Thank you, Needham, for the invitation, for Bitfarms to present, to you both in person and on the webcast today. My name is Geoff Morphy. I'm the President and CEO of Bitfarms, and I'm joined with Jeff Lucas, our Chief Financial Officer. We will be jointly presenting today. Just as a, as something to, get people excited for the start of the year, Bitfarms had a very good year last year. I look forward to talking to you sort of why that happened, but we were the number 1 performing stock on the TSX last year and number 8 on Nasdaq. So a very exciting complement to what we did last year.
In terms of the safe harbor statement, I know you're familiar with this, but please make reference to our safe harbor language, which is also contained in our SEC and SEDAR filings, and can also be found on our website, which is bitfarms.com. First, just to talk about who and what Bitfarms are. We are a pure-play Bitcoin mining company that has been around for six-plus years now. So we know what the last Halving is, we know what this Halving is gonna be like, and we have geared up really over the last four years for what's ahead of us. Just in terms of who and what we are, I'm not gonna go completely in order here, but we're vertically integrated. We have our own proprietary software system.
We have Volta Electrique in Quebec, which is an electrical services subsidiary, which has 30-plus electricians and various people that can take care of our operations from start to finish, and maintenance is very important. We have scale and expertise. Over the six years, we have—we're about 1.5%-2% of the whole Bitcoin network, which isn't a lot, but it's big. We're one of the largest Bitcoin mining companies in the world. We now operate 11 farms in four countries, and we have 2 in development. About 2.5 years ago, we started putting together a management team that has now really come together and gelled very nicely, and that's spread out over Canada, U.S., Paraguay, and Argentina.
So once again, diversified, and that's really the way we operate, very much like the Bitcoin network. As I said, we have 11 farms. We currently draw 240 megawatts. We are heading for 391 megawatts with a growth story, which I'll get into, and we have 567 megawatts, which we can grow into. The strategic growth. Let me get into that. Late November, we made a big announcement, and it was really a defining time for us and one that we really held back for about 18 months. We just thought the price of miners were too much, and if we were gonna give our shareholders some payback and really go for more shares, then it had to make sense.
And we saw a lot of the other miners make big growth plans, and we just couldn't justify it. So we waited and waited, and in November, a company called Bitmain, which is a manufacturer of miners, brought a whole new series of miners into the market and provided introductory prices. It was Bitmain. They had T21s and S21s. People really didn't understand that there was T21s. Everybody was talking about the S21s, and while they were slightly better in the performance standpoint, we found out about the T21s, which is the first miner that an OEM has ever come up with, with factory overclocking. And that introductory pricing was $14 per terahash, and we fully took advantage of that because that's exceptional pricing. A lot of the other miners had spent $20, $24, $25, $28 on the previous series of high-performance miners.
Like, our calculations were the payback on those were 2 years, sometimes 500 days, sometimes longer. With the T21s in the overclocking state, really, the effective price is more like $11.30, so substantially less. The payback period is under a year, and, and Jeff Lucas, when we get into the financial discipline, can get into why some of these things are advantage to us. You look at governance and what we've done over the last 6 years. We're, we've been audited by a Big Four audit firm since our inception. We have a strong balance sheet, we have liquidity, we have access to capital, and we've really worked on the SOX controls and, and internal controls. We have an independent board. Like, these type of things matter, particularly as you grow and move forward.
Lastly, unlike a lot of the other miners, we have geographic diversification. I mentioned we're in four countries, but 11 operations, growing to 13 operations in four countries. We're in Canada, we're really the start of the operation. We have 8 facilities there, expanding one right now, all operating very well, hydroelectricity. Washington State, where we have 20 MW, hydroelectricity coming from the Columbia River. Paraguay, we have 10 MW. We're developing 140 MW more there, hydroelectricity. And then Argentina, where we have now 54 MW operating, and it's our lowest-cost facility because that's off of natural gas, and gas and energy in Argentina is very cheap. So yes, it was a risk to go to South America, but it's paying dividends now, and I think that's really a growth opportunity for us and a strategic one.
Just to highlight where we were in 2023, we advanced our exahash, our computational throughput to 6.5 exahash, and as you'll see, that's gonna ramp up very quickly this year. We're about 14.4 Bitcoin per day on average in December. Through the whole year, just shy of 5,000 Bitcoins that we mined, and at the end of the year, we had 804 Bitcoin valued at about $34 million. We have over 65,000 miners operating. So quite sizable, and goes to that scale that I talked about.
