Q2 2023 Iris Energy Ltd Earnings Call
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Greetings and welcome to Iris Energy's second quarter results conference call.
This time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Lincoln Tech.
You may begin.
Thank you.
Good afternoon for those of you in North America and good morning for those of you in Australia and welcome to the Irish synergy second quarter FY 'twenty results presentation. My name is Lynn content senior manager of Investor Relations and with me on the call today are Daniel Robert Co founder and co CEO and Belinda New Sephora.
Before we begin please note this call is being webcast live within the accompanying presentation.
But those that have dampened by phone you can elect to ask a question by the moderation of our presentation.
I'd like to remind you that certain statements that we make during the conference call may constitute forward looking statements and Irish energy cautions listeners that forward looking information and statements are based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of the company listeners should not place undue reliance on forward looking at it.
All statements. Please refer to the disclaimer on slide two within the accompanying presentation.
Thank you and I will now turn the call over to Dan Robbins.
Thanks, Lincoln welcome everyone. Thanks sure.
Dialing in to our results presentation.
Pleased to be speaking with you today.
So I guess jumping right in.
Sure.
I've, just got a new technology, so I'm, making sure the slides scrolling correctly.
The strength of the business update.
Many of you would have seen their announcement on Monday.
We have successfully increased our operating capacity from <unk>.
Two five points five ex ash as a result of a transaction that we would be made at a third party.
This brings to a hedge to that conclusion.
And outcome around the Phoenix hedge contract, we have had on fluids.
We've made over the last 18 months or so.
It is fair to say it was a good results.
Pleased with the relationship and the partnership we have.
<unk>.
That Bob and half ex the hash.
We installed progressively.
It will all be shipped.
Our expectation in February .
And then it's a matter of getting it to sites managing the <unk> 44 per household machines.
For <unk>.
<unk> represents and installing them.
From there so in terms of specific guidance on that ramp up look.
Expect to start installing machines in March and then it will take.
However, long it takes but rest assured world motivated to get them installed at that full capacity in the very short term.
In terms of the underlying transaction and how it came to happen.
We spoke to you in December .
We explained.
It has been a difficult year, we had a lot of challenges thrown at us.
And at that point, we felt like we were in a good position.
We had the infrastructure we had the prepayments we'd beat mine, we had cash we had some operating capacity, we had a clean balance sheet as.
As a result of walking the debt facility.
And we urge people to be patient, let us work through the options. We always had hosting there as a backstop, but we also had time and I think we've gone through the process.
Which is the most important being in the outcome has been a good one for the business.
In terms of what the transaction involved it was six seven eggs hash all remaining units.
Acquire under that Phoenix Ash contract.
Against which the $67 million of prepayments the cash we had already paid to be benign represented about $10.
Sarah Ash as the deposits.
It really simply.
We sold two three of that $6 seven ex ash.
Got real cash in the process.
Corrected that cash to beat.
That unlocked for Forex hedge of units for ourselves so as euro cash outlay.
The tripartite arrangement it resolved.
In parallel we didn't take risk on any specific counterparty. It was a three way agreements.
And successfully concluded.
She went to the announcement on Monday.
It's a good result.
And we're very pleased to now have a substantial operating base and move forward from here.
In terms of.
What we're looking at now and where we're going.
Quick update on children.
To recap this is our next site in Texas.
It's a 600 megawatts.
Total capacity thoughts.
So day, one on <unk>, we will have access to 600 megawatts.
All of electronics, Thats really important because it provides us.
Have a great pathway there is essentially locked in.
As we've told you previously that 20 megawatts has been under construction since the data centers.
Now nearing completion.
As part of the thought energized I should not only have we built the full 600 megawatts.
Station in addition to the AEP switch yard.
We're also commissioning a 100 megawatt substation of which the first 20 megawatt data center will draw from.
What that does is give us an even shorter runway to the next 80 megawatts of data centers, which we've now started working on now to recap what this means as we've previously articulated we had 160 megawatts of data centers already built and commissioned in British Columbia.
Into which the majority of those machines that we put in over the next month or two.
We then have 20 megawatts at Childress, almost completed which will round out the first five five ex ash.
We're now working on the next 80 megawatts at Childress utilizing that 100 megawatt substation that is being the price disadvantage us.
Which will support roughly another two and a half.
