Crypto Mining Firm Bitfarms Reports Profit Despite Decline in Markets
Canadian-Israeli crypto mining company Bitfarms Technologies today released its financial results for the first six months of 2018. The company reported a profit, but saw its margins retreat due to this year’s steep fall in cryptocurrency prices.
Note: All figures are in U.S. dollars.
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Company Is Profitable, But Stock Price Still Falls by 5 Percent
Bitfarms, one of the largest cryptocurrency mining companies in Canada, reported in a statement that it had a net income of $4.9 million on consolidated revenue of $22.3 million dollars for the first sixth months of 2018 ending June 30th, 2018. The gross profit was $12.5 million and the gross profit margin was 56 percent.
The results would appear to be positive for the company, as it was able to maintain profitability even with the cryptocurrency markets dropping precipitously in value throughout 2018. However, investors seemed less impressed, as the value of its stock (BLLCF.TA), which is listed on the Tel Aviv Stock Exchange, fell by more than five percent in trading today, August 30th, though it is up by more than 47 percent in the last week.
Bitfarms’ mining operations produced 1,923 Bitcoin (BTC), 2,222 Bitcoin Cash (BCH), 3,324 Litecoin (LTC), 567 Ethereum (ETH) and 220 Dash (DASH) during the six-month period in question. BTC accounted for 78 percent of the financial value of all coins mined by the company, while BCH took up the second-largest share with 17 percent. LTC and ETH took three percent and two percent respectively and the amount DASH mined was nearly negligible.
The company had previously released financial results for the fourth quarter of 2017 (from November 6th to December 31st), when it reported a net income of $4.9 million on $8.6 million in revenue. The gross profit for that quarter had been $7.3 million with a gross profit margin of 84 percent.
Falling Crypto Markets to Blame for Reduced Margins, But a Competitor Fares Worse
The company attributed the drop in gross profit margin to due to lower average realized prices on bitcoin sales and the increase of difficulty on the bitcoin network. The price of BTC fell by 55 percent between the start of the year and June 30th, with other cryptocurrencies also falling steeply. The company’s hash rate grew by 103 percent, while the bitcoin network’s hash rate grew at 138 percent during the same period.
The results from Bitfarms compared favorably with that of fellow Canadian crypto mining firm HIVE Blockchain Technologies Ltd. Yesterday, HIVE released results for the quarter ending June 30th, reporting a net loss of $2.7 million on revenue of $10.6 million. Its gross mining margin was $6.4 million with a gross profit margin of 60 percent. As opposed to Bitfarms, HIVE focuses on mining Ethereum.
Rapid Growth for Quebec-Based Firm
Bitfarms now has around 100 full-time employees and four mining locations in southern Quebec which are using 27.5 megawatts of electricity to mine cryptocurrencies such as bitcoin and ether.
The company got its start when native New Brunswicker Pierre-Luc Quimper began mining bitcoin in his basement two years ago. Quimper had already founded data-center firm GloboTech in 1999, when he was 14 years old, which he still runs today.
Quimper’s home mining operation grew to such a size that he began looking to expand. He contacted his old friend Mathieu Vachon and together, they created what would become Bitfarm’s first mining farm in Notre-Dame-de-Stanbridge, Quebec. They then partnered with two businessmen from Argentina, Nicolas Bonta and Emiliano Grodzki and founded Backbone Hosting Solutions. In 2017, they began to focus exclusively on cryptocurrency mining.
Since then, the company has built three more facilities in Quebec: one at St-Hyacinthe with an electrical capacity of 10 megawatts (and the room to double in the future); another at Farnharm, again with a capacity of 10 megawatts; and a 6.5-megawatt facility in Cowansville. Along with the one-megawatt capacity of the Notre-Dame-de-Stanbridge location, this gives Bitfarms a total installed capacity of 27.5 megawatts, which they, for the most part, use to power Bitmain Antminers that mine either bitcoin or bitcoin cash.
Low Costs Helped Bitfarms Produce Bitcoin Cheaply
Bitfarms also stated in documents released during their conference call that their average break-even cost of producing one bitcoin was $1,567, a figure that is based only on the cost of electricity during the reporting period.
Even though this number doesn’t include fixed costs such as facilities, staff and mining hardware, Bitfarms break-even point appears to be at the low end for the industry. In March, Thomas Lee of research firm Fundstrat said that the average cost of producing one bitcoin was $8,038, a figure that includes the cost of equipment, electricity and other overhead. In a February report, Elite Fixtures estimated the cost in different countries to range from $531 (in Venezuela) to $26,170 (South Korea). The firm had estimated that in Ontario, Canada, the cost was $3,965.
Quebec has several key factors that make it an ideal place to mine bitcoin. It has some of the lowest electricity rates in the world due to plentiful hydroelectric power, of which there are surpluses. It also has a cold climate which removes the need for cooling systems in their facilities.
Bitfarms has found other ways to keep costs down. It created a microelectronics lab in Saint-Jean-sur-Richelieu, Quebec, which allows them to repair their mining ASICs in house, instead of having to send it back to manufacturers in China. This allows them to keep their mining machines up and running, and the play’s CEO Wes Fulford told me during a visit to their facilities that they have an uptime of 98 percent with their Antminer S9s. The company is also planning to add a five megawatt mining farm to this location in the future.
The firm also purchased Volta, a local 40-person electrical company, which results in cost savings on electrical work done in Bitfarms’ facilities.
With Merger Completed, Bitfarms Looks to the Future
In April of 2018, Backbone Hosting partially merged with an Israeli shell company called National Resources, which was already listed on the Tel Aviv Stock Exchange and had formerly invested in metal and gold mines. The new company changed its name to Blockchain Mining, Ltd and began trading on the Tel Aviv Stock Exchange, though the value of its stock has fallen almost 90 percent since the start of year.
Bitfarms has big plans for expansion underway, having already secured access to additional 107.5 megawatts of electricity from Quebec’s power utility Hydro-Québec, for a total of 135 megawatts. Another facility in Magog, Quebec, that will have 10 megawatts of capacity is already built-out and the company is only awaiting the release of next-generation mining machines to equip it with.
Additionally, they have purchased, without financing, two large warehouses in Sherbrooke, Quebec, which have room for 98 megawatts of capacity between them. They have plans for these to be ready in the next 12 months.
Beyond that, they also are looking at additional sites elsewhere in Quebec. At the former asbestos mining town of Thetford Mines, they are looking to create a 100-megawatt facility. And in Baie-Comeau in northern Quebec, they are eyeing a deal that would give them upwards of 200 megawatts of power.
Have your say. Is Bitfarms positioning themselves to be mining powerhouses in North America for years to come? What will that mean for miners on the continent? Let us know what you think in the comments below.
Images via Ian Edwards