DMG Blockchain Solutions Inc. (DMGI) Earnings Call Transcript & Summary

Hey guys, welcome or welcome back to the Channel McNallie Money, the official home of Power Mining Analysis. In today's episode, Anthony Power and I are joined by Sheldon Bennett, the CEO; and Steven Eliscu, the COO of DMG Blockchain. They just came out with Q2 earnings, and that's going to be the topic of discussion for today's video. Before we get into it, take a second, smash a like button, you guys, big help to myself and the channel. If you're not already subscribed, McNallie Money, feel free to join. And let us know in the comments section below if you're currently holding shares of DMG and what you thought about their numbers. With that being said, let's get into today's video. Okay, guys. So that's right. Today's video, we've got earnings review from DMG Blockchain Solutions, Steven Eliscu, the COO; and Sheldon Bennett, the CEO. This is going to be a good discussion. Obviously, a lot of growth on the agenda for DMG this year. I'm looking forward to getting a little bit more color on your outlook for the remainder of the calendar year. Gentlemen, thank you so much for making the time today. Looking forward to the conversation.

And thanks for having us again.

Great. Thank you.

Excellent. Hey, I'll get right into it. Can you walk us through your recently announced Q2 numbers, some of the highlights, maybe key operational milestones in the period?

Yes. I think on the sort of strategy and the key operational side, as we announced on our call yesterday, we fully built out and have operating 6 megawatts of hydro cooling. So that's been a great achievement for us. And there's a duality of that cooling that's really important for the company. One is that, that's sort of the way the industry is going and the best miners in terms of value and hashing are really being built on hydro. But the other side of that is we're learning more about hydro works for our AI and our push into AI. The future of AI, as everybody is seeing, is similar to mining is moving into a direct liquid cooling for the GPUs to really push that capital expense and get the most dollars you can out of it. So we, on purpose, wanted to buy hydro over different technologies that are out there just so we could get that initial experience before we really start going into deploying our plans for AI. That's another point on the strategy side that we had announced and we talked about this as well, that we did purchase fully 2 megawatts of SCIF-rated AI data center infrastructure. So that's not with the GPUs and all that type of equipment. It's just the infrastructure. And for those that don't know what SCIF rating is, it's an acronym, but basically it means it's military grade, which gives you a hint to who we're trying to find as a partner. But SCIF rating is sort of like Faraday Cages, RFI dampening and things like that. This modular data center, it's not a shipping container with some holes cut into it and some 800 amp panels in there for like Bitcoin miners used. This thing is custom built. It's 14 feet high, 10 feet wide. Each one is built to integrate with the other one. So when you put them all together, that makes about 5,000 square feet per megawatt. You don't even know you're in a container, you feel like you're in a building. So it's not -- when you say containerized data center, it's not this idea that most Bitcoin mining companies would have or investors would have what a containerized mining is. So just wanted to be clear on that. And I think the other point that we had on the call was just the progress of STC. Things are going very well. We're hoping to quickly tell about some announcements of companies that are going to onboard. I know that we got a lot of questions from people saying, when are we going to see that? And it's to bring up a fully regulated, especially under the Banking Act entity in sort of 1 year, 1.5 years. It's not a small feat. I mean we've put a lot of our time and resources into this. We believe that this is where the market is going. And what I mean by that is that there's a world of digital assets being transacted that's growing. The Trump administration, I think, is accelerating what I think would have happened anyways, just would have been maybe a bit longer. But when you think about what can be digitized and you think about what's needed for individuals to have proper governance and compliance and regulation over digital assets. So consumers, which is what banking is about is to protect consumers, custody becomes really important. And it's hard for us to manage that because the world of digital assets for most people is like Bitcoin and Ethereum. And you kind of self-custody everything. You didn't really trust anybody else with your assets. And when you did, there were bankruptcies made a real problem for you like FPX, where they weren't really using custody the way that it should be used by traditional finance. And so we think that, that sort of traditional finance mindset is coming into digital asset custody. And we're going to see what we think is an explosion and growth of demand for digital asset custody and positioning ourselves now when the market is a little bit immature, but I think we're going to be in a place where we can have good market share for when it starts to really mature, and we're not trying to do it after the fact. And so that was another big announcement we're sort of talking about and pushing forward. There's probably a few other ones in there. But on the number side, Steven does the numbers. He might rattle out for you.

