Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The current difficulty adjustment at the beginning of June is likely to be somewhere between 11 and 15%. Based on a monthly cost of production of £1.2m the following estimates the EBITDA we can expect based on difficulty adjustments going forward from this point, BTC price remaining at $9200 and our costs fixed at £1.2m monthly.
10% Adjustment - 202 Coins Monthly
Revenue $22.30m
Costs $17.75m
EBITDA $4.55m
20% Adjustment - 227 Coins Monthly
Revenue $25.06m
Costs $17.75m
EBITDA $7.30m
30% Adjustment - 261 Coins Monthly
Revenue $28.8m
Costs $17.75m
EBITDA $11.05m
All in my opinion of course. a 30% reduction would be great but not sure we will get there. Best case scenario likely to be around 20% providing BTC price does not move much for the next month or so.
Hashrate has fallen below 100 EH and the next difficult rate adjustment is falling too. Means miners are switching off, so hopefully both these metrics continue to fall over the coming weeks. In my opinion we would need BTC to remain under $9.5k for a brief period of time to still make it uneconomical for some to mine and thus keep machines switched off.
From my own personal correspondence with the board it does seem that cost issue has been addressed and will fall substantially in 2020. Furthermore when you look at other listed miners in more detail you can appreciate having the most efficient machines and no debt going into a halving.
A prime example being Bitfarms who currently have a capacity of around 810 PH, which makes them a larger miner than us. Look further into their accounts and you see they are currently running over 15,000 Bitmain machines as well as some older and new kit. Based on a reasonable electricity and collocation hosting costs they would need Bitcoin at £11.5k and a 30% reduction in difficulty just to break-even on their costs. So unless BTC price rises and difficulty falls quite substantially you are going to see many miners having to turn their machines off, which can only benefit efficient miners with the latest kit like Argo.
Based on 730PH capacity, Bitcoin around $9k and a 30% drop in difficulty, revenue will be somewhere in the region of $28m. Add the company likely to increase machines over the next year as well. Short term BTC at $9k for a few months will benefit ARB as many miners will have to turn off in droves.
You probably need BTC to be in excess of $12k for difficulty to remain the same, then again I think many miners using S9's will still be running at losses.
Looking at the those costs a fair amount were due to Bixby and Edward's milking the company and legal fees due to the Timis issue. Agreed some of the other costs are excessive and we hope they will be addressed. I expect this year they will be more reasonable now that Bixby and Edward's have gone and we are mining for ourselves.
Just putting this out there as a best case scenario. Now we know the costs from the accounts going forward a low BTC price may not be a bad thing. For example a BTC price at $6k and a difficulty reduction of 75% (if enough miners turn off) could result in a profit of $20m per year for Argo who would be mining around 620 coins a month.
Price of Bitcoin and combined associated difficulty rate will be key going forward. Short term after halving the lower the BTC price and the larger the difficulty reduction, the better in my view. Anything above $12k and difficulty may just go up.
Bitfarms 2019 figures published today. I see them as the yard stick when comparing the ARB mcap. We are around the same size on capacity now. Based on their mcap (£23) and level of debt we should be around £40m mcap. A brief looks shows that their admin costs are also quite high too.
I like either option of steadily increasing machines or making hay while the sun shines and installing as many as possible to take advantage of miners turning off post halving. BTC under $10k for a few months post halving would in my view reduce hashrate and difficulty thus benefiting coin production.