What should we be pointing at?
Okay, for those online, I'm trying to advance the slides and not getting anywhere. Is there a on/off button that I might have hit on this? I don't know. Well, being a good Boy Scout, I'm always prepared, so we're just gonna push forward. This chart really shows that a nice, steady growth over the last few years. And, in 2024, we're gonna go from about 6.5 exahash to 12 exahash by June thirtieth, and then 17 exahash-
Try to see if you go...
- by, uh-
They weren't-
By the end of the year, with optionality and sight lines to go to 21 exahash. So we're gonna have the fastest ramp-up in our history coming up in 2024, and that is possible because of all these new miners. And we've placed the order. They will start arriving in February, and then sequentially, they will be delivered through June, and that'll allow us, basically plug and play, to be able to take our miners and-
Perfect.
Okay, back that up, please. Okay, this is good. Well, there's the chart. See. You can see how, like, how much quicker we're gonna ramp up this year, and then maybe go to the next chart, please. 223% growth in this fiscal year. So the 12 exahash, as much of that is plug and play. Like, we'll take the old M30s and M31s out of our Quebec facilities and replace them with these T21s. And that's pretty easy to do, and we're just gonna go from site to site to site to do that. And then we have one organic expansion opportunity with our first new site in Paraguay, called Paso Pe. It's 50 MW, and recently we signed an expansion to 70 MW, so we're gonna fill that pretty much with these T21 miners.
And that will start in March and then go through the next 2 to 3 months. And then we have an option on this agreement that remains still at $14 per terahash, same price, we've already put down the deposit, that we have flexibility when we wanna do that, but we've got a deployment plan. We fully expect to do it, and that'll take us to 17 exahash. So that'll fill the next new site in Paraguay and then fill the rest of our facilities, some in one in Argentina, some in Washington, and a bit more in Quebec. So, it's a very straightforward expansion plan and very efficient, and that really makes us having ready because of the efficiencies of these operations. Next slide, please. Jeff Lucas, over to you.
Sure. Well, thank you very much. If you turn to the next slide, please, here. So the upgrade that Jeff spoke to is truly a watershed moment for our company, and we've got an internal mantra we call it: intelligent, accretive growth. We're in a very fast-paced industry, as we all appreciate here. A lot of our peers are growing faster than we are, but with any growth that we do, we really take a look at what's the impact to our shareholders and our shareholder dilution. That is key. That's a key premise of all our actions going forward, and I'm gonna speak to that in just a moment here. But let's talk for just a moment here about the impact on our growth and the profitability of this minor upgrade that we're doing here.
So to give you a comparison here, we've taken a look at our results, the last public results we've communicated for the third quarter, and then also showing the impact of this upgrade and what it's gonna do to our top line and also to our bottom line here. So if you take a look at the two left bars here, this is the actual results for the third quarter here. Our direct cost, which is really the cost of electricity, that is truly the variable or incremental cost of mining Bitcoin. Every incremental Bitcoin we mine, it costs us roughly $16,900 here. If you look overall, including the G&A, for the 1,172 Bitcoin that we mined in the third quarter, the total cost for each of those Bitcoin, including all the G&A and support costs, was $22,700.
The average price of Bitcoin, the average revenue that we earn for every Bitcoin that we mined, was about $28,100. So you see here that we generated about $4,700 profit in the third quarter for every single Bitcoin that we mined. That equates to roughly about $6.9 million of EBITDA, which is what we actually achieved here. With this new program in place here, going from 6 to 12 exahash, not only is it gonna give us greater mining capacity and then for more bitcoins that we're gonna generate, secondly, with these more efficient miners, where the actual watts per terahash, which is the measure of efficiency that's a standard in our industry, going from about 35 down to around 25, and then even further down to 23.
What you see here in front of you is that no longer are we paying $17,000 electricity for every Bitcoin, we'll be paying $12,000. And including all the G&A costs, spread out over a larger number of Bitcoin being mined, 'cause we have the larger capacity, and you're looking at a cost of under $15,000. Up against, for example, in the third quarter, of roughly $28,100. By comparison, in the fourth quarter, the average price of Bitcoin and the average revenue we earned for each Bitcoin that we mined was about $36,400.... So you can see that even in the fourth quarter, with increases in Network Difficulty and factors like that, we would have an exponential higher bottom line by virtue of this program we have in place here.