So we had $12.6 million of revenue. That was up 9% from the prior quarter, 1.76 exahash, 91 Bitcoin mined. When we look at what others talk about gross margin, we were at -- our equivalent was 40%. What others equate to EBITDA, we were 20% on that line. Those were on a percentage basis, were down sequentially slightly from the prior quarter based on higher seasonal energy rates. It's one of the things that we've talked about is that we're now utilizing about half our fleet, is utilizing non-firm power. This is essentially wholesale power that is wheeled in from the Mid-Columbia basin from the U.S. and that can be volatile. So in the March quarter, it was higher than what our typical firm rate is. But we still expect for the year that, that to be lower than if we were running only on firm power. So we're still -- we're encouraged that it will actually help us in terms of our ability to save some money on the cost of energy. And so we guided that for this quarter that our energy rates should decline, and they should most likely be below the cost of firm power. So we're encouraged that use of lower-cost energy is going to allow us to even expand more in Christina Lake when we had been talking historically about Christina Lake becoming our AI data center and moving to other regions, finding pockets of low-cost energy. We still believe that's the case. It's just we'll probably be in Christina Lake longer. We have 15 megawatts of firm power. It's going to take us a while to build out that first 15 megawatts of AI data center capacity as a discrete new generation data center. So there's going to be a long tail in terms of Bitcoin mining at Christina Lake, and we're encouraged that we'll have the energy cost to support being profitable there.

In terms of DMG, I mean, I remember when I started looking at the mining space 5 or 6 years ago, there was a few miners that were actually -- quite a few of the mines were hosting miners who sells Bitfarms, Digihost, some of the names out there that were hosting. Then a lot of miners moved to self-mining. I noticed in the numbers there, you've got $683,000 allocated to hosting fees that you guys are paying. Can you tell us more about that requirement to have your machines held at other sites? Is this because of the HPC or?

Yes. I mean this -- I guess the best way to describe it is this was an experiment for us to see in terms of hosting and locating ourselves in another area of Canada with renewable energy. Unfortunately, the season that the March quarter, the rates were much higher than we expected. We expect this quarter, the hosting rates will come down significantly. But we're also not necessarily tied in any long-term contract. So we shall see how that pans out. We think over time, it's going to be similar to what we're paying for firm power and Christina Lake, but we were -- it was higher than we expected for this past quarter.

Yes. I think there's sort of a second factor in there. Definitely, we wanted to try this out. After years of us hosting others, we kind of knew what to expect, and we picked a company that we're familiar with and -- and so that was great. And behind that, as we've sort of said, we have this goal to reach 3 exahash. Part of reaching that is we want to retool inside of our building, which is air-cooled to hydro cooling. So we need to physically move units out, make space so we can retool and then bring in hydro in the future. And so part of it was just like getting space so we could actually start the design and engineering work for retooling.

In terms of that hydro cooling that you talked about earlier, Sheldon, can you elaborate on the performance of those machines? Are they done better than expected? Or are they reaching the targets anticipated? Just to give us an idea of that technology.

Yes. I mean I'll split it into 2 parts. Like part 1 is how are the machines performing, the actual Bitcoin mining machines, which, as everybody knows, as we said, we bought Bitmain's product. The actual machines are running quite well. And so we're quite happy with the technology behind the machines. They're hashing. In terms of repairs, I think we've only sent one in so far for repair. Probably over time, a few more will go in, but it's not like the Jpro years where it was not one. It was many, many, many units. So that's good. In terms of the infrastructure, I think we've struggled more with the actual and space, which we bought from Bitmain as well. Things are, at least for us, a bit difficult to understand. We haven't dealt with this type of pumping technology and all the different things with the VFD and how it turns on, goes off, the alarms, all this kind of stuff. And one of the reasons why we wanted to buy this particularly was we want to integrate this into our Helm, our mine management software. So this has been a great experience for our software team to start integrating into other people's physical hardware. I will say Bitmain has been quite good on the warranty and service side of us installing these 6 units. They've come to site a couple of times, sent some technicians in, helping us out. We followed their procedures on commissioning and work with them, so definitely a learning experience. I've talked to some other miners that have the same type of units from Bitmain, and there are some learning experiences. Going from just fans on a rack on a miner to pumps and VFDs and butterfly valves and all sorts of different things that we're not used to is a bit new. I think the learning curve has been pretty fast. We're getting better at understanding what the systems are telling us and where there could be a potential problem. But I think this will just make us smarter as we deploy more hydro, and I think it will really help in our plans for AI and how we want to deploy hydro and AI.

In your last couple of operational updates, you've mentioned that there could be like a slight reduction in hash rate as we advance into further into '23, is this because of what Steve was saying earlier with regards to...

The hydros are running fine. This is mainly the Jpros in our older fleet, where we'll down clock them in the summer months. And so we kind of -- in the evening, it's nice and cool, they run fine. But during the day, when it gets over 30 degrees C, we will down clock them so that they're consuming less power, giving up less heat, less fluctuation in the hash rate. That down clocking does 2 things, one is we don't have to deal with the problems of machines overheating as much. But 2, from a revenue point of view, we're running more efficiently. We're actually making more money.

More money. Yes.

Less hash rate, but more profitable hash rate. So some people say, "Oh, well, you're losing like hashing." And we're saying, "Well, yes, we are, but we're gaining revenue." So it's like -- it just depends on how you want to look at the numbers.

