Dam, that is producing a lot of power. And Paraguay gets a significant amount of that power, and a significant amount of that power then gets sold back to Brazil or at least sold to Brazil on a wholesale basis because they have no place to put it. I have never heard of ANDE not having enough power, but they have had infrastructure constraints, which they are solving through upgrading their high-voltage lines, their high-voltage corridors, their substations. And the one in Paso Pe in Villarrica is strong. It's been there for a few years, and there's abundant power there. The one in Yguazu is recently constructed. It's 1.2 GW. They've got 500 kV high-voltage lines leading into it.
We don't expect it's also closer to the Itaipu Dam, so electrons have shorter distance to go. But we just don't expect the curtailment to be there unless there's really these emergency conditions, which would be highly unusual. So it's one of the things we very much like about Paraguay is being able to operate our miners 24/7, around the clock. There's heat there, and since we've operated there for a couple of years, we know how to deal with that heat. So I expect that the exahash that we'll be adding this year in Paraguay, especially with the T21 and the hydros, we're going to get a lot of active, ongoing production coming out of that country. It's a solid place to do business.
Just a couple of detailed infrastructure questions. One, Paso Pe, 70 MW. I understand that you have all the heavy-duty equipment, the substations.
I'm just wondering if you have anything running there. What's actually on site now?
I can add to this, but Ben, why don't you, as chief of mining, why don't you answer this question?
Sure. Thanks to take that question, Kevin. Right now, what we have is we've got basically three buildings, which are up, and we are deploying our first MicroBT hydro miners. So those hydro miners are going to be online this month. And next month, with these buildings and the T21s, we are going to be deploying T21s in April. So a little bit of a phased deployment. The first miners coming online this month are going to be the MicroBT hydros. And next month, we are going to be deploying T21s.
So Ben, are any of the hydros running now?
What's sort of your immediate takeaway, and how do you see operating the operating requirements there versus air-cooled? I'm wondering, there's been a lot of chatter in the industry about using immersion to defray operating costs. And I'm wondering if you've had any touch on that with this deployment so far.
Sure. Well, we don't have any MicroBT hydros up and running in Paraguay right now, but we do have quite a bit of experience with immersion. Personally, I founded an immersion technology company back in 2018 where I was doing immersion with 3M and U.S. Manufacturing for Bitcoin mining purposes. Realistically, when we look at immersion versus air-cooled, sure, there are some benefits from using immersion from an efficiency perspective, but the capital expense required to set up that infrastructure versus the air-cooled infrastructure, really, we just feel is unjustified. The MicroBT hydro units are pretty different.
The way that they've designed those hydro units makes it a lot more analogous to how we operate our air-cooled facilities. We have miners that are physically sitting in some sort of a server rack that can be pulled in, can be plugged back in, they can be hot-swapped. When you're doing immersion technology, you've got to deal with all this fluid. You've got to deal with cleaning the miners, preparing the miners. Every single time you interact with a miner, it's quite a laborious process. With the hydro miners, we expect them to be operating relatively similar way that we operate our air-cooled miners.
The only thing that's really different is how that heat is pulled out of the miner itself, which, from everything that we've seen so far in the tests and the tours of the hydro sites that we've seen, is done in a very, very clean, efficient, and stable manner.
Last question for me. What's on site and what's contracted for Yguazú, Jeff? I understand you have the site, not clear if you've got transformers lined up. And give us your take on meeting your timeline objectives there.
Sure. The timeline there is we will have production by the end of the year, full production there at the end of the year. We secured the land in January, which you needed the physical address to be able to start the other studies. So there's an environmental and electrical study on the go with ANDE right now.
We have hired a third-party company, which is an EPC contract, to construct the connection at the ANDE substation, which is right across the road from us. So that's sorted out. That's underway. There's an approximately seven-month line of sight from when they will get that done, 7-8 months there. The timeline for transformers and cabling is about seven months. It's pretty much exactly the same as what we went through at the Paso Pe site. So we expect that those orders will be going in now so that we can get the important connection points, the primary connection points, in place later this year, probably fourth quarter. And we've already had the scheduling done with the T21s for going into there. So things are coming together nicely. Kevin, the site is quite exceptional.
As I mentioned, it's right across the street from the ANDE substation, which is brand new. We will do an underground cable. It will leave the substation. It will go under the road and basically right into the field where we are now, which is nice high ground. It's not subject to water. It's nice and firm and solid. We've got enough land to fully develop the 100-MW power purchase agreement there and, in fact, a bit more. So it really is a superior site.
Thank you very much, gentlemen. Appreciate it. I'll turn over the floor.
