Tue, May 30, 2023 12:19PM • 47:11
SUMMARY KEYWORDS
year, bitcoin, people, good, company, miners, talk, bitcoin mining, industry, power, opportunities, price, paraguay, pretty, argentina, investors, hearing, machines, institutional investors, mining rigs
Summary
- Introduction to this episode. 0:02
- Introducing jeff murphy, ceo of bit farms.
- Jeff’s background and background in financial and operational banking.
- How did you decide to move into crypto? 2:21
- Jumping from board to day role to president and ceo.
- Moving into crypto in 2020.
- How Bitfarms has grown from a Canadian company to an international company.
- Efficiency ratings.
- Retail and institutional investors in bitcoin mining. 5:44
- Two types of investors, retail and institutional.
- Retail investors vs institutional investors.
- Efforts to attract institutional investors to the space.
- Bitcoin mining stocks in 2023.
- Canadian brokerage houses vs. American brokerage houses. 11:54
- Cantor fitzgerald, american brokerage house.
- Canadian brokerage houses vs us brokerage houses.
- Consolidation in the industry and need for capital.
- Environment and public attitudes.
- The sustainability of the mining industry. 17:09
- Being 100% renewable for the longest time.
- Environmental compliance and reporting.
- New york times hit piece on bitcoin mining.
- The second objection, stranded power.
- How to monetize stranded power? 22:43
- The advantages of stranded power in Argentina.
- How other industries can go to the power.
- Value added analysis is becoming more important.
- Bitcoin mining and the cycle of capital.
- The current state of the mining industry. 27:00
- Mining machine technology is plateauing, or at least for now, for now.
- Mining machines are evolving.
- Three year payback period for mining machines.
- Investors want to pay for the latest machines.
- The regulatory environment in different countries. 32:10
- Gold rushes back on in the market.
- Risks and regulations in different countries.
- Regulation in the bitcoin mining industry.
- Regulatory changes in quebec.
- What are the challenges of going to South America? 36:38
- Challenges in south america, argentina and paraguay.
- Challenges with getting a bitcoin account in Argentina.
- Norway vs europe, and why they didn’t want to go there.
- Emerging market currencies.
- The benefits of being in the game. 41:12
- The benefits of being in the game.
- Mining more bitcoin during the china ban.
- Getting debt under control and capex requirements under control.
- Working hard to find new opportunities.
00:02
Hi everybody, this is DJ Dunkerley of New Currency Frontier. And I have with me, Goeff Murphy of Bitfarms. Bitfarms is a public Bitcoin mining company, based in North America, although it has sites in Latin America, US and Canada. If you’ve been following New Currency Frontier for years, you know about Bitfarms because I’ve been following this company since 2020. And I’ve written numerous stories on it. And I do own stock in this company. So keep that in mind that I am an investor. This is also not a paid promotion. As usual. There’s been no funds transferred to me by Bitfarms for this interview. Although if I see Geoff at a trade show, I’m going to hit him up for free drinks, as I normally do, because that’s what us journalist guys do. So anyways, enough about me. Let’s begin. I’m excited to do this interview and to pick the CEOs brains of Bitfarms. So Geoff, let’s just ease into this interview, can you tell me a little bit about yourself?
01:00
Sure, DJ. As mentioned, I’m Geoff Morphy. I joined Bitfarms pretty much just over three years ago. My background is financial and operational. I came up through the commercial banking system and got to know credit and risks and how to structure and arrange money and do those type of things. I then worked for a boutique investment banking firm, doing a number of restructurings, arranging money for high growth situations. And then my career transformed but went more operational when I was brought inside a, a TSX listed investment company that had made a variety of investments in a variety of different parts of the world. And they wanted me to optimize it and restructure some of that stuff. So it gave me a lot of challenging situations to really try to work out. And I worked myself out of a job that put me into a position where I was looking at just doing some directorships and things like that. And then Bitfarms came along, it was a recommendation. I always was curious about Bitcoin, and what a better way to get to know Bitcoin and all the opportunities there by diving in feet first into a directorship position. And it was about four months after that COVID had hit and having it just occurred. And our primary principal officer, the company announced he was leaving. And so I was asked to jump from the board into the day to day role. And I have been in a senior, sort of pivitol spot since September of 2020. And have moved myself up from an EVP and now as of late December of last year, became the president and CEO. So I’ve been in it, I’ve had my sleeves rolled up, I’ve been involved in really all the capital raises and everything strategically we’ve done since the last having so it’s, it’s been a full time job.
