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Good morning. My name is MJ, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bitfarms Second Quarter 2022 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, August 15, 2022.
I will now turn the call over to David Barnard from LHA Investor Relations. David, you may begin your conference.
Thank you, MJ. Good morning, everyone, and welcome to Bitfarms Conference Call for the Second Quarter of 2022. With me on the call today are Geoff Morphy, President and Chief Operating Officer; and Jeff Lucas, Chief Financial Officer. Before we begin, please note this call is being webcast live with an accompanying presentation. To watch along with the slides, you can log on to our website at www.bitfarms.com under Investors Presentations. If you've heard a listen to the call on your smartphone, you can download the presentation from there. I would like to remind you that this morning, Bitfarms issued a press release announcing its second quarter 2022 financial results.
Turning to Slide 2. I'll remind you that certain statements that we make during this call may constitute forward-looking information and statements. Bit Farms cautions listeners that forward-looking information and statements are based on certain assumptions and risk factors that could actual results to differ materially from the expectations of the company. Listeners should not place undue reliance on forward-looking information or statements.
Please see today's press release and related to those risks set out in Bitfarms public documents filed on SEDAR as well as sec.gov. The company undertakes no obligation to revise or update any forward-looking information or statements other than as required by applicable securities law. During this call, the company will refer to certain measures not recognized under IFRS and that do not have a standardized meaning prescribed by IFRS and therefore, maybe not be comparable to similar measures presented by other companies. The company makes the following non-IFR measures, gross mining profit, gross mining margin, EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin as a [ different ] information to complement IFRS measures to provide a further understanding of the company's results of operations from management's perspective.
Gross mining profit is defined as gross profit, excluding depreciation and amortization and other minor items included in cost of sales for the mining segment of the company. Gross mining margin is defined as a percentage obtained when dividing gross mining profit by revenues for the mining segment of the company. Direct cost of production represents a direct cost of Bitcoin based on the total electricity cost and hosting costs related to the mining of Bitcoin divided by the total number of Bitcoin Mine, EBITDA is earnings before interest, taxes, and depreciation, and amortization. Adjusted EBITDA is EBITDA less changes in the value of our Bitcoin holdings and non-cash G&A charges included in equity compensation expense.
These alternative IFR measures have is as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing the company's results as reported under IFRS. We invite listeners to refer to today's earnings release and the company's second quarter 2022 management discussion and analysis for definitions of the aforementioned non-IFR measures and the reconciliations to IFR measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted. During today's call, President and COO, Geoff Morphy, will review our operations for the quarter. CFO, Jeff Lucas, will follow with a detailed financial review and Geoff Morphy will return for some closing remarks after the G&A. We requested investors to send questions in advance, which I relate to management after we achieved before we open the call to analysts interested in live Q&A.
And now turning to Slide 3, it's my pleasure to turn the call over to Geoff Morphy.
Thank you, David. I would like to welcome everyone to today's call. In Q2 2022, Bitfarms mined 1,257 Bitcoin, up 31% sequentially from Q1 2022. Building on our momentum in production, we mined 500 bitcoin in July. The strong Q2 2022 production completely offset weaker Bitcoin prices such that we also grew revenue sequentially to $42 million and still generated cash from mining operations as defined by adjusted EBITDA of $19 million.
As evidenced by the results of our publicly traded bitcoin mining peers, these are not just solid but superior operating results. 2022 has been one of the most challenging periods in the history of the Bitcoin mining industry due to the sharp decline in the price of Bitcoin since November 2021 and the more severe depression prices starting in early May 2022. Yet, even in this environment, we continued our growth trajectory and expanded operations.
In March, we commenced production at the bunker Phase 1 and then [ Leger ] in April. We also increased our corporate cash rate 33% from the end of Q1 to 3.6x a hash per second at the end of the second quarter. Now, our corporate hash rate is just shy of 4x a hash per second, which means we continue to gain market share. We estimate we now represent approximately 2% of the network hash rate, which is a company record. In June and July, we took decisive actions to maintain our financial flexibility and increase our liquidity.
In doing so, we reduced the balance of our Bitcoin back loan facility from $100 million to $23 million as at the end of July and secured new equipment financing of $37 million. Jeff Lucas will detail the financials in a moment. Regarding operations, some key achievements include: in Q2, we brought online the bunker Phase 2 in the city of Sherbrooke, Quebec, representing 18 megawatts of new capacity, installed 10,300 miners, and mined 1,257 Bitcoin, validating our superior operating performance.
