HIVE Digital Technologies Ltd. (HIVE) Earnings Call Transcript & Summary

[Audio Gap] results related to HIVE 2020 Annual General Meeting of Shareholders. Now if we move to Slide #2, I will briefly mention disclosure, which you can read in full after the presentation is over. Except for the statements of historical fact, this presentation contains forward-looking information within the meaning of the applicable Canadian Securities legislation. That is based on expectations, estimates and assumptions as of the date of this presentation. If we move on to Slide #3, I am pleased to welcome today's presenters Frank Holmes, Interim Executive Chairman of HIVE; and Darcy Daubaras, Chief Financial Officer. And now as we begin the corporate presentation on Slide #4, I would like to hand things over to Frank Holmes. Frank?

Thank you, Holly, and thank you, everyone. I've just never seen in my life so many questions come in, Darcy. It's really quite remarkable with the -- there's a concentration, you can see a clustering questions that shareholders are inquiring about. But I think we're going to try to answer all these questions. But what I'd really like to start off with is for those were not able to make the AGM, and just for Darcy, give a recap that the positive news that came from the AGM. Darcy?

Yes. We held our AGM approximately 2 hours ago. And as everybody knows with the COVID that we're experiencing, we had a lot of shareholders -- we were very happy with the number of shareholders that voted electronically to keep everybody safe this year, and I'm happy to announce that every one of the proposals that were put forward went through and were approved. So all of the Board members, we've got -- sign off on our stock option plan, restricted unit plan and also the auditors, Davidson & Company LLP have been approved for another year. So it was great. It's good to see the energy from the shareholders through their voting, and that was a very exciting thing to see. And obviously, we're very happy with the mandate that we've been given going forward for the next year for those directors, and we're looking forward to 2021. And as Frank has said, as the number of questions that we're getting just shows how much energy there is around this sector right now. A lot of it has to do with the pricing, but I think it also has to do with HIVE as a company and how we've been a proxy for Ethereum in the past, and it's becoming even better moving forward.