Assuming the same high efficiency modules that we have today BBSI obtain J.
<unk> price.
This is the culmination of now a couple of years.
On this site.
High voltage large scale infrastructure energy projects do take time.
They take time to negotiate with utilities connection agreements.
Integration into the LNG market and they also require capital.
To put down.
A substantial amount of capital getting the thought to this point, but what that has allowed us to do is now scale rapidly.
<unk>.
Efficiently.
In the relatively short term just given the investment that we've made in that thought focus is absolutely there as well as plugging in the five five X.
Over the next couple of months.
Continuing the momentum that we've seen at the start of 2023.
That's it from me for an Apple Kashi back to Lincoln Lincoln to give you a further update.
Thanks, very much Dan.
This slide just step through the illustrative economics across a range of different scenarios and bitcoin prices at the current global hash rate and they are really a couple of key takeaways from our perspective.
Lastly, just in terms of the profitability and cash flow generation associated with the infrastructure. We built you can really see the step up in mining profitability as we step up from two <unk> to $5 Opex, a hassle operating capacity and just to illustrate at a $25000 of bitcoin price.
This represents an almost three times increase in mining profit with annualized money profit stepping up from $33 million to $94 million and we expect this to really support some strong operating cash flow going forward.
Secondly in terms of how we will monetize our available infrastructure, we really believe that the economic hedges validate our strategy of adopting a patient approach and fully assessing all of the available options and ultimately optimize our decision making around self mining versus a blend itself mining and hosting model.
So as we can see from the economics.
So to the boxes shaded green $5 of Opex of hash itself mining delivered the fastest purion mining profit versus the blend itself mining and hosting model and again just to illustrate at $25000 Bitcoin price self mining the full $5 opex the hash without any additional cash outlay.
<unk> to generate more than $140 million of additional mining profit on an annualized basis.
Turning now to that to the next slide and this is the peer comparison slide here, we thought it'd be helpful. Just to share some perspectives on the sector and why we view Rs energy as a differentiated exposure.
Firstly from a scale perspective, 5% opex of hash itself mining.
<unk> really positions us as a leading bitcoin mine out in the space and certainly among the top five U S. B climb miners by by excess cash we.
We also really wanted to highlight that.
But disciplined in risk focused approach that we have always taken towards capital allocation and also our balance sheet.
As we're all aware of 2022 presented the sector with some very significant headwinds and.
And we observed many public minus raising significantly equity capital and the process, obviously diluting shareholders along the way and we wanted to reiterate here that we have not sold a single share since our IPO in 2021.
Notwithstanding these challenging market conditions.
We have really four tooth and nail to optimize the operations optimize our funding position optimize our liquidity.
Ultimately respect.
Use of shareholder funds not only just to weather the band market, but also grow our infrastructure platform significantly and get the most out of our assets.
And just to touch on the balance sheet through that risk focused approach to structuring out that we're starting this year off with a clean balance sheet no debt.
$38 million cash.
31 January .
And then the final takeaway here just in terms of efficiency one metric. We do look at is how many bitcoin. We are mining per exit has been installed capacity and over the course of 2022. We are very pleased to have met the sector on this message on this metric, which we believe is a reflection of the quality of the facilities that we built.
The long term view that we take towards our investments and importantly, the quality of the team that we have on the ground.
Turning to the next slide here.
Finally, just wanting to highlight again that our management team remains highly aligned and highly committed to the business.
And as a board and management on about a quarter of the register.
And to reiterate we have not sold a single share.
We're obviously still very early on this journey and we see huge growth opportunities to come and we want to acknowledge that we very much appreciate the support that we've received along the way we were the first bitcoin mining IPO that was led by Bulge bracket banks, we continue to enjoy broad sell side research coverage.
We're looking to build a multi decade institutional grade infrastructure platform and we are very much here for the long term.
That note I'm, just going to hand over now to the Linda is going to take us through a summary of the Q2 financial results.
Key Lincoln just meeting slides solid.
And then last night is that good morning, Tim.
It needs the cracking tracking day.
Hi.
In North America.
Start off looking at now between mining revenue and it's certainly been ethylene exciting and challenging year for the business.
Six months during Q1, we energized by Dan Mckenzie and Prince George.
And as illustrated by the chart on this site, we actually achieved a record peak for mining of 700 and AG between mines during the period and we realized an average price of around 21, okay.
