The Canadian Bitcoiners Podcast - Bitcoin News With a Canadian Spin - The CBP - Jeff Lucas, CFO, Bitfarms

Episode Date: July 11, 2024

FRIENDS AND ENEMIES We're thrilled to welcome Bitfarms CFO Jeff Lucas to the show. A great many things to discuss in the broader mining space, as well as items specific to the current state of affairs at Bitfarms. From a couple of Canucks who like to talk about how Bitcoin will impact Canada. As always, none of the info is financial advice. Website: ⁠www.CanadianBitcoiners.com ⁠Discord: www.twitter.com/CBPMediaNetwork A part of the CBP Media Network: ⁠www.twitter.com/CBPMediaNetwork This show is sponsored by: easyDNS - ⁠⁠https://easydns.com/⁠⁠ EasyDNS is the best spot for Anycast DNS, domain name registrations, web and email services. They are fast, reliable and privacy focused. You can even pay for your services with Bitcoin! Apply coupon code 'CBPMEDIA' for 50% off initial purchase Bull Bitcoin - ⁠⁠https://mission.bullbitcoin.com/cbp⁠⁠ The CBP recommends Bull Bitcoin for all your BTC needs. There's never been a quicker, simpler, way to acquire Bitcoin. Use the link above for $20 bones, and take advantage of all Bull Bitcoin has to offer.

Friends and enemies, boy, do I have a treat for you tonight. Jeff Lucas is here, CFO of Biff Farms. We've had Ben Gagnon on the show before, before his big move to the C-suite. I guess he was the chief mining officer before. Before his move to the top of the C-suite pyramid, let's say, over the last few days. As I mentioned, Jeff's a CFO. Biff Farms is in the news lately. They've been a, I think, darling of the Bitcoin mining space for most of their existence established in 2017, obviously. And we've

talked about them a bunch on the show over the years. They are a favorite of Maximalist, thanks to Ben and some of the stuff they've been really pushing. You'll remember we discussed with him a few years ago, the idea to take some of their treasury and buy Bitcoin instead of buying equipment or deploying it another way. Interesting at the time, remains interesting now. We'll talk a bit about the Bitfarm's hodl strategy, among other things, with Jeff. You're going to enjoy this, I promise. So let's start as we always do here with the ads. A little commerce up front, EasyDNS, the presenting sponsor of the CBP. We've been with Mark for the better part of a year and a half now. Outstanding sponsor. We've bought our

website with him, canyabitcoiners.com. We also bought Iwantbitcoin.ca, which links to our second sponsor. We'll get there. Don't worry. If you want to host your content on a place where you don't have to worry about it being pulled down, EasyDNS is your partner, is the guy that you're looking for, Mark over there. But that's not all. They have a whole suite of services available. So we talk a lot about the virtual private server stuff because it's probably important to Bitcoiners more than the average person.

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go over there, start something the way that Len and I started CBP, easydns.com. Tell them we sent you a CBP media is the code and you get 50% off your first round of buys when you use our promo code. So you can't beat that. You don't get 50% off anything anymore, certainly not at the grocery store. So go over there and buy some domains. Domains actually might be the second best asset. I know Saylor says there's no second best, but I bet you there's some domains out there that you could sell down the road. Not financial advice. Second sponsor, Bull Bitcoin. Bull Bitcoin is led by a team of guys who are crazy and extreme in the best way. My wife, I think I told this story on the air, my wife and I went for dinner with the Bull team and a few other good Bitcoiners, Mark,

Jesse Berger, who's a friend of the show. And my wife left there thinking, I'll never do that again because all you guys talk about is Bitcoin and the collapse of society. Ain't that the truth? If you want to deal with a team of extremists, Bull Bitcoin is a company you should be using. They are non-custodial, never worry about a rug pull. They are giving you an opportunity to both buy and sell on their platform. And of course they have the bills platform. So if you really want to live on a Bitcoin standard, okay, you could do it. And I'm not just talking about paying your cell phone bill or like buying gift cards. You can pay your property tax. You can pay your insurance. You can pay your university tuition. These guys have it all figured out. It's one of the best platforms on the planet. And like I said, there's other companies out there

from which you could buy your Bitcoin. Those are all good companies too, I'm sure, in a lot of ways. But where you buy your Bitcoin says something about what kind of ethos you support. And in Bitcoin, the ethos you should support is the one that is never going to stray in the name of adopting other tokens for revenue or whatever. Lots of other companies do that. I recommend and I use and Len recommends and Len uses old Bitcoin. Go over. I want bitcoin.ca if you haven't signed up. If you have signed up, keep buying. If you haven't, I think you get $21 if you put some money in your account, fill out necessary information. They need a phone number. I don't know whose phone number it has to be. I'm just saying, okay, go over there, sign up,

and all those good things can be yours. Jeff is here. Jeff, great to see you. Thank you for making time. I didn't apologize before. We were talking a little bit before. I want to apologize because we've had you on the books for a number of weeks now and your executive assistant of the Bitfarmers executive assistant has been doing her due diligence, asking me for questions. And I gave her like a two line email the other night. And I don't normally do that. I don't give scripted questions, but I don't normally just give two lines either. So I'm glad that that two line email did not send you running for the hills, number one. And number two, I think Jeff, that we're going to

