© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning. And welcome to the Bitfarms Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded today.
I would now like to turn the conference over to David Barnard with LHA Investor Relations. Please go ahead, sir.
Thank you, Joe. Good morning, everyone. Welcome to Bitfarms' Conference Call for the Fourth Quarter 2022. With me on the call today is Geoff Morphy, President and Chief Executive Officer; and Jeff Lucas, Chief Financial Officer. Before we begin, please note, this call is being webcast live within the accompanying presentation. To watch along with the slides, you can log into our website at www.bitfarms.com, under Investors Presentations. If you prefer to listen to the call in your smartphone, you can download the presentation from there as well.
I would like to remind you that this morning, Bitfarms issued a press release announcing its fourth quarter 2022 financial results.
Turning to Slide 2. I'll remind everyone that certain forward-looking statements will be made during the call that future results could differ materially from those implied in these statements. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties and invite you to consult Bitfarms' MD&A for a complete list of these. Also during the call, reference will be made to supporting slides and you can find the presentation again on our website at bitfarms.com, under the Investor Relations section.
The company will also refer to certain measures not recognized under IFRS and that do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies.
We invite listeners to refer to today's earnings release and the company's fourth quarter 2022 MD&A [indiscernible] of the aforementioned non-IFR measures and their reconciliations to IFR measures. Please note that all financial references are denominated in U.S. dollars unless otherwise noted.
During today's call, CEO, Geoff Morphy, will review our operations for the quarter and CFO, Jeff Lucas, will follow with a detailed financial review and Geoff Morphy will return for some closing remarks after the Q&A. We've requested investors to send questions [indiscernible] which I may reach to management time permitting after the call to analysts interested in the live Q&A.
Now turning to Slide 3. It's my pleasure to turn the call over to Geoff Morphy.
Thank you for joining us today. As we are excited to talk to you about our recent successes and why Bitfarms is well positioned in the current environment to take advantage of improving market conditions. As a leading publicly traded international Bitcoin mining company, we continue to carefully assess strategic decisions regarding geographic diversification, farm expansion, miner utilization, public and private company acquisitions and capital allocation. We have created the following key differentiators. We ensure our competitive low-cost structure by maintaining strict discipline when evaluating expansion opportunities. We seek out and source stable and surplus sources of energy with attractive pricing to continue to expand with a view to reducing our production costs. We utilize and continue to enhance our proprietary mining management software and vertically integrated electrical subsidiary to yield and improve fleet and operational efficiencies. We set the standard for KPI reporting transparency, maintain the highest standards in financial controls and reporting and have been audited by a big 4 accounting firm since going public in 2017. During the past 1.5 years, we have built an exceptional management team. Our international team has significant experience and enables us to scale our operations without additional resources. And for the past 9 months, we have implemented and continue to improve on a highly disciplined approach to growth and capital preservation, including debt reduction.
We will continue these efforts in 2023 by continuing to seek out accretive and cost-effective acquisition opportunities to bring further expansion, increase cash flow from operations, diversify our international footprint and leverage capabilities of our management team and using our proprietary software to add immediate value. Industry consolidation will continue in Bitfarms. As we have mentioned numerous times in the past, it has a superior platform for this type of growth. Completing and integrating acquisitions prior to the next halving in Q2 2024 is strategically important. Also, in Rio Cuarto, Argentina, we plan to soon to overcome recent impediments and execute on a plan to fully activate our new farm with 50 megawatts of low-cost electricity and adding well over 1 exahash of new production. Most importantly, this will be accomplished with very little capital outlay. On the development front, the pipeline is robust, and there are emerging opportunities that may meet our fundamental criteria for transaction growth, which we are working to realize. Now I'll review our accomplishments since the beginning of 2022.