<unk> in between mining revenue of 16.
Hey.
And whilst our operating average rate increased five point change from <unk> to see in the second quarter the numbers.
<unk> decreased 720 <unk>.
The global cash rate increase and the implied difficulty up more difficult.
Being that different at GCI.
<unk> <unk> lower in the quarter and we achieved it between price of 19, K, resulting in revenue of $13 8 million.
During the second quarter as Youre aware, we also decommission the miners associated with the nonrecourse sdd to inventory.
2020 chain.
And move on now to look at our operating hot selling key one Ricci.
<unk> operating costs.
<unk> 6 million.
And Keith that increased to $16 7 million. The main increase is primarily due to the electricity cost is an increase from $6 6 million to $7 four as we energize the Mackenzie NPG side, and we havent been great average operating cash rates.
When we look at the average electricity cost.
Mine this increase from $8 four in Q1 to 10 <unk> and this is due to the excess demand charges attributable to the average unutilized power capacity as well as the increase in the average viable hash rates during the period.
I've been looking at the adjusted electricity costs at the mines, we achieved a normalized <unk>.
Tricky costs of $9 five that the mine.
So thats been adjusted for the excess demand charge.
So I'd and other cost of increase from $8 million in Q1.
$9 $3 million in <unk> and this is due to a full quarter operational cost Mckenzie and Prince George site and THC and we also built out the corporate platform to support a five five.
Business and beyond.
I will now turn our attention to the balance sheet.
31st in December 2020, we had total assets of $412 million and title liability of 104 $142 million as Lincoln previously mentioned, we have a really strong cash at bank balance at the end of January at the end of December It was sitting at a similar number of 30.
$9 million, which it slid limited grateful finding it's D J.
And as Dan mentioned in our opening slide we also utilized main mining hardware prepayments, the accounting value of that being $69 million.
Fully utilized.
Balanced diets and this resulted in our average operating cash increasing to five 5% over the coming months.
During Q2, we also recorded a primarily noncash impairment charge of $105 million, which $67 million relates to the limited recourse Bonnie financing SBB.
We also have looked at the carrying value of our remaining miners, which at that time were approximately a hash and we've been pad.
The market value of miners.
The great goodwill of 600 K has also been in pads, meaning that.
Longer requirement to test for impairment annually and were only required to check when as indicators of impairment.
In terms of the SD Bay, a receiver has been appointed on February the third.
And the last column.
<unk> balance sheet on this slide shows the adjusted balance sheets.
It reflects the de recognition of the SA data look like from the group at 31st to December .
2020, and as you can say that would ritchie.
Our assets to are bound approximately 300 meal and a liability of 29, Neil as that debt.
Technique play comes off from an accounting point of view of the balance sheet.
All up a very strong balance sheet at the end of December .
So we're now going to need.
The Q&A session.
Presentation and facilitate at will.
Handle that question.
Thank you at this time, we will be conducting a question and answer session.
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One moment, please while we poll for questions. Once again Thats Star one if you have a question or comment.
Our first question comes from Mike colonies with H CW. Please proceed.
Hi, Good morning, guys and thank you for taking my questions, congratulations as well and working out the bit made equipment contract great to see that really great work there.
First can you speak to your ability to secure power contracts.
<unk> site, how those conversations are going and the potential power cost you expect to lock in as you near end organization an organization there.
Joel Thanks, Marc.
So this is where a lot of our focus is at the moment. We're just refining those arrangements negotiating final terms, we're not looking to sell a long term PPA at this point in time.
Many of you would have noticed that the market cross power in Texas has plummeted of lighthouses reading a report showing that 60% down multiple mode. The commodities now sub <unk> <unk>. So it is good target for us in due course, we might look at longer term contractual arrangements.
But we're gonna initial 20 megawatts worth of capacity. It is an opportunity to hedge more of a short term basis maybe.
Maybe a couple.
The time and really optimize their operations and importantly contracting experience when you're dealing with.
Volatile and variable Prost power markets.
First which what is the project here.
So we're going to take our time.
With some short term aging and really will mean to the process as we build confidence in it over time, I think getting a longer.
Longer term security around that power price makes sense, but we're going to take our time and do it appropriately, particularly recognizing the relatively small operating capacity.