02:55
Okay, I can’t resist asking this question. So in 2020, you start to move into crypto. Can you tell me what your peer group your friends, your acquaintances said to you? You know, I know this question when you said, oh, yeah, I’m doing this crypto stuff. Now, tell me because I’m interested in hearing this myself personally.
03:16
Like I said, Well, that’s different.
03:18
They’re nice to you. Okay.
03:21
So you’ll have to explain that to me. And I’ve had a lot of good conversations with them, that they just couldn’t understand why I didn’t have any time off anymore just to go and do my thing or get together with them. And, frankly, for the last three years, I just haven’t had time to get together with people anymore. It seems this is a demanding job. This is a demanding sector being 24/7. And the dynamic nature of it sucks you in and, you know, it’s, it’s exhilarating.
03:50
Oh, good. I’m glad that your peer group like encouraged you and didn’t you know, that’s a different story than a lot of us guys in crypto, but that’s awesome. That’s great. Can you tell me a little bit about Bitfarms in general? I mean, for people who haven’t been reading my blog for the last three years.
04:08
Sure, Bitfarms is a Canadian company, but we’ve gone international now. So we started five and a half years ago. And going back three years ago, we had five locations in Quebec all fairly close proximity, all using hydropower. And since then, we have grown by about eight times. we were s600 Petahash and now we are five exahash and growing. We have operations in four countries, Canada, the United States, Paraguay and Argentina. We have 196 megawatts of power that we consume and growing. And we have autonomous teams in each of those locations, and 91% of our power that we use is renewable. So that really sets us apart from a lot of our competitors, nice consistent agreements. And, and we can talk about those a little bit. But we have amongst the highest efficiency ratings of any publicly traded miners and we are actively compared to many of our peers. So people can see how consistent we are month in and month out in our cost of production, which are quite low and our efficiency, how well we we work our assets to provide return for shareholders. And we also take pride on the fact that we are very conscious of our shareholders and try not to dilute them. But we maintain a good balance sheet and good liquidity.
05:40
Okay, great. Yeah. I mean, we could talk a bit more about that later, in the interview. I really like – I’ve always said in Bitfarms -, I really like this company, because just the operations, and then you know, I, my background in operations, so I always gravitate towards the operations, guys, geek-type companies. But what’s interesting is something I want to talk about is I’ve noticed, the question is, like, how do you think like, you have two types of investors, retail and institutional investors? How do you think? Well, first of all, do you have conversations with retail investors? And then how did they view the public Bitcoin mining space? And then I know you have conversations with institutional investors? And then how do they view the space in general? And is there a difference between the two? Like, how do investors view you, public Bitcoin mining, and view Bitfarms?
06:30
It’s a good question and depends a little bit when you ask. Back in 2021, when things are just going crazy in a good way, retail investors couldn’t get enough of us. We had enthusiasts and cheerleaders and and they I got emails galore about please issue another press release, let us know what’s happening. Let us know what’s happening. If we didn’t put a press release like every week, there were people on me saying, what news do you have for us, they were that hungry for information. And the retail investor, you’ve got some long term investors that really pick and choose amongst the miners and really look for the fundamentals. And you’ll also have retail investors that are more play the volatility and more the day trades or the week trades. And you don’t really get to develop a relationship with those people because they’re in and out in and out. But the institutional lens is very different. They like stickier investments, good fundamentals, good. traditional metrics and, and the like, and we spent a lot of time with those investors, I would say… … 20% of any given week, I’m speaking with investors, institutional investors, prospective ones, and I’m talking about what what the latest is. And when, three years ago, when I first started doing it, it was more introductory. Now it’s way they know what’s happening with all the different miners. They have a quarterly call and they’re digging in. Okay. This is where you were last quarter. What have we done for us this quarter? And did you manage to get this solved? What are you doing in business development? They’re asking the questions, they’re really much more intelligent. And certainly the retail, some retail investors are that way too. There’s some very penetrating and thoughtful discussions now with some of these institutional investors. And we are about 30% retail, institutional 70%. Retail, I think it’s slid down a little bit, given the softness of the market last year. But we’re always endeavoring to get some stickier bigger money family offices and institutional investors to join our base and they push us to and that’s not a bad thing.
08:51
That’s interesting. So the institutional I mean, that’s my follow up question. I’m just, I’m just processing that because I am trying to figure out like, who and who is in this space besides me, right? Which I’m not complaining because it’s, you know, we’re at the trough right now. And, you know, my personal experiences, I’ve been telling people Wow, Bitcoin mining stocks have had an awesome 2023 like you know, your company and across the board. The numbers are fantastic. My general group of friends have been like, completely not impressed, which makes no sense to me whatsoever. So it sounds like I’m assuming the feedback you’re getting this year is better. Right? Because everyone’s having a really good year. Right?