Please turn to Slide 4, which shows some highlights. We more than doubled our hash rate in 2022 and increased further so far in 2023, reaching 4.7 exahash per second at the end of February. We mined 5,167 Bitcoin in 2022. And in February 2023, surpassed the 20,000 milestone for Bitcoins mined by Bitfarms since its inception over 5 years ago. We generated $142 million in revenue and $52 million in adjusted EBITDA in 2022. Our costs remain amongst the lowest in the industry.
With our all-in quarterly cash cost of production lower than the quarterly average Bitcoin price, we again posted positive cash flow from operations in Q4 2022, which is an accomplishment as the industry struggles. We also significantly increased our flexibility and liquidity by reducing debt by over $140 million during the last 9 months and lowering CapEx commitments by almost $70 million.
Slide 5 summarizes the status of our farms. We ended 2022 with 10 farms in 4 countries. We have 188 megawatts in operating capacity, 95% of which is powered by sustainable hydroelectricity, an additional 40 megawatts of built capacity in Argentina is awaiting and pending approvals, which will allow for substantially and timely expansion with electricity costs that we fully expect will bring down our overall corporate decline production costs.
Turning to Slide 6. We show some of our particularly noteworthy achievements at our farms. Ahead of schedule, we successfully completed our ambitious Canadian expansion plan, increasing our hydro-powered megawatts, specifically at our 3 new farms located in Sherbrooke, Quebec. We achieved full capacity of 96 megawatts under our power purchase agreement.
During Q4 2022, at our Garlock farm, we energized 18 megawatts. At The Bunker, we energized the remaining 12 megawatts capacity, bringing it to 48 megawatts. And as planned, we decommissioned and sold the De la Pointe facility for net proceeds of $3.6 million.
In Paraguay, at our Villarrica farm, we imported and installed 2,888 new micro-BTM30s, which added a net 168 petahash per second at the farm, bringing the total hash rate in Paraguay to 288 petahash per second at January 31, 2023, and improved our overall efficiency to 39 watts per terahash. The previous miners have been sold.
In Washington State, we are operating 20 megawatts and generating approximately 600 petahash per second. Farm highlights are continued by turning to Slide 7. In Rio Cuarto, Argentina, there are approximately 10 megawatts currently online, an additional 40 megawatts of capacity built and awaiting approvals.
We expect approval of our power permit very soon. Once we receive this approval, we can draw power under our power purchase agreement from our private power producer. Once activated, we expect this farm to benefit from the lowest cost power across our operations. Then when the importation of new equipment has been approved using some of our $22 million of hardware credits, we will purchase and import 8,000 to 9,000 miners. Based on current prices of miners, we expect the hard group credit to more than cover our capital expenditure requirements to bring this 50-megawatt warehouse into full production during 2023. When complete, this will increase our corporate hash rate to 6 exahash per second for our existing portfolio. After the first 50 megawatts are deployed, we can then ascertain the timing of the construction and build-out of the second mega -- the second 50 megawatts on the same property with the same beneficial attributes.
For a glimpse of our operations in Rio Cuarto, I encourage you to refer to the 2-minute video that was recently posted to our website.
Please turn to Slide 8, which summarizes and highlights our operations and positions as we proceed in 2023.
With that, I will now hand the call over to Jeff Lucas for the financial review.