Now in terms of fleet growth, you guys have plugged in about 65% of additional machines in Q2 here. Can you talk to us about kind of the next milestones in your year-end exahash target?

Yes. Well, we've talked about growing to 3 exahash. We also talked about our building, which is 36 megawatts and retrofitting that for hydro. So when you look at -- we talked about the newer generation equipment that we expect to be very price competitive as we look in the back half of the year, 13 to 16 joules a terahash. We were to take just, let's say, 1/3 of the building, which is 12 megawatts, that's close to -- that adds close to an exahash. And that from a physical implementation point of view would be one way we could reach our 3 exahash end of year goal -- end of calendar year goal. And that's essentially what we're looking at in terms of how we actually finance that. I think on the call yesterday, we said it would either be Bitcoin-backed loan or some other type of debt financing that we would utilize. It still remains to be seen. Near term, we want to -- as we talked about, we want to take down debt on our balance sheet, just kind of given some of the uncertainty and volatility we're seeing in the market. We've just kind of seen some of that just the last couple of days, even as we hit a new high yesterday on Bitcoin, just the general markets, we're being somewhat cautious. But if market conditions allow as we look in the back half of the year, maybe we'll take our -- and if Bitcoin pricing itself is up, maybe we'll utilize that to be able to lever up a bit more. What we want to do is just we want to do incremental increases. We're not necessarily looking for some massive increase in hash rate. So 3 exahash is our target, but we're not looking like some others who want to grow several times their current hash rate. Investors should not expect that. Really, what we're saying with Bitcoin is it's a good business for generating cash, and we want to stay current. And that's really the objective with the business.

In terms of that, you mentioned about 12 megawatts and using that to put more hydro into the facility. What sort of -- obviously, it's on the numbers. I mean in terms of hydro versus traditional air cooled systems, how much more increase in capital is required? And how long is the return on investment achieved coming back into the organization, Sheldon?

No, that's a good question. I mean the way we're looking at it is a cost per terahash for a hydro miner and an air-cooled miner is relatively the same. I think you're a little bit better off buying hydro overall, you're getting a bit more for your money. But then your kind of question is infrastructure-wise, we have the building made for air cooling. But for us, the way we're looking at this is. If you look at the actual physical size of the hydro units, whether they're the service style or the boxes of sort of the traditional look of the Bitmain style, it doesn't really matter. They actually will fit into our existing racking. So our plan is not to change any of our power distribution at all. And so -- and the way we build a pod is we have 500 kilowatts on one side, 500 on the other side, air blows in, comes out exhaust at the top. Our idea is just to use exactly the same infrastructure, but then put the piping in that we know where that hot air would blow into and then take that piping with the manifold that feeds the cold, takes the hot out, run it through a pump in the pump with the VFD to control it, then it would go outside to our dry cooler. And so our incremental cost to convert to hydro is minimal. I mean this is compared to if I had to build brand-new infrastructure, bring in new infrastructure, I'm only really paying for the pumping and the piping and the dry cooler. Dry cooler, something like $50,000 a megawatt. It's not going to hurt us in any way. And then the pumps, a few thousand dollars a pump, VFD, a few thousand dollars more than then all the piping and labor. So this is not something that we can't do. It's not something that's going to be like, "Oh, it's $100,000 a megawatt." This is fractions of that to do this conversion. So we're kind of upbeat about it. It's really just, as I said, it's about making space so we can do this conversion without impacting the existing miners that are running right now.

To obviously have this liquid cooled -- I'm assuming maintenance and longevity of machines is expected to be longer than traditional...

Yes. Going back to the S21s we're running now in hydro, I'm no longer buying fans. So when you think about a fan, okay, it's like $8, $9 a fan. It's not a big deal. But when you have 10,000 Jpros or 20,000 Jpros or whatever people have, those fans are running 24/7, they break. I mean they just go. And it's a moving part that it has got a lot of strain on it. And that's sort of gone. So when you think about it with hydro, you've kind of removed moving parts. You have a control board and 3 hashboards and the moving part is the pump. So as long as you've got some good pumps and a good VFD, you're in pretty good shape. With air cooling, there's a lot more with those fans as moving parts and then you have some of the fans and the PSUs that have to be replaced as well. So this has become much less moving parts and less problems. So as long as you can keep that temperature right, then it's really just about manufacturing. Has your manufacturer made a quality product that consistently works? Yes, we're excited about continuing to grow in hydro.

I remember reading your study on immersion cooling when you put that out into place. And you obviously were sort of leading in that area because you were the ones that effectively doing the testing on this and you produced a report. And what we've seen is we haven't seen enough data from any of the mines are using immersion cooling. But I'm hoping, obviously, as a conversation we've just had now about the hydro cooling there is it seems like you're more than happy to sort of discuss performance and data as we go through. So I applaud you for the transparency.