The next question comes from Josh Siegler with Cantor Fitzgerald. Please go ahead.
Hey, team. This is Will Carlson on for Josh. First question, do you have any foresight into additional PPA opportunities in Paraguay?
Good morning, Will. Yes, we do.
As I mentioned earlier, they've taken a very conservative approach to bringing in Bitcoin and crypto mining into the country. They've allocated megawatts, some at high voltage, some at medium voltage, sort of in the order of about 650 MW in total because they do not want to run out of power in the country. They want to go it slow, but they also want to do it in a meaningful way so that the sector can go into production there and generate revenues for the company. But I do not expect any new power purchase agreements there to be let over the next couple of years, maybe just a year. It's tough to say for sure. But for the time being, they're wanting to make sure that the power purchase agreements they've signed will actually be developed. We are well on our way with ours.
There's some others that are well underway. There's others that are going a little more slowly. So I expect that if in the short term we are to pick up a contract, it probably will not be a new contract, but one that's already been existing. It will be an existing contract that we might be able to buy or joint venture or do something with that's already out there. But I think as we, as a company and as a sector, continue to develop there, I think ANDE will get more confidence. I think the government and the people will get more confidence in what we can bring to the whole country. It really is a partnership, and it's still fairly early stages of that partnership. So I think there's more there.
But for the time being, we're just going to focus on developing our 170 MW that we already have, that we've already acquired, that we already have in place, and we'll go from there.
Great. Really appreciate that cover. And the second question, you guys have done a phenomenal job in your international expansion by all measures. I'm just curious, how are you guys thinking about future expansion opportunities within the United States?
Well, as I commented earlier and on earlier quarterly calls too, we think there's areas in the United States that represent really neat strategic opportunities to us. As we said in the script, we do want a balanced portfolio, and the United States is an area that we are lower than we'd like to be there. We continue to look for good opportunities there. We're looking at a couple right now, but it's early stage.
We've looked at many, many opportunities over the last year, year and a half, and for whatever reason, they haven't come together. But this year might be different, and we will continue to look. We look with a very open mind and open eyes to trying to do something very interesting there, hopefully something will materialize.
Thanks for the cover.
The next question comes from Lucas Pipes with B. Riley. Please go ahead.
Hi. This is actually Fedor Shabalin asking questions on behalf of Lucas Pipes. Congratulations on painting down there. And my first one may be for Ben as it's more technical. I want to talk more a little bit about outperformance of T21s. So you said when you tested it, they outperform the manufacturer's specifications in both normal and high-energy modes.
Can you talk more a little bit how high you were hash rate readings and what about power consumption and, I mean, how economical it's to run them on, I mean, higher than stated characteristics?
Yeah. Great question. Happy to answer it. So we have our first 12 T21 miners, and in our tests, we've been seeing in the normal energy mode performance anywhere between 193-195 terahash per miner at the same exact energy efficiency that's specified by the manufacturer at that 19 W per terahash level. In a high-energy mode, most of our miners are operating between 235-238, but we've seen miners go up to 241. And that's actually better than the energy efficiency mode that was promised by Bitmain. So that's just under the 22 W per terahash that they advertised.
If you go back and you take a look at that hash cost table that I showed you, you can see that that 22 watts per terahash efficiency, especially with our really low cost of power around $0.04, is incredibly attractive and incredibly profitable. And so by squeezing more units, more hash rate out of the unit, effectively, what we could get is a cheaper miner, both in terms of absolute cost because it's less than the it's a lower price than the S21. And we also get a significantly lower effective cost per terahash that we purchase. So when we bought these miners at $14 a terahash, that's at the 190 spec. But when we operate them at the 233 or this kind of 235 range, that number goes down significantly below 14, down into, I think, around $11.30 or $11.40, if my memory is correct, per terahash.
So we get a lot more out of the miners. They generate greater levels of profitability and a faster payback.
I appreciate all the color, Ben. That's very interesting and exciting news. And my second one may be about the cadence of additional capital rights in 2024 to funding your stated growth and maybe potential M&A opportunities, how we're going to raise funds for these if it's the case. Thank you.
Over to you, Jeff Lucas.
Great. Thank you. Good morning, Fedor. So a couple of comments here. First of all, our liquidity still continues to be very strong comparable to the level that we reported in December. And this is actually after having made substantial payments towards the 36,000 miners that were part of the upgrade that we announced November 28th here.