I'll just to add to that, Darcy, in December 8, Motley Fool unexpectedly came with this incredible bullish article on the industry, the ecosystem of crypto and Blockchain mining, and they recommended HIVE as a proxy for those who do not want to open an account on an exchange and have a wallet and buy their own Bitcoins, Ethereum there that were that proxy because we both hold an inventory, and we will sell enough coins to pay for our electrical bills and everything else we need. And that really triggered off this sort of new surge of buying that we saw because of this sort of mining Bitcoin and Ethereum. And we're the only one that really mine Ethereum on an industrial scale. But in the next visual, I just want to remind everyone that the DNA of volatility. It's a great opportunity for some, but for others, it's just too difficult to stomach. HIVE Blockchain's daily volatility could be plus or 9%. That's how the data has been acting recently. With big interest from institutions, they have said they've been buying Bitcoin. Predominantly, those institutions are going through the futures market. And that's a big part of what was able to take Bitcoin through $20,000, predominantly a hedge fund is well known, that started earlier this year buying. But that volatility works both ways. It can go up 9%, it could fall 9%. And over a 10-day period recently, it's been resurging and falling, there's incredible corrections we're seeing. Compare it with the S&P 500, compare it to gold, you compare it to Bitcoin and you compare it to gold stocks. So clearly, we've taken on this new DNA of volatility as more people want to participate in this business for the critical business, but do not want to go directly and buy a coin. And I'm just going to go to the next visual try to walk you through the sort of -- this all started to take place that just prior to the Bitcoin having. To me, that was significant, but it's interesting because Bitcoin really didn't move much, and there was like sort of up, what's the word, apathy towards that having. But I know from my experience of over 30 years in the gold mining industry, if you were to have global supply of mining, gold would be over $20,000 also. It would just explode. When you have this embedded under growing demand, especially when you look at Asia and India and China and Southeast Asia is proclivity buying gold. What you've seen with Bitcoin, it's become a phenomenon that's global. And so we had this, what to me was important was a golden cross. And you can see where the 50 day went above the 200 day, and it hasn't looked back. Interesting enough, this golden cross happened for gold a year earlier, and it's been going for a longer up cycle, but nothing like the movement that we are seeing in Bitcoin and in fact, I would say that Ethereum is lagging Bitcoin, and Ethereum could easily double to put in context where Bitcoin and Ethereum peaked at the last surge in 2017. But some of the -- the next visual is just highlighting the number of addresses holding greater than or equal to 1 Bitcoin share, and that's been growing. And there's a great piece of research years ago on Metcalfe's Law that explains that as more people adopt to a system of supply, which is shrinking, then you get these exponential moves on the upside and I think that, that's where we're witnessing, there's been so much positive news this year on the crypto space. The next visual is showing you the total Bitcoin options and open interests as it's have been expanding, and this is part of the institutional and have come in there. But a big thing that happened a couple of weeks ago was MassMutual Insurance, and they bought Bitcoin in cash. And they basically included, what they call a cold wallet. And that also ignited this industry. Now the next visual is dear to my heart because I always pulled in this debate, gold versus Bitcoin. I think that they're both unique alternative asset classes. And the drivers behind Bitcoin are similar as an alternative asset class as it is to a possible part to any wear-haul. It's just the way you see that more people want to have a limited number of prints, the higher the price goes up for those prints or those original paintings. Gold is different, gold you wear. You really don't wear your Bitcoin. And you need electricity to enjoy it, to be able to convert it to something that you could. So gold has many more applications besides being the fourth most liquid asset class in the world. So I'm a big advocate that having both is just wise for that person that has a bigger appetite for risk. So this is another visual to try and put things into perspective of how Ethereum and Bitcoin have been sort of tracking for the past 2 months in this sort of huge move, and they're moving in tandem. The other part is just recognize that HIVE is moving in tandem by the hour. If Ethereum is up or Ethereum is down, HIVE Blockchain is moving exactly in tandem. And I've been told it's quant funds that have algorithms that trade-off of it, and that also accelerates volume. But this is another visual to give you a highlight. When you look at the MSCI All Country World Index, how it's performed. Now it's come back from the wipe out that took place in March and April bottom, and it's now positive for the year, but nothing like Bitcoin. I mean it's just really quite remarkable. And the Bloomberg Galaxy Crypto Index, it too is also far paced. And this is what millennials are coming into. And this is a very important part we have found for our other -- our funds in the ETF space is millennials and price discovery. By going to these various websites where they can trade securities at no commission, they're also, for many of them, like the Robinhood and the Acorn, they can buy Bitcoin and Ethereum. And so what we're seeing is that this price discovery by minnows all of a sudden brings in bigger players. And HIVE has been such a wonderful recipient of that, but there's some rational reasons behind it. But this will give you an idea of how we outperformed the Galaxy Crypto Index, the S&P Composite Index, the NASDAQ Index. The NASDAQ's spectacular, being up 42%, but nothing like HIVE has. And I think it's just this -- the imagination of HIVE replacing a much bigger universe of buyers that want to participate, but they're reluctant to buy the Bitcoin and Ethereum directly, they're using HIVE as a proxy. And that is why HIVE is positioned to maintain coins in inventory. We've traded them out when we've needed them on our quant model and for capital expansion. And the next is we hit $1 billion in market cap. We have outperformed -- we've seen that Riot has also done a phenomenal job this year in its growth. A lot of it has been able to -- with their AMT, we call it, at-market trading, been able to raise capital to be able to fund their future needs. What is interesting for us is that we've not used that mechanism as of yet. We've used it with cash management, sort of an active treasury management that Darcy and the team have done a great job in managing and we've been able to -- and we'll talk a little bit more, maintain where we've been growing. But this is another visual of looking at how this year we've done as a stock, and there were so many doubters. And this is not so much the boast to everybody, but really the issue is that we maintain our education to the shareholders of what the company was doing and what the landscape was. We talked about it over 18 months ago, what was called the crypto winter. We explain what our experiences were and how we're managing it. And I think what happened for a while for the other cryptical companies, they had other problems and/or their executives, they were not maintaining the rapport with the public. Bear market or bull market, we've consistently been giving quarterly updates and doing communication and educating how and what we're doing in this sort of very volatile crypto ecosystem. And since November, which I thought was interesting, basically Thanksgiving when we announced, around our GPU.One acquisition, how we performed. And that ignited interest because I think we want to control our destiny. Darcy can tell you many stories that just having control of your destiny is just so important, not dealing with landlords that are greedy, landlords that try to take advantage because they're in the crypto business. And so that's why we've entered into a purchase agreement to buy GPU.One. And to fulfill and part of the terms of that, we're going to complete their campus. They ran low on capital to complete their facilities, and we made that commitment by issuing shares. Actually, a very modest amount of shares of the company. And more, the investment was to complete it out for the 50 megawatts, so we can complete our vision for the next 12 months. This is the other visual that's really simple. Ethereum has been a great move this year, but HIVE has participated more. And a lot of people can't understand it, but I'm going to explain to you in the next visual, what I think is a real key factor. In the world of quantamental research of looking at stocks, and that is any stock where you can see revenue in the last quarter is above the fourth quarter average on a per share basis. So when a company is issuing shares faster, then they are growing their revenue, then it slows down their overall, the quants immediately show that -- indicate that, and they don't buy those stocks. So what did HIVE do during the summer, it demonstrates to the public, it was the first quarter where we were independent of Genesis Mining, we were able to show that our sales per share grew at 85%, and the EBITDA was up another massive amount, which was the #2 best-performing company. And the company that's made the most press releases on expansion of equipment has been Riot. In fact, their sales were negative. Now this is important to fact check using that database. Darcy, do you have any comments on that?