09:37
Oh, there’s a lot of relief. Yes, for sure. Okay. And, you know, it’s still tempered by the fact that we still have a long way to go to make up lost ground from 16 months ago, some of our previous highs. But yes, they like we are cashflow positive, they like us growing again, things like that. All things that we really had to prudently undertake in terms of slowing down or our growth prospects last year when the margins weren’t there. And there was a lot of question marks with the macro economy, which scared a lot of people, but I think people are people understand inflation is now generally under control and headed in the right way. Interest rates are up, maybe they’ll go up a little bit more, but I think people can understand where the top is now. And I think they’re starting to come back in and we’re seeing that with Bitcoin, AI, and some of the other positive things that are happening.
10:32
Okay, so I mean, again, would you agree with the summary, the institutional guys are like picking up in the space in general, just not your company are getting smarter, more knowledgeable? And then retail, you’re starting to see some some knowledgeable guys into it, but it’s nothing like the peak of 2021. Would that be a fair assessment?
10:52
That’s fair. The institutions are coming in. And as I speak with investment bankers, and they talk to their clients, they see a pickup of engagement with them, and are encouraging Bitfarms and our team to engage more with them and do some non-deal roadshows to go in and talk to them because they’re receptive to our message now, okay, that wasn’t necessarily the case. three, six, nine, months ago, when they were getting out of our stock, as well as a lot of other technology stocks and heading for money markets,
11:25
Can I ask, is it just North American institutions? Are you seeing guys from Asia and Europe?
11:31
Not so much Asia at this point, but Europe for sure. It’s picking up too, not to the same degree, but when we were down in Bitcoin, Miami, we met with a few of the enthusiast institutional family offices, people that were attending the show, and and they were, they were back in they were very interested.
11:54
Okay, good. Um, so I noticed like coverage… … brokerage coverage, right. So you got that nice report from Cantor Fitzgerald, the American brokerage house. So that was awesome. I mean, I Okay, I’m a geek, I enjoyed reading that report. So the American guys indeed picking you up how the Canadian brokerage houses ? Are you guys getting covered? Are you getting like good engagement, good conversations with those guys? Or are they just…
12:22
There’s a bit of a difference. But yeah, Joshua wrote a very good report on us. He spent a lot of time engaged with us to get to know the company, he went on a tour of our facilities. And he really understands the company and we spent a lot of time and he met a lot of the team as part of the process. He really did his due diligence very well. But thanks, switching from US to Canada, GMP-Stifel picked us up in late March, just after we released our our full year results. And Bill their research analyst there wrote a very good report on us.
13:02
I hold Bitfarms stock through Stifel and they didn’t give me the report yet. Okay. Sorry. That’s just annoying. If I look annoyed, that’s why. Okay,
13:12
And we’ve got a good relationship with that company. It’s Canadian, and one of their investment bankers. He has seen our sites and I’m, I’m shortly just doing arrangements now. But we’ll probably go down and see some of the South American sites within the next month with him. They, they have a keen interest in us, they have represented us in some of our M & A and due diligence efforts, we’ve undertaken on some opportunities that we’ve seen. So we’ve got a good relationship there. But still, the Canadian brokerage houses do not have the same depth and appetite and access to capital as the US ones. They also generally do not have the relationships with the crypto mining companies that, frankly, I want to be engaged with. So they need to pick up but with that said, Canadian Alberta Treasury branches says reached out to us and wanted to develop a relationship with Canaccord has historically had a relationship with us. So there’s a few. But there’s also half a dozen deeper, better placed firms in the US that can really give you a deeper bench of banking services that they’re important to us. And frankly, it’s an industry that is consolidating, we want to see m&a opportunities. We want to see greenfield opportunities, and it’s only those folks that are really plugged into the industry that can bring those good opportunities to us as well as capital if we need it. To execute on.
14:51
Okay, good. Thanks for that color. I didn’t have access to that type of information just gave me so I found that interesting.