Since quarter end, we increased total electrical capacity across all locations by 29 megawatts to 166 megawatts. Today, we are approaching 18 bitcoin per day in daily production and 135 bitcoin per average exahash per second in July, which is top quartile efficiency and performance. Slide 4 summarizes the status of our farms. We ended the quarter with 9 locations and 137 megawatts in capacity, up from 8 locations and 121 megawatts in capacity at March 31, 2022.
Later, started production in April, initially adding 16 megawatts of capacity, which has since expanded to its full capacity of 30 megawatts. And in conjunction with the bunker Phase 2, increased our total corporate capacity to 166 megawatts as of August 15th, 2022. Construction continues on 2 facilities in Canada and the first of 2 warehouses in Argentina.
Now I'll take a moment to detail the operations, plans, and recent progress at some of these locations. Turning to Slide 5. As you will recall, we have contracted power with Hydro Sherbrooke within the city of Sherbrooke, Quebec for a total of 96 megawatts. With the creation of the bunker, Leger, and Garlock, we expect to be fully operational at these farms by the end of December, a full 2 months ahead of schedule. These 3 facilities are located in close proximity, which affords numerous efficiency advantages.
We are shifting to new state-of-the-art farms from an older site, De la Pointe, our first location in Sherbrooke. De la Pointe is presently operating at 18 megawatts and is planned to go offline by the end of 2022, again, 2 months ahead of schedule. With its earlier-than-expected termination, we can begin the sale process for this property, and we expect to convert this unencumbered real estate into cash in early 2023.
The bunker first activated in March 2022 is currently drawing 36 megawatts and running 9,000 miners from its first 2 phases. Phase 3, which is targeted for completion in the fourth quarter of this year, will add another 12 megawatts. Upon full build-out, the bunker is slated to be a 48-megawatt farm housing 13,000 miners and anticipated to contribute a total of 1.3x a hash per second. As noted, Leger contributes 30 megawatts and is operating 7,400 miners, delivering over 740 petahash per second.
As you may recall, in mid-March 2022, we acquired our newest site, Garlock in Sherbrooke. We own this asset outright. We have completed the warehouse cleanup and building improvements with electrical infrastructure, lubers, fans, racks and miners to follow in September. We expect Garlock to be fully operational by year-end. Each of these locations on our Sherbrooke campus benefit from advanced design and sound reduction monitoring systems. With 18 megawatts at Garlock, 48 megawatts at the bunker, and 30 megawatts at Leger, we will fully utilize our 96-megawatt power contract in the city of Sherbrooke.
Please turn to Slide 6. In Rio Cuarto, Argentina, we have contracted plans for up to 210 megawatts, consisting of 4 warehouse-style buildings inside the gates of a private power company, which will utilize available capacity and otherwise stranded power. We are building out warehouses #1 and #2, and warehouses #3 and #4 remain under consideration for future expansion. During the quarter, we made significant progress on construction of our first 2 50-megawatt warehouses and associated infrastructure. The initial electrical supply line is nearing completion with a connection expected to take place within the next 30 days. So far, we've imported over 4,800 miners. The installation of racking, miners, servers, and data cabling in the first warehouse is underway with miners expected to be installed starting in mid-September. Significantly, we continue to expect to begin production at the first 50-megawatt warehouse in the fourth quarter of 2022 and expect to complete construction at the second 50-megawatt warehouse in the first quarter of 2023. Last week, to better align our capital plan with our production schedule, we successfully renegotiated the timing of some minor deliveries for our second 50-megawatt warehouse. The net effect shifted $39 million in scheduled CapEx from Q4 2022 to the first 9 months of 2023. Please move on to Slide 7.
The LatAm team also is responsible for our current operations in Paraguay, and this slide shows our 10-megawatt farm in Villarrica. Like our farms in Canada and the United States, this farm is run on low-cost and abundant hydropower. The economics here are quite positive, and we are able to productively utilize some of the older miners in our fleet in this location to optimize assets, performance, and capital deployment. In Paraguay, we are building on our experience from constructing 8 farms in North America. As stated in our last earnings call, we continue to believe Paraguay is ripe with opportunities for expansion. We started building the core LatAm team to support our growth and development in this critical and opportunity-rich region in early 2021 and now have 15 people on board in both Argentina and Paraguay. We started the process to hire technicians for the first real quartile warehouse.
Turning to Slide 8. In summary, at the end of the quarter, we have 9 farms in production in 3 countries and are drawing power from 5 hydroelectric providers. Today, we have capacity of 166 megawatts and an additional 63 megawatts under development that are expected to come online this year for total plant capacity of 229 megawatts by the end of the year, representing 89% growth in 9 months.