have a great conversation tonight because as I mentioned in the intro, you guys have been busy over there the last little while. So maybe before we start, how are you doing, number one? And number two, introduce yourself a little bit. Tell people a bit about Jeff Lucas, where he's been, what he's doing now. The floor is yours, my friend. Good. Well, Nagy, I'm very glad to be here, actually, because this is a very, very exciting time for our company here. And we've got a great story to tell. There have been a lot of developments, and I'm more than glad to share those with you

here. To give you a bit about my background, as you can see, guys, I've been around the block a little bit, perhaps a few more times than Joey here. And I joined BitFarm about three years ago. And it's kind of a funny story I was telling Joey earlier. When I was given this opportunity, I had said to wife, you know, about this opportunity to join a Bitcoin miner called Bitfarms. And she goes, what are you, crazy? So then I go to my kids and I say the same thing.

And they go, what are you, crazy? What are you waiting for? And that's all I needed to hear. And from then on, it's been a lot of fun. So this has been an absolutely terrific job because we've got a great group of folks. I can tell you without a doubt that we've got some great mining properties, but our best assets are people. And that's really what makes it exciting. These are folks who are committed, passionate about Bitcoin. They're smart. They're very open-minded. They challenge your ideas. It's been a lot of fun. It really has. I've enjoyed it immensely.

In terms of my background, I'll just say very quickly here, before I joined BitFarms, I was in the CFO and COO roles for a number of public companies on the NASDAQ and the New York Stock Exchange. And I did that for about 25 years. Before that, I actually began on the buy side as a securities analyst. I also spent six long, painful years in public accounting. Good experience to have, but I don't recommend it for others. And I also worked in Wall Street doing what's called high-yield finance. So it was a great background, but I really enjoyed being in an operating environment. And I've had that opportunity at BitFarms, and that's what's made it so much fun. So you do have quite a story. Okay, that's interesting. I'm curious,

are you a Canadian, Jeff? I'm a Canadian at heart, and that's interesting i'm curious are you are you a canadian jeff i'm a canadian at heart and that's what matters i actually live in boston i really am i live in boston but both this current company i've spent you know i spent a couple weeks and months up in the montreal area in my previous company i spent a fair amount of time actually in the cambridge area of ontario so i spent a fair amount of time up here. I asked because another guy I'm trying to get on the show who I really enjoy his commentary as well. And actually your mannerisms are almost the same as his guy named Kevin Muir, who I'm a big fan of, who has a background in finance. I think he still works for CIBC or BMO, I forget. But anyway, a story for another time.

Why don't we start with the question that I think is on everybody's mind. It's on my mind. Do you want to talk about the CFO or the CEO search news? You guys picked Ben. He's coming up, I don't want to say from AAA. I think you could say he was already in the majors for some time when he eventually got that CEO call. What is the mood like over there around Ben's ascension to the top of the food chain there? How was that search? Anything you can shed some light on, I'm all ears.

Yeah. So you can think about it many ways. One of which is Ben has now formalized his position for what he's already been doing for us for many years. Bear in mind, he's been with us for five years. He was sort of the chief mining officer. But it was more than that. He really was our chief strategy officer.

And so we are all very excited and very optimistic about having him on board. And there's a couple of reasons for that. First of all, as many of you already know, he's probably one of the most creative guys you're going to find and also one of the most informed. He is a true OG, I think, in our business. There's just no doubt about that here. And, you know, I love hearing the guy's thoughts and ideas. To be candid, some of them are a little off the wall, but a lot of them really have really a lot of merit to them. And this gives us the opportunity to really explore all angles here in our business. That, I think, is one of the elements that differentiates us. But you know what also makes it very important is the value comes not just from the creativity. It comes from executing on that creativity. We've got, as I mentioned before, a really great team. We've known Ben. We've worked with as I mentioned before, a really great team.

We've known Ben. We've worked with Ben now for five years. He knows all of us. He knows where we're strong. He knows where we need reinforcement. And that is critical because when you think about it, and I know our board gave a lot of thought to this as well, you bring on a new board member from the outside and there's a long learning process here. And it's not just, you know, two or three months, you can go six months. In this business, we don't have that luxury. You know, the beauty of Ben, in addition to his smarts that he brings on board here, is he knows what to do. He knows how to work with us. We know how to work with him. And we can get that ball moving pretty quickly here. So one of the first things that Ben has is doing is really exploring a lot of opportunities. So the board has a mandate. And this is part of what's been going on with some of the activity you've heard about Riot and others, to do a strategic alternatives review. How do we maximize

the value for our shareholders, for our communities, for our employees? And he gets it. He's a source of a lot of the ideas behind that. So with him sort of driving the process here, we can really move forward and begin executing on a lot of these. Why don't we talk about that then? We'll just head down this road. We'll pull on a couple of threads there. You guys were one of the last holdouts in terms of pure Bitcoin mining instead of doing HPC, AI, stuff like that. Stuff that the other miners have not only done but seen a fair amount of success with. We talk a bit on the show about Iris Energy, Iron.