One last comment I want to make is that even above these numbers here, there's further upside, because Canada, which comprises of just under two-thirds of our total production capacity, around 64%, we actually have an accrual of what's called the VAT tax, around 15% of our cost of electricity, that currently we do not recover. There's been some tax legislation, and we are in the process of getting a letter ruling from the Canada Revenue Agency, that's actually going to allow us to get a refund for that VAT. That's going to reduce the cost of our Bitcoin, the cost of mined Bitcoin, of roughly $800 for each Bitcoin mined. That's a huge increment as well to our bottom line. So when you look at our business overall here, you're actually going to see some very strong margins here.
If we could just turn it for a second for the next slide, please. So this slide shows you both the revenues and the adjusted EBITDA, or the EBITDA that we've earned. So you see here, as I mentioned before, that in the third quarter, we had about $35 million of revenues and around $7 million of EBITDA. So we had about a 38% gross mining margin and about a 20% EBITDA margin here. Under this program that we put in place here on a pro forma basis, we would have actually a mining margin of around 57%, and we would have an EBITDA margin around 46%. So you can see the huge increment that we can achieve by this watershed upgrade program that we're putting in place here. Clearly, it's going to position us very well for the years ahead here.
If you go on to the next slide for just a moment here. This slide gives you a little perspective of where we are over time. Now, as how many of you are aware, there's an element called Network Difficulty that comes to play in the mining in Bitcoin mining here. And the greater the Network Difficulty, you know, the more the cost inputs have to be, the more challenging it is, in essence, to mine Bitcoin here. And so even with dramatic increases in Network Difficulty every quarter, as you can see on the left here of this slide, that the chart shows that our Bitcoin quantities are coming down because of the higher Network Difficulty, but our revenues are either increasing or stable.
While we're showing here roughly $33 million in the third quarter, we're going to do about $36 million, and this is public information, in the fourth quarter. So obviously, we're in a pretty positive track here. And very importantly, with this upgrade program in place, the margins and the profitability of every revenue dollar we bring in is going to be even higher. Now, if we turn to the next slide for just a moment here. This is an important slide. This speaks to our, not only our liquidity position, but also our financial flexibility. And what you see here is that when we made the announcement on November 28 about this upgrade, we communicated to the world that this program to get to 12 exahash was fully funded.
That's important, because a lot of our peers are very aggressive with their ATMs in terms of diluting their shareholders. We do that very, very carefully and very consciously. The best way to communicate that point is a very, very simple example here. We are spending about $96 million for this upgrade. We're adding six exahash. If you look at market valuations, exahash, roughly every exahash is equivalent to about $60 million in market value. So when you look at it that way, we're spending a little under $100 million, and we're generating about $350 million of incremental market value. In actuality, we did a multiple of that because the market was very strong in December, and furthermore, it received very positively the upgrade program that we announced here.
So obviously, this is a very accretive action on our part here. But we're also very well positioned here, as you can see, from the standpoint of liquidity and further growth here, whether also to be able to weather the uncertainties that may present themselves in the Halving. But as you can see here, we've got about $86 million of cash, $85 million of cash, and roughly $34 million of Bitcoin liquidity. So overall, we feel we're in a very strong position moving forward. Turn to the next slide, if you would, please. So overall, where does this leave us, and what's ahead of us here? Well, this may give you a sense of slide here, showing you the upward progression that we have available for us. The Q2 2024 is where we're going to have the 12 exahash.
We have this option with this upgrade program we did, and the contract we have with Bitmain for an option for an additional 28,000 miners above the 36,000 that we've contracted for. The beauty of this is that this gives us the flexibility. If we find, you know, that the halving is being a little more traumatic on the whole industry, we have the option of either doing part of that 28,000 or not doing it at all. So we have great flexibility here. I also, by the way, want to underscore that we're not the only ones with this structure in place. You've probably been seeing press releases during December and early January. A lot of our peer companies are doing a very similar model.
We're the ones who came out with this template of having this original amount we're buying and the option available to us, and a lot of our peers have taken to follow suit. We find that's pretty typical of what we do in our industry here overall. But what you also see here is that we could, by the end of the year, be at 17 exahash, and then even further, by redeploying our existing miners, be at 21 exahash. So we'll be going from about 6 exahash to around 21. That's a dramatic improvement and a huge, larger share of the overall market. Even as aggressive as the network difficulty increases are here, we'll be going from about roughly 1.3% of the total market to a little over 3%. So we feel that we're very well positioned.
