Member Info for Hexam

Krauty - it was FP that mentioned the 100mW thing. Personally I have no idea when we will be part of the scheme as I can’t remember hearing or seeing anything outlining possible timescales.

On the monthly updates, in defence of ARB they now include additional financial information (which no other miner provides that I’m aware of) and this added a couple of days to the release. Given that they messed up these numbers so much in Q1 I’d personally prefer they went back to just focusing on the mining numbers themselves and any updates on Helios etc. and got the numbers out quicker in line with most other miners.

“Why are you allowed to say there is a chance that argo can mine less than 200 coins this months but others can’t” In plain english. Answer that question.”

Yes sir! Actually I thought I already had, directly and plainly, when you asked me the same question earlier. At the risk of repeating myself, as far as I am concerned anybody is ‘allowed’ to post any prediction they like - it’s not for me or anybody else to stop them.

However, it would be nice if the prediction came with any kind of substance backing it especially given that 200 should be such a breeze. And I’m not saying that based on dodgy assumptions it’s from things we know as fact and the straightforward maths behind mining numbers.

As to ‘a chance’ vs ‘an expectation’ let’s just say there is a chance my footie team Southampton will win a trophy this season but I certainly don’t expect it.

So yes there is chance the number is less than 200 but it would take an unlikely combination of things like no increase in efficiency (from newer machines and immersion), really significant downtime in Texas and not adding as many new rigs as expected. So it could happen but unlikely and bad news one way or another if it does. Of course the other possibility is that something totally unexpected has happened like a catastrophic failure of some sort at one of the sites.

To be fair I can see why someone who doesn’t understand how mining works sees getting to 200 as a good result as it is over 10% higher than last month but hopefully any investor here should have done enough research to know how easy that should be given all the known or expected upsides this month.

Finally, I agree with Chopsing though having just seen his post - let’s just see what the results are now and then possibly ‘debate’ whether they are good, bad or ok depending on what we’re actually told.

Jamesy - We all focus on different things (there are so many variables, both financial and non-financial, it's impossible to consider them all even for just a few stocks). For example I look at profitability and its drivers mainly and compare to mcap and don't consider EV at all but that's just me. Everybody finds what works (or doesn't!) for them even if it's just 'gut feel'.

I haven't looked in enough detail at other miners to make a stab at which has the best value (much too much work!) so I'd be interested in why you think ARB is top? To me it has some big plusses (including funding to at least to 3.6EH, what looks to be a great facility and a relatively low cost base) but some big minuses too (including on efficiency and liquidity). I've dipped my toe into HUT8 as their balance sheet/liquidity looks strong and efficiency is pretty good - though their variable costs are relatively high. BITF, RIOT, CLSK and CORZ also look interesting for different reasons but couldn't say which is best value at the moment (and would only be my view anyway as it is such a subjective thing).

Also if BTC takes off then I think mining efficiency is still important (though I agree less so but certainly more than variable costs for example) but current HODL and overall EH will come more into play in terms of profits. Of course must still look at relative mcap - or EV if you prefer :-)

"I prefer to stick to more traditional metrics like Mcap, revenue, variable costs, overheads and balance sheet"

I agree but mining revenue is directly proportional to the efficiency metric so it's a key driver and this increased revenue comes at no or minimal extra cost (as it is driven by efficiency). So it has much more proportionate impact than increasing the number of machines, and reducing variable costs - for example even if eliminated all variable costs (as used in the mining margin) it would only the same sort of impact as improving efficiency to BITF's level! It's such a key driver - probably only BTC price is more important?

Yep, RIOT's figures are poor but BITF mined 500 with 3.7EH and I'd rather be aspiring to be them as far as productivity goes (which in time I think we will be - fingers crossed). RIOT also has a lot going on at the moment (like ARB):

"During the month of July, the Company ended its hosting agreement with Coinmint LLC (“Coinmint”) and shipped all of its remaining miners at Coinmint’s Massena, NY facility to Riot’s Whinstone Facility in Rockdale, TX. The relocation of all of the Company’s previously deployed miners at Coinmint is in progress by way of a swap agreement with another Bitcoin mining company and shipping of the balance of previously deployed miners at Coinmint. While this redeployment of miners is underway, approximately 12,146 miners are currently offline and therefore temporarily not counted in the deployed fleet figure. As a result of this relocation of miners, the Company expects to further reduce its cost of production through lower power costs and by eliminating all third-party hosting fees on its hosted mining fleet.