As a percentage of our operating portfolio in the short term.
Got it I appreciate the color there Dan.
You guys, obviously have a lot of runway childress with regards to total power capacity, how should we think about the capital requirements to build out the site on a cost per megawatt basis.
And roughly what the total time it takes to develop these incremental data centers you plan to rollout.
Yeah look the largest component.
First of all stepping back we've been invested a lot of fixed costs required to get these sites get these capacity build out the full high voltage substation to 600 megawatts build out the first 100 megawatt medium voltage substation, we've actually ordered the second 100 megawatt transformer already as well so.
We've really light into that programming schedule to ensure that we are cutting down lead times, we're preserving optionality and really giving ourselves the opportunity to optimize.
The time frame and the way in which we build out that thought.
In terms of capital, we haven't stopped talking to capital providers.
<unk> and yet we haven't sold a share we haven't taken on corporate level debt, but it doesn't stop us having conversations we're continuing to have discussions around that data side that we five and a half fixed operating capacity.
Substantial operating cash flows of that will deliver refer back to Lincoln slot.
That operating cash flow provides not just the source of funds.
Equally a way to secure additional lift diluted types of capital as well.
As we've said in the past, we're only going to do capital. If it makes sense to date equity has not made sense. So to say it was in the future.
It Hasnt made sense for us at the corporate level, that's not to say the widening in the future. When you go through all the options Tiger ton and make sure that we went through the best result, the majority of that Capex from here is the mining hardware itself.
You can see <unk> data points with the transaction, we did with <unk>, where I think we are effectively acquired the for Forex hash at an average price of 50.
Dollars.
<unk>.
Now that's not to say, that's where the pricing will be when we go to buy new hardware or even if tomorrow. We why don't you go and buy additional hardware, but the Tvs I reference point.
You extrapolated that half the next 80 megawatts beyond these first 20 at Judas to fill up the first 100 megawatts of medium voltage power that we're building that's about two and a half ex the hash coal at $20 a tear hash you're looking at about $50 million for the hardware plus a small amount for the infrastructure and data center.
The capacity.
On top of that so we'll just keep working through it first things first is get these modest installed over the coming weeks and months will too.
Really finished that <unk> have Joe address we will get another $18 million back.
As a refundable deposits in children from AEP as part of that process.
That's another addition of cash into.
Onto our balance sheets, and then we can sit there and really work at how we optimize capital structure.
<unk> et cetera, and what we've always said this market is so dynamic we need to be flexible we need to be nimble, we need to preserve optionality minimize exposure to the downside and the upside will come in where does guidance maintained that mentality guys for the next few months.
Very helpful. Thanks for taking my questions.
Our next question comes from Paolo <unk> with Canaccord. Please proceed.
Hey, guys, it's actually drove out this year.
Paul Nice to see the nice progress in the business. Just wondering guys are in your <unk> facilities.
Yes.
Above what Youre doing there and your power capacity is there any incremental potential from here too.
Increased power.
At those facilities.
Feels like with everything up and running there that would be.
Money well spent as possible.
First of all given the attractive power prices and Thats, all Green and then I'll have a quick follow up.
Absolutely looking that's important we've been 100% renewable energy since day, one our intent to stay that way.
We've got 160 megawatts commissioned.
<unk> as you know Joe.
We then add the 20 megawatts of Childress, we've got another 580 megawatts to go at Childress, that's not to say that we build all of that out before coming back to BC, but.
But we have said in the past and it remains the case that we've got over a gigawatt.
Of additional development thoughts.
Globally, and the focus obviously hasnt been there over.
Over the last few months in terms of communication with the market, but we've continued to develop those thoughts we believe in the long term, we understand developing new infrastructure projects is a multiyear.
Frame, we've got development projects and base say, Canada, the U S Asia.
Asia Pacific We've continued to keep the ball rolling on those thoughts look at paying connection deposits in due course, we've got rights over land.
Negotiating connection conditions with the utilities.
The near term, we've got the 590 megawatts and I think that gives a clear pathway to growth.
We're absolutely focused on developing and incubating additional thoughts.
Outside of North America in addition to within.
Sure Thanks, Dan and then.
We're looking at.
Coin spot price in that.
Well I think everyone would agree that we're happy to see it moving up.
But it does feel like I would just like to get your view on asics spot prices.