14:58
Well, I can take you back. I can take you back even more to the late twenty when we were looking to really raise money for the first time and, and we had a couple of firms in Canada that that interviewed me and said, I don’t know how much you can raise. Why don’t we do a little roadshow and give you a test. And the one firm came back and said, it tested very well. We think can raise five to 7 million Canadian for you. And I was well, that’s a drop in the bucket to sort of the type of money that we’re looking for. But that’s great. And then I started knocking on doors in the US and HC Wainwright. I heard was very big in the sector. And we, we got into serious discussions in December. And he said, I think I can raise Canadian 20 For you, within about a week. And we signed just before Christmas time. He tried to do the deal for us on New Year’s Eve, but we couldn’t find enough lawyers, and we ended up doing 20 million, January 7, and then another 20 million January 14, and I think it was 40 million Canadian, mid February and 70 million, I think, the following May. So just that depth and access to capital is a difference maker. And that sort of compares, pretty much at the same time where we were in our formative days and the US just offered enough capital that we can really accelerate and execute business planning.
16:20
Okay, good. It’s good to know. Okay, I want to switch gears here because I want to talk about, like, I want to talk about the environment, you know, and then the public’s attitude, the attitudes towards Bitcoin, money, and the environment. And I mean, like, what? Less so again, like when you have conversations with retail institutions, the general public about the environmental footprint, like not just your mining operations, or Bitcoin mining operations? Like are they surprised when you say, well, actually, we’re like, you know, 91% renewable, we use hydropower, we don’t pollute. And I, you know, I say that, because the general public view of Bitcoin mining is in terms of environment is kind of not that good. So what can you tell me a little bit about your encounters? Like what, what conversations you’ve had around that?
17:09
Sure. People that hear us say, we were 100% renewable for the longest time, and it’s only our recent expansion in Argentina that uses natural gas, turbines to power to provide power to us. So yes, you’re, we’re 91% renewables right now. And I’m proud of it. In fact, it was about three weeks ago that we mined our 21 thousandth Bitcoin using renewable power. And that’s over the last five and a half years, I don’t think there’s very many other companies that can say they’ve mined 21,000. So it’s 1/1000 of all Bitcoin that will ever be mined, we did it at Bitfarms, and we did it with renewable power. So I sort of get off on a tangent… And, but it’s those long term, hydro contracts, it’s not exposed to commodity prices, that really gave us a great talking point in terms of our economics, because the margins are there, that consistency is there, there’s not the surprises that, like many of our peers got when they, when the Ukrainian Russia war started, and natural gas prices went through the roof. We weren’t concerned. So it was a good strategic move on our part. But back in 2001, when there was more money around the ESG front and environmental consciousness was really, really picking up in ’22. And when tighter mining conditions started, people sort of backed off, and just wanted companies to survive. But in the last few months, there’s been a lot more conversations about ESG. Again, and not just the E or not just the S, not just the G but all of them. They’re important. And now that we’re listed on NASDAQ, and seeking SOX compliance, we’re having to do a lot more of that. And I think the whole industry is, and I’m, I’m very favorable to that, because we are so transparent in our production and in our outlook, where some of our peers are less so and have reported high levels of environmental compliance and carbon neutrality and things like that. These new reporting standards are going to really call out and show where everybody is, and we were already making tracks to, to get into the reporting and make sure that we can give the type of world-class reports that all bigger companies will need to do starting in really a year or two.
19:41
Okay, and I agree, I agree with you like, like everything you said, like I bought into and I bought in years ago, I’ve looked at the ESG stuff, and I guess my frustration is you know, all us guys know that I’ve written articles on it. And then you know, the New York Times comes out with his hit piece that, you know, everyone in the industry kind of looks at And then our issues is, how come no one talked to like this New York Times guy who kind of knows what’s going on? So I guess, you know, to throw that hot potato to you do like do any, like a major publications ever go out to yourself or anyone industry and ask, you know, just ask this question. So you can tell them the truth or like what? I don’t know, I kind of threw you a mess there. But why do you think like popular media is just so factually incorrect on on some of the stuff about Bitcoin mining?
20:32
it really is incredible. It really is. And I think it might be the lobbying efforts on behalf of the status quo that want to paint us as a dirty monster. But that New York Times hit piece is is what it was. And one of our competitors went out there and actually issued a press release to dispel some of the claims in there. And they had to, they had to create different mechanisms to make a point. But I Bitfarms, not surprisingly, because we are primarily green, and we’re conscious of this, didn’t get mentioned in that article. And it was very selective. And I, I expected more of a New York Times writer than than what we saw there. That was I was unfortunate. But you have to take advantage of these opportunities that when something like this happens, then you can jump on the bandwagon, just the same way you as you’ve asked me this question, and get the facts out there. And, and that’s what we’ve been taking the opportunity to do and, and our team has been getting out there talking more about it. Okay, we’ve got quite a good track record. And, and, and a lot of our expansion opportunities, continue to evolve around clean power, and better better energy management. So you’ll hear more about this.