Moving to Slide 9. One of our tools for continuous improvement is our recently revamped proprietary minor management system called MGMT 2, which enabled us to manage at the individual minor level hundreds of thousands of miners across our global decentralized farms with a focus on maximizing uptime. MGMT 2 features improved controls, tracking, sensors, alarms, visualizations, and performance metrics, enabling increased efficiency in operations.
As noted earlier, we are at 135 bitcoin per average exahash per second in July, which is top quartile efficiency and performance. Another measure of efficiency, joules per terahash is realizing steady improvement. At the end of July 2022, we were at 40.6%, improving 17% compared to 49.1% at June 30, 2021. Looking ahead, we plan to further optimize the performance of our fleet by prioritizing the most economic repairs first, making sure we are focusing on cash flow. Additional features such as variable load, cash rate control, and under-clocking or under development. In addition to integrating Bitcoin mining economics, we also will be incorporating external data to better optimize our operations, such as grid load balancing and market pricing, taking our operational control to the next level regarding fleet activity. During the quarter, we installed 10,300 latest-generation miners.
Additionally, the first 4,800 were imported into Argentina and are being helped by our first --being held for our first 50-megawatt warehouse and we've made operational in the coming months. Year-to-date, we have installed over 25,000 miners, bringing our total install base to over 44,000 active miners. With another 4,000 miners currently in transit, in addition to what we already have received accounts for approximately 80% of our expected minor deliveries for 2022.
Please turn to Slide 10. For a discussion of our updated quarterly hash rate goals, based on our current infrastructure construction and minor delivery schedules, we are targeting 4.2x a hash per second as of September 30th, 2022, and 6 exahash per second as of December 31st, 2022. In addition, with the contracted minor delivery scheduled, we expect to add 1.2x a hash per second when fully operational in the first half of 2023.
Please turn to Slide 11. With that, I will now hand over the call over to Jeff Lucas.
Thank you, Geoff. I'm very pleased to report we continue with our operationally profitable growth during the second quarter. Let's discuss some of the highlights. I wish to reiterate that we mined 1,257 bitcoin in the quarter. This performance improved our cost and bottom lines as well as shaped our financing activities as we continue the actions to maintain financial liquidity and flexibility to execute our growth trend. Our quarterly revenue was $42 million, up 3% from the prior quarter as 31% higher Bitcoin production more than offset the 20% decline in Bitcoin prices. In comparison to the prior year quarter, our revenues were up 16%, reflecting almost 500 more BTC mined in the prior year period, offset by an average BTC price 30% lower than the prior year period.
As illustrated on Slide 12, Bitcoin's average direct cost of production per bitcoin in the second quarter 2022 was $9,900 among the lowest reported in the industry. This is a 14% increase in production costs from $8,700 in the first quarter of 2022. The increase can be broken down as follows: for percentage points from the increase in quarter-over-quarter average network difficulty, which was partially offset by an equivalent of a 3 percentage point decrease from incremental operating efficiencies achieved during the quarter. There was 5 percentage points of the increase attributable to an accrual for potential Canadian tax legislation affecting VAT tax rates or VAT rates and our electricity costs. Without this accrual, our production costs for the second quarter would have been $8,700. Similarly, the average direct cost reduction per bitcoin in the first quarter without this tax accrual would have been about $8,000.
Turning to Slide 13. Gross mining margin impacted by the decline in the price of Bitcoin was 66% in the second quarter as compared to 76% in the previous quarter and 79% in the year-ago quarter. Gross money profit was $27 million compared to $28 million in the second quarter of 2021. For the quarter, we recorded an operating loss of $173 million, which included a $78 million realized loss on the disposition of digital assets, a $70 million unrealized loss in the revaluation of digital assets, and an $18 million impairment charge in goodwill. This compares to an operating loss of $2 million in the second quarter of 2021, which included at the time an unrealized loss of $15 million on the revaluation of digital assets. Net loss for the quarter was $142 million or a $0.70 loss per basic and diluted share. This includes $8 million of non-cash compensation expense and $5 million of interest expense, offset by $20 million of foreign exchange gain associated with funding our Argentinian expansion and an income tax recovery of $19 million. This compares to a second-quarter 2021 net loss of $4 million and inclusive of a $5 million loss in digital assets, a comprehensive net loss of $9 million or $0.02 per basic and diluted share. Most importantly, we continue to generate cash and mining operations.
We achieved adjusted EBITDA of $19 million or 45% of revenue for the quarter compared to $24 million or 65% of revenue in the second quarter of 2021 and $21 million or 53% of revenue in the first quarter of 2022. Turning to Slide 14. Our financial strategy continues to focus on maintaining the strength and flexibility of our balance sheet and protecting shareholders' investment while supporting our key financial goal of funding our planned growth at a relatively low cost of capital. As part of this, we adjusted our Bitcoin management strategy to sell a portion of our Bitcoin production and treasury holdings to partially fund our operating needs and ongoing growth investments.