Since its last monthly update, Riot received an additional 9,316 new S19j Pros and deployed 4,320 S19j Pros in its immersion-cooled buildings, with an additional 7,200 miners staged for deployment. Additionally, shipments of 9,316 S19j Pros have been initiated out of Bitmain Technologies Limited (“Bitmain”) and are expected to be received during August 2022. Upon deployment of the staged miners, the Company expects to have a total of 47,511 miners deployed with a hash rate capacity of approximately 4.9 EH/s."

@lejjb - Although all the loans are in USD or EUR the ones in USD are linked to LIBOR and these total around $4bn (the rest of the loans are either on a fixed rate or linked to European rates).

A 0.5% increase would therefore perhaps increase payments by around $20m pa. Not really that big in the scheme of things.

"Why does it say that the $9.5m will effectively offset their power costs in the month? Unless it cost more in energy to generate the 318 bitcoins than their value then the energy cost would be negative by a significant margin??"

There was actually quite a bit more in the update including this:

"When applied to anticipated power costs for the month, the power credits and other benefits are expected to effectively eliminate Riot’s power costs for July" So yes, it seems like they are only saying it is just offsetting but I agree it seems rather more than that. Whatever way you cut it though it seems a good deal (almost too goo to be true or to last as you indeed suggest)? It's not clear to me if/when ARB join the scheme that it will be comparable to this but hopefully it is close as then it really won't matter too much how hot the summers are in Texas :-)

"In July 2022, Riot produced 318 BTC, a decrease of approximately 28% as compared to July 2021 production of 443 BTC, while significantly reducing overall power costs through effective employment of its proprietary power strategy.

Riot earned an estimated $9.5 million in power credits as a result of curtailment activity, to be credited against its power invoices; the $9.5 million in power credits equates to approximately 439 BTC, computed by using the July 2022 average BTC price of $21,634.

As of July 31, 2022, Riot held approximately 6,696 BTC, all produced by the Company’s self-mining operations. In July 2022, Riot sold 275 BTC, generating net proceeds of approximately $5.6 million. Riot currently has a deployed fleet of 40,311 miners, with a hash rate capacity of 4.2 exahash per second (“EH/s”). Current hash rate capacity has been temporarily impacted by the ongoing relocation of a portion of the Company’s mining fleet, from a third-party hosting facility to Riot’s Whinstone Facility, which is ultimately expected to further reduce production costs.

Curtailing the Company’s power consumption reduced BTC production by an estimated 21% in July, but also significantly reduced Riot’s power costs for the month. By providing power back into the ERCOT grid during periods of peak demand, the Company estimates that power credits and other benefits from curtailment activities totaled an estimated $9.5 million, significantly outweighing the reduction in BTC mined."

So Riot lost 21% production in July due to curtailment. ARB should be affected less as I think around half the capacity is still outside Texas but it will nevertheless put a dent in the numbers - may even go below 200 after all! All the upsides though should prevent this especially if they have improved efficiency at all.

Just a shame they won't get any credits like RIOT (presumably). Looking good though for when we are part of the scheme depending on how ARB's participation compares.

*sorry - in June they mined 179 BTC, not May (that month's best forgotten)!

Hi Jamesy,

Like you my focus is really longer term but in order to improve efficiency significantly by November it has to start improving at some point soon which is why I'm hoping for some to show up in July. Even without any efficiency improvement though the number will be comfortably over 200 unless we have lost well over a week of production in Texas.

Your 3.3 EH is very cautious as the company have said they are still on track to install the 20,000 bitmain machines by the end of October which will give 3.6EH. That's without any intel machines, benefit from immersion or the additional BTC converted from the zcash mined.

In May ARB mined 179 BTC with around 2EH so about 90 BTC per EH. The top miners are mining over 130 BTC per EH so we are currently a long way behind. As you rightly say though difficulty will probably increase and even with the benefits of immersion 130 per EH will be a challenge and your 110 figure seems reasonable (though again a bit conservative I think).

So I think your overall conclusion of $130m annualised revenue is very conservative - so much so that it will actually be lower than the total annual costs are likely to be!

So I think you are far from being a "fan boy, rose tinted glasses" and I actually hope you are being way too conservative.

Instead I hope they have 3.6EH from the 20,000 bitmain machines and at least some of the intel machines (all would give 5.4-5.5 EH by the end of the year) plus the zcash benefit still and some meaningful benefits from immersion so that they are perhaps operating at around 120 BTC per EH.

4 EH at 120 BTC per EH and your assumption of $30k BTC would give $170m annualised revenue which will should give a profit. Not a great one but that is largely down to the BTC price, not ARB (again hopefully the $30k is conservative too).

