425: Bitfarms Expands Hosting Agreement with Stronghold Digital Mining, Adding 10,000 Miners

Bitfarms enters into a second hosting agreement with Stronghold Digital Mining to deploy an additional 10,000 miners at Stronghold's Scrubgrass site in Pennsylvania, supporting 2.2 EH/s.

Summary

• Bitfarms has entered into a second miner hosting agreement with Stronghold Digital Mining.
• Bitfarms will deploy an additional 10,000 miners to Stronghold's Scrubgrass site in Pennsylvania.
• This deployment was originally intended for Bitfarms' Yguazu, Paraguay site.
• Energization is expected to begin in December 2024.
• The agreement supports 2.2 EH/s.
• The 20,000 miners deployed across two sites will have an efficiency of approximately 20.5 w/TH.
• Bitfarms deposited $7.8 million with Stronghold, representing the estimated power cost for three months, refundable at the end of the initial term.
• The initial term of the Hosting Agreement will expire on December 31, 2025, and will automatically renew for additional one-year periods unless either party provides written notice of non-renewal.
• Bitfarms will pay Stronghold a monthly fee equal to fifty percent of the profit generated by the Bitfarms miners.

Sentiment

Score: 7

Explanation: The announcement is generally positive, highlighting expansion and efficiency improvements. However, it also includes standard risk disclosures associated with forward-looking statements and the volatile nature of the cryptocurrency market.

Positives

• The agreement allows Bitfarms to optimize assets with rapid upgrades at Stronghold's Pennsylvania sites.
• The deployment of miners improves Bitfarms' overall fleet efficiency.
• Vertically integrating operations with Stronghold's power generation infrastructure reduces capital expenditure requirements.
• Bitfarms can take greater control over its cost of power via energy trading and better utilization of the T21s wide range of operating modes.
• The agreement supports Bitfarms' strategy to increase its U.S. footprint and diversify beyond Bitcoin mining.

Risks

• The document contains forward-looking statements that are subject to various risks and uncertainties.
• The Stronghold acquisition may not close within the anticipated timeframe or at all.
• The construction and operation of new facilities may not occur as planned.
• Expansion of existing facilities may not materialize as anticipated.
• New miners may not perform up to expectations.
• Revenue may not increase as anticipated.
• The ongoing ability to successfully mine digital currency is not assured.
• Failure of the equipment upgrades to be installed and operated as planned.
• The availability of additional power may not occur as planned.
• The power purchase agreements and economics thereof may not be as advantageous as expected.
• Potential environmental cost and regulatory penalties due to the operation of the Stronghold plants which entail environmental risk and certain additional risk factors particular to the business of Stronghold including, land reclamation requirements may be burdensome and expensive, changes in tax credits related to coal refuse power generation could have a material adverse effect on the business, financial condition, results of operations and future development efforts, competition in power markets may have a material adverse effect on the results of operations, cash flows and the market value of the assets, the business is subject to substantial energy regulation and may be adversely affected by legislative or regulatory changes, as well as liability under, or any future inability to comply with, existing or future energy regulations or requirements, the operations are subject to a number of risks arising out of the threat of climate change, and environmental laws, energy transitions policies and initiatives and regulations relating to emissions and coal residue management, which could result in increased operating and capital costs and reduce the extent of business activities, operation of power generation facilities involves significant risks and hazards customary to the power industry that could have a material adverse effect on revenues and results of operations, and there may not have adequate insurance to cover these risks and hazards, employees, contractors, customers and the general public may be exposed to a risk of injury due to the nature of the operations, limited experience with carbon capture programs and initiatives and dependence on third-parties, including consultants, contractors and suppliers to develop and advance carbon capture programs and initiatives, and failure to properly manage these relationships, or the failure of these consultants, contractors and suppliers to perform as expected, could have a material adverse effect on the business, prospects or operations.
• The digital currency market is volatile and subject to fluctuations.
• The inability to maintain reliable and economical sources of power to operate cryptocurrency mining assets.
• The risks of an increase in electricity costs, cost of natural gas, changes in currency exchange rates, energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which Bitfarms and Stronghold operate and the potential adverse impact on profitability.
• Future capital needs and the ability to complete current and future financings.
• Share dilution resulting from an ATM Program and from other equity issuances.
• Volatile securities markets impacting security pricing unrelated to operating performance.
• The risk that a material weakness in internal control over financial reporting could result in a misstatement of financial position that may lead to a material misstatement of the annual or interim consolidated financial statements if not prevented or detected on a timely basis.
• Historical prices of digital currencies and the ability to mine digital currencies that will be consistent with historical prices.
• The adoption or expansion of any regulation or law that will prevent Bitfarms from operating its business, or make it more costly to do so.

Future Outlook

Bitfarms anticipates that the rapid upgrades at Stronghold's Pennsylvania sites will provide significant near-term value. The company looks forward to completing its acquisition of Stronghold and executing its strategy to increase its U.S. footprint and diversify beyond Bitcoin mining.

Management Comments

• Optimizing our assets with these rapid upgrades at Strongholds Pennsylvania sites will provide significant near-term value for Bitfarms, stated Ben Gagnon, CEO.
• The 20,000 miners we are deploying at the two sites between the two hosting agreements will boast efficiency of ~20.5 w/TH, continuing to improve our overall fleet efficiency.
• Vertically integrating our operations with Strongholds existing power generation infrastructure reduces capital expenditure requirements and allows us to take greater control over our cost of power via energy trading and better utilization of the T21s wide range of operating modes.
• We look forward to completing our acquisition of Stronghold and executing our strategy to increase our U.S. footprint and diversify beyond Bitcoin mining.

Industry Context

This announcement reflects a trend in the Bitcoin mining industry towards strategic partnerships and hosting agreements to optimize operations, reduce costs, and expand geographic footprint. Companies are increasingly focusing on energy efficiency and sustainable power sources to improve profitability and meet environmental concerns.

Comparison to Industry Standards

• The hosting agreement between Bitfarms and Stronghold is similar to other arrangements in the Bitcoin mining industry, where companies leverage existing infrastructure to deploy miners quickly and efficiently.
• Riot Platforms and Core Scientific are examples of companies that have also pursued hosting agreements to expand their mining capacity.
• The efficiency of 20.5 w/TH for the deployed miners is competitive within the industry, as companies strive to reduce energy consumption and improve profitability.
• Marathon Digital Holdings and Hut 8 Mining Corp are also focused on improving their fleet efficiency through the deployment of newer generation miners.

Stakeholder Impact

• Shareholders may view the agreement positively as it supports growth and efficiency improvements.
• Employees may benefit from the expansion of operations and potential job creation.
• The agreement could strengthen the relationship between Bitfarms and Stronghold as key partners.
• The local community in Pennsylvania may benefit from the economic activity generated by the mining operations.

Next Steps

• Energization of the miners at Stronghold's Scrubgrass site is anticipated to start in December 2024.
• Bitfarms aims to complete the acquisition of Stronghold.
• Bitfarms intends to execute its strategy to increase its U.S. footprint and diversify beyond Bitcoin mining.

Key Dates