We got to capitalize, and it's going to be very accretive to our bottom line here. So if you go to the last slide, please. So in summary here, if we're going to reflect upon what Jeff shared and some of the comments I've made here as well here, we, I'll say in general, that we enjoy a reputation as being sort of the adults in the room. And we see that in many ways in terms of how we deploy our capital, how we look at making our investments, waiting for the right time and the right opportunity here, even to the point when, as Jeff pointed out, we are the only major miner here that's audited by Big Four and has been for six years. So these things all put us in a very, very strong position overall here.
We feel that while we're taking advantage of the opportunities in this very new market for ourselves, we're also bringing a high level of discipline and structure as we move forward in our activities here. With that, why don't we do a Q&A?
That's right.
We got some.
Oh, go ahead.
Well, I just-
John.
I focus on slide 9. Post halving, if you go off the Q3 numbers that were reported, it puts you at around $45K break-evens. How are you getting down to actually like a $28K at post halving?
Well, in terms of the breakeven?
Yeah.
Because one, we have greater efficiency. Okay.
John.
So you're having, first of all, we're growing our efficiency because the watts per terahash, as pointed out, is going from 35 down to 23.
Mm-hmm.
The second point, with 12, right, and with 12 Exahash, we'll be obviously mining, you know, we'll be creating more Bitcoin, and that's gonna help spread out, spread over the G&A costs that we're incurring.
G&A is an increasing rate.
Marginally so. But you make, you raise a very good question, John, because what we've done over the past few years is invested very heavily in our G&A, in the form of investing in our engineers, our operations folks, you know, folks in the finance and the control side. We put in place the administrative infrastructure to support our growth, and that really is, in so many ways, a leverage growth going forward here. Because we can double the business, we can triple it, we will not have anything remotely close to that level of increase in our G&A going forward.
That's right. We're scalable. Like-
Because the operational leverage, rig efficiency, and the, what would power cost be approximately?
Well, it's, as it says on the bottom of the slide right now, corporately, it's $0.042. So that's, that remains-
Yeah
... standard, but it's, it's, it ranges widely because we currently signed a six-month fixed rate contract in Argentina. It's summertime there, energy costs are low. That's $0.021. We expect Argentina to be about $0.03 around the, for average around the year, and we go up to $0.039, a little under $0.039 in Paraguay, and then in Quebec, we're, we're $0.046-
That's right. That's correct.
... right now. That includes the value-added tax in Canada that Jeff talked about, and then Quebec, Washington's similar.
Yeah. And by the way, if we didn't have that VAT tax, the cost of electricity in Canada would be around $0.04 per kWh.
Yeah.
It's a dramatic impact.
Can you guys talk about when in Q2 you guys reached the 12 terahashes?
Well, official guidance is June thirtieth.
So-
I don't expect we will get to 12 much before that-
Yeah
... because of the arrival of the machines on a monthly basis and the construction schedules.
Technically, you guys get down to the lower 25 watt terahash efficiency post halving?
Yes.
So the production, in terms of unit economics and the production cost, so it should double. So what would your all-cash-in, like, all-in cash break-even be at that point?
Well, if you can go back to the slide there, we said 12, we're up to $12.5 thousand for the energy costs.
Yeah.
In theory, that would double, on the assumption that you don't have a reduction in the Network Difficulty, you know. Why don't you keep... There you go.
There.
If you're looking at the all-in cost of $14,800, you know, you can safely double that amount.
Yeah.
So you're really looking around $29,000 there, as compared to $42,000 or $43,000 today, and who knows where it can go from there?
That seems mostly driven by the...
Under 30,000 seems really low.
Yeah. It seems mostly driven by the rig efficiency.
That's correct. Yeah. By the way, just to be very clear, this is cash cost.
Yeah.
Just so people understand, it does not include depreciation.
'Cause I look at that sand, like, that line in the sand, as, like, the strike price of a call option. Every dollar that Bitcoin goes above that line increases 100% of the bottom line, right? So that's-
That's right
... the lowest I've ever seen.
