One of the largest cryptocurrency mining hubs in the country released their quarterly updates to show just what a large-scale mining operation in Canada looks like.
Hut 8 has reported that they mined 828 bitcoins in Q1 of 2018, which comes out to just over $7.75 million at the time of publishing. They also reported a total revenue of just under $11 million and a gross profit margin of 80 per cent, or $8.8 million—excluding depreciation. Hut 8 currently operates several mining operations in Drumheller and Medicine Hat, two cities in Alberta. From December 21 to May 24, Hut 8 has mined more than 1,300 bitcoin and continues to hold onto them.
As one of the first-ever publicly traded and the largest cryptocurrency mining company in the world (based on funding and construction capacity), following along with updates from Hut 8 offers a glimpse into three growing industries in Canada: cryptocurrency stock trading, mining, and the how much electricity those processes take.
The Toronto-based Hut 8 purchases devices known as BlockBoxes from parent company (and massive mining operation Bitfury) to mine bitcoin. They have 17 BlockBoxes in Drumheller and will add 40 more in Medicine Hat by the end of 2018.
The idea of depreciation in the cryptocurrency mining world is particularly interesting as it paints a picture of how mining can be wildly lucrative and a real risk at the same time. Looking at exactly how profitable a mining operation can be is difficult as it comes down to a few different factors. Hut 8’s mining cost per bitcoin was $2,615 over Q1 while the current cost of a bitcoin is $9,381 at time of publishing. Remember that bitcoin can fluctuate wildly—at this point last year, one bitcoin was valued at $2,800, while at its peak in mid-December a single bitcoin cost over $25,000.
Mining cryptocurrency is all about entering favourable agreements with local utility companies. A report surfaced last year that said the average price of mining a bitcoin in Canada was close to $4,000 USD, which is significantly more than Hut 8’s cost. This is because Hut 8 works with electricity providers to secure better deals. Their Medicine Hat site will be more lucrative as Hut 8 has entered into a formal agreement with the city to buy 42 MW of energy (almost enough to power a city of 75,000) and lease land at a more competitive price.
“We are excited that our data center build-out in the City of Medicine Hat is well underway,” said Andrew Kiguel, CEO of Hut 8. “Once operational, Hut 8 will own 57 BlockBoxes, representing a 335 per cent increase from current mining capacity, securing our position as one of the largest publicly traded Bitcoin miners in the world, with a total of 66.7 MW of power capacity and 448 PH/s. We believe our City of Medicine Hat Facility will represent operational excellence and set a new global benchmark for industrial scale cryptocurrency mining operations.”
Take this into consideration with how bitcoin’s price rises and falls on a whim. That means Hut 8 actually incurred a $3.8 million net loss decrease because of how bitcoin’s price fell over Q1 2018. As the company ramps up operations in their new facility and the price of bitcoin hopefully grows, Hut 8 is poised for growth.