If you think there may be a window here.
We're a six given the kind of supply glut on the market a very success, we may have an opportunistic time.
<unk>, a rising bitcoin price.
Spot prices.
Reacting.
Zinc and what.
What that May mean for your capital strategy.
<unk>.
At some point of time in the future. Thanks, guys.
Thanks, Joe look absolutely.
You tend historically, you tend to get anywhere between one and three to four months of a window a bit coin stopped packing that paid up and hardware prices don't necessarily respond in kind and there is often opportunities around that we've been able to capitalize in.
In the past on that when we were on listed.
So the benefit of our shareholders, but.
But equally.
Sometimes you can try and get too cute with this and the reason I say that is <unk> got.
Got a really natural investments.
Protocol to deploy more capacity in the sector, where historically if you go back over the last four five <unk> and.
And look at average hardware process typically priced to deliver the buyer of that hardware on average of 124% Richard that sounds like a precise number. It is it's an average of all the data points that we have.
Colitis.
When you amortize the cost of the data center infrastructure electrical the land et cetera.
With somewhere between 50, and 80% year on year. So you can get ILUVIEN to acute Triton ethics pricing and to a large degree of these <unk> risks you would be calling goes up you pay a bit more of a hardware is still priced such that you're still deriving.
What we view as an acceptable return.
And allocation of capital.
Aside that you don't try and optimize around the sides to do that.
But this is why the <unk> is really exciting for us because you've got that natural hedge on the way down with we've seen with the last <unk> contract.
At the time that was signed with a $40 price cap.
The market price at the time was maybe 60.
Dollars give or take great deal.
What really worked in our favor was the fact that we had a clause that if we get the lower off market profit delivery and.
At $40 cap, so even though a big point is obviously you had a drawdown and we've had that natural hedge and being able to deploy capital.
Hopefully.
To adapt to be the bottom of the market to acquire those ethics, but again on the way up.
We're happy to pay we are happy for other people to make money, we will maintain our discipline around capital allocation.
But we feel pretty good about the prospects for investing additional capital in this.
Victor.
Great. Thanks, guys.
Our next question comes from Josh <unk> with Cantor Fitzgerald. Please proceed.
Yes, hi, guys congratulations on.
Again, the four for secured that's actually going to be my first question. I was just wondering if you could give a brief update kind of around the timing on what you expect those rigs to be delivered or they currently in transit and when do you expect to actually get them plugged them. Thank you.
Absolutely not see Josh.
As of this morning.
Been shipped.
But I believe the first batch is not far away and then there might be another batch next week in any case the more full guidance as we expect them all to be shipped this month. So by the end of February .
They need to allow some time for them to travel.
Travel up from Asia to North America, the Atlanta, Mike.
Make it through.
The logistics channels and ultimately get to our team on site, who will start installing them.
Long that process takes I don't want to promise anything because we're still working through the logistics. We already made the announcement on Monday. It has a lot of machines were taking tens of thousands.
We want to get it right, we want to make sure that we look after these assets toward the right way and optimize.
The operating environment, but equally we are clearly highly motivated to get in.
As soon as possible. So I think we should start seeing a ramp up beginning.
Hopefully early next month, and then as to how long it takes from there.
But fueled the ramp up to 5 million of Opex ash Im not sure it might be another month or so.
Understood that's helpful and in the meantime, as Youre getting these rigs up to speed and plugged in.
How are you thinking about your current cash burn and your current cash levels.
Lincoln Belinda would you like to handle this otherwise I'm happy to download the talking.
Yes.
Yes sure I.
I can address that so I mean from a cash perspective, we've just disclosed at the end of January .
31 $38 million.
Cash balance at <unk>.
The runway.
So I mean.
And Opex perspective, we've seen the numbers in this result, but with sort of targeting approximately $2 million per month.
Sites in other Opex. So we do the math from there, but we think there's significant.
Significant runway versus the current cash balance and no <unk>.
Commercially very much incentivized to plug in these new miners Asap to start generating more operating cash flow.
Got it thank you very much.
Okay. Your next question comes from the Chase White with Compass point trading and research. Please proceed.
Thanks.
I appreciate you taking the question.
So a couple of questions if I might.
First of all I may have missed this and I saw on the presentation you guys said.
<unk>.