Yes. It's definitely interesting to see how the market is reacting to some of those announcements for equipment. And as we know, within this industry, the availability of equipment coming out of China is getting very scarce. It's controlled by a couple of people, and you've got Riot making major commitments. From what I understand there, the days of delivery are quite a ways out, but it's showing to the market that they're able to put a press release out and the market reacts to it. On the GPU.One side, I want to echo what Frank was saying is that memorandum of understanding that we have with them to try to work out a deal. We're continuing to work on that, and that is very much being able to control our own destiny as Frank had mentioned, to be able to talk directly with landlords, talk directly to the electricity providers. A lot has changed, especially in the last 2 years since I've been with the company. When I started out, we were very much having to take what we were given. We didn't have a lot of power. Over the last 2 years, I think with the work that Frank and I have been able to achieve we're getting more transparency and be able to control our own destiny, and that's been a great benefit to the company and to our shareholders. I'd much rather see the train coming with the transparency and be able to react to it than to be in the dark and have the train hit you right away.

And this is the Darcy and myself also has been a vice director, who is our concert violinist and tax lawyer that has been in this industry for, I think, over 6 years. So he knows a lot of the issues, and he's been inter -- very critical for us in getting control of the assets in Sweden, Iceland and controlling our own destiny away from our -- the other strategic partner we had. On the next visual, it's shown up. This idea of communicating on a regular basis, good news or bad news, how you're managing, sailing in the storms and the winds of the crypto space. We've continued to do that, and it shows up in liquidity. Darcy, why don't you sort of comment on these numbers. I think as you said, it's over 2 billion have traded so far this year.

Yes. To the end of December, we were always very excited about the amount of volume that we get on the bench for exchange. So we just did a quick evaluation. And at that time, at the beginning of December, we had treated over 1.5 billion shares on the TSX and the other associated exchanges within Canada, whether it's the NEO or some of those other alternative ones. And then when we take in the amount that's down on the OTCQX in the U.S. and our exchanges in Frankfurt and Berlin, it pushes us over 2 billion in trades worldwide.

The next visual is another sort of idea of looking at that volume that has been expanding and liquidity. And it's not just here. You add these numbers up. And from when Darcy commented the first time, I think it's 1.7 billion shares have traded. When we look in Canada, another 420 million in the U.S., we're talking about a 400% increase from the previous year. And we've really not issued many shares during that time period, and we've demonstrated the growth in our revenue and earnings and I highly recommend that you go, if you have it and you're a shareholder, is listen to the recap we gave on December 1, when we made the earnings announcement, the first 2 quarters that we were independent of the previous partner, strategic partner that was with the company, and we've been able to get much more transparency to the shareholders. And with that, we've been able to -- when you look at the agreements we had at cost of electricity, cost of everything is down, I think we just negotiated 50% of Swedish energy at less than $0.02, at $0.016. That's the cheapest of all the crypto companies. Darcy, you echo that?

Yes. No, no, absolutely. Yes, through 2021, we've locked in with our electricity provider Vattenfall to hedge 5% -- 50% of our electricity. And this is something that we like to do, and we did during calendar 2020, just to try to take the uncertainty out of the electricity because, as we all know, the electricity is the largest single cost of production that we need to -- in the data centers and if we can lock some of that stuff in, it's just us in budgeting and just to take away one of those extra variables in the business.

And it's really important that you have these big downdrafts and corrections. At the beginning of this year, we had Ethereum surge to $280, and then quickly fall back to $125, and then do a nice steady march up after the having took place to over $600. And it's those down drafts. So we apply our -- I mentioned before, we apply our quant model. When these things were up 2 standard deviations, Ethereum was over 60, 20 days, trading days. And over 1 year, we would take profits to be able to expand, and then we would mine. And when it went back to $125, we said, okay, well, let's just keep mining and rebuild our inventory position to get us back up to a satisfactory level because we never know when we're going to need those coins for, if something that's going to expand. And it was fortuitous that we did that after the correction took place. But here is an important part in visual. The next one is showing you that HIVE reported September 30, record Ethereum mining production, driven by DeFi demand. It was an unprecedented DeFi demand. And the next visual is basically staying that the Ethereum miner has generated all-time high fees in the second quarter of $17 million. For this quarter, it's less, so it has impacted us. There's the sheer number of benefits we've got from it and I think approximately from a theory in mind by blockchain, I'm rounding these numbers off. So just please, they're not exact numbers. And -- but I think they're -- Darcy could probably highlight and comment on the change in the numbers?