21:56
Now, the second objection that you get in the popular media is that oh, you guys are like, you know, taking power that can be used to fuel the the televisions of these poor rural villagers in whatever country you’re in. But then really, we know that the power is stranded in the sense of the power is a lot of Bitcoin mining is done on these facilities that are just literally too far away to power. Anything else. So there’s the concept of stranded power? Is that type of an idea that, that people are familiar, is that the type of argument that you have to put forward? Or do even people know about stranded power? Because that’s the second objection I see. And no one ever seems to say, wow, you know, the Bitcoin mining facilities in the middle of nowhere, right? Like there’s nothing …
22:40
There’s a lot of ignorance still around that subject. And our job is to educate in so many different ways. But we offer a couple of advantages there. Stranded power just makes sense from a supply and demand basis. In pretty much all our locations, huge amount of hydropower was generated for heavy duty industries in the past: aluminum, forestry or other things, and then they they migrated out, leaving huge amounts of excess power. And so we go in, and it’s ideal for us, we want a substantial amount of power, but we can monetize it and bring benefits to the whole area, including upgrades of of substations and the wiring and things that bring softer benefits to the local users as well. We do that in Quebec, we’ve done it in Washington, we’ve done it in Paraguay. It’s even somewhat true in Argentina as well, where we improve the standard of the grid, and we also get an energy management program so that in those peak times when Quebec for example, when it gets when it gets very cold, they say we we need to reserve power to heat homes and we shut down and we shed the load and it can go to the places that need it, two or three hours later, they say you can turn back on. No other industry has that flexibility to be able to to flex, flex the energy grid and optimize it like what we can do for energy grids. And then my last point is how many other industries can go to the power not many. But we can. So if air is really want to take advantage of their surplus stranded power, they will invite us to go right beside the hydro dam or wherever their power source is so that they do not have losses with with transmission, the old wheeling format. Because of physics, there’s a resistance issue there. And the closer we can go to the power source, the better and we’re flexible, whether it’s containers or warehouses, we can set up right there and optimize your system even more without loss and the type of monetization that we are doing for communities and grids. is important now, not particularly well recognized, but will be more so as people do as as towns, cities and utilities start doing their value-added analysis and we’re ready for that. And we, we as a industry need to do a better job ad that talking about sort of the type of monetary benefits and physical benefits that we bring to grids.
25:24
Good. Okay, great. I asked about mainstream publications, they don’t talk to you. Hopefully, we can change that. Okay, so now I want to start asking the geek questions for people that kind of been following the industry. And the big one is Bitcoin mining rigs. So what we’ve seen is the cycle over the years, you know, Bitcoin goes up, the mining rig guys come up with these, like, new groovy sexy machines that the companies have to buy, because their efficiency is so much greater than the old machines, leading to these really large capital expenditures that allow you know that major mining companies tend to be just, you know, urgent need for capital. Sometimes the timing between the rise of Bitcoin and having the need for capital can lead to this crunch time where the mining race can then just like, kind of really jack up the price of the mining rigs. So it’s kind of this game that’s been played between the mining companies that have the power generation and the supply of the mining rigs, mostly because Bitmain, in particular, has had these, like generational advances. So my big, literally, multimillion dollar question is, do you see that continuing, you know, down the road, as Bitcoin goes up in price? Do you see Bitmain, and, you know, what’s up miners that, hey, you got to buy these new rigs, because like, they’re five times as efficient as the other ones. So give us the money? Do you see that kind of cycle continuing? Or do you think Moore’s law in Bitcoin mining rigs is starting to tail off of it?