Thank you, Geoff. Network difficulty increases are raising the cost of production for everyone. As new miners continue to be added to the global network and complete for a fixed number of bitcoin block awards, only the most efficient players will succeed. Bitfarms continues to execute tactics to maintain an efficient cost structure and strong balance sheet. This positions us for intelligent growth, consistent with our strategy of carefully pursuing accretive growth opportunities and our operational capabilities enable us to achieve the superior financial performance with efficient capital investment. I'll review our mine economics, our performance and our financial strategy. Please turn to Slide 9. In the fourth quarter of 2022, we mined 1,434 bitcoin compared to 1,515 bitcoin in the third quarter. The difference is primarily due to the 20% increase in average total network difficulty from the third quarter to the fourth quarter. That said, over the full year, our hash rate expansion delivered mining growth from 3,453 bitcoin in 2021 to 5,167 bitcoin mined in 2022, an increase of 50%. Our fourth quarter revenue was $27 million, comprised of $26 million from our mining activities and about $1 million from our Volta Électrique subsidiary. This compared to $33 million in the third quarter, reflecting a 15% decline in the average decline price quarter-over-quarter and about 5% fewer bitcoin mined during the quarter as the network difficulty increase offset our average hash rate increase of 13%. These factors also impacted the full year and 2022 revenue was $142 million compared to $169 million in 2021. Focusing on mining economics. Please now turn to Slide 10. In the fourth quarter of 2022, Bitfarms direct cost of production per bitcoin remained among the lowest reported in the industry, averaging just under $11,100, albeit up from $9,600 per bitcoin in the third quarter of 2022. The change reflects the increase in network difficulty, partially offset by greater efficiency from our miners and a modest decrease in our total cost of electricity per kilowatt hour, primarily attributable to a favorable U.S. Canadian dollar exchange rate. While direct mining costs did increase this quarter, our hydropower electricity costs are not impacted by volatility and fossil fuel prices, and thus, we continue to benefit from stable electricity costs. As a result, our direct cost of production per bitcoin has remained relatively steady in the 10 quarters, the 10 quarters since the last halving. Fourth quarter gross mining profit was $8 million or 33% of revenue compared to $17 million or 52% of revenue in the third quarter. This reflects an average bitcoin price in the fourth quarter of $18,100 which is 15% lower than the average price of $21,300 in the third quarter. Our total cash cost of production, including the direct mining cost plus the fixed cost of revenue, including rent, technician salaries, in cash, general and administrative expenses, otherwise referred to as G&A or overhead was $16,800. This increase of $2,300 or 16% in the third quarter was again due primarily to the impact of the higher network difficulty on a direct mining cost. Importantly, our cash cost of production in the fourth quarter remained below the average bitcoin price of $18,100 thus delivering positive cash flow from our mining activities. From an IFRS reporting standpoint, for the fourth quarter, we reported an operating loss of $20 million, which included a $29 million realized loss on the disposition digital assets, a $23 million change in unrealized gain on the revaluation of digital assets and a net impairment charge -- or excuse me, a net impairment reversal of $9 million. This compares to the third quarter operating loss of $98 million, which included a $44 million realized loss on the disposition digital assets, a $46 million unrealized gain on the revaluation of digital assets, an $84 million impairment charge to our property, plant and equipment, and a $14 million foreign exchange gain associated with funding our Argentinian operation. Our net loss for the quarter was $17 million or $0.08 per basic and fully diluted share. This compares to a third quarter 2022 net loss of $85 million or $0.40 per basic and fully diluted share. Importantly, we continue to generate cash from our operations during the quarter and achieved adjusted EBITDA of a positive $1.1 million, even with the low average bitcoin prices the industry experienced in the fourth quarter of 2022. Turning now to Slide 11. Our balance sheet strength and flexibility continue to be our highest priorities. Our financing strategy is predicated on our principles of operational excellence, financial stability and intelligence, accretive growth. This supports our key goals of prudently funding finance commitments, planned growth and selective opportunities at a relatively low cost of capital.