But electricity inputs are important, and this is where the strategic shift from North America to South America, where we can find good, safe, low-cost electricity is important. And the mix of energy we've got, like a year ago, we were primarily in Quebec. Now, with Argentina working and such low-cost power, and Paraguay increasing, that weighted average cost of power is coming down, and that's why we continue to, that's why the expansion in Paraguay this year is there. And it's not subject to inflation, it's fixed.
What's the power cost in Paraguay?
It's about $0.036 at the 10-MW facility that's operated within CLYPSA . Everything else in the country is operated by ANDE, A-N-D-E, which is the national, state-owned distribution company. So our two new facilities are both under ANDE contracts. They're $0.039, and they're not subject to inflation. The former contracts that have been amended were subject to U.S. inflation. That's been stripped out of it now.
Are there any curtailment risk in that, in that power built in that price, or is that a-
No, it's fixed. Like, there is some language in the contract under emergency conditions, there could be. But under the Eclipsa contract, yes, we've experienced. With that 10 MW, yes, we've experienced some curtailment. Part of that's system load through a transformer that really needs upgrading. We've experienced it lately with some of the crazy heat temperatures, like 39, 40 degrees, and they've asked us to curtail. But under the new ANDE contracts, we're right beside the substations. There's a lot of power there, so we do not expect substantial curtailment. In fact, we're talking to them about additional contracts, that if we were to sort of offer up curtailment contracts, what type of rate could you give us?
That's an opportunity for the future, but that's not subject to where we are now, but it's an opportunity. Please.
Yeah, it's just on the equipment upgrade side, I guess, like naturally, you had a head start by doing the upgrades, you're more efficient, you get the margin benefit. If we look back at prior halvings, I guess just how much of a head start do you feel like you have before other folks upgrade or difficulty goes up, and then its margins kinda naturally compress over time? How much of a head start?
Four years ago, we were not in very good shape for it. We didn't have the scale. We had a bit of a bloated management structure. They had to really terminate a number of employees. It was really quite haphazard four years ago. I can't say I was with the company at that point. I joined in May. But it wasn't set up. They were a public company, but they'd never taken care of capital raises or anything in their history. So their liquidity was not in good shape, their margins weren't in good shape, they were suffering from some older equipment that was ailing. Different times, and that's why I started off by saying: We've been preparing for this for four years.
So that this time around, the scale and the management team, like all those type of things come into play. The reduced electricity costs that we have, all these strategies are now contributing to a much better and stronger company now.
But, you know, just one other comment here. If you want to take a look at our position vis-à-vis some of our peers here, we're really bringing two strengths to play, and this upgrade does the second one. The first one is that we've got relatively low cost of electricity, particularly given the opportunities that we've identified and taking advantage of in Latin America. The second point is, as you've obviously seen here, is that we're now bringing in place very, very efficient equipment, some of the most efficient equipment out there. These T21s are around about 19 watts per terahash. That's some of the lowest, the highest efficiency, the lowest rating and the highest efficiency out there.
I think the second part of your question is how, like, how the rest of the industry is doing. Like, as Jeff mentioned, there's been some following announcements in December and January by some of our competitors, S21, T21s, and other equipment. So the companies in our, in our space that are well capitalized are adding more capacity. So that network hash rate is going to continue upwards. What's really neat here, because of the pace of the growth that we're doing, we're gonna capture more market share. So where we're sort of 1.5 now, I don't know how much it's gonna advance over the next 6 months, 6-12 months, but we could be 3%. That's sort of where our numbers sort of take us. We'll see what actually happens.
The halving is going to readjust that Network Hash Rate, whether it's probably not gonna be in April or May, but June, July, August? Yeah, I think you're gonna see a lot of old equipment come offline. I think the estimates are all over the place. John probably can give his estimate on how much is gonna come off. I've seen everywhere from sort of 20% to 33.3%, and a bit more than that, that will come off, but then we have competitors and ourselves that are adding Network Hash Rate. It will recover fairly quickly, but all with this newer type of equipment.
What's the network hash rate assumption on these slides that you know?
Yeah.
There's no comp.
So this pro forma comparison here is lower. It's about 400 to where we were actually, around the third quarter. I know, of course, right now we're at 511, so I recognize there's a change there. But the point to make here, that still even—you know, these are economics very compelling, that even at the higher network hash rate here, we're still gonna be highly profitable. But we want to give an apples-to-apples comparison, just to be very clear here.
Some people are saying, when the Halving happens, the price of Bitcoin goes up.