27:00
Well, I’m, I’m not an electrical engineer. Never been a semiconductor expert. Yeah. So what I can do is share some of the anecdotal information that I’ve been discussions in, and I am hearing that it is it is plateauing a bit, or at least for now. And because we go from seven nanometer to five nanometer to four nanometer to three nanometer, there’s, there is a physical limitation based on on sort of what’s possible that absolutely limits scale. And from what I’m hearing, as you said, Bitmain is the leader in technology and here, and what I’m hearing is that really over the last 18 months, they are not investing the same type of r&d dollars into pushing the boundaries further, I think what I’m hearing is that they think that three nanometers and five nanometers is enough They’re in there, and that they can develop that more, but given the tail off of machine sales last year, and even into this year, our estimates is that there’s still a lot of mining machines sitting in warehouses that need new homes, and they are getting obsolete, for the reasons you listed. And the miners just have not been buying them as as much and certainly the margins out there, as it used to be. We saw at the trade show a new company with a four nanometer, we heard micro BT had new announcements and also with their hydro minor system, different cooling system and getting thermal benefits out of the water circulation system. So they seem to be evolving in different ways for better thermal management and speed. But like, you also have to look at the price of some of those high performance machines is three times higher than we all used to like our S19s and our M30s. They are 100 Terahash type machines. And now to to go beyond that you can pay three times more and with a halving that’s less than a year away. That might translate into three-year payback periods where we like sort of M30s. Like the higher performance S19s something that over 100 Tera hash now to bring our efficiencies down as a corporate fleet. But we look at the price of our electricity, what these machines are supposed to operate, and then our payback periods and we like less than a year like they used to be six or seven months. But if you have to pay three times more to get this much more performance, but you’re paying this much more sort of cost, and those payback periods are going to be long and I think some people are missing that part of the equation and..
29:58
Are they able to sell them at that price? It doesn’t make sense to me three year payback. They’re selling it three year payback.
30:08
Machines, like, go up to 150, 155, 160 their hash and versus the old 100. And I think investors really liked the sounds of getting the latest and greatest and these highly efficient machines, but you want to pay back. And so we take cost into into consideration, not just sort of the boss.
30:36
Yeah, like the only reason I could see someone I mean, you know, correct me if I’m wrong, or reason I could see someone buying these type of machines, if they’re really constrained about power expansion, like, you know, they’ve got their, their 30 megawatts and they can’t get a hold of anymore, so they need to optimize that. Do you think like, Have you ever heard of people just like, is it really anything in this industry where we’re literally running out of places to expand for power?
31:03
No, I don’t think so. I don’t think so either. There’s a lot of opportunities still, and people are getting better with solar and some of these other locations, other parts are still opportunities opening up. But if, if you’ve got 5,6,7 cent power, and you need a machine like that, just to provide you with a return, you’re probably going to do it. But with the halving coming up, I would suggest people that are paying 6,7,8 cents, or not going to be very long for this industry. If that’s where their power is, and having is 11 months away, they’re going to be really constrained.
31:41
Okay, so while I’m taking away from this conversation, just having you don’t have to agree with me, so I see a company buying these latest miners, I’m sure not gonna buy their stock because that doesn’t work. That three year payback is like, is poison for me anyways, as an investor, okay
31:58
Keep in mind three-year payback is more where we are right now with hash prices and the prices now. Now, we can all be brilliant people that Bitcoin then goes to $50K or $60,000. Next week, all ills are washed away. There’s margins in it for everybody and and the gold rushes back on. But…
32:15
yeah, that’s, that’s like nice out, right? Like, you know, like, I’ve always told everybody, you know, I should tell you, I’m always a vulture investor, like, I’m sitting here, you know, talking to you doing my due diligence. And, you know, getting absolutely no love from the market for that, or actually, no, that’s wrong from the public, the market is loving me and loving my investments, but not the public. So it’s when the public starts to love me, and I get you traffic on my blog is honestly when I start selling off, so…
32:45
Just managing the company I need to, and the team needs to manage what happens if it …. it hits 60,000. But then on the other hand, everybody was saying for a while that it might be going down to 12,000. And you better tighten your belt, because you need to survive. So we made a lot of moves last year and early this year to get our operational efficiencies up and our cost down. So that if price stayed down at 16,000, on a longer term basis, we can survive, and we have survived and thrived. And it’s the ones that could make money sort of a few months ago, when bitcoin price was 16,000. That when you get into the halving, those are the kinds of companies you’re going to want to support. Because they’re already like me. And we were one of very few companies in the fourth quarter of last year that had a positive adjusted EBIT, and that’s what counts.