Our approach to financial management is straight forward. We look to utilize the proceeds from the sale of our daily Bitcoin production to fund our operating expenses, contributed to our debt service requirements and reduce our leverage while affording us the financial flexibility to continue our growth activity, even in midst the current period of bitcoin price volatility. We use our ATM, our at-the-market program judiciously to fund their growth investments towards a minimized shareholder dilution. Through our efforts to deleverage the balance sheet, we lowered total indebtedness from $165 million at its peak in early June 2022 to $47 million at December 31, and a further reduction to $23 million as of February 28. We also reduced our CapEx commitments from over $100 million for 2023 to $32 million at the end of the year. During the fourth quarter, we renegotiated miner purchasing agreements, extinguishing without penalty payment obligations of $45 million and establishing a $22.4 million credit that's available for future purchases. Combined with our completed 40 megawatts that build out an in-place capacity at Rio Cuarto, we have dramatically reduced our CapEx financing needs, creating financial flexibility to fund further growth. At December 31, we had cash of $31 million and 405 bitcoin valued at $6.7 million for total liquidity of $38 million. During the fourth quarter, we generated $54 million of proceeds by selling a total of 3,093 bitcoin, 1,434 from production and 1,659 from Treasury. We received $3.6 million net cash proceeds from the sale of our De la Pointe farm in December, and we raised $6 million in net proceeds from our ATM program. For the first quarter of 2023 through March 20, we raised additional net proceeds of $14 million. In the fourth quarter, we also continued to lower our outstanding indebtedness. We retired our 3 oldest and most expensive equipment debt financing facilities for $8 million. To fully extinguish our revolving bitcoin backed credit facility, we paid $23 million which freed up over $8 million of Bitcoin that was otherwise collateralizing the loan in encumbered. We restructured our equipment financing in BlockFi, paying off the outstanding balance of $21 million for a settlement of $7.8 million in February of 2023. In addition to settling the BlockFi loans subsequent to quarter end, we paid off in full about $380,000 due to Reliz Technology Group for about $118,000. As a result, we ended February 2023 with just $23 million of total indebtedness, which is scheduled to mature by February of 2024, well in advance of the expected halving date as planned when we entered into the facility. As a result, we successfully eliminated debt obligations of over $21 million, reducing principal and interest payments by $1.6 million per month or about $20 million in total. Turning to Slide 12. I will now turn the call back over to Geoff.
Thank you, Geoff. We manage our business with 2024 having clearly in our sights. While no one can predict or control the price of Bitcoin, only the most efficient mining companies will succeed. Our performance metrics are consistently industry-leading. We have maintained low direct cost of production, and we are working diligently to reduce our corporate overhead costs. Even at Q4 2022 Bitcoin price levels, we continue to generate positive cash from mining operations. We substantially reduced our debt, CapEx and monthly cash obligations. Also importantly, our debt obligations are scheduled to be fully repaid in February 2024, over 2 months ahead of the next halving. With our existing infrastructure, and $22.4 million in available credits from mining purchases, we expect to substantially cover our CapEx requirements to achieve 6 exahash per second by the end of 2023 from our current portfolio of farms. In addition, we expect a cash tax recovery in mid-2023, which will further improve our liquidity and ability to quickly execute on arising opportunities. Our experienced global management team is highly capable of finding, negotiating and integrating new international opportunities and then to design and build new farms in a cost-effective manner. Having vertically integrated operations developed over the last -- over the past 5 years continues to be a key competitive strength. We are following a path of growth with absolute discipline and as evidenced by our track record of operating excellence, we remain well positioned to take advantage of emerging opportunities and be a respected consolidator in the industry. Before the Q&A session, I would like to mention that we will present at the Sidoti Small Cap Conference being held virtually on March 22 and 23, and the Ladenburg Thalmann Technology Expo in New York on April 27. Operator, we can now open the call for questions. Please go ahead.
[Operator Instructions] And our first question here will come from Kevin Dede with H.C. Wainwright.
Mr. Morphy and Mr. Lucas, thanks for having me on. Maybe a little more granularity on the Argentina situation. You talked a lot about, I guess, power authority. I'm just kind of wondering where the miners are and because I know that getting through customs was an issue in the past, maybe get us sort of caught-up on timing there. And maybe also what you're talking to that point, address the $22 million in credit and the opportunity that affords you in shipping more miners there?