So when you think about the numbers overall, with that liquidity level that we had in mind, as we're going forward here and we're bringing the operations online, particularly down in Paraguay here, the business overall has the capability really to be generating about $7 billion of cash flow above operating expenses per month. And bear in mind that the fact that we've actually paid down our debt in February and fall, except for lease obligations, which are very small, that brings additional $2 million as part of that $7 million here. So we're in pretty good shape overall here. We do have further expenditures involved here in the CapEx side as we're continuing to build out Yguazú and Paso Pe and what's happening in Baie-Comeau here. And that's roughly around maybe the $40 million level. And then we have continuing payments on the 36,000 miners.
If we were to exercise the option coming to play as well. So generally, in a cash position, we're pretty good. But all that being said, we are considering and certainly giving attention to additional potential raises in the marketplace. And I do really want to underscore here that any capital raise that we do, we always do with an eye towards what is going to be the equity development that's going to benefit our shareholders. An example I gave here in my script here where we're spending about $95 million on the 36,000 miners here, yielding about $350 million of incremental value to our shareholders. That is a key element and a key metric that we look at as we consider whatever fundraising we're going to be doing going forward.
I appreciate all the color here, Jeff.
And my last one, just trying to squeeze in a high-level one. We already talked about M&A opportunities and industry consolidation potential, portfolio. But in your opinion, at current economic environment, current BTC pricing, less efficient miners, but they're still efficient. And don't you think it could be less M&A portfolio if these conditions persist? Thank you.
I think you're right. Originally, with the halving coming up, we thought probably 20%, 25%, maybe even 30% of the network hash rate would come off from the less efficient miners. That's what's happened in the past. But this time, with the ETFs that demand, the price going up to an all-time high, effectively like five weeks ahead of the halving, these are different market conditions that are prevailing right now. We are in a transitionary market, a paradigm shift, as I said in my script.
Things at this point are different this time. And as a result, I think it's probably going to give a longer lifespan to some of those less efficient miners. It's going to make some of the miners that maybe have been struggling because of older machines, not getting the same type of margins, maybe not the same type of access to capital, it allow them to continue to carry on as opposed to either going out of business or seeking somebody larger that can come and upgrade their operations. So I think you're right there. It may not have the same level of M&A activity and consolidation as we probably thought even a few months ago.
I appreciate all the color and details around here. Thank you very much, guys, and continue best of luck. Thank you.
Thank you.
Thank you.
And we have a follow-up from Kevin Dede from H.C. Wainwright. Please go ahead.
Well, thanks for staying on, gentlemen. Appreciate it. Ben, you showed a shot of the T21s racked up in location in Quebec. But what wasn't clear was whether or not you're intending to run them in three-phase or two-phase, if you're using the same PDUs that you were using for the M30s, and what kind of CapEx requirement or any change you'd need to make in those legacy facilities.
Yeah. Great question. One of the advantages of the T21 is kind of the robust design of it. And that includes a pretty powerful power supply unit that operates at three-phase. So in order to support that, we are upgrading all of our PDUs to smart PDUs that supply the power in three-phase.
If you look back on that photo, what you can see is you can see the PDU that's above the T21s looks pretty different than the PDU that's below. The upgrade process there is incredibly simple. Basically, the panel goes right up to the rack, and then you've got one plug from the PDU directly into the panel and the breaker there. We don't even need to change the cable. We just need to change the PDU that's plugged into the cable. So that plug-and-play nature of the PDU upgrade makes it really, really cost-effective and really, really quick. That is the only infrastructure upgrade that we need to make at basically every single site that we operate at. Jeff Lucas could probably speak better to the CapEx cost associated with that.
Actually, the CapEx cost associated with what Ben was speaking to was pretty modest, particularly very modest relative to what's involved with the miners themselves.
Thank you, Jeff Lucas.
But I think just to Kevin, just to punctuate a little more what we were seeing there, keep in mind 68% of these T21s are going into existing facilities in a plug-and-play installation. And when Ben said it was pretty straightforward, yes, we are upgrading the racks modestly, but we're ready to go. It really is a straightforward and certainly less complex buildout with substantial gains than building new infrastructure. So when we said this is going to be the fastest, most dramatic increase expansion in our company history, it's true. And this is why. And fortunately, it's so cost-effective and, frankly, simple in comparison to building new facilities.
We have our hands full with the two big installations in Paraguay that are going to take the other miners, but this is going to be a big year for us. Fortunately, most of it's fairly straightforward. I just wanted to add that.
Thanks, Jeff. Thank you very much, gentlemen. Appreciate you following up with me. Thank you.
Thank you, Kevin.
This concludes our question and answer session. I would like to turn the conference back over to Geoff Morphy, CEO, for any closing remarks.
Thank you all for attending today's conference call. We look forward to updating you with our monthly reports, other developments, and on our Q1 2024 conference call in May. Thank you for attending.