So whilst profit leveis are more at the mercy of BTC at the moment hopefully your assumptions will prove too conservative including the one on efficiency. July will tell us if there is any progress in this direction (assuming they let us know roughly what the level of curtailment has been).

I can’t predict what’s going to happen weather-wise next summer or the summer after Hexam, no crystal ball mate!"

I don't think you need a crystal ball for that.

OK - so based on your opinion we can expect a 10%+ loss of production each year due to summer power downs. So 5.5EH plus immersion is really under 5EH plus immersion. Good to know. Just hope winter is OK.

"you are a classic “numbers guy”. Nothing wrong with it but I know you can’t see beyond it."

Thankfully you know nothing of the sort - an opinion stated as fact which is ironic given that is what basically you are accusing me of.

Besides any "numbers guy" worth their salt understands above all else the limitations of any estimate and in particular the reliance on the assumptions used. It's nice to see you actually agree with me that the thing we don't know is the level of curtailment (yes, they are 'tweaking' too but they were last month as well). And I have been clear that this could well push us below 200 but if that is the case please explain why we should be happy that curtailment has been that severe?

"calculations are wonderful when you know what numbers to use for the calculations".

But that's the point - we do know.

The number of days in July is a fact (or are you even going to dispute this)?
The difficulty level is a fact (can look it up easily)
We have been told the schedule for adding and swapping machines (or do you think they are falling behind)?

The things we don't know are:

- Any improvement due to immersion or new pool (so I've assumed none)
- Any improvement from swapping new machines for old (so I've assumed none)
- Amount of curtailment

So the estimate of 220 is based on facts, an assumption they are sticking to plan and simple maths. No other upsides assumed. Yes, they could be below 200 if they haven't stuck to plan and/or Texas has been down for half the month but why are we supposed to be happy with that?

"Explain to me why youre able to say there is a chance it will be below 200, but others arent?"

Of course anybody is able to make any prediction they like - it's not for me or anybody else to stop them but equally I'm allowed to call out a prediction which in my opinion is just plain silly and misleading with no calculation to support it.

Saying "There is a chance" is not the same as "I expect". Is it really that hard to grasp?

For clarity I EXPECT the number to be over 220. It should actually be well over 300 with the EH that ARB has but we are where we are at the moment.

To have an EXPECTATION of it being under 200 shows either a lack of understanding how mining works (more machines, newer machines, extra day, lower difficulty all mean we should see a much higher number than last month).

Only two things really mean there is a CHANCE the number is held back to below 200:

1) they haven't added any machines for July or 2) they have lost lots of days mining due to the heatwave (at least 10 days). If either (or both) of these happen then this is still bad news and so I'm not sure why anybody would be happy with it?

Of course my calculations could be completely wrong so would welcome a counter argument with reasoning and a different calculation as to why under 200 BTC is 'expected' and why this should be acceptable for ARB.

It's either a complete lack of understanding of how this mining malarkey works or simply a deliberately low estimate so that can say how wonderful the 200+ number is when it comes out.

It should be over 220 but there is actually a chance it could be under 200 if there has been severe curtailment in July i.e. many days equivalent with no power. That would explain such a low number but would bode terribly for future mining prospects in hot Texas summers.

My guesstimate would be 220-240 depending on level of curtailment, hopefully higher end if not more.

btw - the other possible plus this month is that they may be in a decent mining pool now.

So you’re changing your argument given the Nasdaq is bigger - it’s not about size at all? Fair enough though I still don’t necessarily agree with you but not sure it matters at all in this context.

“Nasdaq is not a good measure of opinion as its too small.“

Seriously? You might want to rethink that.

"I think they could spread the capex over a longer period of time, especially during these troubled times"

I honestly don't think there is much scope here. Their schedules already look quite long and as they've described them as the 'useful lives of the assets' they would have to justify why they've increased them.

Besides the depreciation was only £32m in total last year so any change would be a few million at best. It's tiny stuff in the scheme of things especially as it's just moving costs into later years.

"I can't decide if it's strength or naivete the way they treat capex, they take so much upfront."

I don't think they are doing anything unusual. I presume you mean by taking so much up front you think they should count more as capex? Have you got any examples?

Employees can indeed be capitalised (I've been both 'capitalised' myself and in my role capitalised other people) but only if they are clearly working on a project (or similar) that is capitalised and that's one of the main grey areas.

In cash terms it makes no difference anyway as what counts is money actually spent and the only way they can make a difference there is to pay the money for whatever it is in stages (though that obviously sets up a debt and again is just timing - unless they are also hit with interest).