Just to come online in the second calendar quarter of this year.
Any any color you can give on kind of when exactly you guys are anticipating I mean, obviously things can happen during construction, but.
Are we are we thinking like early April or is it more like mid to late quarter I'm, just trying to get a good sense of.
How that's going to look.
Look as you say, we're always cautious around these gone.
<unk>, because we never want to underperform.
We always want to make sure that we deliver.
We're really comfortable with Q2 and that should be looked at through the lens of us often.
They are performing ahead of schedule. So I think it's fair to assume that we are targeting more towards the start of Q2, rather than the end.
But equally we are dealing with 600 megawatts of high voltage power. There are safety being there are technical things a lot of it's outside of our control and if it takes an extra few weeks the types of extra months.
For us Thats, Bob let's get it wrong.
Got it Thats helpful.
And then in British Columbia.
At what power consumption level do you expect the cost to kind of normalize on a per client basis.
In other words like how much do you have to start consuming before you've you've optimized.
Your power consumption there.
Yes. The short answer is no issue now with the $5 of Opex over the next four to six weeks that issue will disappear entirely but to answer your question more.
<unk> savings and you're getting off mute if you'd locked yet.
Sure.
The excess demand charges are expected to normalize at around.
90 megawatt range.
Roughly $2 eight.
So as Dan said.
Nathan focused on.
Getting these new miners energize Asap.
Got it that's very helpful makes sense I appreciate it thank you guys.
Once again, if there are any remaining questions or comments. Please press star one on your Touchtone phone. The next question comes from Reggie Smith with <unk>.
One moment.
Please proceed.
Ritchie Your line is live.
Oh I'm sorry.
I'll take the question.
I guess my question is more kind of big picture thinking about bitcoin is obviously off its lows hash rates still at all time high companies are cleaning up their balance sheets, we have the having some time next year next spring what's next for the Bitcoin mining space.
So.
<unk>.
What's the next story here.
Okay.
That is a pretty high level question Reggie.
Whatever we side it will be different.
Yes.
Anything.
Look I think clearly margins.
Improved since because rally from mid teens.
Look we prepay it would be kind of hit back there right like it just doesn't pay to be optimistic plan for the worst types of the best it's just down nature.
But in saying that it is looking constructive.
The hobbies and exciting events as we know typically within three to six months of that we see another parabolic Ron given that supply shock does that have and again, who knows but at the end of the day, it's only $21 million of these things.
They're not making more of them.
It feels like adoptions, only going one way and even the increased regulatory scrutiny on the sector, it's hard to see that as anything but a positive just given the abundance of different projects and these unregulated.
<unk> casino in exchanges.
I think it's just going to bring an era of legitimacy to the space and to be quite as clearly just a digital commodity and should benefit from that.
In terms of the mining space specifically.
Look having some level of scale I think is important to be able to cover those overheads continued to grow et cetera, and we're pleased to announce based among those top class Mr models.
That gives us a step change to have that scale.
And really continue to look at growing through the cycle, but continuing to do it in a disciplined.
Meta.
In terms of energy prices I think you've seen alumina the hate coming out of the market to that that'd be a relief the miners that maybe weren't using 100% renewables or didn't have fixed power prices.
So thats, probably helped them as well.
Yes.
Todd to comment more than that I think it's steady as she goes people will look at adding incremental capacity.
Yes.
To do that if it makes sense.
Got it makes sense you mentioned scale in that kind of leads into my next question.
How do you guys think about.
Mergers acquisitions like what are the conditions that it would make sense like how how should investors think about that.
And then.
As a result of that.
Would the synergies be primarily at the corporate level out there.
Synergies with operations like.
How does that work.
We haven't seen too many <unk>.
Notable mergers in the space. So just curious like what's the algebra that you guys are doing to evaluate that.
It's a funny question rich because we.
<unk> like <unk>.
Hey, Brian it's jumped up and down for the last 12 months since the Tau as the sector M&A mergers and acquisitions.
Ah 60 terminal generates banking phase or whatever like people just love talking about it bumps to try to work out what would make sense.
As well we've had conversations.
<unk> talked to a lot of the other mining companies.
I can say in specific circumstances, where it does make sense and could lead to a win win you might have one pain.
<unk> got a really strong.
Project development background infrastructure background, another team that might be well capitalized.