Um-
It could be significant.
There are these four-year cycles. If you look back at the previous ones, it didn't go up right away. It started up about two months afterwards. Not a lot, but about five months afterwards, you really started seeing it step up and then accelerate upwards.
What causes that?
I think it's just transition. I think it's adjustments. I initially thought that because of the sophistication of the market increasing, that pace would speed up. I don't know if it will.
[inaudible] It will go from, like, 900 Bitcoins sold into the market per day to 450 immediately, so that causes a bit of a supply drop.
Yeah, there's less-
Yeah, and there's another element, too, and that is what's the flow factor here? Because 70% of all the Bitcoin that's currently out there has not moved or changed wallets in over a year. So the actual. So the velocity of Bitcoin, you know, is pretty tight there when you think about that. And so therefore, as the demand increases, particularly in time with the ETFs and other factors, that has that much more of an impact on the price of Bitcoin.
It's interesting, this time around, part of the variation of why the network's gonna fall off, if ETFs continue to come in and they're buying there, then maybe the price is higher than it otherwise would be.
Yeah
... and help save some of the low-cost producers. So, like, it's really tough to say what's gonna happen, but we've always been a low-cost producer, keeping our G&A under control so that whatever the storm, we can weather it. And if Bitcoin prices are higher, then we generate higher cash flows and returns.
So is there a mandate for consolidation ultimately, and, you know, where do you play in that vector?
Consolidation is natural, and in this industry, with the four-year epics and the halvings, it's accelerated... So that life cycle hypothesis, yes, we're still in that growth stage. Margins can be very good, but the maturation, you can see, it's, it's, it's basically mandated. So yes, that's just natural.
Mergers or just people?
There's gonna be-
No.
There's gonna be both.
Yes.
Like, there's going to be—depends where the electricity prices are, depends how well you operate your facility. So there's gonna be people that fall into bankruptcy, and probably, nobody will want their assets. Like, older miners, when you can get these miners at a good price, doesn't make sense. If there's a good electricity contract there, that's really of interest to us. Some good people, good interest to us, but I, I think you have to pick and choose where your opportunities are. We actually started a corporate development team two years ago to primarily look at opportunities. We thought there'd be more consolidation sooner. It really, it really hasn't taken place, and now we're really thinking probably the opportunities will, will start coming in, more like distressed, sort of mid to late summer.
You know, to take-
We'll see what happens.
To expand upon your question a little further here. Two years ago, we began thinking, "What's gonna be our sustainable differentiation in the market?
Mm-hmm.
It's a commodity business. We're all doing the same thing. It's moving very, very fast. And the thing that we realized, we have to become the most efficient and the best operators in the business. And there's a relatively simple measure of that, and that is: how many Bitcoin are you mining per month per Exahash? And you can see that measure out there. There's a guy, Anthony Power, who actually reports on that every month. We are consistently at the top or tied for number one for the past, what, 14 months or so in that business.
At least, yeah.
Because we wanna have the highest uptime, the greater power usage efficiency, which means that all the power we're buying is going towards the miners, not going to ancillary services. These are some of the elements that can make a difference and have a dramatic impact on your return on investment-
It's made-
'Cause you wanna run those machines all the time.
It's made a big difference because we have been criticized for running older equipment, but it's really been to our benefit. Because of our uptime, we've managed to get these metrics out of older equipment, and it's meant that we have not had to spend really these exorbitant amounts for new miners. Now, when the opportunity presented to buy, to get the next generation miner at low cost, we jumped on it. But it's the first time that we really thought that the proposition makes sense. But before that, we knew these miners were making too many miners, manufacturing them. We knew that there was warehouses full of them. There was no good reason why they were $20-some-odd per T.
If you think back a couple years ago, like, they were $70, $75, $80, $100 per T, and really, it was really tough to justify that, but the margins were pretty fat at that point.
So you've demonstrated you don't have to be the biggest to thrive?
For sure. For sure. We've always said, "We're not gonna be the biggest." We're not gonna grow for growth's sake. We wanna make prudent, prudent growth that makes sense, and I think we've exercised that now in our... The discipline, which was painful at times, waiting about 18 months to pull the trigger on new equipment. Fortunately, we were rewarded.
Why wouldn't... So you're saying anyone who's gonna have cash on the balance sheet, why wouldn't they go through a similar upgrade? You obviously improved the break-even to ton, and you've mentioned other folks are already starting to follow suit.