As far as a Bitcoin mining company, sort of nondescript, but we're one of the first to really embrace and publicly do so this idea that they can do high power compute and stuff like that that's become really trendy, both in the Bitcoin mining space and sort of the broader, let's call it the Q's economy. And I'm curious, you know, what was the shift in thinking in your mind? And maybe you could talk a bit about why there was such a, I don't want to say delay, but maybe a hesitance to make that shift from pure Bitcoin mining over to this blended business model, let's call it. So look, let's be candid. HPC right now is a very hot topic. There's a lot of froth out there.

You see that in some of the share prices here. But what is the reality? And I think we're going to learn a lot more, all of us, about not only what we're doing, but what others are doing, in terms of what can you truly and genuinely achieve with HPC and AI. We actually are very excited about that as well. And we are deep into the exploratory process here.

So I don't want to give away too much of this point in time i would say stay tuned here but there's some of the elements of what we do that make us ideally suited for hpc i think first and foremost is that we're generally known as being very very good operators and that's key our sprint really rests in the design the development the build out and the operation of data centers. This is exactly what the HPC and the AI folks are really seeking right now, because they know you have to have a very, very high level of performance. We have some of the best up times in the business. In measure of how operating, our operating efficiency years is how many Bitcoin do you

mine per exahash? And we have been consistently at the top of the list among the public miners. And that's an important element. So that's what gets us excited and why we say, you know what, we've got some good fits here. Now let's be candid. We know that Canada's got a great opportunity because we've got some major centers here. We're near metropolitan cities. And so therefore we're not going to have some of the latency issues that others might have. We've got opportunities in Washington state in the United States and an acquisition made recently for 120 megawatts in the Pennsylvania area. That's got a lot of promising as well. Where we're delving into and getting our arms around a little further are some of the opportunities that may exist or may not exist in Paraguay and Argentina.

There are more remote locations. We have a lot of resources there. Those are very successful operations for us. And right now we're making the assessment whether or not it makes sense for us to actually even pursue that down there. But we're doing a lot of work on this right now. We're doing a lot of heavy lifting at this stage to make sure that when we do move,

we're doing so intelligently and judiciously. How should I think about the difference between HPC and AI applications for your data centers and the narrative that Bitcoin miners have really had a symbiotic relationship with, honestly, if you ask me, that they can be, quote unquote, demand response and increase baseload without costing anything because of that wasted or potentially wasted energy? HPC is a different beast, right? You can turn off a Bitcoin miner, but if someone asks you to produce a picture of, you know, Barney the dinosaur with a machine gun, you can't tell them, no, you got to do it. You got to give

them that picture when they send the token in. How are you guys thinking about that? That's a significant shift in my mind, but maybe I'm wrong. No, actually, you know, I think you're raising one of the most important points about the difference between the two. I think you're absolutely right about that. Our goal and the goal of a lot of our peers has been how do you get the cheapest power possible? You know, demand response provides an opportunity to get very low power costs. But, of course, you also have the interruptibility and you have the curtailment. That's the way we've been thinking about the business. As a matter of fact, we have some proprietary software called MGMT2. It allows us to monitor and manage each of our soon-to-have 103,000 miners out there.

That allows us to fine-tune them for interruptions or disruptions in the power. That's not what HPC does or what HPC depends upon. And it is indeed a bit of a mind shift here, as you think about it. Now, of course, the beauty of HPC is, one, the margins are much higher. Secondly, you've got consistency and continuity of a revenue stream. And we've been, it's taken us years, but we've gotten very comfortable in an environment where you have those disruptions and you still can maximize profitability in the operations. So it's not an easy response. And I think it's one that we all have to think about very carefully. The other point, by the way, to keep in mind here, as everyone's well aware, is the capital

investment for HPC is huge compared to what you have here for mining. And just to give you a couple of simple examples here, for the infrastructure on a megawatt basis for a Bitcoin miner, you generally hear it's about maybe $350,000 to $550,000 per megawatt. Because of our expertise, we generally do it for $250,000 to $325,000 per megawatt. But that's a fraction of the $5 to $10 million more per megawatt that you need for HPC. That's a whole different game. So, okay, maybe the best place to go here then, Jeff, is this, we'll call it again, a shift in thinking from being a pure Bitcoin miner to an HPC blended, let's call it business model. In my view, this

is actually a good move. Although my peers and colleagues in the chat may disagree, and I'm sure I'll hear about this on next Monday's show. But to me, it makes sense because you guys do have a responsibility to your shareholders that it seems like this is, whether frothy or not, I happen to agree with you on the froth point as well, there's money to be made here that's left on the table. The question then becomes, in my mind, what is the exposure to Bitfarm's exposure to? Is it exposure to Bitcoin as sort of a higher beta? You know, if you like the HODL strategy, you mentioned the operational expertise you guys have.