Sure. Let me start. I'll tell you about the current climate environment in Argentina, and then Jeff Lucas can talk to you about the miner credits and the CapEx anticipated for Argentina. But Kevin, we're very excited about where we stand in Argentina right now. It came with some impediments and some slowdowns last year as a result of the government and some of their fiscal challenges, but they've made adjustments, and we are moving with them. So the first situation was the power permit. The power permit once the high-voltage lines and the facilities made, they had 6 months to review the situation and provide approval to our private power contractor to be able to turn on and provide power to us. In the meantime, we we've had to take and pay for power from the power grid at higher prices. We believe we are very soon going to get approval from the government to allow our private power producer to turn on the power. And as soon as that happens, we will start benefiting from lower-cost power. As we get more miners into the facility, the cost will even get lower because right now, with the power contractor being utility scale, they need to produce at least 26 megawatts of power, currently closer to 10 megawatts before we can start getting the full benefit out of the power being taken from that facility. So we are excited that, that seems to be around the corner and that lower costs are going to be coming in to us. We expect that the second challenge was importing miners into the country, which was stalled as a result of the country's balance sheet, and they have made changes, as I mentioned. And now we expect that probably within the next 30 to 45 days, that it will be open to us to start bringing miners into the country. And initially, that will be a few thousand, but then that will move up to 8,000 to 9,000 miners. And fingers crossed, it looks like we should be in full production during the third quarter of this year, and that facility will be at full production. And then depending on the markets and the prices and the hash price and all the other factors that will come into it along the way, we will make a decision about implementing the second 50-megawatt warehouse that we can put on the same site with all the same favorable attributes.
Okay. So you're hashing there now, what -- about what level are you hashing now and you're running completely off the grid?
We are pulling power exclusively from the grid right now because the private power producer doesn't have the green light to turn the power on for us. So the cost is higher because we're taking grid power. That will substantially reduce based on energy prices right now and our contract with the private power producer. So that should be around the corner. And I was remiss in my previous comment of saying that between the approximately 10 megawatts that we're drawing now and approximately 26 megawatts, when they turn on at utility scale, they will produce more power than we need, and they will sell that power to the grid, that tends to be at a loss to them, so we'll have to make it up. But it will be a blended power rate that will take us down to what should be $0.03 per kilowatt expressed in U.S. dollars or less once we're in production there. And yes, we're driving generally 8 to 10 megawatts right now. And with full sights on drawing a full 50 megawatts later this year.
So per your discussion, Geoff, regarding the government, do you think they've sort of backed off a little bit on the custom clamp down? Do you think machines flow in with less hiccups in the future so that -- such that you can get to that sort of 26 meg consumption more near term than the full 50 in the third quarter?
No, a different lens, Kevin. Under the former program, they provided an advantageous exchange rate called the blue-chip exchange rate, it's called a variety of things. That us and a variety of other foreign direct investors were taking advantage of to bring equipment into the country because it was a more favorable exchange rate, but that also impacted the country's balance sheet at a time when it really didn't have the wherewithal to be able to stomach that any longer. So it put a stop to that practice and then it needed to bring in new channels to be able to allow foreign direct investors to invest in the country, which is now done. And because we have been there for 2 years, have employees in the country, have a track record of being able to build and pay suppliers, we now have what the application required to be able to submit the application and get approval to become a direct importer. When we're a direct importer, we can bring equipment in. We will pay not at the CCL or the blue-chip exchange rate, but at the official exchange rate, but we will also have substantially less in brokerage charges to do it. They pretty much offset each other. But the best part of it is that under this new approval process, which we are in the queue and we feel very strongly that we're going to get approval within the next 30 to 45 days that will be allowed to be a direct importer. And while there still be communications with the government and smaller approvals, it's in their best interest because of the cash flows that we'll be bringing to the economy to approve that application, and we'll be a good corporate citizen of being able to do that. We're excited for that to happen.
Okay. And then with regard to the 22 mill credit, you foresee dedicating its use to going from the 26 level you're anticipating near term to 50 in the third quarter in terms of megawatts?
I'll let Jeff answer that. But it will take us from the 8 to 10 that we're at now, right up to the 50, and still have some credit left over. But go ahead, Jeff.