We're very data-focused. And just on that study we did, that was, as I said before, we're working on getting a grant. We should have an update this year about all of that study and the results of that study. So maybe look out for that, and we'll have a discussion on it. But that project has become a really interesting project on efficiency in hashing and technology. And it wasn't a one and done. It was a start, and this is kind of a study we did to show in general, like we shared it with everybody to show the efficiencies of moving from air cooling to direct liquid cooling. Whether it's immersion fluid or whether it's hydro, it didn't make a difference. That was the point of the study. That study has gone now through some peer review and some more testing and work that we've been doing. And there will be sort of a part 2 of that coming out this year. So we're going to be excited when that comes out, and we'll share that as well.

And what we would also say -- I mean, Sheldon mentioned it before is if you want access to the latest silicon, it's going to be on hydro. I mean we see that with the Bitmain's XP+. And just as new miners are introduced, the most advanced technology is going to be on hydro. And not that air cooled necessarily goes away, but we think now, just based on what we're seeing in the market, hydro is going to have -- this is among the first years where we'll see a real push on hydro technology and a crossover probably this or next year versus other technologies.

There seems to be a real conviction of those miners that want to move into hydro or immersion cooling technology. And then equally, those miners are happy just to stay air cooled because they believe the cost of investment, they're going to get a similar return from what they've invested in air cooled. In terms of those machines from Bitmain, are they literally ready to go into liquid itself? Or have you got to make any changes to the machines when they arrive at DMG?

The miners we bought were hydro-ready. So I mean they just slotted right in and we put the pipe -- connected the pipes and turned them on and they fired right up. So there was nothing really to do. It was quite a simple process. Yes, all of that worked really well.

Yes. With hydro, there's no retrofitting of miners. And with immersion, there's enough availability these days of immersion-ready miners that at least to our understanding, the days of removing fans on Jpros are long gone.

Yes. We are aware that MicroBT bring out models for immersion cooling ready to install. And I'm going back over like 12 months ago, it was like Bitmain at that point in time hadn't got machines that were effectively ready to be put into immersion cooling. You had to remove fans in various parts to get it ready. But it sounds like now there's been a big change to make sure that whichever technology you're using, those machines adequate there to save you time. You want to get the machines hashing as soon as they arrive, and it's great to hear that as soon as they hit the liquid, they were switched on and working.

I think there's enough demand on both hydro for sure, but also on traditional like liquid immersion in the U.S. and other countries. And you can see that by the amount of megawatts when you look at larger companies like Riot converting -- you look at Helios that was now Galaxy used to be. You look at the kind of megawatts of immersion that they build. So there will be suppliers that will continue to make those immersion-ready miners. And we've talked to the big suppliers and wanted to ensure that they're going to continue on making immersion-ready equipment, whether it's direct liquid or hydro. For sure, hydro is going to go. But we were a bit worried that with the growth of hydro so quickly that they might scuttle liquid immersion. And we still believe and I've always believed the liquid immersion is just as good as hydro. It's just a different technology. And we think it's a great technology, liquid immersion as well.

I want to jump over to HPC, AI in a second. But one thing that caught my attention on the earnings call yesterday, I tuned in. I said well done to both of you. I thought it was a strong earnings call. You mentioned the cost to fit out the Bitcoin mining around $1 million per megawatt as opposed to your initial estimates of $2.5 million to $3 million. Is that related to the synergies you found there with the retrofit like you just talked about, Sheldon? Is that the machine prices are lower than you thought they'd be in the cycle? Is it a combination? Can you just add some color?

It's really just the machine pricing is lower. We talk to the salespeople at the big manufacturers and it's kind of their job. They're always saying, "Price is going to go up. You should get an order in now, right?" But we've always kind of said, I don't think so. I don't see a lot of huge capital coming in like it used to. And so even with Bitcoin price jumping up like it is now, we'll see if it stays, what it does. We don't know where it's going. I don't really see machine prices changing significantly. There's just not -- when you look back a few years ago, there was easily $1 billion to $2 billion just of capital going into Bitcoin miners. The lion's share of that went to machine manufacturers. And so unless there's going to be another renaissance of a huge amount of capital coming in, I don't think you're going to see a real price jump. And the capital, people are kind of pausing and their thinking and they're strategizing what they're going to do. I think that capital is smarter and more forward-looking than it was before. I think there's a lot of reasons that went in. I think people made a lot of great money with their capital. I think it can be done again. But I think it will be done differently and people are going to be a bit more pensive about how they're going to do things and what they're going to do and how they're going to deploy capital. And just like we are, we still plan on deploying capital into crypto mining. But we're being really careful how we're doing it. I just don't see us buying the leading-edge miner that's at, call it, $24 to $30 a terahash that's under 10 joules when we can buy something at 12 or 13 joules, as Steven said, for $14, $12. And yes, that power makes a difference, but the ROI on that cost per terahash, it's just too hard to buy the most leading edge. And we believe we're a low-cost manufacturer of hashing. Our cost structure is quite low. Our operating structure is quite low. We own all of our infrastructure. We don't have any real debt around that. The only debt we keep us from the S21s that we've been paying down, as we said. So yes, I mean, we just don't see a world where we're going back to $50, $60 a terahash miners.