These are, I think, benefits to investing in Bitfarms that exist sort of more tangibly in a pure Bitcoin mining sense than they do in an HPC sense. One of the questions I asked the other night on our show was, I want to hear from Jeff why people should buy BitFarms as opposed to some other way to expose themselves to what's basically another blended business model, something like NVIDIA. NVIDIA is a bad example because there's just so much potential for a blow off top in that thing at this point. But you get what I'm saying. There's other ways to expose yourself to this trend that are not Bitcoin mining, that don't carry the risk of the Bitcoin price. Am I on to something

there? You guys have a view on that? What have you talked about internally? Well, let me step back for some of the questions you're asking me because you're asking a lot of really good questions. First of all, what do our investors look for in us here? Let's recognize that there's a value associated with being a high volatility business, which we are. If you can manage yourself in that environment where you're in a high beta environment vis-a-vis Bitcoin, then that works works your advantage here i think that lends a lot of value in the eyes of

investors because a lot of that has not been realized in the current share price as you deliver on that that's going to have upside performance the second point very naturally is the opportunity for growth and we've actually really you know we've adopted that in earnest now. We made an announcement back in November of 2023. The fact is that we were going to be expanding our operations in Paraguay and upgrading our mining operations to improve our efficiency greatly here. We're going to be growing very dramatically. We were around six and a half exahash last year. By the end of this year, we'll be about 21x a hash. And our current announced plans for next year, and we have a lot more in the bank that we haven't announced yet, is about 35x a hash.

You're seeing even this year a threefold increase in our x a hash. That's dramatically more than what you're seeing in the network hash rate overall by far. That's what investors are paying for. You invest in public companies for the growth opportunity here. And this we feel is, you know, we are well suited for that, ideally positioned, and that's going to bring some attractive returns, we believe, for our shareholders. On top of all that, though, you ask, where's the incremental revenue and profit opportunities? And that's part of what we're looking at as well, whether it's, you know, things with HPC, whether it's generating heat, other derivatives activities we can do similar to our synthetic hodl, and I can talk about that in a moment, there's a wealth of

opportunities out there really to further build upon that value and to in turn result in driving up share prices. Let's talk about the synthetic hodl. Tell people what that is. Sure. So synthetic hodl is actually for us, it's an efficient and effective way for us to raise capital here. So without getting too technical, I am the CFO, so I have to sort of stay away from that here. But, you know, selling shares in the market right now is actually very expensive for shareholders. The cost of equity, and you can think about that same as the interest you may have on a loan here, is anywhere in our space between 30 to 40 percent so it's very very expensive and yet we and others use raising equity as a means of funding our growth going forward debt does not make a whole heck of a lot of sense in our business or at least in a limited sense it

does because there's so much variability in terms of the earning stream you don't want to find yourselves in a situation like a lot of our peers did just two and a half, three years ago. So there's really a drive towards raising stock in the marketplace, selling your shares here as a means of funding your growth. But that's also the most expensive way to do it. What we've done instead, we said, all right, we've got our Bitcoin here. We want to be able to use the Bitcoin that we generate from our operations to fund our growth. But at the same time, we want to maintain that upside potential. The problem is you can do that by having a large huddle. We can't afford to do that. We'd rather use our money that we have from operations to fund our growth because it's a lot cheaper for us to do that by selling some of our Bitcoin here

than it is by selling shares. So what we've done instead, by way of example here, if we have one Bitcoin that we generate for money activities, what we'll do is we'll sell that Bitcoin. We'll take about 85 to 90% of the proceeds and plow it into our capital investment. Again, a lot cheaper than selling shares. The other 10 or 15% of the value of that Bitcoin, we'll actually buy long dated call options. These are call options in Bitcoin that are going to expire or mature over the next maybe nine to 12 months. The beauty of

doing that is on the one hand, we've raised a lot of money here to fund the growth cheaply, but also we're buying these long-dated call options, so we also participate in the upside of Bitcoin if it goes up. Now, if it doesn't go up, we'll spend 15% of the money or the value of that Bitcoin to buy those options. Maybe they expire worthless, but that 15% is a lot cheaper. And then going out and selling shares, we have to pay 30 to 40% on a yearly basis. That's the thinking behind our synthetic hodl. I'm a big fan of that strategy. I've talked with Len about that off the air a couple of times. I actually prefer it. I greatly prefer it, I should say. That's really an understatement to this idea that miners hold some percentage of everything they mine and then are

basically, as you mentioned, forced sellers in a down market. This is basically the only time you're forced to sell. To me, it never made sense. Why are other miners not doing this? Like, this is not a secret. It's not, you know, a sort of well-guarded, vaulted idea. It's out there. You guys have spoken about it at length at least a few times. And I'm curious as to why you think other miners just have decided not to adopt the strategy, even though they should have learned these lessons, you know, not once, but probably twice now for some publicly traded miners. They just don't seem to care or they don't understand what is the problem. I think it's a little more than that, actually. It is a very, very straightforward concept. And it's one that resonates very, very well with institutional investors. But retail investors still want to know what's your huddle. You know, we're all sort

of maximalists at heart. We're hoping and expecting the price of Bitcoin to go dramatically. And it's a more compelling story for retail investors to know that these guys know that we are a company has a large huddle that has a price of Bitcoin invariably goes up, which we're all convinced is going to happen, that you're going to increase your value here by having that huddle in place here. We are getting that value appreciation as well. We're just being a little more technical, a little more scientific here in terms of how we're managing that. So to minimize actually the amount of dilution we have to do for our shareholders and to help grow the business more cheaply. How much does the halving play into that? You guys have been through a handful now.

