I'll write some more about a few details later, but first I wanted to show how misleading this press release is. I'll quote from it and add my context.
average direct cost of production per BTC** of $9,400, compared to $9,900 in Q2 2022
That ** was in the PR, I didn't add it. They are making up this definition to make it seem favorable, like they are mining at a profit. They aren't - it was a $98M operating loss for the quarter. If you go find the **, it reads:
\*Represents the direct cost of Bitcoin based on the total electricity costs, net of the gain on disposition of marketable securities used to pay Argentina energy costs in Argentine Pesos, and, where applicable, hosting costs related to the mining of Bitcoin, excluding electricity consumed by hosting clients, divided by the total number of Bitcoin mined.*
I didn't quite understand what this net gain on disposition of marketable securities is referring to, but I think it's a one-time accounting for some movement of money between Canada and Argentina.
Regardless, if you actually go pull up the Q3 report, it shows $33M "cost of sales" against the 1,515 BTC mined. That's $22,011 / BTC. It cost $22,011 for each BTC mined in Q3. This is a marked improvement over Q2 where it was $33,265/BTC, but they are still losing money for each BTC mined.
They later even include this line in the same PR:
Total cash costs of production per BTC were $14,300 in Q3 2022
But this is the ignores-depreciation cost. The 9,400 number is hard to figure out, but clearly misleading.
Bitfarms is on pace to be one of the largest known producers of Bitcoin.
"on pace to be one of the largest". The phrase means nothing more than "Bitfarms is one of the producers of Bitcoin.". lol.
even with recent BTC pricing, we continue to generate positive cash flow from operations and posted $10 million in Adjusted EBITDA.
The Q2 report ended the period with $46M and the Q3 report ended the period with $36M. All while raising cash and selling BTC. You have to contort to ignore lots of real costs to declare positive cash flow.
“During the quarter, we strengthened our balance sheet to be better positioned to take advantage of complementary opportunities,” concluded Morphy.
AFAICT, All this is saying is that they paid some debts, specifically $15M on the 10.75% revolving credit. This does bring their liabilities down from 138M to 113M, a nice 24M drop. However, assets went from 473M to 376M, a whopping 97M drop. Assets - Liabilities is lower doesn't sound like a stronger balance sheet to me.
And how is having less cash as well as less unpledged BTC represent make you "better positioned to take advantage of complementary opportunities"? I have no idea.
“When the BTC price started to trend lower, we began deleveraging the balance sheet. Since June 1st, we have paid down $94 million in debt, including fully retiring our highest interest rate facilities. As such, we expect to reduce annualized interest by $9 million.”
June 1st is Q2 if you missed it. Most of this was last quarter's announcement.
At September 30, 2022, the Company held $36 million in cash and 2,064 BTC valued at approximately $40 million based upon a BTC price of approximately $19,400.
Firstly, "held 2,064 BTC" is a stretch when 80% of that is pledged as collateral. In fact, the lender actually holds all of that BTC. From the SEC report:
The Company is exposed to counter party risk as it is reliant on the Facility Lender to return the BTC collateral upon extinguishment of the Credit Facility. ... The pledged BTC is held in a segregated Coinbase Custody account owned by the Facility Lender.
Also, at today's price, that "approximately $40 million" is now approximately only $32M.
A few more nuggets:
Sold 2,595 BTC
Mined only 1,515.
Subsequent to September 30, 2022 sold daily production, totaling 486 BTC, during October 2022
Selling everything we mine now.
Raised $13 million of net proceeds through the at-the-market equity program.
Diluted shareholders more!
Held 2,064 BTC in custody on October 31, 2022
100% of our BTC is now in custody against our loans.
Finalized terms on sale of the de la Pointe facility with net proceeds of $3.5 million expected to received by year end.
Selling off real estate assets.
Averaged 16.5 BTC per day in daily production for Q3 2022, frequently exceeding 17 BTC per day in daily production.
Averaged 16.5 but frequently got 17. Yes, that's how averages work. You frequently were below 16 too, right?
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