Yes, sure. Kevin, so we have right now a little under 2,500 miners that are deployed there in Argentina. And we'll be looking to approximately 13,000 for the full 50 to 52 megawatts to take advantage of that. The capital cost for those miners is completely covered and then some, as Geoff pointed out, with the $22.4 million of credits that we have there. So in other words, we will be capping a large portion, but not the entirety of that credit to fulfill and meet our capital requirements for the miners hopefully for the first warehouse.
Okay. And that gets you to the 6 exahash target you're offering for the year?
Correct.
Correct.
In fact, there's probably more miners than that. So that if we are given other opportunities, we should be able to flex beyond 6 exahash with that credit as well.
Well, so that's kind of where I was going. There's been some talk, there's an opportunity for expansion in Washington U.S. There's Hydro-Quebec, that's offering, I think, 260 to 280 megawatts. And then I think there's been some news out of Paraguay with more Bitcoin miners going there. And I was wondering if you could sort of round out anticipated expansion in those geographies?
Sure. In Quebec, which is our home base, where we have 7 operations, the RFP is still there, but suspended by changes in the political government. We're still hopeful and we continue to participate in discussions to allow that RFP to roll out in a way that's beneficial for the province of Quebec as well as beneficial for us. We can't give you any estimate or any guidance on when that will come to play. In fact, there is some factions that would like to see that canceled. We think we bring a considerable amount of value to the province of Quebec, and we're supported by the towns and the mayors and the MPs, where we do our operations. And we see the operations -- the opportunity to set up in towns and cities where there's a lot of surplus hydropower, employment that is necessary, skilled labor that exists from the forestry and mining industry. So we're excited about Quebec. But at the moment, we can't count on it given the moves by the province to get the new rules of the RFP in place. So that's there. Washington is a wonderful area where we had successful operations. And once again, it's hydro power. And we're seeing both greenfield opportunities, brownfield opportunities and acquisitions in that area. Discussions continue. So that's a bright spot. In Paraguay. Paraguay, we were very excited about and probably about this time last year, I was telling you how excited we were for it. It's -- they've got a surplus hydro load there that we'd love to take advantage of. But since then, they brought in some rules that resulted in a tariff in that area increasing probably too much, and it seems to have poured cold water on the interest of us and a variety of other miners going to Paraguay. We think this is a mistake. In fact, I am headed to Argentina and Paraguay later on tonight to have some of those discussions with those people to try to bring some more reasonable balance to what they want in exchange for power cost per kilowatt hour, the deal status or the curtailment factors and things like that. But Paraguay in the meantime, it's an election year. And as such, things are somewhat shelved as until the election goes through. So we don't expect really much change in Paraguay until later this year. But yes, there is 1 bitcoin company that's announced that are going into Paraguay with 100 megawatt opportunity, and we wish some good luck. This time last year, we were working on multiple 100-megawatt opportunities in Paraguay, and they were -- they've been put on the shelf based on some of the current announcements. Hopefully, that covers some of the geographies you asked about, Kevin.
Absolutely, all of them. Geoff, one last question for me before I turn the floor over. Can we talk about mining efficiencies. You've noted on the slide deck, you're now at about 39 Joules per terahash, I think, as of February. I'm wondering, if you look across the fleet and the leftover credit that Mr. Lucas has spoken to, is there thinking internally about how you might consider optimizing machine performance to push that efficiency lower or higher, depending on your perspective?