Yes. As we've -- had announced and talked about in Q2 of fiscal 2021, when we got there at 32,000 Ethereum mined and received. That was a huge push and a huge jump in DeFi during that period. And as a result, there was a lot of demand and the transaction fees went up astronomically during that quarter. So when we get our rewards, part of it is, I'll call it, the base Ethereum, and the other part is driven by the transaction fees that we get. And there were times where on a daily basis, 40% of the fees we were receiving were attributable to transaction fees. That's dropped off quite a bit, as you can see in the third quarter year-to-date, down around 20,000. And that's just because it's fallen off of it, but the DeFi is still there. We're still getting pieces of that. It's not as robust and hasn't exploded as much as we had some of those peaks as we had in September of 2020.

The other thing that's just to bear in mind is that during this period because the fees were so high, a lot of people started jumping in on trading and mining Ethereum. So you could see the difficulty rate rose in this past quarter by 22%. And so that means just that more people trying to get the -- the sort of fixed number of coins being mined just makes it more difficult. But we think that this is going to drop off here going into the first quarter of 2021 with the -- what's called a DAG file, that is the memory chips are going to need 8 gigabyte memory chips, and we're going to talk a little bit more about that which we think is going to drop off dramatically. But on a positive note, for Ethereum coming off to that degree, our Bitcoin mining has an improving for a couple of reasons. We mentioned previously that Lachute was a slow go, and we bought that during COVID, which has made it very difficult. And now it's -- even buying GPU.One, the challenges when you can't even go across province -- provincial lines and that they stopped to flying over to europe, part of Canada. It's made us difficulty, but we're still pursuing and going through the data, but the expansion we anticipate from Lachute, the having impacted all the S9s we had. As you can see, the June 30 quarter, we had none for the March '20 quarter, and then we exploded up to $153, and then the having took place. So that impacted our older chips, I guess S9s. And we sold some -- many of them, and we kept on stream, ready to go, turn on electricity running through them, we kept them on the shelves. And we made an acquisition, which we announced. So Darcy, keep comment about that, and we expect to be a record Bitcoin production this year.

Yes. No, absolutely, Frank. When we acquired Lachute facility in Québec in early April, we had about 1.5 months. So half of that first quarter that you see of the $153. We were running S9s very consistently, leading up to that havening because we all knew that there was going to be some issues after that. Continuously through there, we made some capital investments as part of our expansion to put some new generation miners in there. When we did hit that mid-May havening. We unplugged a lot of those S9s because they weren't profitable. So on the back end of that first quarter, we were running without the S9s. And then through most of the second quarter that we see there with the 88, that's that effect of the havening. Just because of that, the S9s weren't profitable, so we weren't running them. So we had a lower number of machines running, but they were the new generation miners that are much more efficient and can make money at the prices that they're running at, which was around, I think, they averaged around $340 off the top of my head for that quarter. And then as we've seen, we've seen a huge -- or sorry, I was thinking of Ethereum there. But they were down. But as we've all seen, there's been a huge spike in the price of Bitcoin. We've plugged those S9s in that we had remaining, tried to get them all running on their 3 cards, and we're seeing that right now up until yesterday, we -- 140 coins. We expect that to be around 160 by the end of the year. And we still are very bullish on where we think that Bitcoin is going just internally. So we're managing the sale of those coins. We're being fairly conservative, and we're actually -- when we're needing to sell points to pay for operating. A lot of that is coming from the Sweden Ethereum side. And just following up a little bit on what Frank was talking about in terms of Ethereum and that decrease that we did see -- that we are experiencing this quarter. And I know Frank is going to touch on it a little bit. But that DAG file issue is a huge impact on our GPU miner. So throughout the third quarter, we've been spending a lot of money upgrading those rigs. The vast majority of them had 4-gigabyte cards. And that was sort of the line where these DAG files were coming out and the chips have a harder time to manage a DAG file that size. So they don't drop off a cliff and become completely useless, but their profitability drops. So we're experiencing that right now. We've been going through a very aggressive replacement program there, putting in 8 gigabyte cards, and we're well on our way, and we've got a great system setup to be able to replace those fairly quickly over the next little while. So part of that is what we're experiencing there with the lower. But with these 8-gigabyte cards, we're trying to mitigate that as much as we can moving forward.