33:42
I agree. Okay. The big the big issue, especially for us guys who’ve been in this business for a long time, can you tell me about and compare the regulatory environments of like Canada, the US, Latin America, even the differences between Paraguay and Argentina? And I’ll say this, because I noticed you’re not in Europe, because Europe, and we don’t have to talk about this tangent, burned a lot of Bitcoin miners, like Sweden did a few years ago. So if you could tell me about the risks, you know, to a reasonable degree within each country and maybe compare them , compare like, you know, Texas to Paraguay or Argentina to come back to. Give me some color on that. That will be great. I know. That was a tough question. But you agreed to this interview…
34:33
There’s regulation everywhere and we are spending an increasing number of man hours working with regulators and the one thing I can say is at least regulations for Bitcoin miners are less than for the next year. But for the exchanges where they have 1000s of customers and know-your-customer is so critically important and In providing important and this investment advice, we’re not in that game, we’re a miner we’re an utility in the sector, we frankly don’t have any customers. So a lot of that goes away. So really, it’s when it comes to regulation, it’s about how are we going to get good power purchase agreements, how are we going to operate the country and operate profitably and then be consistent and keep that alive? In Quebec, for example, when there was a huge rush in 2018. And they put a moratorium on it. And with few exceptions, they haven’t added really any more megawatts in that area. And we’ve now got a political new, fresh, provincial government there. We’ve got Hydro Quebec, that’s got an agenda in terms of other sectors. So we’re back into education and dealing and working with value-added situations to show our benefits to the province, we have close to 100 employees in Quebec with good well-paying jobs, educational opportunities for promotion. And we’ve given a lot back to the local areas. And so we’ve learned that we need to engage more just with the cities and towns in which we operate. And that’s worked out really well for us, Washington, once again, it was educational, but less so they were more sort of used to data centers, Amazon and the like. So and we bought an existing facility. So there really wasn’t a lot of red tape there. But we didn’t meet really any senior people from that utility for a year, they weren’t interested in meeting with us. Go down to South America. Argentina, is a very bureaucratic system. Just to set up bank accounts, you need a tax ID and I think the application process for that was about three and a half months, let alone getting power permits, and, and all the other things locally that we’ve had to do. We’ve been basically three years there now, two and a half. And we just got into production last September, and we’re still ramping up, it takes a long time. And you have to have a lot of tenacity and be open. Paraguay, once again, you have to be open. But there is a more youthful energy there. It’s not as bureaucratic. And I have that facility, we opened a 10-megawatt facility there in January of 22. We built that facility in less than four months, it was our cheapest place to build, it went up as fast as any other that I can remember, probably faster, and is a very efficient operation there. Paraguay represents an area that we would really like to expand, and they’ve had publicly some issues getting a Bitcoin law through, it’s not illegal right now. But they haven’t really made it legal yet. So we haven’t been able to open a bank account there. Because it’s not legal, but it’s not illegal. So every area represents its own challenges. And we spend a lot of time and effort in each of those areas. In South America, you have to be careful of some of their customs involves facilitation payments and things like that. And you need to stay away from that. I don’t I, myself, nor anybody else in the company wants to spend any jail time. But you know, if you want to accelerate things down there, a payment here or there, from what I have heard, will take you a long way. And as a NASDAQ TSX company, you don’t do it that way. We’ll, we’ll ask we’ll run away if need be. But we’ve seen opportunities like that, and the whole company knows don’t do that. Now, your other question was about Europe. We’ve looked at Sweden and Norway, as well as a couple other areas a little further back in time. Were not scared to go there. Norway was looking pretty good. And then they put undersea cables over to Europe. And when they were started running out of natural gas, the price went up to doubled and tripled. And we just didn’t find it reliable, economic, reliable and economic proposition to go into the type of places we were looking to Norway. Sweden is an area that we were looking at, as well. But now there’s a real political movement against the miners, it seems data centers, and now they’re talking about implementing a pretty prohibitive tax on on your electricity there as well for just people in our sector. And it’s prejudicial, but that’s what they’re proposing. So I hear there’s a couple sort of loopholes but you don’t make hundreds of millions of dollars of capital investment decisions based on a possible loophole. So we’re gonna have to see that through but we’d like to go to Europe, but none of the opportunities is just upsized up. Yeah, we’re very careful with that.
40:02
Yeah, I, I haven’t had good experience with investing in companies that went into Europe, but let’s not talk about that it’s painful. Um, okay, so I have two other questions. We’re getting near the end, and I know you’re gonna run off soon. So I have like two specific topics I wanted to bring up, they’re pretty obscure. I think I’m gonna I want to bring up something that you may not want to comment on. It’s because I tried hitting up other blockchain companies didn’t want to talk about it. So: Ordinals, Bitcoin nfts. transaction fees. You know, I tried hitting up a company about that they want to speak about it briefly. They’re all excited. And then they didn’t really want to say anything specific. So there’s a lot of… … and I noticed, you didn’t bring it up your quarterly call? I know, it’s it’s not a research report. But that’s kind of the big buzz right now is these new, these heightened transaction fees going to the miners from know, NFT’s ordinals, inscriptions, all type of stuff. So do you have given anything like to say about that?