During the quarter, we executed the following: we sold 3,357 bitcoin, generating proceeds of $69 million and reducing leverage and interest expense. We paid down $62 million of our revolving Bitcoin bank credit facility, reducing borrowings under this facility to $38 million and freeing up $27 million of Bitcoin that was otherwise collateralizing the loan. We secured a new $37 million nonrecourse equipment financing during the quarter. This is on top of the $32 million non-recourse facility we put in place in February. And we raised $9.6 million in net proceeds from the judicial application of our ATM program that we launched about a year ago.
In all, we ended the second quarter with cash of $46 million and 3,144 bitcoin valued as of June 30 at $62 million for total liquidity of $108 million. In addition, subsequent to quarter end, we paid down a $15 million in our Bitcoin bank facility, and we raised another $4.1 million net of expenses under our ATM. Before turning the call back over to Geoff, I'll mention that we have a number of industry events coming up, including the Needham Second Annual Virtual Crypto Conference on September 8, the H.C. Wainwright 24th Annual Global Investment Conference on September 12th to the 14th and the B. Riley's Second Annual Crypto Conference on September 29th, all these events being held in New York City.
Turning now to Slide 15. I'll turn the call back over to Geoff.
Thank you, Geoff. Before we take your questions, I'll summarize our strong market position and our growth strategy. As of today, we are operating with 166 megawatts and 3.9x a hash per second, which powers about 2% of the entire Bitcoin network, which is a company record. We have mining production in 3 countries: Canada, the United States, and Paraguay, and we fully expect to begin operations in Argentina before the end of the year. Well, other Bitcoin mining companies struggle to keep a lid on cost of electricity fueled by commodities. We have long-term hydroelectric contracts that sustain cost of production amongst the lowest in the industry. This is evidenced by our average direct cost to mine Bitcoin of $9,900 in the second quarter. Even at recent pricing levels, we continue to generate positive cash from mining operations.
We have a flexible balance sheet and financing resources. We've built an international management team that brings operational expertise and capabilities to drive the most efficient and profitable operations in the industry today and for the future. We're following a path of growth with discipline. And as evidenced by our track record of operating excellence, we are well positioned to take advantage of emerging opportunities and be a consolidator in the industry.
David, could you please start the questions that you received in advance and then maybe go to the operator after that?
Great. Thank you, Geoff, a couple of questions we had in advance. I'll start with this first one. Aside from warehouse #2 in Argentina, what is your growth plan for 2023?
For 2023, we had a lot of exciting opportunities. As mentioned, Argentina, we're bringing on the first warehouse 50 megawatts in the first half of the year. It's -- construction is underway. And we're excited about it because some of the things that we learned from building the first warehouse in terms of being able to do things quicker and with less cost, we'll be able to apply to the second warehouse. So that's exciting, and we also see numerous opportunities in Argentina. But we also, as we've commented on previous earnings calls, we're very excited with Paraguay. There's a lot of opportunities there and large-scale opportunities because of their abundant hydro situation. Also mentioned on previous calls, Washington represents an area of abundant hydroelectricity where there's opportunities.
And then right in our home backyard, our original home backyard in Quebec, we have multiple facilities and some of which we're still building out. But they've released information on the RFP process. That will be something in the order of about 267 megawatts across the industry that they're going to award. The information on Hydro-Quebec's website indicates that there should be more information and I think the -- well, the formal submission process is underway, the qualified applicants will be able to actually submit their offers with locations and all the other criteria that was listed in the RFP approximately mid-September. And while we don't know when those megawatts will be awarded, we would anticipate given past performance. It will probably be later this year, November, December type of time frame. But being the largest Bitcoin mining company in the province with what we believe is one of the strongest social responsibility records in the province and having spent considerable time and effort lining up new locations, we think we're well positioned to do very well with that RFP process.
So those are the things that are in our geographies right now, but we also believe that where the industry is right now that there's going to be opportunities both to merge and consolidate. There's going to be opportunities with some of the other miners that may not be as efficient that they need the type of operational prowess that we have to actually do [ inorganic ] expansion as well. And from what we understand from investment bankers, we're getting closer to seeing more of those type of opportunities this year, and we're ready. We've got the management team to embrace those opportunities and a strong and flexible balance sheet. So we're very excited about what's going to come this year and what's going to come next year. And while we're not providing a lot of guidance for next year, much of it will be depending on the economics in the industry and the opportunities presented to ourselves because we will remain disciplined, and we're ready for it.