Joined forces you might have one company, whose only doing hosting and recognizes that really to succeed longer term you need to be vertically integrated in and look to use M&A as a way to do that because it is harder and longer to do that.
Organically, but for us.
Having having done everything we've done we are in the land we own the infrastructure. We are now high efficient proprietary data center design.
We limit the counterparty is we've got a clean balance sheet with a very.
Experienced quality management team.
I think just signing up to frankly other problems by trying to integrate a business when we can grow organically.
Relatively swiftly and efficiently.
Yes.
I'm going to say, how it would make sense, but I would never rule anything out.
No that makes sense that was kind of I was thinking about it as well, but I wasn't sure if I was missing some potential synergy.
And I can appreciate that.
Last question for me.
You.
So it sounds like you said.
One final payment to be made that payment was actually from someone else.
Have you didn't disclose what that amount was I'm just trying to back into like.
Our price for those six seven.
Ex hedge I know you it sounds like the math you did was the $67 million divided by four that you kept but I'm curious what else was the last payment just to get a total cost.
Yes.
We haven't disclosed that and I am just cautious about confidentiality in the commercial terms of that agreement.
Would not think it unreasonable to extrapolate it out.
Our effective economics across the deal you'd be willing to ballpark.
Understood. Okay. Thank you.
Okay. We have no further questions from the phone lines at the moment.
Thank you and now we will.
Just move to Q&A.
Q&A, that's coming through on the webcast.
One question being asked from a financial speculative pasta Linda this one's for you is what's included in the other costs on.
The adjusted EBITDA.
Thank you Lincoln say, let's call that there was a salary adjustment may decide that.
Pretty much 90% and then other.
No one off cost in relation to transactional sales.
Potential.
Things that can go ahead.
Yeah.
Thanks Linda.
Just kind of go through the questions sequentially. Another question being asked is when we consider doing nothing at this time.
It refers back to Daniel's comments earlier around.
All options being on the table as we've consistently said we are always talking to potential fund.
The fund is around around them capital, but.
As we also said we'd never sold a share.
Module in this at the business and we.
We want to be laser focused on risk management and only take on the right capital at the right time, when it makes sense to do so.
Another question coming through just a point of clarity around the cash balance that it doesn't include the $18 million of shortest refunds.
That is correct. So the cash balance that we quoted of $38 million.
In January and $39 million in December that is exclusive.
Yes.
The children's refund that we expect post <unk> designs.
Another question, perhaps this one's for Dan.
The round what is the minimum cash position, we want to see before we commit to further capex around building new data centers.
The pain.
It's not as simple as that we don't have a target working capital of eggs.
Tens of millions of dollars.
It really just depends on a number of factors.
Do we have that we have that whats our operational cash flow over that period of time, what's the commitment we're making what's the drawdown profile in the east because of construction for that commitment.
Luke.
Risk of making kind of hand, why these statements.
We will just continue to be prudent and make sure that we're managing to the downside. We're assuming the market always goes worse, even if a guy in vertical because between decides to go on a run we're always going to model out scenarios.
Assuming that turns around rapidly and make sure that we've got plenty of headroom.
Yes.
Proven an ability to manage the balance sheets and not just manage it I think we've clearly demonstrated that.
Lincoln's earlier comments, we will see.
<unk> core our way back and try to optimize every dollar of funds that shareholders.
Allow us to deploy and we will continue to do that.
Yes, we don't hope it going on balance sheet.
So we're not looking too tight on that additional volatility, we'll keep an appropriate cash balance and make sure that we can ride out various cycles.
Thanks, Dan.
Another question coming up around what our uptime assumptions across cell sites, including Texas and look I guess.
Talking to uptime and inefficiency, that's something we take very seriously we see we build own operate all of these data centers ourselves.
Leading efficiency across the sector, we're always targeting full 100% uptime, if it's not 100% we're looking at ways to optimize.
And we're going to continue doing that going forward, taking lessons from operations and obviously looking to leverage them in the Texas when that comes online as well.
I think Lincoln, maybe just jump in this is another point, where now we've got a step up in operating capacity in.
A resolution to beat mine and we've got that behind US is to go back and actually focus on why we are differentiated.
We don't do shipping entitled.
Older abandoned warehouses.
You wouldn't expect your local capital CD data center to be down 10% of the year.