41:04
And the ERC 20 tokens, yes, yes. Why they want wouldn’t want to talk about it? Like, these things seem to come and go. And by being in the game, you get the benefits of this. Like, if you go back a couple years ago with the China ban, at that point, I think over the course of two weeks, pretty much all 60% of the world’s network capacity went offline. And at that point, we were mining about seven Bitcoin per day. And lo and behold, two weeks later, I’m waking up, we’re mining 14 Bitcoin a day, like revenue doubles, our cost inputs haven’t changed, it was great. And that lasted for a number of months, as the network hash rate sort of grew back into itself, and some of these Chinese miners migrated outside of China. But in this latest round, it was May. So it, it really wouldn’t have made it onto our first quarter call. But you know, at Bitcoin Miami, I was asked about that. So like, there was about 10 days where we were mining more Bitcoin because of these influences that you talked about. And I, as I said, it’s, it’s, it’s extra money for us, because there’s no cost inputs for it, we just ended up getting more transaction fees. And it really, it’s really run its course, this time around in the course of two weeks. So we’re we’re pretty much back to normal-ish right now. But at the start of it, we were mining about 13 and a half Bitcoin per day. And there was one day that it ramped right up to 22 and a half Bitcoin per day in our production. Well, more than that,
42:41
I mean, that was the Monday. Yeah, I saw that.
42:43
And, like, thank you very much. And so really over that 10 days, and just using sort of 13 and a half as as basically, the former daily average, we ended up mining, about 33 or so more Bitcoin than we would have normally. That translates to about 900,000 bucks. That’s, that’s pure, pure contribution. So we like these episodes, if people for other people want to bring more of these things on and do it, where the utility we make this happen, and our shareholders are the benefactors because we we have that much more cash flow, it helps her our investment. And I think we’re a company that does like to HODL when we have surplus cash flow, that’s really been the case over the last couple of months. So that’s probably going to help me to do some of that.
43:40
So yeah, I noticed I’ve noticed the transaction fees that the miners collect is public information and and you don’t have that spike is coming down. So I guess, like your forecast is that, hey, it’s just all gravy, but we’re not gonna make any forecasts about the future. And it looks like it’s died down for now. Is that kind of correct?
43:59
Yeah, you can’t really count on it. But when that happens, we’re going to take full advantage and we still it’s early in this in this game and and there’s a lot of innovative people and they want to use the Bitcoin network and blockchain to enable other transactions. I think people are still getting that figured out. It’s a wonderful platform. Getting started.
44:22
Alright, my opinion, I think it’s gonna spike up again, the .SATs thing looks like you know, it’s just starting to take off, but again, all right. We’ll see how it goes. I’m pretty, pretty optimistic about that. Okay, so you’re going to be taking off in a couple of minutes to another meeting. Is there anything that you’ve been waiting desperately bring up? But I haven’t let you talk about it yet.
44:44
DJ, you’re always pretty thorough. But I think what you’re seeing here is that we’ve been a pretty restrained company, getting our debt under control, getting our CapEx requirements under control so that we can absolutely live within our means. Which, okay, yeah, sure, it was tough. And we have sorted that out, we did a great transaction, like, for example, or debt, middle of the last year, it was $165 million. Now we’re about 19 million. And it’s scheduled to be fully repaid by well in February of next year, because of their term loan installments. And so it’s under control, we’re not gonna have any debt for the halving or at least that’s the forecast right now. And our CapEx obligations, we have $20 million of micro BT credits that we’re going to be applying this year to future hardware installations. So instead of having obligations when we plan our expansion, we can draw on these credits. Okay. And, and that will reduce dilution. But it’s also we’re a company that is now living well within our means, has access to capital. And we advanced our our forecast from 6x, hash from the end of the year to September 30. And frankly, we got our fingers into a variety of things. And with the economics being better now, we’re really hoping that we can, we can bring some other expansion opportunities and the rule within the company is it needs to be done and accretive by the next having. So that we have everything under control for the halving. And so we are working hard to try to find new locate new opportunities that we can ramp up beyond our 6x Hash target. Time will tell whether we successful but we’re still working on it. Awesome.
46:31
Thanks very much for your time. Great, just really as always excited to be owning the company while I’ve been owning it for mostly three years. So as excited as I can be after a three year relationship, but thanks very much.
46:46
And again times in the worst of times, I think over that three year.
46:50
Times are pretty good. Times are pretty good. I can’t complain this year. That’s for sure. So that was Geoff Murphy of Bitfarms. And thanks. If you made it through all the way through this interview, I hope you find it as enjoyable and interesting as I did, but I’m a bit of a geek, so hopefully you found parts of it at least at least useful.
