In hockey, when your team’s down and your favourite pita-slinger’s getting on your case at your local shawarma shack, you can pull out the faithful excuse that it’s a rebuilding year. Yeah. A rebuilding year. They’re making trades and figuring out how to skate together and once they iron out some of the kinks and find out what combinations work best for line chemistry, then you’d better watch out in June.
I have about four different variations of that story as a Toronto Maple Leafs fan, and they’re all equally inaccurate and unsatisfying. Now for Hive Blockchain’s (HIVE.V) first year after the end of the crypto-winter, those stories could be recycled and used to describe what they’ve been doing. The stories would be accurate, but still unsatisfying.
The company has managed to effectively staunch the bleeding from their attempted palace coup suffered in the frosty desolate wasteland of crypto-winter of 2018, at the hands of their former minority shareholder and partner, Genesis Mining. Now that said bevy of palace assassins is effectively in their rear-view mirror, this company is focused on transitioning in a new direction. One that hopefully will lead them back to profitability.
For right now, though, they’re being forced to eat an $11.5 million loss, broken down into non-recurring charges impacting gross mining margin, $6.1-million in non-cash expenses, $2.1-million in recorded foreign exchange loss, and $1.4-million recorded loss on sale of digital currencies and investments reflecting a decline in coin pricing.
Hive’s Q2 at a glance:
- Generated record income from digital currency mining of $12.0-million;
- Generated gross mining margin loss of $600,000 from mining of digital currencies, or approximately $5.5-million, excluding certain non-recurring charges including a value-added tax provision in Switzerland related to historical periods, upfront energy costs paid during the quarter in Sweden for which the company anticipates receiving energy rebates in the future, as well as some overlapping service provider costs the company paid related to its transition to its new service provider, Blockbase, from its original provider Genesis;
- Increased mining output of newly minted digital currencies:
- 586 bitcoin;
- 20,649 Ethereum;
- 32,692 Ethereum Classic;
- Generated $300,000 in cash flow from operations;
- Increased net cash less loans payables to $5.3-million, with digital currencies assets at $7.2-million, as at Sept. 30, 2019.
They’re rebuilding their team by getting rid of the non-productive non-team players (Genesis) and bringing in a company they’re anticipating will work well with their existing team. Now with Genesis in the rear-view mirror and all of their GPU altcoin mining rigs moved physically from their old spot at Genesis to their new homes with Blockbase, the company is looking towards the future with perhaps, a little more optimism than the market presently warrants.
“We have successfully taken full control of our Ethereum mining operations in Sweden with no significant shutdown of our equipment or facility. We have seen improvements in the efficiency and performance of our Swedish facility by leveraging Blockbase’s newer software. Additionally, we have identified opportunities to reduce our mining energy costs — the most significant portion of site operating costs — by entering into direct agreements with local electricity suppliers. As we have previously noted, we expect this new operational structure in Sweden to result in more efficient operations, a lower cost structure and greater flexibility in our operations,” said Frank Holmes, interim executive chairman of Hive.
The big dog in crypto-mining is Bitcoin. The block reward is 12.5 bitcoins whenever one of these companies manages to close one, but that’s slated to change later on this year. After that, closing the block will net these companies 6.25 bitcoins, and there’s going to be a period of adjustment where these companies will still be contending for a diminished reward while paying the same amount. That will change naturally. The supply shock will ease off as companies realize their losses and either pivot away from the scene, or implement some alternative method of recouping their losses while they wait for the market to correct itself.
Hive’s got this alternative down, and that’s the big benefit this company has over the one-coin miners presently operating in the space. When the kw/hr rise and the bitcoin profits begin to dip prior to the price correction from the halving, companies like Hive will have altcoins like BCH and ETH to fall back on until Bitcoin makes a comeback and starts its late 2020 and 2021 run.
That’s smart.
Sadly, the company is set up for another rebuilding year next year. But come 2021, you know they’re going to have a hell of a team.
—Joseph Morton