No, it was a crazy year 2021. And like you say, that was probably close to the average. I know some of the big miners were able to put in massive orders in 2021 and probably get closer to $30. But some of the miners out there, yourselves including that we're paying $80, $90 a terahash. And you're now saying effectively, you can get some of the most efficient machines, which are at least twice the bit of those machines in 2021 for probably less than half of the best prices we achieved in that particular year.

Yes. And also, it's just -- this comes down to supply and demand, as Sheldon was saying, just on demand side, manufacturers of hash rate are being much more cautious about capital purchases. And Bitmain is getting some competition on the supply side. So we look at Bitdeer, Canaan is coming out with a fairly efficient miner later this year based on what we've heard in the marketplace. And MicroBT is there and it just...

Auradine is coming up...

Auradine, you've got Block. There's a few players in the market now. Yes, I just got back from Singapore where I met with Bitdeer over there. And they're selling their machines, obviously, now to small companies and retail investors. And at the prices they're selling at, they said they're making great margins. So that gives you an indication that even at those prices at $14 a terahash, Bitmain must be making a lot of money out of it still. And when you say demand hasn't increased, I look at the global hash rate and the global hash rate has massively increased in the last sort of 18 months.

I mean that's the hashing you're getting out of new machines is so much higher, right? The physical amount of machines, I don't think is ballooned much is like old ones are getting retired, and the new ones that are coming in, they're doing 4 or 5x the hashing of an old one.

Yes, good point.

And that's on a backwards-looking basis, for sure. I mean we've been wildly wrong on our estimates for hash rate growth. They've been much higher than we expected. But you also just look at the P&Ls of the largest Bitcoin miners and what investors are saying where they should be investing CapEx going forward. And it's pretty clear that there's going to be a reduction in the increase of hash rate going forward. This is all about forward-looking. We're talking about looking at the back half of this year. We just think the marketplace is working in our favor if we actually are a little bit more cautious on waiting to purchase new equipment. And that equipment given more competition and kind of this -- just the whole change in the way the public markets are driving how Bitcoin miners behave, that for us, as we said, adding hash rate to stay in the game of being in Bitcoin mining business and having healthy cash generation, it's going to be more favorable.

Makes sense. Sheldon, the lady at the jewelry store told me the same thing, the prices of Diamond rings are only going up. So same as the Bitmain salesman apparently. Now you guys also made a purchase of some HPC 2 megawatts worth of prefab data centers. You were talking about the level of, I guess, perfection those data centers have, the military grade. Can you talk to us about that investment? Do you know where those will be situated now? And where are we at in terms of client or contract discussions?