This is your first one, I guess, if you joined three years ago. This is your first halving experience. As a CFO, how do you guys think about the halving and the increased, I don't want to say increased competition, but we'll say obviously decreased block reward. How does that affect your operations? You guys are expanding. As you mentioned, some of the projections for the end of the year are nuts. It's basically a double in active miners and a triple in X hash. Do I have that right? I'm pretty sure something of that nature. And so how are you able to make that prediction when typically this is when miners find themselves in the hottest water? What are you guys doing right that these other miners just don't seem to get? Well, I'm not going to speak to what they're doing right or wrong, but I can tell you what

we're doing and what I'm thinking here. First of all, we think about the halving a couple of years in advance. I mean, Ben is already pounding on me to begin thinking about the next halving. What are we going to do about that here? When we actually announced the Upway program back in November, 2023, we did that clearly with a halving in our sites. And let me give you some numbers there. Back then in November 2023, our efficiency was 38 watts per terahash. That was down sort of near the bottom of the barrel among the institutional miners here. We're now at 25.

We're going to be at 21 watts per terahash by the end of this year and further improvements from there. So we're actually going to be more towards the per terahash by the end of this year and further improvements from there. So we're actually going to be more towards the top end of the group here overall. Now, how does that affect your economics? So let's think about that and get some very concrete numbers here. Right now, we're looking at the hash price, which, as you know, is a combination of the price of Bitcoin and the difficulty here. Roughly, today it's about 4.8, 4.9 cents per terahash. That's a tough environment in which to make money. What we've done by improving our efficiency here

is that we've taken the cost of electricity from what might have been per terahash in the range of maybe $0.035 to $0.04, it's going to be down to $0.021 to $0.023. Secondly, by tripling our over our exahash overhaul here, and by being a larger share of the overall network here, we're obviously going to be generating and mining a lot more Bitcoin. That means our fixed costs can get spread out over a larger number of Bitcoin as well. That's also going to work in our favor.

So what are the specific numbers that come into play here? All right, so let's assume we're talking about, let's say 5 cents0.05 a hash price going forward, which I think is pretty conservative in our expectations. That's going to get better. But we want to be ready to weather very effectively and profitably $0.05 a hash price. Electricity is going to be about $0.01 to $0.02. Our fixed costs spent out over more Bitcoin, rather than being roughly about maybe one and a half cents, it's going to be 0.6 to 0.8 cents. So you're talking roughly about 2.8 to 3

cents at most of costs for five cents of hash price, five cents of revenue here. That's over about a 45% margin of business. So what we've done in preparing for the halving is we thought about how to be more efficient, how we can spread our costs here, and minimize those costs going forward. That's the way. It's pretty straightforward, but that's the way we've looked at it. Okay.

Help me wrap my head around where the HPC comes in. Because the prediction for the very significant increase in deployed and energized miners, the projections that I've heard Ben make on increased efficiency of already established farms and equipment, all these things are, I think, basically tied to the Bitcoin mining. And you're mentioning there a couple of things that I will push back on a little, stuff like the cost of power. In the political environment we're in, the cost of power for miners, I think, is anything but fixed these days. And I'm always curious as to how miners think about sort of the political risk involved with their business. You're not a popular sort of user of power at this moment. I don't know that you'll become more popular. I think the best case scenario, at least here in North America, is that you probably stay neutral or somewhere around the place where you are now in the pecking order. And then the other part of me wonders,

how do you know that the power you bring online and the equipment you bring online won't be better used as HPC? So how can you square things like we're going to mine more Bitcoin? I don't want to sound adversarial, but I think it's a question that a lot of people are wondering about these publicly traded miners who are, in my view, correctly starting to look at different revenue streams with the tools at their disposal. Well, I think you really need to look very, very carefully at the nature of those power agreements. As I mentioned at the beginning of our conversation here, Joey, that we will look for low-cost power because we can afford curtailment and interoperability. We can operate quite profitably with that.

There is indeed opportunities here to pay more scrutiny for your power here and therefore to enjoy the higher margins and the consistency that you get from hbc so actually it does fit it is fitting quite nicely but you can have to understand that under the underlying fundamentals of your power sources and how you can use that to your advantage so as i pointed out before hbc is not ideal for all of our power sources but it does have benefit for a lot particularly north america and that's what we want to explore further. And I want to say, once again, stay tuned because that's a key part of our strategic thinking as we're going forward and as we're developing it and unfolding it as we speak. So I think you're making a lot of good points,

chef. And, you know, I think if I look at the chat here, people are pretty hyped up on, on bit farms and some of the stuff you're saying, there's a, you know,

a couple hundred people between YouTube and Twitter tuned into you because you've been in the news. And I think before we hop into the stuff with Riot, I want to ask, as the CFO, I have a couple of friends who are Bloomberg users, the terminal elite, I call them. And they think you guys are undervalued. Your market cap is a little shy of a billion, I'm pretty sure. And you're talking about a lot of the things that I hear from these folks on the regular. There's solid team at BitFarms. Continuity is difficult to price. The PPAs are difficult to price. And it's not necessarily just about the exahash, the synthetic hodl, et cetera, et cetera, the more tangible things. How should people value you guys then? This is not a problem unique to Bitfarms either. I think it's a problem that a lot of miners are having that, no pun intended, that

they're operating these businesses that are on the cutting edge of a number of different silos of expertise. And they're having a hard time convincing potential buyers, Wall Street, whatever, you pick your sort of term. This is what we should be worth, even though the share price is this. How should we value you guys over at Biff Farms? Yeah, that's a really good question, Joey. We spend a lot of our time trying to educate investors because our power contracts are not complicated.

