PoW Mining Updates – CleanSpark, Core Scientific, Argo, Hut8, TEPCO, Microsoft

While energy intensive, the practice of mining digital assets on Proof-of-Work (PoW) blockchains is pivotal.  Mining secures the networks offerings like Bitcoin, Litecoin, Monero, and more, making them more robust than any system to have come before.  Although this practice used to be quite lucrative, the decline in value of digital assets throughout the overall market in 2022 has resulted in many of the sectors largest outfits falling on hard times.  In addition to this, there have been multiple examples of regions implementing moratoriums on the practice while they study its environmental impact.  With that in mind, the following are a few recent developments involving some of the biggest names involved with PoW mining.

CleanSpark

Sustainable Bitcoin mining outfit, CleanSpark, has recently downgraded its anticipated hashrate capabilities for the coming year.  Its original expectation of being able to boast 22.4EH/s was amended to roughly 16EH/s – a drop of 28.5%.  The issue at hand is believed to stem from a partnership with Lancium, which is a partnering company tasked with building an additional mining facility for CleanSpark.

In its FY2022 financial results, recently filed with the SEC, CleanSpark indicates that the aforementioned delay to its mining facility is the result of capital constraints being experienced by Lancium.

“Lancium informed CleanSpark that capital constraints have affected their ability to meet their commitments. Expected completion dates have been pushed into late 2023 and, based on current market conditions, perhaps even later. For this reason, CleanSpark’s management team is revising 2023 calendar year-end guidance to 16 EH/s.”

Despite this setback, CleanSpark notes that it continues to hold the, “44th spot on the Financial Times’ List of the 500 Fastest Growing Companies in the Americas”.

Core Scientific

As some of its competitors continue looking for a path forward in what is a persisting down-market, Core Scientific may have found its saviour in a pre-existing investor – B.Riley Financial.

The creditor recently penned a letter to shareholders and lenders of Core Scientific, with B. Riley financial putting forth a proposal which it believes will open a path forward, making bankruptcy unnecessary.  In it, B. Riley Financial indicates that it is prepared to put forth another $40,000,000 out of a needed $72,000,000 in contingent-free financing.  In addition, it proposes that any loan repayments and interest owed by Core Scientific are halted for as long as the price of BTC remains below $18,500.

Notably, it appears as though B. Riley Financial is willing to go down this path as it stands firm in its belief that the underlying business of Core Scientific is sound, and that its current situation is simply due to an “…ill-conceived strategy by the Company to continue to build out power facilities and expand miners while never selling Bitcoin on hand and never hedging prices”.

It should be interesting to see how any fresh capital afforded to Core Scientific affects its ability to repay current liabilities to companies like BlockFi, which is undergoing its own restructuring process amid its Chapter 11 filing weeks ago.  With regards to BlockFi in particular, it is believed that Core Scientific owes ~$80M.

As it stands, B. Riley Financial states that ‘time is of the essence', and that it has extensive experience navigating such processes.  With this being the case, we should have more information on the fate of Core Scientific sooner, rather than later.

Argo Blockchain

Argo Blockchain, much like Core Scientific, is actively undergoing a restructuring process in an attempt to avoid declaring bankruptcy.  Although there is a glimmer of hope for each, with the latter potentially receiving new funding from existing investors, Argo is taking a different approach.

In a recent filing with the London Stock Exchange, Argo Blockchain indicated that it was looking to shore up its balance sheet by selling various assets.

“The Company is in advanced negotiations with a third party to sell certain assets and engage in an equipment financing transaction that the Company believes will strengthen its balance sheet and improve its liquidity. The Company is hopeful that it will be able to consummate the transaction outside of a voluntary Chapter 11 bankruptcy filing in the United States,”

News of its continued attempt towards restructuring came as a bit of a surprise for many, as Argo Blockchain mistakenly published documentation in recent days which indicated it was on the cusp of bankruptcy.  As a result, various stock exchanges halted trading of its shares.  The aforementioned filing spoke to its expectation that trading of its shares resume as soon as possible in the United Kingdom.

Hut8

Meanwhile, Hut8 has recently announced that it has brought on new talent to fill the role of Chief Financial Officer.  Replacing Shane Downey in the role will be Shenif Visram, a former executive at IBM.  The newly appointed CFO commented on his transition to Hut8, stating,

“I am incredibly energized by the opportunity to work with a team of seasoned executives with robust backgrounds in this exciting industry…Leveraging my previous experience in M&A and driving growth in the infrastructure technology space, I am eager to make a meaningful contribution at Hut 8 by building on our established balance sheet-first approach as we continue to successfully navigate the market by executing on our differentiated strategy and grow as a leader in Bitcoin mining and high-performance computing.”

Although Hut8 has not found itself in a position quite as dire as competitors Argo Blockchain and Core Scientific, the company has nonetheless has a trying year with its shares trading at a fraction of what they once were.

Tokyo Electric Power Company (TEPCO)

In Japan, the Tokyo Electric Power Company (TEPCO) is one of the largest outfits of its kind, which is why it caught the attention of many when news broke that it would begin a foray in to Bitcoin mining through its newly established subsidiary Agile Energy X.  This endeavour is being undertaken through a partnership with TRIPLE-1, a company which specialize in manufacturing ASIC mining devices.

Through this partnership, TEPCO looks to become more efficient in its operations, utilizing/monetizing every drop of excess energy it creates.  As it stands, a pilot program for mining with excess energy is already underway in Tokyo, with promising early results.

Notably, this is not the first instance of TEPCO showing an interest in blockchain technologies.  Back in 2018, the company announced a partnership with a start-up known as Electron.  At the time, this partnership was undertaken as TEPCO looked to expand its knowledge on blockchain, and develop innovative ways to modernize energy distribution.

MicroSoft

While each of the above companies are directly involved in PoW mining, Microsoft is slightly different.  Rather than having set up its own mining operations, until now customers have been using computational power available through its online cloud services to mine PoW assets.  Taking a cue from rival Amazon, Microsoft has now announced that it will no longer permit this practice without first receiving written approval.  For now, it is not fully clear why the change in policy occurred, or what it will take to obtain written approval.