Great. Thanks, Geoff. One other question we received in advance. You adjusted your hotelling strategy, what might make you change back to hotelling BTC?
So let me answer that one.
Go ahead.
So we have modified our hotel strategy. And really, we did it as we're looking at our overall financial position and how best to fund our operating investment activities as we continue our growth trend. And really, we do that very simply with a very keen eye towards minimizing shareholder dilution and maximizing financial flexibility. We anticipate selling a portion of our production to fund our operating and debt service requirements.
As a matter of fact, at current production levels and BTC prices, our production exceeds our ongoing operating expenses, even the debt service principal and interest. So we feel very effectively at this point in time that using the Bitcoin that we're producing is one of the lowest means of cost of capital for us to certainly fund our operating in a debt service required.
But in addition to that, what's critically important to us is that we do be positioned for the financial flexibility to really fund our growth requirements going forward. And to do that in this fashion, it's going to be a lower cost of capital for us is practical. And that's really been one of the key elements has driven our decision to begin tapping into our Bitcoin holdings and to continue to do so at least at a minimum, what we produce on a daily basis, again, to fund our operating needs going forward. And as a relative inexpensive means of funding our growth targets going forward as well.
David, is there any more questions? Or do we want to turn it over to MJ to pull the listeners?
Those were the couple of questions we got in advance. So turning it back to MJ for the poll.
[Operator Instructions] The first question today comes from Kevin Dede of H.C. Wainwright.
Can we start with where you are Jeff, Mr. Lucas, that is, could you please just make sure I understand your equipment funding was at about 32%? I think you said you added 35 for 67. Does that account for the full 1.2 exahash machines that you'd add to Phase 2 in Argentina?
Well, first of all, that doesn't reflect actually the machines that we're putting in place in Argentina, given the fact that they're located in Latin America, and you can probably appreciate some of the collateral considerations that a lender would have. What I will point out to you though, Kevin, is that we do have additional unencumbered miners currently in Canada and North America, and we're having new ones coming on as well that we have not yet used of collateral for borrowing facilities and that we can certainly do so to further fund our capital requirements relatively inexpensively going forward.
Okay. So it's fair to assume that machines that go to Latin America have to go unencumbered? And that $67 million has to do with [ for ] behind the machines that you're installing in Quebec and Washington?
Yes, it does. But bear in mind that a number of those machines that are actually collateralizing those loans were machines that were previously paid for. So much of the funding that we generated to those 2 loan facilities actually is being used at an extensively for us to fund our other growth opportunities, including, for example, Argentina as well and Paraguay.
Okay. All right. But maybe let's look at it from an infrastructure CapEx requirement perspective. And maybe you can help me understand for the Phase 3 at bunker, are you all set for your requirements there? And do you have the financing you need or the capital you need to continue to Phase 2 in Argentina, just on playing infrastructure?
Sure. Yes, we're in good shape actually from financing of our infrastructure activities. As I'm sure you're pretty well aware, Kevin, the infrastructure costs there really a small percentage of the total cost compared to, for example, the miners in particular. But overall, for our capital expenditure that's going to -- for our infrastructure growth, both in Canada and in Argentina, we're in good shape.
Okay. So if you look at Phase 1 and Phase 2, that's about 100 megawatts you're talking about. But it looked to me that the drop for the miners there would be around 85 megawatts. Does that give you a little more wiggle room to add to those facilities, you're pretty much set at what you've offered.?
Kevin, we need about 1,000 more miners to fill out the second warehouse. In the scheme of things, not a big challenge at this point. Like right now, to buy miners, there's lots available and a very good price.
Yes, absolutely.
And I guess, we bring this warehouse on the first quarter -- mostly in the first quarter of next year. I think we're happy that we have that flexibility. We've got -- we know we've got the miners coming, but we're going to get this right. We're going -- it's important when capital is so precious that you deploy it on time and on a reasonable basis. So we want to make sure that we build the infrastructure and then bring the miners in. As Jeff Lucas mentioned, like the lion's shared your cost is in the miners. So we want to make sure that we get the infrastructure and the warehouses built then bring the miners into coincide.
And we have the flexibility to do that with the miners that were deferred, that are on contract, and with spot buys, which could be quite lucrative right now for us. So it's nice to have that flexibility. And like in terms of the warehouses, because Transformers continue to be the big lead time situation, all these things are ordered for all the construction that we're undertaking right now. So we're in good shape that way. And the miners unlike 1.5 years ago are the liquid -- are much more liquid and we can pull them in.