Right. And further, just to complement on what Darcy was sharing with you is that we look at our Bitcoin, we're over 300 Petahash now. And our vision, you mentioned this before, is to get to 1,000 Petahash this time next year. And the GPU.One opportunity would allow us to fast track the build-out of that to have that footprint. And we're also looking at opportunities here in the U.S. in Texas. So I think it's interesting how it's evolving and this inexpensive electricity here. And it's always green energy. That's all we'll focus on. But we think that this time next year, our goal is that we'll get this up to 1,000 Petahash. And coming back to Ethereum, what I mentioned earlier is that during the quarter, many people with 4-gigabyte memory cards jumped on the bandwagon after the Ethereum fees came out, and now they're going to have to lead. That's what -- so we think that we're going to see the difficulty and our speculation is going to decline over the next quarter as we ramp up our 8 gigabyte and just to give you an idea, we have -- we're like a major force in that, and ended up having 107,000 GPU cards in Sweden, that's like 13,400 rigs. We have to take these from, what's called an RX 470 chip and upgrade to an RX 580. So we have been moving chips as they come in, move them back to China, we get back a credit for them. And it's a rotation that was running at 4,000 cards a week, and I think it's just up to 10,000 cards a week, so that we can get to the sort of 80% of the way there by the end of January. We've ordered almost 100% of the cards. I think it's over like 90% of that number so far. And it's just in process of being improved, the memory chips, and then coming back and installing them. And in Iceland, we had -- we basically had RX 380s, and they're replaced. And I think it's about 3,800 rigs. And as Darcy said, we spent a lot of money, of our cash, and we sold some of our Ethereum at these price levels to help pay and accelerate so that we wouldn't be caught behind this DAG file challenge. Any additional comments there, Darcy?

No. I think it's been a, I'll say a challenging quarter for the spend. The -- as I call myself, the guy with the calculator that's taking a look at the forecasting and the budgeting. It's necessary capital investment that we need to spend. And it gets a little bit nervous because of COVID and everything else going on. So you run into challenges where the fact that we might be able to put everything together, but now you've got shipping. And my fingers are crossed that worldwide that this pandemic can get under control, and shipping can become a little bit back to normal. And the other thing that we run into, that's a bit of a risk and it is every year for any miner getting stuff out of China is the timing of Chinese New Year, which I believe was scheduled for sometime in February, there's been reports that they might move it up. So I'm hoping that with the work that we've done in investments that we can get as much as we can in before that Chinese New Year shutdown happens, and get up to that 90% level so that we can keep mining and take advantage of this bold run that we're having with the Ethereum pricing.