That's not to say that it wouldn't make sense to be quay money, but our approach is to build profile multi decade infrastructure that allows these machines to work right through various weather and cosmetic.
In addition, because every 1% of downtime strikes.
It's a lot of money and it's worth the upfront investment and Thats, just how we think and I'll give you a couple of examples.
One when temperatures guys sub zero in winter.
These chips can get culp and I can start cracking. If you don't look after them again, the industry isn't necessarily incentivized to talk about these issues, but it's real these are chipboard you put them in negative five negative 20 degrees temperature stuff's going to go wrong.
But an automatic recirculation functioning our data centers.
Adjusted the ambient temperature and automatically redirect some of the output.
Ed back into the intake to give these chips a bit of a blanket when temperatures go sub zero in fact, we've learned that the optimal operating temperature for the chips has actually been above zero. So we try to optimize for that.
In summer when you've got the opposite issue the ambient temperature is heating up.
We've got variable speed exhaust fans.
That automatically ramp up and down based on the ambient temperature to optimize airflow and importantly, optimize that ancillary power consumption and little things like that.
Not only translate directly to our bottom line and thus be coy mind efficiency stats, but more importantly, nm on asset integrity and Loctite. These chips physically last a long time.
If you look after them if you let me get Dusty, let them get humidity all over them over hate leave them out in 30 degree Celsius temperatures and shipping entitled they aren't going to last.
So we have taken a different approach to that and we'll be patient in time, I think that will be demonstrated even further.
Thanks.
Couple of questions being asked about whether we would be looking at next generation mining.
Beyond the approach that we have in particular hydro hydro cooled minus 10.
So hydro.
You don't really a next generation mining per se, it's just a way of calling the chips themselves just by running.
Fluid rather than air across the chips, and it's not like immersion, where youre not basically having the chip service engage with the fluid it's more done through chips.
Okay, that's not as much of interest to us and seemingly immersion today, we're doing a bit of R&D is not that of interest.
Gilliam simply because air cooling is really efficient if you get it right because you take input from.
Outside.
Hello, It through the chips and then you exhaust it back into the atmosphere.
It's very hard and I'm not a technical guy.
Phoenix and the engineering challenge of having to have a closed loop system and recycle.
Youll fluid transfer medium, where youll try to get those molecules away from the chips.
It doesn't seem intuitive to want to tighten back in and apply them back to the chip services will continue to do R&D, but that very much sums up how we see all these other technologies.
Methodologies unfolding in terms of the chips themselves.
Absolutely static to have 29, and a half Jules <unk> efficiency as one of the top efficiencies in the market.
And this is efficiency is not the data center and production efficiency Lincoln referred to earlier. This is the efficiency of Tony electrons into hashes, how much energy G&A for each unit of passion Pal.
We've done that really efficiently as well.
It might do have a more efficient model.
So we will absolutely look at that going forward and work out whether the cost benefit.
They do cost more money on a per <unk> basis.
Carefully looked at all the scenario is the pricing.
And go through our normal capital allocation decision process to work out what model, we want at that point in time.
Thanks, Dan.
I think that's all of the questions to that coming through on the <unk>.
That form.
Perhaps now we just hand over to Dan just for a couple of concluding comments and then we can probably wrap up the call.
Joe Thanks, Lincoln look thanks, everyone for dialing in those obviously.
Challenging 2022 for the industry for.
For our team.
I'd like to give a big special thanks to <unk>.
Our team.
Yes, I have worked so hard over.
The last 12 months and the reward in the last week for them.
And all of this that's really pleasing.
The other day, we adhere to enjoy ourselves and to see that lifting spirit is fantastic.
Really excited about now building from this point, we feel like it's.
Another milestone and something to grow from we are looking at in the next 18 megawatts at children were looking forward to getting out amongst you the investors educating you on.
Why we came to market, while we believe that we're here for the long term, we've put a truly differentiated.
Proposition, 100% renewable energy proprietary data centers doing things, you're an institutional grade fashion.
We'll be patient as we've demonstrated we will go through the right processes.
But finally like to thank you.
For all your support as investors.
Since the IPO, it's been a bumpy ride, but the amount of support and encouragement validation that we're doing things the right way it is really appreciated.
So thanks again for dialing in.
Good.
Talking to you again soon.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.