Big cryptomining operations have got into big debt in 2022. However, their mining hardware is still worth a princely sum. A case in point is US-based Stronghold Digital Mining (SDIG), which released its latest set of financials earlier this week. One of the most eye opening observations in the financial statement was that SDIG recently cleared $67.4M in debt by selling off 26,200 of its mining rigs.
Selling off over 26,000 mining rigs hasn’t left the Stronghold mines, upon which its future prosperity largely depends, empty. The firm says it has retained approximately 16,000 Bitcoin miners with a hash rate capacity of over 1.4 EH/s and total power draw of 50-55 megawatts.
Though losing the majority of its mining rigs to clear a debt (and 2.5 EH/s of crypto mining power), SDIG reckons that if the market conditions change favorably it will be able to buy up more mining rigs at a keen price. In brief, there are four major factors SDIG management will be watching; cryptocurrency pricing, power pricing, and mining rig pricing and efficiency.
Some other good news for SDIG is that it has updated its financing agreement with Whitehawk Finance LLC, adding a flexible extra pool of $20M borrowing, doubling the term to 36 months, and reducing near-term payments. With the $67M debt paid off from the sale of mining rigs, Stronghold has $47M liquidity for opportunistic investment.
Stronghold’s Vertically Integrated Advantage
A cryptomining company selling off its rigs doesn’t sound like a very hot investment. SDIG has a strength compared to many other miners, though, as it is vertically integrated. As well as owning and operating mining rigs, it owns and operates approximately 165 MW of power generation capacity. Its Scrubgrass and Panther Creek plants in Pennsylvania burn coal refuse, which is a waste byproduct of legacy coal mining operations for power and renewable energy credits.
With its mining operations scaled back to <56MW that leaves a lot of excess power to be sold. It says this is a good time to scale back Bitcoin mining due to the higher power prices / demand. Stronghold’s flexibility to divert power to mining or outgoing supply for the best profits are a clear advantage in this business.
Cryptocurrency prices are well off the lows we saw in June 2022. ETH has climbed back to nearly double its June low, and BTC is about $5,000 up from its June lows, sitting today at around $23,500. Last month, in a news article about the cost of Bitcoin mining, we reported that a Bitcoin currently costs about $13,000 to mine, thanks to new energy efficient ASICs from the likes of Intel and Bitmain. Selling this coin for $23,500 obviously provides some scope for profits. Whether this is an attractive business to be in depends on your feeling about the prospects of crypto over the longer term.