And I think coming on in the next visual is to show you that the enthusiasm as crypto prices are rising, not only as HIVE can benefit from enthusiasm, but the ecosystem of coders, there's something like 30,000 in the ecosystem around the world. And this has been growing this year. So which is positive because a lot of the places are losing jobs, but the interest in mining or new DeFi projects where you can convert your Ethereum into a securities lending Ethereum and you're going to get Ethereum yields. It's really interesting to me because what I've seen is that the supply of Ethereum is being soaked up with many of these new decentralized finance mechanisms to generate yields. And then we have Ethereum 2.0, so the trend running parallel with proof-of-work and proof-of-stake. And this proof-of-stake is that you have to contribute your Ethereum, which you're going to yield on. And basically, that supply is gone. So I think the numbers were adding up close to 5% of the Ethereum supply this year has gone. And that's sort of a very bullish tone for the industry. And as Ethereum, I think, will be a key growth sector next year that -- and most often, they use Ethereum as a backbone for these DeFi ideas, these concepts, et cetera. And that just creates a demand for us. So I think that the last time, as I said, Ethereum hit $1,500, when Ethereum -- when Bitcoin hit $19,000. So Ethereum is way behind, and we're in a very advantageous position as we fast-tracked our build-out over the next month to 6 weeks. So we -- next visual is just showing the industry, just not only people coming back into it, but the spending. Blockchain spending is anticipated to grow as more people spend time and money and effort on it. It just helps the overall ecosystem and the digitizing of money. More countries are looking at it. The Bank of International Settlements has talked about it. There's so many white papers but the idea of digital money. And we're in the sort of big groundswell within -- and HIVE is there mining Bitcoin and Ethereum. And not only with that, we have a very strict sort of policy of being green energy only, and electrification we'll be seeing in Sweden with our software being able to slow down or accelerate the use of electricity during peak periods. The government is turning around and participating with that, and we get paid. We slow down. It doesn't -- we're mining less Ethereum for an hour. We're going to get compensated for it, but it really helps the community, it helps the overall infrastructure, capital spending for power lines, et cetera. So we're very excited about seeing this how it's going to grow. We have people looking at the Lachute facility, new landlords, and they're looking at taking the heat from our thousands of, think of hair dryers, having 10,000 hair dryers blowing at the same time. That's a lot of heat giving off. And that heat is now to -- heat a building in the snow and the cold. So these are the positive parts that we see there that are very unique for our business model to have an ESG footprint. We mentioned earlier that Lachute, it's been a slow build out due to COVID. We're seeing, like I mentioned earlier, regarding Darcy said about China, we're seeing that moving people from Croatia to Iceland to Sweden, along with getting equipment on a common basis. It's just ongoing as we navigate through COVID. And we're just not stopping. We just make it slowed down. But we're not stopping and to upgrade our facilities and to expand our facilities. And our goal is in this next year is not only to get 1,000 Petahash for Bitcoin mining, but it's also to build out our facilities in Sweden and Iceland. And when you take a look at Sweden, it has the capacity for us, in our leases, that to add something like 13 megawatts. We have that ability. And if the electricity is cheap enough, well, that would be another 10 -- that would be 10,000 rigs and 80,000 cards. So we have to plan that, and I'm really happy to share with you that we've done that all internally. We have not taken on expensive bank debt. We've not taken on expensive loans. We've negotiated, tried to look at it, to do it, et cetera. But so far, we have managed our growth internally so far and doesn't preclude us from putting on some type of a debt that doesn't preclude us. But we have found it's been cheaper to manage the volatility. Like I said earlier, when Ethereum has these huge explosions. On the upside, that we'll take profits off the table to help for expansion. These are some of the visuals for 2020, where HIVE's opportunities, that data center campus in New Brunswick, Canada, giving the company access to an additional 50 megawatts of low-cost green energy. The biggest headwind we hear all the time is Ethereum 2.0. We think it's 3 years out, and we think there's lots of opportunity. We think the supply side. And just like we're seeing in copper, copper hitting a 8-year high. Well, why is that during a global slowdown and copper going up, why? Because supply is shrinking. So having a Bitcoin, along with Ethereum's DeFi and Ethereum 2.0, they're taking supply of the system. So I think that there's much more upside and then we'll take a look at -- I've been asked so many questions about going into putting up our -- doing your own node and hosting some of your own coins to earn an income. But right now, it's much more profitable for us to mine the coins and sell them if we want to get income. And Darcy, we've got lots of questions.

Yes. So I now would like to open it up to questions. As Frank mentioned, a lot have already come in. [Operator Instructions]. So the first question I have for Frank and Darcy is, after you mine the Ethereum and the Bitcoin, do you immediately sell it in the open market?

Well, no. Not necessarily.

That's right.

What we do is once we mine it, it goes into our cold wallets that are held -- a lot of them are held off chain with Bank Frick, and also we're moving over to a company called Fireblocks. And what we do is we mine just enough to pay for our operating expenses and try to inventory the rest of it. So in times like now, when we have high crypto prices, we don't have to sell as many coins to cover our operating costs. And we're really lucky that there was a period there where we're really building up our Ethereum and Bitcoin reserves so that when the price is tanked, and for lack of a better word, we had that inventory to do things like we've gone through this quarter is to fund the upgrade of our GPU chips within Sweden.

Okay. Another question says, does HIVE's current expansion plan include building the Kolos project?

Well, that's interesting. For the shareholders that are not aware, we spent money early on this expansion in the Nordic countries, and that was a big air ball. Because just as we bought this land, the government politicians were anti-crypto. They increased the taxes. They made the investment just commercially -- just untenable, you just could not make money with it. And just recently, they changed those terms. They now want to have Bitcoin miners to come back to the country because they have a surplus of electricity. Inexpensive green energy, hydro energy, they built dams all through the fields, all through Norway, and so we will explore that. We've kept it on our balance sheet. And we still look to resolve that. But right now is for us is to focus on the opportunities in Sweden, which we have an existing intellectual coop group. We help with the Boden industry. They have a complex. They have a university program for training coders and gamers. Boden used to be the military center for the Swedes to back against the Russians, it was an important NATO site. It's now basically for a technology center and inexpensive electricity. So you have a complete ecosystem there. And we have Facebook as the data centers there and other major users of data centers are in that area. So the opportunity in Norway will go as a back burner and then we have for Iceland. We have opportunities to expand in Iceland, our Ethereum footprint. And then it's just massive what the opportunity is for us in New Brunswick and in Québec. Darcy, would you agree with that?