The beauty right now, we're about 77% hydro. When we're all done with the upgrades, we'll be about 86% hydro. The beauty of hydro, among other things, in terms of being green here, is the fact that cost of electricity is pretty constant. It's actually pretty easy to manage and pretty easy to measure here.

The challenges that we have are really twofold. One, we are geographically disparate and investors, particularly North American investors, The challenges that we have are really twofold. One, we are geographically disparate. And investors, particularly North American investors, are not going to attach the same value to Exahash you have in Paraguay or Argentina as you're going to attach what we have in Canada and the United States. But what's interesting is actually there's a greater dependency and reliance on what we do in South America here. And there's even greater value that's ascribed and, more important importance that's attached to the work that we do down there overall. And so therefore, by virtue of that, there is actually a fairly higher amount of certainty that we have in terms of the revenue stream and the earning stream that we have in Latin America.

But that's hard for our investors to appreciate, because you hear about instability, things of that nature and that can be unsettling the second point that comes into play here though is that we're talking about a 3x or you were talking about a 3x increase in our hash rate over the past year there aren't very many of any other miners who have achieved that so you can imagine that's sort of viewed with a bit of skepticism or they say missouri show me you know they need to see the evidence of that and we are convinced and we believe firmly that as we get closer to hitting our numbers here and hitting on 21x hash the 35x hash plus next year as we get those numbers it's going to ingrain themselves in people's minds that this is becoming a reality here yeah they should

be accord one a higher value for the amount of x a hash accorded one, a higher value for the amount of ExaHash they have, and secondly, a higher value for the ExaHash. But this is a big issue to point out, I mean, because we wrestle with that. I wrestle with that myself because when I think about raising money in the market to fund a CapEx, it doesn't make sense. You know, you always hear you're diluting the shareholders, you're diluting the shareholders. Are we really doing that? And let me give an example here. In our business, it costs roughly $21 to $23 million in exahash for the infrastructure and for the miners. Valuations in the marketplace right now for our peer companies can be anywhere between roughly

$45 to $55 million in exahash. So we're raising money to a degree in the street and using our own money from operations, spending $21 million, getting the potential for $45 to $55 million of value from each of those $21 million that are spent. So it's really very promising as we see here, but it's a story that we have to continue to inculcate. And by the way, one of the great benefits that we have, we also try to educate folks on, geographic diversity is a big benefit right now.

We're all seeing what's happening in the regulatory environment, how difficult it is and the risk of being isolated or associated or concentrated in one area. And we've taken pains to avoid that here. It pays dividends, quite frankly, but it's a bit of a harder story to sell. I think that's putting it lightly, honestly. The story about, yeah, it sucks. I mean, in Bitcoin, I think we look a lot at other jurisdictions and find that maybe the, God, I don't want to rag on the mainstream news here. These are my words, not yours.

I think a lot of people find that what you hear on TV is not always what you find when your boots are on the ground. And you guys are putting boots on the ground in some of these other jurisdictions. You mentioned there the work is valuable there in a way that it's not quite as valuable here. I say here, but in North America, let's say. I mean, this is all sort of, it's all interesting stuff. You've done great so far. Now we have to move to Riot and a group of people who seem to have no problem buying your shares, maybe a little too easily these days. What is the deal with this takeover attempt? People are talking a lot about this because it's become sort of a popular topic on Twitter spaces. We've talked about it a bit on the show. I don't know much about the sort of structures and legal backgrounds and things of this nature, the rules around a takeover. Although this one has captured my attention a little more than most. Now I realize, and I'll preface this before you start, you are in a unique position in that you know a great deal and probably

can't share everything you know. And so you will be parsing your words and nothing you say here should be viewed as the word of God. Jeff is not coming down from the mountain with stone tablets with anything he says here. We're just talking about some stuff that's going on between Riot and Bitfarm. So maybe give an overview, Jeff, on where things are and how they got there. Yeah. So it's going to have to be higher level, quite frankly, because I have to be very careful to write what I say here. So let's recognize something about the industry overall. This is a commodity business. We're all doing the same thing.

We're providing hash rate. There's no differentiation in the product we provide. If you look at cycles in commodity businesses over the past literally 150 years, there's a pattern that repeats itself. And a key part of that is going to be a consolidation phase, which we're entering into right now. Now, clearly, when the board made the determination that we needed to find a new CEO that's a little more focused on growth than just building on scalability, as our predecessors did very, very effectively here, that does indeed bring a lot of attention from other players, particularly where we're seen as being very good operators.