Great question. So we purchased out 2 megawatts of 10 available to us, and we still have the right to purchase out the remainder. We bought them mainly to get things going with AI. It's hard to go and tell potential customers that you're an AI company and you have no AI assets. So it does help build confidence that we are kind of putting our money where our mouth is and that we're serious about getting into this business. Where will they go is a great question. So it's kind of a horse and cart thing where if we just put it in Christina Lake, which we can do immediately, but if we get a customer that wants it in the Yukon, for example, or they want it in Quebec, for example, then we spend all this time and efforts and cost moving it to a place and then we have to pick it all up and move it again. And so what we're trying to do is sort of dovetail together the offtake contract with the movement of the equipment. And so we prefer it goes to Christina Lake because we have all things we need there to turn it on and plug it in and get it running quite quickly. We also would like it if it would go to Malahat on Vancouver Island as our partner. And we can turn some on there, but not 10 megawatts. They don't have that much power until some more power is granted to them and built out. But the goal is to get that offtake agreement done and then start moving. There is an argument we've had internally about moving it anyways, like may we not assemble it, but we may move it into Vancouver. So potential offtake agreement partners can physically come and see it, walk through it, understand it, get their head around it versus going to the states and -- go to the states and visit and see it as well where it is with the manufacturer. So in our mind, it's kind of like let's not -- we bought it, let's not really do much with it until we have an offtake. And then the second part of your question is, do you have an offtake? And as we said yesterday, we're encouraged by the signaling of the Canadian government. Now that we have the election over, we have a cabinet, we know who our ministers are, we know who are kind of the decision makers. We understand more of their platform or what's interesting to them from a government procurement point of view. We are feeling more confident that we've been doing the right things before the election that are now reaping benefits post election. And selling to government, we had a question on our Q&A yesterday, is considered slow and painful and usually a long road to death if you're a business that doesn't have the cash to survive. We don't think it's going to be like that now. We think on the AI front, the signaling that the current government has given is that they have money, they have will and they want to get stuff done as quickly as possible. And there's a bunch of reasons for that, whether it's political or whether it's economic or whether it's sovereignty or whether it's whatever. But set aside the reasons, the messaging is that this is something we want to do. So then the real question is, do we have something that is interesting in the government and can we get something agreed with them in a reasonable amount of time, 6 months saying is reasonable. And we've kind of signaled that we're hoping to do this within 6 months, not 12 or 18 or 2 years. If we thought it would be 12 or 18 or 2 years, we would continue talking to government, but we focus a lot more on enterprise, enterprise offtakes. That would just be prudent for anyone. And there's nothing to stop us from doing an enterprise offtake tomorrow if one came along that made sense to us. But our goal is really to try and get in with government because of the SCIF rating. There aren't a lot of enterprises that would want a SCIF rating on this type of equipment. And two, because it's rare to have this type of equipment. And we think that as we're more interested in the Canadian government and its different agencies, we think that, that resonates with them, the access to it fairly immediate and the ability of it to be mobile. And this is why I kind of threw up the word the Yukon. It's like if we did a deal that involves a Canadian agency and they wanted that compute power in the Yukon, it can go there. It's not like a purpose-built building that doesn't move. And that is actually a consideration that we've learned that's important to -- at least on the military side is the ability to move these things around is quite important. You may want a lot of compute deployed close to something for whatever reason, which they won't tell us quickly. And the fact that they do fit this sort of 10 x 14, which means you can road transport them and seaport transport them is really important. So they could be deployed anywhere, land, across oceans, pop-up, come back, whatever they want to do. This is really interesting for some of the people we're talking to. And this is why it's kind of hard to say, well, they're going to go to Christina Lake or they going to go to Vancouver Island because depending on who that offtake agreement is with, it could be there, but it could be anywhere in the world, depending on who does it. So we get a lot of these questions and the questions we don't know yet, but we're going down a path that is sort of narrowing into who this could be on the government side. There's a different path that we're going down on the enterprise side of who it could be and what we could do. Our first choice is government. We think that, that would be the best for us to really enter this business. But we don't affect Bitcoin price. We don't know. We're working it out. We don't know yet.

Yes. It was interesting on the call yesterday, a lot of questions about these government contracts. It sounds like you guys feel that the juice is worth the squeeze. Can you comment on the Systemic Trust on the banking side of things with the work you guys have done this year on that front? Does that put you ahead of the line, so to speak, in terms of relationship with the government or any sort of policy or trust in that relationship?

Yes. I don't think Systemic Trust really helps us on the government side. I mean it's a regulated financial institution. So we have that to always deal with, which is always a joy to be regulated. But in the digital asset world, there isn't a whole lot of government involvement, right? There is in things like policing where the RCMP have seized digital assets and there's a role for custody there, but it's not that big. And the real area of digital assets that's interesting is around banking, around the broker-dealers that have digital assets are buying and selling and holding. So banking, staking, ETFs, things like that, liquidity where we can help with liquidity on exchanges. These are the things that we're interesting for Systemic Trust. And so there's not a whole lot of exchanges in Canada, maybe a bit less, depending on what you think about Robinhood and what happened at WonderFi if you're going to see as a U.S. or Canadian company. But the overall growth of digital assets is what's interesting. And so we're sort of continually running into more and more opportunities that I would say, traditionally didn't look at custody and now sort of looks at custody because one is maturing as an industry and, two, is -- in that maturity is looking at the risk side. And two, regulations are kind of coming in and being understood. And so I said this earlier that when you think about crypto miners and you think about Ethereum miners that kind of started this whole industry, call it, a decade or so ago, there was no custody. It was your own little paper wallet or your Trezor if you had one or whatever. And nobody really thought a lot about custody at the time, it's like you kept your coins to yourself, you never shared them with anybody else, and that was custody. Exchanges started. And obviously, they didn't follow custody and you had Quadriga go bankrupt and lose a lot of people's money. You had FTX as the biggest one. You had in there, what was it Celsius or something as well. There's a few in there, right, where they weren't following custody regulations that a normal trading exchange in equities would follow. And I think the market has learned from that. People have learned from that. And we believe that this learning is going to eventually find its way fully into digital assets. And that's going to explode the size of it. And I think that we're positioning ourselves now for something that we see is going to continue to grow over the next few decades.

Look forward to hearing about it. And Steve, one for you while we've got your finance brain ready and prepared. You have obviously a loan with Sygnum Bank, the credit facility you've got there. I think in the accounts, I think it's shown about $20 million at the end of March. I mean we're mostly in May now, so that could have changed. And you were alluding to earlier in the conversation about reducing some of the debt on the balance sheet. Well, effectively, that is your debt on the balance sheet. Can you tell us -- I mean, it's shown as current assets. So that either assumes there's a plan to reduce it or it's effectively just a rolling loan that you can just utilize over a given period. With the Bitcoin price rising and that loan is collateralized with Bitcoin, can you sort of explain how it works when -- obviously, you don't need to put as much Bitcoin against it, thereby enabling to use Bitcoin for something else that you might want to utilize? How does that process work?