Okay. Can we talk about power prices a little bit, please, Geoff? Did Hydro-Quebec reflect any of some of the fluctuations that we saw through the second quarter? And how have the people you've negotiated with the Rio Cuarto deployment reacted to pricing? I mean, as I understand it, you scaled back given that there might be some changes there, you wanted to reassess. Now that things seem to have become a little bit more rational, maybe that offered an opportunity to step up expansion?
Okay. The first question was regards to power pricing in Quebec. And the tariff that we enjoy in Quebec continues on. We have not had any changes in the price from Hydro-Quebec. Now as Jeff has mentioned, the Canadian government has put in plans to change some of the VAT pricing, which increases our cost of electricity. And that's more of a political tax-based situation as opposed to Hydro-Quebec changing rates. So I think if you want to go into that, then we can talk about that in a separate question and answer. In terms of Argentina, yes, you're right. We were very concerned about natural gas prices increasing. Only a portion of the electricity contract is fixed. We've got -- for the first 4 years at $0.22. The rest is market-based pricing. And we were very concerned. And rightfully so, the prices of electricity have gone up.
We've seen that around the world. We've seen it impacted with some of our competitors who use electricity generated with natural gas. And we didn't want to put ourselves into a position where we were bringing online facilities with marginal profitability. Favorably, the prices have gotten better. And favorably, the exchange rate to move U.S. dollars into Argentina has also moved to our benefit. So we're quite liking the cost dynamics of our first and second warehouses in Argentina. But we also anticipate that this winter, at least in the Northern Hemisphere, as Europe seeks natural gas to warm their houses, and we expect prices to go back up. And we're cautious about that.
Fortunately, Argentina is in the southern hemisphere and is a little bit more immune to that, but still they are affected by global prices, and we expect prices to go up. But between the portion that is fixed and the portion that is market-driven, we're very happy with where rates seem to be right now, and that has allowed us to go ahead with the second warehouse. And if rates get better because the world pricing of commodities, energy commodities comes back down. And we're all set to move on warehouses 3 and 4 as well as perhaps other opportunities in Argentina.
Okay. Last question for me, Geoff. Can you talk a little bit about some of the immersion testing you're running in Washington? How far have you sort of pushed the limits there? I noted that your slides said you have an opportunity to expand one more megawatt to 21 in Washington. And I think if I remember correctly, that's 2 separate facilities. But you've also alluded to having expansion opportunity there. So maybe you could sum up the situation in Washington State for me, please.
Sure. We continue to play with immersion cooling. We think it's quite potentially a dynamic that will, at some point, change the industry. But it's still very, very expensive to -- from a capital cost standpoint to enter into immersion, but we need to familiarize ourselves with the technology and the ins and outs of it. So we have our first container in Washington. That is an immersion. It's still in the test mode right now. We are seeing some good production come out of it, but we have not fully utilized that. We're still tweaking it. We're still getting things going. That container was only delivered weeks ago. So we continue to move through that, get familiar with the container itself, and more. And I think we are still very much fortunate that our air-cooled facilities have a lower capital cost.
We are in environments where it's working very, very well. It's tough to compete against like the air-cooled versus immersion cooling at this point because of the high capital cost and the thinner operating costs right now. So we're still working through that, Kevin. Now I said there's opportunities in Washington. It's more than just immersion cooling and what we're playing with there. We're having favorable discussions with the local electricity providers. There are smaller-scale operations in the area, whether we buy or whether we expand, we're working on all those opportunities. But Washington was -- has a lot of electrical hydropower that was developed in many ways for the [ Alcoa ] and big dams were built decades ago on the Columbia and the aluminum operations have all moved away, which means that there's a good, clean electricity at attractive prices available.
I think we've mentioned on earlier calls, and it's still the case. Our Washington facility is our lowest cost operating facility amongst our fleet. So we -- and the other part of it is that we've now had that facility now for close to a year, approaching a year, and we now have a staff and a team down there that we're confident in that's capable of doing more. So we've got that nice foundation that we can grow from now. So that's making me and us a lot more comfortable with looking at new opportunities in the state.
The next question today comes from Chris Brendler with D.A. Davidson.
I would love to -- first follow up on Kevin's power question. I see a lot of miners with you're behind the meter or grid-connected facilities where power costs have been higher than expected this summer. A lot of those have been in Texas with the heat issues, but I just would love as a reminder, is your impressive results here with the cost per coin below 10,000, even with these power prices, is it more a function of the hydro or a function of your PPAs and your power contracts that have locked in low pricing or something else?