We actually always envisioned ourselves as being one of the consolidators in the industry. And the reason for that is pretty straightforward. We're very, very good operators, as we've pointed out many times in the past year. We can take businesses that aren't as effective, are successful, are operating with profitability. We can acquire those businesses, incorporate our own practices,

and have these businesses be very successful, very profitable here. But given some of the activities that's happened with us over the past several months here, that has brought a lot more attention to folks who themselves look to consolidate, and they want to bring on board some of our expertise, and the fact we've already established

geographic footholds in some remote locations that steps away from some of the risks that we're seeing with the concentration in Texas and other places here. So I think some of those industry drivers here and some of the elements that are particular to our company has led to a lot more interest in us going forward. One thing that our board has committed to publicly to our shareholders, community, and our employees is what's called a strategic alternatives review. And that is finding opportunities to really maximize our value going forward here. That process doesn't happen overnight. Now what we're seeing by Riot's efforts here, they are trying to impose some board members

or bring in some new members onto our board of directors. And two reasons, one of which is to maybe bias the activities of the board in favor of what they're trying to do, and they are trying to get us at a less expensive value here. But the second point here, I think, is we need the time to do this thorough review process here. And quite frankly, the board, Ben in his new capacity, and other members of management here are all very instrumental in making it successful here.

But we've got a lot of opportunities at our disposal here. And this alternatives review is going to help us in many ways maximize the value. But for us to be able to do that, we need time. And that's why we have this shareholder rights plan in place, as it means affording what Raya is trying to do here going forward. Shareholder rights plan for people paying attention or listening to the show is the technical parlance for poison pill. shareholder uh rights plan for people paying attention or listening to the show is um the technical parlance for poison pill uh and yeah and and you know i'm curious you mentioned it there

what what makes you think we're entering into a consolidation phase of this this cycle it's something we've talked about on the show quite a bit over the years and again my terminal elite friend uh also believes that we are entering into this phase. I'm not a thousand percent sure. If you had asked me, Jeff, four or five years ago, what it would look like when miners really started to become targets for acquisitions, I wouldn't have said it was miners buying other miners. I would have said it was stuff like oil and gas companies or sort of private, maybe public private partnership, hydroelectric stuff like what we have here in Ontario or Quebec,

things of that nature trying to grab Bitcoin miners because they have basically everything except, as you mentioned, the operational expertise on the mining side. What about the current sort of state of affairs has you believing that we're starting to get into this sort of rubber hitting the road as far as mergers and acquisitions in Bitcoin mining? Yeah. So first of all, I appreciate you thinking about where we were a couple of years ago. I felt similarly. As a matter of fact, when I first took this job back in 2021, I was convinced that the utilities were going to suck us all up. Because why? One, you have to migrate towards where power or the incremental cost of power is the cheapest.

And secondly, there's a fundamental value to mining in terms of load balancing that the utilities also benefit. And I was convinced back then that we're all gonna be consumed by utilities. And that may still happen here. But the reason I'm saying we're in a consolidation phase right now is because you think about where the business was

just two and a half years ago. We were enjoying, and our peers were enjoying, 85% mining margins. We're not getting there those days. Those days are not with us anymore. You know, we're getting far more sophisticated. Margins are getting compressed. How do you get an advantage?

Scale makes a difference. And it makes a difference because you can bring expertise and new opportunities, new locations. You can find, bid, negotiate, and acquire locations far more easily. You have a larger number of Bitcoin, of which we spread your fixed cost base, which is a big advantage.

In a commodity business, that's absolutely key. And very, very importantly, the capital markets are far more sophisticated now than they were just a few years ago. And the availability of capital, and there's a huge benefit that the clean sparks and marathons that the large players can have in terms of raising capital more cheaply than some of the smaller players can.

All those factors speak to moving towards more of a consolidation and migration towards a fewer large players here. Now what's also come about as a result of what we're seeing here now is we're all seeing a sort of diversification of our product mix, whether it's HPC, key generation, or a number of other opportunities here. There's a wealth of ways that we can understand and capitalize on our existing knowledge and base of resources here to really grow and expand our businesses very properly in new directions. And the larger players are going to have the financial wherewithal to take those chances and also have the expertise and the breadth of management leadership to do that very effectively. What is stopping the sort of resource, you know, the electric companies,

let's call them, from snapping you guys up? I don't mean like Bitfarms. I mean, sort of the Royal U as far as the miners. I personally don't, I still don't see why they're not doing it because you mentioned there a couple of great, you know of great reasons. There exists, obviously, I think maybe an oil and gas, private oil and gas, more rationale not to go out on the risk curve and try mining. I'm thinking specifically about career risk. I can't go into a boardroom at Exxon and say, listen, we got to spend a hundred million on buying up every Bitcoin miner in the States. They have all the hardware, they have all the PPAs, they have all the expertise. We should be doing this. That's a career limiting move potentially. But at the sort of partnership level, the private public partnership level, it's not really a career limiting move. And as you mentioned there, especially in North America,

I'm thinking specifically about Ontario in this case, we have problems with grid load. And to me, it's an obvious sort of synergy that they're missing out on. Why are they not, like, why is it not, you know, OPG making a play for Riot or making a play for Bitfarms, I should say, as opposed to Riot? You know, that's the partnership. I think, I don't want to say you want to see it,

but I think it's the partnership that makes more sense than these miners, than Riot acting adversarially. And those are my words, not yours, acting adversarially toward your operation. What's stopping these guys, Jeff? So, Joe, you're a little more forward thinking than a lot of those guys are. And I understand that they're in a pretty stable industry, that thing utilities here. They may be a little more risk averse than you and the rest of us are in crypto overall here. I'm not an energy guy yet. I'm getting up to speed pretty quickly here.