Yes. I mean we kind of look at that as a place that we've parked Bitcoin with the volatility of Bitcoin, as we talked about, the post Liberation Day exacerbated Bitcoin volatility. We were in the neighborhood of having a margin call. So we're very cognizant of keeping a very significant buffer. And just in terms of the way the loan works, if you get below a certain threshold, Sygnum Bank will send us a message and say, you need to top off the amount of Bitcoin you have. Obviously, right now, given the combination that we said we've paid some down and that the price of Bitcoin has gone up, we could pull from that loan if we wanted to. But I think right now, we're saying we're not necessarily looking for significant amounts of capital. We're being able to fund that our needs through operations. It has been useful for multiple capital purchases, not just the T21 miners, but the additional infrastructure related to our hydro. We tapped that. We've been disciplined using only for capital purchases to date. And I think for us, it's just kind of -- did we hit the high for Bitcoin yesterday, probably right in the middle of our earnings call or not? We don't know. So what we're saying is, we're not -- we're bullish on Bitcoin over the long term, but we also know that sometimes volatility can be your friend. Other times, it's not. And just kind of if there's an overhang of economic uncertainty, we want to at least in the near term, take that down, but that's essentially how it works. You think of it as a line of credit. We have a certain amount -- it's over collateralized with Bitcoin. And -- but if it goes below a certain threshold, we have to top off the loan. Right now, we're pretty far away from needing to do that. So that's not a concern. But the amount of leverage that we have on the balance sheet, it's something we just -- we did really well. And I think the best way for investors to think about it is treasury management. We deferred the need to sell Bitcoin at a time when it was lower. And we're not necessarily big believers in technical analysis, but you kind of -- it's hard to fight the tape when we have recurring 4-year cycles. This historically would be the top of the cycle this year. And we want to lock in our gains. We've done really well. We want to lock in our gains. And that's kind of how we're looking at it. We said we're going to take it down. We're not necessarily going to take it to 0, but we will see -- we'll evaluate that as we go through this quarter and look into the back half of the calendar year.

It's interesting. Bryce was having a discussion just over an hour ago about DMG on the previous podcast we did for our subscribers. And you look at the value of your HODL versus the market capitalization of your company, and it looks like the market is not really giving you any sort of value for the business because your HODL is probably close to $38 million, $39 million and your value of the company at the share price today was about $42 million. So 92% of the -- is the HODL price versus the value of the company. We know from your asset base, I mean, I think you're operating your net asset value is like about 150%. So the asset -- for every dollar you're investing in DMG at the moment, you're investing in $1.50. I mean this is U.S. This is that Canadian monopoly money, whatever they call it up there. This is U.S. money. And so it's like $1.50 for every dollar you've invested. I mean it's extraordinary that some of the companies just aren't getting the sort of like the credibility. And then we look at the likes of strategy, the market is giving a 2x premium on their Bitcoin HODL, but not giving the miners anything there. And as an aside to that, just do you see in the future any opportunity to get a yield from the Bitcoin? Is there anything you're looking into that can maybe bring in another revenue stream that way? Or is it something that's not on your mind at the moment?

I mean we look at that stuff. But for us to worry about, okay, let's say we can get 5% yield on our Bitcoin is kind of -- it's like talking about just fine-tuning a treasury management policy that really isn't going to ultimately have any impact on the long-term value of the company. The long-term value of the company is by us succeeding in the initiatives with the software and services, including Systemic Trust and what we're doing in AI. Clearly, Bitcoin mining on its own is a tough business in the public markets. We've been valued less. We know that because at least in part, maybe it's because of the exchanges were listed on our market cap, things like that. And we know that, that by itself is challenging when you kind of look at the broad base of public miners. So we're not necessarily caught up on how we could fine-tune our treasury strategy. We're going to look at that if it gives us an opportunity, but our focus is really on how do we maximize the value of the company. Yes, the analysts at JPMorgan have given a 1.5x value on the HODL based on -- on a miners' HODL, based on kind of what they're looking at relative to strategy and where they're kind of saying is expected appreciation of the asset. That's reasonable. And you could say, okay, well, for DMG, that even reinforces the point you're trying to make. But that's not our focus right now. I mean Sheldon and I are not out here screaming that our stock is undervalued. We know we have work to do on really realizing value from the company. And treasury management for us is like we're proud of it. We're proud of the work, the job that we've done with utilizing these Bitcoin-backed loans. But at the end of the day, it's going to be much more important for us to execute on the strategy.