Yes. No, it's definitely been a challenging situation there, and it's sort of been, I guess, a bit of a holding pattern. And the great thing is just the -- focusing on those facilities that we've already got in place. And being a part of the community there in Boden is really important to us because it's been our flagship at least since the company started.

Okay. Another one says, approximately how many Bitcoin will 1,000 Petahash produce on an annual basis?

Well, that's going to depend on the difficulty. That's going to be a big factor.

Yes.

So if you think today, we have approximately, just giving around numbers, not exactly, but approximately 300 Petahash, and that's generating 2.5 coins a day, Darcy, roughly ballpark?

Yes. It's so volatile, as you say, Frank, with the difficulty from day-to-day. But yes, it's around 2.5 a day.

So taking that up to 3.3, that would take it up to 7 -- that would take it up to about 8 coins a day. Based on the difficulty today, it's really important to recognize that as more people come into mine, it's a fixed number of coins. It's like a piece of cake. And there were 6 people going to enjoy the cake, another 60, guess what, there's less there to share. And so the only way to crowd with those other hungry eaters is to have a faster chip. And so what we see is the difficulty delays. There's a real technology problem in Asia of getting just memory chips, but just overall chips that are going to Bitmain and going to the other manufacturers and then selling into the space. There's been -- I've been told that there's been a big demand by telecom companies around the world for DRAM and for -- if you look at NVIDIA chips, they picked up, and a lot of that has to do, the growth for 5G. 5G is very important for us. You can see the entertainment business, Disney's announced it, Warner Bros. Everyone's going to streaming. They're trying to go B2C from not B2B, but the Disney is not going to movie theaters, they're going, basically trying to get to you directly, and Warner Bros. is doing the same part. And that's all because of the growth in 5G is going to allow that. And so you need to have better memory chips. And so this has put a stress on the deliverables now today, there was a story that Bitmain -- a dispute between the 2 owners of the company was supposed to be settled for hundreds of millions of dollars, but who knows if that. All I know is it's not just the issues of Bitmain. It's the issue of getting a good quality technology and equipment. And we know that we -- we went to buy some of this stuff, Darcy, remember, it didn't get delivered. And we still are owed some S19s that were ordered in the summer. Weren't they in June?

Yes. We put an order in with Bitmain through a broker for about 12 Petahash, and we still haven't received our full Petahash allotment. So Bitmain has still got some challenges in their delivery. I guess, as part of the arguments from what I heard is Bitmain sort of goes, well, we sent you something, you should be happy, well, like, well, no. We purchased not necessarily a number of miners, but I purchased a certain amount of Petahash of miners. And we're still working with the broker, and he's working with Bitmain to try to get resolution for it. Right now, I'm not holding my breath completely. I'm glad it was a small order and not a multimillion-dollar order with Bitmain.

Just think you shell out for a brand-new car and it's supposed to be delivered next week and it's not delivered for 3 months, and then you get a notice, now it's 6 months. And you can see the orders now that people are making press releases on, it's not going to come for a while. And I think that some of the aggressive data centers like Core Scientific have used their balance sheet and gone and purchased big orders. And if you want to get those machines, then you have to use their data centers, and those data centers are expensive. So you're -- as a miner like ourselves, a lot of your margin gets evaporated away. And so we're very, very focused on looking for opportunities, which we've been able to do and building out Lachute. Darcy, just recently, we bought 1,000 machines? And these opportunities pop up, you have to have the cash in your balance sheet to be able to do them when they come. And that's what we will continue to do.

Great. And I believe you discussed this question in the last webcast that several people are asking again. It says, what is the outlook for HIVE listing on a U.S. Stock Exchange such as NASDAQ?

Well, it's a great question, and NASDAQ will provide you with more visibility and et cetera. But it's unprecedented we trade 0.5 billion shares, and the OTC is pretty liquid. And so we're exploring all these various exchanges. Of greater interest is to get listed somewhere in Asia. So that we can get this long-term vision of trading 24/7 around the world. But -- and we can't turn around and say, we're going to go to this on an exchange because that's promissory and the regulatory world exchanges are not like promissory statements like that. So we have a vision. We said to get to 1,000 Petahash next year and to be listed where we can trade globally.