But I do recognize that the biggest impediment, I think, for utilities is three letters, PUC, the Public Utilities Commission. It's a regulated environment. It's not one that's conducive to taking on risky endeavors, despite how compelling the economics and the operational benefits may be. So I think we're going to be getting there in time. And you may see actually a lot of these utility holding companies begin actually setting up separate operations to make acquisitions of the miners. So indeed, their utility operations can truly benefit from the load balancing and other

elements and the other attributes of mining here. But I think it's not a simple mind shift for these guys by any means whatsoever. But as the business grows and establishes itself and achieves its credibility in all of our minds, not just we as maximalists, but everyone's minds, that's when you're going to be finding a much more receptive audience to what you're suggesting.

I think we'll get there. Just take a little bit of time. Yeah, I hope you're right. I think, I think that's the one that makes sense. I mean, not that I want you guys to be purchased by OPG or whatever, but it just, it drives me, it drives me nuts that, that these guys are not thinking this way. And instead I'm being told to, uh, you know, set my thermostat to 82 when I'm not home and 81 when I am home, you know, for my comfort, for my comfort and safety. So we're, we've talked about a lot of stuff here. I want to give you an opportunity to tell us what we should be looking out for. Now you've already mentioned a few things. You guys have this sort of strategic vision. You'll be sharing little by little coming up. Your next earnings report, I think is the end of August where I'm assuming you will address

shareholders the way you always do with Ben at the helm for the first time, sort of in an official capacity. What else should people be looking for from BitFarms from your camp over the next, let's say, quarter or so? So first of all, our earnings call will actually be in the earlier part of August because we have to report within 45 days of our quarter end, which is June 30th. So you know we'll be doing it before August 15th. We'll be announcing that relatively shortly here. What I would focus on things,

the things I would focus on here is, what gives companies a sustainable advantage in the marketplace going forward? What gives miners an edge going forward? So look at that and look at some of the strengths that we bring. And I think, you know, the beauty of having Ben at the helm here is he's the guy who can articulate

that better than almost anyone else in the business. We really are very, very disciplined in structuring our thinking and our operations, and I think you can get a better appreciation for that. And as you see that in getting confidence in what we're doing in Paraguay, Argentina, and perhaps other parts of the world, I think you can begin ascribing a higher value to the extra hash that we've operating down there. The second thing to keep in mind here is that we have been very careful in judicious growth

in the past. Now that we have the organizational infrastructure in place here and the people and the scalability, we are really well positioned to be growing very dramatically. We've got a corporate development team that's very, very active right now, very aggressive, pursuing a wealth of opportunities, more opportunities, quite frankly, than we've seen in a long time here, and opportunities that we can particularly capitalize upon ourselves.

So again, keep an eye on what's really critical for success in our industry going forward. Look at how we, Bitfarms, brings that operationally, and how we manage our business, and how we find opportunities and capitalize upon those. And also take a look at what we're doing in some of the more remote regions of the world here where we're finding opportunities to achieve and capitalize on the value that's there. By doing that, people are going to begin ascribing higher value when we think higher multiples

to our business going forward. That's a good answer. I mean, there's lots to dissect there. I'm just going to scour the chat here for, let's see, any questions. Utilities or defensive stocks? I don't know if that's a question or not. I think you're off the hook here, Jeff. I want to thank you once again for an outstanding interview. It's not often I get to speak with somebody who is an expert in the

sort of numbers side and the economic side of mining. There's a lot of, and actually I'll level with you. There's a lot of miners who contact us to come on the show. And oftentimes we say we don't want to, because I don't want to hear just about how you're planning on rolling out hash and this stuff. And that's great and everything. But I think you understand better than most that telling people you're putting equipment online is no longer enough to get a 20% jump on your stock price over a couple of trading sessions. Those days, like you mentioned, are gone. And so I was excited to talk to you tonight. You've done a great job outlining some of the things that are going on with BitFarms. And I think this space more broadly,

they give people a lot to think about before you go, if people want to follow what's going on at BitFarms, what's the best way to do it? And also, sir, where is your Twitter account? Can we not get these, these tidbits every so often on Twitter and like 140 characters, what's going on with that? Yep. I've got to make it more active than I have. And you have my commitment to do so. So you got that. My suggestion to you is pay attention to us in terms of our press releases go on our website

we're really actually beefing up our over overall social media and communications effort here we brought on board a new head of investor relations and now she's actually taking on marketing communications as well so we're really making some great inroads there we know we've got a great story to tell and before we could tell story, we had to make sure we had that story in place. We're there now. We're now taking it to the next level and getting that story out there. So I think it's a very exciting time. I think we all agree here that we're in the best business that we can be in here. This has got to be the most fun any of us have ever had in our careers here. That's how I feel and my colleagues feel the same way. And Joey, I get a sense you take that to heart just as well. Yeah, I do. I won't, I, you know,

I told you where I worked before the show. I won't share it with the broader public here, but you're damn right, man. It used to bring me no joy to have something to do at seven o'clock on a Wednesday night, but now it's all I think about, you know, it's the only thing I care about. So anyway, thanks everyone for listening, watching. Take care of yourselves. All right. Take care all.