Exactly. Kevin, we're doing that every day. We utilize all the latest generation miners. We have overconcentration of the M30 MicroBTs, but we also have the S19s. They're all very good miners. And we are able to achieve amongst the best efficiencies in the industry right now based on our software system and our operations and our technicians. And that comes from making sure that you have all your machines up and running, fully running and fully optimized. And we're very good at that. And that's why we continue to achieve these great efficiencies. Now -- sure, there are great sort of high-performance S19s and M50s that are achieving even better efficiencies, but they're 2x or 3x the cost, and this has been a challenging environment. We think that you can't just take a look at the watts per terahash or Joules per terahash in isolation. You need to take it combined with how well you operate your fleet and your power costs because at the end of the day, what you need is cash flow from operations to provide a return on investment. And I think there's a lot of other people out there that are growing for growth sake. And clearly, with our targets of 6 exahash, we're not doing that. We have prudent growth, very disciplined because we want to provide value to our shareholders. And as Jeff Lucas has mentioned, with these hardware credits, like we're able to roll out a substantial increase in production without a substantial cash outlay, which means a far less dilution to shareholders. We think this is key. We think this is important for our shareholders to know that we can substantially grow without a substantial outlay. And we have been achieving positive cash flow from operations even through some pretty lean times. So Kevin, when you look at the Joules per terahash for these miners, you'll also have to look at power costs and take them into conjunction with that and your payback periods and your ROI. So that's what we do. Our computational -- at least our calculations on how to do it is a mixture of the performance of the machine, the capital cost of machine and then the expected output in terms of cash flow. So it's more complicated than just looking at the Joules per terahash. But when you get that figured out, you can generate good returns.
But let me add to comment that, if I may. We're also -- as we look at ROI and payback, we're also very aware that we have a halving event coming next year. And so while a lot of our peer companies may be investing and higher performing and more extensive miners out there, I think people have to be very attuned to things that go beyond a 1-year payback, recognized in the year 2 or year 3 would be impacted by the halving event, which, of course, is a great element of uncertainty.
Our next question will come from Bill Papanastasiou with Stifel.
Congrats again on the recent efforts to reduce the indebtedness and the renegotiation of those previous contracts. My first question is related to treasury management. In the first couple of months this year, the company has maintained a total balance of just over 400 bitcoin, but we continue to see positive price action for the digital asset and based on the macroeconomic outlook, it seems like things are only going to improve from here, fingers crossed. Just wondering whether you can share your outlook in terms of treasury management strategy as we progress into 2023 with the halving in the back of our minds?
Sure. So let me start off with that, and then Geoff may fill in as well here. We made the conscious decision last year actually to use our Bitcoin holdings to pay down a lot of our indebtedness and for deleverage company overall. We recognized and adopted the strategic intention at that point in time that we feel investors describe greater value to our financial performance than they do in our results, certainly in the building of treasury of Bitcoin, which they, of course, any investor can do on his or her own here. The important point to keep in mind going forward is that while we're looking at growing the business, we want to do so to be accretively because there's minimal dilution to our shareholders as possible. With that in mind, Bill, what's going to drive our treasury strategy going forward is utilizing the Bitcoin from production, you need, of course, operating expenses and our debt service requirements and to the extent it makes sense to contribute to our capital expansion plans as well. As we continue to see and if we continue to see an improvement in the hash price, that is, of course, the amount of revenue that we derive from a terahash here. We may be in a position here where we'll be generating greater revenues above and beyond our operating expenses and our debt service requirements. At that point in time, we may give consideration to beginning to build up our treasury reserves. But again, the overarching goal here is to minimize dilution to shareholders, we would rather use our actually BTC proceeds and we would actually engage in the ATM to fund the growth of our business going forward.
Great color. Just moving gears -- shifting gears to Argentina. Can you speak a bit more to the opportunity there and why the team remains so bullish. My understanding is that there's a significant amount of natural gas and it trades at a discount. Can you add some more color to that? And we've recently seen natural gas prices reduced this year, and I'm wondering if you're able to comment whether this reduction in natural gas could have an impact to the power cost that you'll be drawing on in the future through [indiscernible] or the other -- the energy provider at the site.