Yes. And just on that like a 5% yield on a Bitcoin, that's nice. But we've looked at a lot of these different models. If we were to part with 200 Bitcoin to go into a 5% yield, the keyword is part with it because it would go to somebody else's hands and then we take on the risk of them performing and us actually getting our Bitcoin and our yield back. There's getting more interesting things where now we're talking to some potential partners where the Bitcoin that we would put out for a yield would sit in Systemic Trust. And this is more interesting than it would sit in some company in a jurisdiction that we're not comfortable with that would not have the insurance and the protections if something went wrong, that we would be fully made whole. And that's really important. And this is why I think talking about getting Bitcoin yield is hard because at least at the Bitcoin miner side, a lot of us have learned like once you've let your Bitcoin leave your wallet, you're no longer in control. And so you really need to trust that counterparty. And there isn't a whole lot of trust in other counterparties out there right now for lots of different reasons. And even in trust companies, Canadian trust companies are completely differently managed and regulated than U.S. trust companies. And so the thought of us putting our Bitcoin into a yield in the U.S. company with the U.S. trust is a nonstarter for us. So yes, that's just a thing to be aware of as well. So it's not that we're against it. We just haven't found a mechanism that we would be comfortable putting our Bitcoin at risk for that 5%. It just -- we haven't found it yet.

Yes. As we get close to the end of the conversation, I just want to get your thoughts on Bitcoin mining over sort of like the next 3 or 4 years as we get closer to another halving. And also effectively looking how -- I mean, you've already highlighted it's a challenging industry at the moment, but the move into HPC, AI, how the 2 industries could actually really complement each other moving forward?

Well, that's a great question. We've kind of said before, we are kind of believers in what a term that came out called Mullet mining. We do like that idea. We know that HPC doesn't run at 100% power utilization like crypto mining does. And so we think there is room in there for crypto in behind. We also know that when you look at HPC, you have your primary power and then you have your backup power. And so megawatt-to-megawatt, if you've got 1 megawatt running at 80% and you've got another megawatt sitting there in backup, to me, I see 1.2 megawatts it's crypto mining and a megawatt that's doing AI. And then you're fully utilizing your capital that's gone into building this infrastructure. And so this is kind of the way we're thinking about it in our heads is -- and Steve sort of alluded that this idea that we would just only do AI, Christina Lake and move all the crypto mining to other places. They've kind of rejigged that to like, let's put them together like a Mullet mined idea. And the AI would be in a different part of our property, and we've got 30 acres, we would build that separately with a different distribution line. And the crypto would stay where it is right now in that same distribution line to keep running there.

Awesome. HPC in the front, Bitcoin mining in the back, the Mullet mine. We've heard that term before as well, Sheldon.

Yes, yes. So it's -- I always thought of Mullet is referring to hockey, but okay, fine. I mean it's been around for a long time, remember it in the '80s and '90s as well.

There you go. And we just think this is another reason why Bitcoin miners are well suited to go after this new generation of HPC because for us, maximizing ROI is always top of mind, and we're familiar with how to do things that traditional data center operators may not have even thought of.

Yes, very complementary between the 2 businesses and a good question, Anthony. I know we're at time here, you guys. I wanted to give you the opportunity to close out if there's anything we haven't touched on today. Great discussion. Congratulations on the earnings, and we look forward to seeing you down in Vegas.

I think the only thing we didn't really touch on, and I didn't bring it up at the beginning was just the advancement of our software, but with the blocks here coming back out and being made public again. I think we do that another call. There will be some more media out about that, but our software team has been working hard to bring to the public a product that was freely available, as we said in one of our press releases, and now it seems to have disappeared. And so it's something we use all the time. And so we're happy to open up blocks here to the general public in the future here to use a Block Explorer for free where they can put wallets in and download transactions. I don't know why this seems to have disappeared, but it has. And so we thought that was a little bit of an injustice to the Bitcoin network. So we are going to launch out blocks here for free again for people to use and track wallets and download information about wallets. So that's the only thing, and you'll get some more information on that. Outside of that, we are in Las Vegas next week as you guys will be as well. So we encourage people if they would like to see Steve and I or one of us, not the other, make your choice. Just let us know, send us an e-mail to investors at DMG, and we'll do our best to meet.

I'm just looking down the list there, Sheldon, and I'm ticking all things off like you guys do. The only thing you don't do at the moment, and you might not start doing this is actually build your own mining machines.

If you go back in our history, we actually were going to build a crypto miner. We had put some money into this about 2017, 2018, something around there, Steve? I can't quite remember. Steve was working on that project.

Long time ago. Yes.

Enough money, and learned not to do this business.

Yes. Fair enough. Okay, guys. Well, we've covered a lot of ground here. If we've missed anything that you're thinking of, leave it in the comments section below. Feel free to hit the subscribe button, like the video, and we'll see you back here on Monday.