Well, let me start and then Jeff Lucas can add to it because this is a calculation with a lot of math involved with it from a variety of factors. But yes, we're very fortunate to have hydroelectricity that has not flexed as a result of the commodity prices. So the prices that we've had historically are the same prices we have now. So we have not been susceptible to commodity price increases like many others have. And as a result, we continue to enjoy good solid, consistent hydro electricity rates in all our locations. Argentina will change that once we get it on board, but a substantial part of that contract is ticked at a pretty low price $0.022 per kilowatt. So that's looking like it could be amongst our lower-cost facilities as well. Jeff, why don't you add a little more in terms of that calculation on the cost of mine of Bitcoin because there's other influences as well.
Sure. Glad to. But I do want to just emphasize, by the way, Chris, Geoff's comment there, one of the true virtue for us of hydropower is the stability of our costs. As you see, the cost of mine Bitcoin, the direct mining cost, which is comprised of electricity and in the past, not currently hosting expenses, when we incurred those were the elements may up be direct mining or the incremental mining cost. But overall, if you take a look for us, in terms of the quarter that just ended, how much it cost -- the cash cost to mine Bitcoin. And the direct mining cost is about $9,900. And on top of that, you have about $1,100 of other costs that comprise cost. So overall, you find that we've got roughly about $11,000 all in cost here on a cash basis for the money at Bitcoin. So that puts us, we think, in a pretty good position.
And even to expand upon the factor in G&A, which is a fair question to ask the cash G&A, nonetheless, it still brings us to an overall cash cost of around $15,500. So we feel overall, we've got the structure in place, including the benefits of hydro here of having -- continuing to have a very attractive price structure -- our cost structure, excuse me.
That's great. Just to follow up on that question. I saw in the deck on -- this was Page 12, has this 5 percentage points attributed to the VAT tax issue? So that's on top of -- some of these numbers are being inflated by the VAT tax?
That's correct. To be more specific here, actually, the impact was 5 percentage points to that 14% increase in total over time. So to go in a little more detail here. In Canada, the Canadian financing authority is considering legislation actually that would remove the opportunity to recover your VAT or your input taxes, which is about 15% right now of our energy cost. So in essence, our costs in Canada go from $0.04 to $0.06. That's reflected, by the way, I want to underscore this. That's reflected in the $19,900 that recorded in front of you. Now, this may not come to tax. The legislation hasn't been fully approved yet. But consistent being consistent in accordance with IFRS accounting, we did have to recognize that accrual in our financials. So therefore, appropriately, we also include in our various operational measures, including the direct mining cost of Bitcoin.
So again, that has an impact on the Canadian portion. And by the way, all of electricity costs, Canada represents about 88% of our total cost of electricity each quarter. So yes, we had a 15% increase in the Canadian portion. Obviously, no increase in play in Paraguay or Washington, which, as Geoff pointed out, it's so $0.03. Paraguay is around $0.36, and now we have Canada about $0.46. If that legislation does not pass, we will revert back to the $0.04 and of course, have a massive catch-up from the previous 2 quarters when we have indeed been accruing this amount. But all in all, even if that legislation is passed, we feel we're going to be in a very strong and very competitive position with the cost to mine Bitcoin.
Chris, and add to that. The Canadian government announced that in February. And as Jeff mentioned, we're accruing for it because we think that's the prudent thing to do and what IFRS requires us to do. But we actually took a leadership position because we're one of the largest miners in Canada. In terms of developing a coalition to bring in the experts that are required to advise us on this, to review the proposed legislation, and to really work with the Canadian government to figure out whether this is the right thing for them to do. Obviously, we don't think it's the right thing to do. And what we've learned is that it's inconsistent with the way they treat some of the other industries. So we're hopeful, but we certainly can't plan on it that the Canadian government will pull this back, and we'll be able to bring our Canadian energy mining costs back down again. But until that happens, we're just making sure that we -- make sure we put away the money and make sure that we don't have a surprise cash kept later this year or next year or whenever this might or might not happen.
And by the way, Chris, we're getting a lot of support here because there are over a dozen companies working with us as part of this coalition.
Great. That's the black... So the other question I had was on the fleet. I really appreciate the disclosure here, you guys break out your fleet better than most and a little over 40 tools per terahash number that hopefully can come down over time, as you mentioned. But I'd love to hear like are we at a point where some of the older fleet is being retired. And do you think that's one of the main reasons we haven't seen in the overall network hash rate increase more, just given all the folks that are coming online within hash rates or moderate here, I think it's because of inefficient machines from the past are being turned off.
Certainly, we've seen or heard anyway through others that a lot of S9s have been turned off because of profitability. We have taken a number of the micro BT miners that are new and moved them into Quebec and are part of our update program, replacing M20s with M30s and that's helping our efficiencies as well as increasing the pure size with new M30s that are incrementally adding to the fleet as we bring more infrastructure and megawatts on. But yes, we are continuing to upgrade our fleet. Washington is absolutely modern with entirely new equipment. Argentina has got new equipment scheduled for there.