Great. We have time for a couple more questions. This one says, how does HIVE plan to handle Ethereum 2.0 and its reduced mining profitability? Will there be a heavier focus on Bitcoin mining going forward?

As I mentioned earlier, I don't think it's for a while that, that's going to happen. I think you're going to see margins expand after this next quarter. When all the 4 -- most of the world has been mining on 4-gigabyte memory chips, they're going to -- they haven't -- they don't have the money and they have an upgrade to 8, they're going to no longer be profitable, and we'll be quite profitable. So we think that, that is -- it's a big CapEx.

Okay. And lastly, maybe both of you can comment on this. What is the ultimate goal of HIVE's management? And where do you envision the company in the next 5 years?

Wow, 5 years. Well, I've seen -- yes, I've seen the evolution of the company in the last 2 years and it's gone just heaps and bounds. So 5 years, I think, is a bit of a stretch, at least in my mind. I think from my standpoint is for HIVE to continue to expand in the Ethereum side. I know Ethereum 2.0 is out there. But we feel that it's -- there's going to continue to be some demand for that for the coming years. So it's not something that's going to fall off the cliff. And then also, as we've been working with the -- our acquisition in April of Lachute is to expand and diversify with our Bitcoin mining, and that's a big thing to have some diversification. And we've got some opportunities in Sweden. There's other data centers that potentially could be available. And I know we've got some expansion in the current hanger we've got. And I think the next thing would be looking at more high-performance computing. That's sort of the next thing for these GPU chips after we get past the Ethereum side is what are the other opportunities, whether it's gaming or providing stuff for Disney or whatever, Warner Bros, whatever the companies might be to provide that back-end, but we need different miners, more -- higher capacity. So those are the kind of things that we're looking out into the future in terms of how do we make sure that we -- recession-proof is the wrong word, but what's the next thing. Because 2.0 will happen. We think it's still going to be a couple of years, but we've got to make sure we position ourselves for that next step. And as HIVE has been the largest publicly traded Ethereum miner, to have that as our backbone and also expanding into Bitcoin, we've got to make sure that we're continuing to keep our eyes open. Not put on the blinders and look at the expansions that we can do. Frank?

I think that in 5 years from now, if you were to follow through on some of these forecasts for Bitcoin, where it would be, and what we've done, we could be $10 billion. We can move up tenfold in a year. We can move up tenfold in 5 years. And that would be predicated on growth in Bitcoin pricing and Ethereum, and the growth in DeFi. We're going to take a greater interest in DeFi. We made 1 small investment. We're going to look at that stage as it grows. And we think that it could easily be that. And so that's the real -- it's hard for me to say that, but the Bitcoin can go to $100,000 a coin, then just think of that as a fivefold increase from where it is today approximately, then why can't we go for up to $5 billion then? And so it's -- we're making a forecast on the price of the commodity or the currency when you think of that. But I honestly feel that this company could be $10 billion. And I honestly feel that HIVE's brand is just so well-known as the go-to stock. And if you haven't read them, the Motley Fool's article, I just think it gets it down to very simplistic terms that we mine coins, and we sell and we save. We sell when we need to expand or upgrade, and -- but we always want to make sure that we're putting coins net in our balance sheet as at play. And so I remain bullish from that end. Internal cash flow, we've been able to manage so far. We may top the capital markets, but we do not want to take on any of this funky, expensive debt. We've explored it. We've been through it, and it ends up being not only expensive debt -- it's an expensive time-consuming process, Darcy can tell you about it. It's just -- you just have no idea that going back and forth, the negotiations, et cetera, and you just scratch your head and you say, look, how do I get the capital? What can I do internally to expand into Bitcoin and Ethereum in that footprint? And as we go further down with software next year to improve our software skill set, its ability to much more quickly move between Ethereum, Ethereum Classic. We did that for a while. We sold that when the margins got high. We use those proceeds to buy more chips, so we will be able to move using software. I think that's about a wrap, Holly. And Darcy, do you have any final notes, Darcy, to comment on?

No. No, I don't. So I came in 2 years ago, and markets were not -- didn't look too nice and sort of coming in at the bottom. But I think putting that aside, what we've been able to achieve over the last 2 years of taking control of our destiny, reducing costs everywhere we can. And it set us up for where we are today, where even though cryptocurrency prices are a lot higher than they were 2 years ago. We've got the stability and low -- try to be the lowest cost provider, lowest cost companies so that when we do have to go through the doldrums and lower prices, we've got the correct cost structure to make it through those challenging times.

Right. Good. Well, thank you, everyone.

All right. This concludes today's webcast. Thank you, everyone, for tuning in, and merry Christmas.