That's right. Mm-hmm.
And then that just pushes hash rate up, so, you know, like at 28K numbers, it's great, but yeah, are you looking at it as if everyone does this, or are you just looking at-
Okay
... significantly higher network?
Okay. So to a degree, we are, but let's think about this, and you, I'm sure you have your own figures here. Roughly 25% of the total Network Hash Rate is our large-scale public miners, and clearly, our share of the total network is gonna grow. And to your point, there's something to that, but you've got that other 75%, which doesn't have the capability, doesn't have the financial resources or the favorable circumstances that's gonna allow. What you are gonna see here is the business is gonna get more competitive, but you're gonna find a larger share of that by the efficient, the most efficient operators, who generally are public companies because they have access to the capital to support that technology advancement.
You think the nation states sort of play into that equation as well? Any thoughts on that?
They're gonna be there. We don't have very good visibility on what's happening in Russia and Venezuela and places like that, which might be a nation state, or it might be individuals with connections. But, they're gonna be players, but they gotta learn how to do it, and a lot of those places, they have harsh weather. You just don't jump into this game. You need experience. Building data centers, you can take for granted, but there's lead times, there's the airflow, there's heat and thermals, whether you're go into immersion, whether you're gonna go into hydros. There's a lot of options, and frankly, that's six years of experience in Volta Electrique, and the resources, our MGMT system, which is our proprietary software system that tracks every miner and what's happening in energy consumption.
It also goes into the facilities with the temperature, humidity, airflow going through it to optimize the machines. Like, we even get down to the variable speeds fans for pushing air through, that in the wintertime, when it's colder and they're not needed, they shut down, so the parasitic load is lower. It's those type of things that we're looking at, every aspect of the business to optimize, and we continue to do that, and we know that our MGMT system, we continue to enhance and put investment and programming into it, just to be able to control that many more variables. But, you know, they're out there. They're gonna do their thing, and if they deliver energy very cost-effectively, they're gonna be a force. But, we're talking in two years-...
Network hash rates of something like 750-850 exahash by the end of 2025. No people have a lot of sort of the world capacity.
Have you taken delivery of the T21s, and have you evaluated them to see if they live up to the original price?
No, we have not taken delivery yet. The first units, 12 of them are coming in, towards the end of the month, early February, and that's when we will get our hands on them. Nobody has had—nobody has their hands on T21. I'm not actually—I don't know if anybody has the S21 yet either. But, Bitmain's been reliable that way. They're the biggest manufacturer.
I'll add, we actually visited the six-
Yes
... subcontract manufacturers that Bitmain has. We looked at their operations. We sort of cherry-picked which ones were from where we wanna source these miners.
We sent two people over-
That's right
... in the summer to better understand their contract manufacturers, Malaysia and Thailand, to understand those factories. In fact, I don't think anybody else has done that, and I probably shouldn't say this out loud - ... but, we actually mandated in the contract where those miners -
That's right
were gonna come from because we were impressed.
Which ones those are?
That's our secret.
You said the 12 exahashes is fully funded.
Yes.
Probably you paid a 10% deposit or something?
10% deposit on the option-
Yep
... so to secure the option.
On the option.
Right.
In order to get 12 exahashes by June, how much more cash do you have to actually spend from the balance sheet?
We haven't disclosed that amount, but I will tell you, first of all, we did make a 10% deposit for the original order, for the 36,000 miners.
Yeah.
Actually, there's about 5 separate payments. We've already made 2.
Oh, okay.
I'll leave it at that.
How much ATM capacity do you guys have left?
We're not using an ATM.
No?
No. We-
We used to have one, and-
Yeah
... it expired in September.
Right.
That's the direction back out.
Yeah. I do wanna underscore, we are very focused on shareholder dilution. We think about that religiously.
Well, I actually like miners with ATM capacity, simple version. Like, I view this whole thing as, like, a call option.
Yeah.
The ATM capacity plus balance sheet, whatever cash you have is like your ATM.
I think if someone exercises discipline with their ATM, I would agree with you entirely. But do you have miners who are actually using the ATM at a 30% to 35% cost of equity to buy Bitcoin, or not to sell some of the Bitcoin from operations? That's a bit of a different calculus here.
Okay, well, thank you for your time-
Thank you
... and your attention.