As we've mentioned, with Paraguay, we sent down some of our used miners, 3 different series of used miners there. So it was a very low-cost installation. And in Quebec, we're -- we've got our legacy operations, thereby no means old dinosaurs. They continue to be upgraded. We have completely retrofitted like Collinsville last year, entirely new facility, De la Pointe is being phased out and replaced with 3 new facilities in Sherbrooke. All of those are by and large enjoying next-generation -- latest generation miners. And we're getting the performance. Go ahead.
Just to add to that, Chris, to give you a bit of perspective here. So a lot of the miners that we now have up for sale like our old S9s, there were 90 watts per terahash. The F-19 pros that we put in place in Washington are about 31 lots per terahash. And the M30s are also in the mid-30, the M30s that we're putting in place, and Leger, the bunker are in the mid-30s in terms of wattage per terahash. So you can see the huge difference that's making in terms of our efficiency.
Yes, that's great. And just one more quick one that as prices have come down, there's certainly some opportunities to pick up some additional machines cheaper. Do you lean towards the latest model? Or is it all just a question of the XP? Or is it all just a question of the price and what you're paying for terahash.
A mixed bag. We've been a big supporter of MicroBT historically. We have Bitmain S19 series in Washington, but we've been a big supporter of MicroBT. That's where the 48,000 minor order has been. They've been a great support of bit farms. And we're looking at M30s and M50s S19, we will use our relationships as we look for miners to get the best possible terms. And right now, there's a lot of machines around. So I think if we had a preference, it would be for some of the best MicroBT units because we have more experience with our repair center with those units. We know from history that they perform longer and stronger without breakdowns. So -- but we will, at this point, at least have 2 primary manufacturers that we're relying on. And our familiarity with their equipment is great. But yes, it's important, as we look in these times where profitability is squeezed. We've got a [ having ] coming up that we make sure that we continue to use some of the best quality and performing miners available.
The next question comes from Dillon Heslin with ROTH Capital Partners.
I think in your July operational update, you talked a little bit about in Canada, having some curtailment on power due to just temperatures. I was wondering if you could talk a little bit more about that. How big of an impact is that having on your uptime and how you think about power costs in relation to Bitcoin prices and what you can maybe do at some of the new sites that are coming down the pipe in the future?
Dillon, thank you for your question. It's good to connect. Dillon, in July, we didn't have any miners that were down for curtailment. Curtailment in Quebec is a factor that we deal with, but only during the winter months, we do not have curtailment as part of our contracts in Washington and Paraguay, and we won't in Argentina either. So I'm not sure where you're picking up that July factor?
I might have been misspoken about curtailment, but more so just like higher temperature or higher like seasonal temperatures.
That's different. And yes, higher temperatures get to be a challenge on our miners and really tax our facilities and our infrastructure and being able to move air through the -- of our facilities to keep the miners lower enough temperature that they're optimized. This year in Washington and Quebec, we were faced with higher temperatures. And that meant set sometimes miners go offline because of hardware, they get hot, they protect themselves and they need to be rebooted. And we generally, we book them when things are a little cooler in the evenings and overnight. So yes, we lost some efficiency there. It's actually led us in some of our facilities in Quebec, which are the newer ones to better optimize some of the airflow in some of those facilities. While we think we're on to our sixth iteration of design for our facility.
So we think we've got it right, but there's always room for improvement. And with the squeeze on profit margins in the industry right now because of Bitcoin prices, we are trying to get as much uptime as possible and mint as many bitcoins as possible. So we are absolutely looking at the airflow in those facilities and how to optimize it, get more air through them. And we're succeeding like every percentage point you can get an uptime is money in your pocket, is value for our investors, and we continue to press that really hard at all of our facilities and our operations people have really been able to take it to the next level in that regard. So you will continue to see improvements that way as we go ahead.
That concludes our question-and-answer session. I'll now turn the call back over to Geoff Morphy, President, and COO of Bitfarms. Please go ahead, sir.
Thank you all for attending today's conference call. We look forward to updating you with our monthly production reports as well as other developments and our Q3 conference call in November. One final remark. We will be launching our new website later this week. In addition to an improved look and feel and easier navigation, it includes many metrics from our operations and monthly production reports that we are sure you will find useful in tracking our results and progress. Additional functionality is envisioned, and we will be adding that to the website in the future. Please be sure to visit bitfarms.com in the next several days. Thank you very much for everybody attending today's call, and have a good day.
Take care all.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.