Absolutely. Yes, the lower natural gas prices will help us as well as any other miners that is driving power from natural gas field electricity. In Rio Cuarto, Argentina, the whole country benefits from the fact that I think it's the third -- it's a country with the third largest reserves of natural gas in the world. I think they're second or third in oil reserves as well. So they're energy rich. And what's also a benefit to us, not necessarily a benefit to them, is being in the Southern Hemisphere, a long way from the population centers of the world, there's no LNG terminals. It's hard to move that oil and natural gas anywhere else. So there's -- just like what we look for in hydro, surplus hydro, they have surplus energy in the form of natural gas. And we can help monetize that, which is good for the country and it's good for us. And as we said in the script, we expect when this thing -- when this facility is fully activated, that it's going to be our lowest cost energy of any of our sites. Right now where natural gas prices are, we think it's going to be USD 0.03 per kilowatt or less. It's an 8-year contract. The first 4 years, 60% of the -- 60% is at $0.022 per kilowatt, and the rest is at market prices, which we do not exceed -- expect to exceed much over $0.03 per kilowatt. So we are very hopeful that this will be sub-$0.03 power, which will bring our total cost across our whole fleet down, and down quite significantly. So this is a strategically important area for us, strategically important for our shareholders. And we know it's taken longer to put in place and it's been a bit of a black cloud for our shareholders and our valuation. So we are excited to hopefully pass this hurdle soon and show everybody that this is going to be activated in a very successful project.
Lastly, I just want to circle back to the equipment credit that Kevin was asking on and just expand on it a bit more. If I do some back-of-the-envelope math, it appears that if we were to consider $15 per terahash pricing for ASICs, you get to about 6.2 exahash of the existing 4.7 and drastically reduce the machine efficiency. Are you able to comment on whether there's a particular mix that you like in terms of what you think you'd select to deploying to the Argentina facility. Does the credit pertain only to MicroBT? Or can you purchase other types of equipment? And my understanding is that MicroBT has been a significant -- significantly utilized -- all their ASICs have been significantly utilized at Bitfarms and you continue to get very high efficiencies. Just any color on there.
You're right. It's been -- a good portion of our fleet is MicroBT M30 series miners. They are a workhorse. They've been tried and true. When they do falter, we can -- we have the knowledge at our repair shops to fix them and get them back in action, and they have amazing longevity. They're not a super high-performance unit, but they truck along with very good efficiencies. And yes, your math in terms of calculating the exahash years, some of our calculations as well. So it really represents an opportunity should an acquisition come along that we can utilize that credit elsewhere. But yes, these credits are offered MicroBT units. We have the flexibility that we don't have to put them all in Argentina, but that seems to be the low-hanging fruit right now. So that's where we will go. But we're open sort of beyond that 6 exahash to putting them elsewhere as well. But we're -- as we look at expansion opportunities, we'll be happy to use the Bitmain equipment as well. As I said earlier, to Kevin, it's just a mix of the circumstances at the particular site and the capital cost that goes with the miners versus their performance and then when we make the decision.
Yes. Bill, about 85% of our miners are MicroBT, and we've had a great track record, as Geoff pointed out. And the repair record of these things is excellent.
And our next question will come from Dillon Heslin with ROTH MKM.
First, I wanted to talk a little bit about Argentina again. Talk a little bit about this the next steps of the build-out sort of being on pause. What exactly do you think you need to see to give you confidence that you can continue to pursue that opportunity?
We are very advanced, Dillon. The first 50-megawatt site was completed in October. It's ready for miners. All the equipment, all the IT connections. They're all in place. It's just that we had to step back from the government approval changes. So as soon as we can get the miners in there and the power turned on, we're golden. And it seems that both of those approvals are imminent. So as soon as miners arrive at site, they can be plugged in and we'll increase our hash just like that, right up to 50 megawatts. So really after that, it's considering, like, as you recall, we have a 210-megawatt contract there. We had initially planned on building all that out, but then when conditions in the market deteriorated, we really focused on 2 warehouses rather than 4 warehouses. So we're really looking at 100 megawatts. So if the -- what's happened in the industry over the last few weeks and even really the last couple of months is very encouraging. If that hash price can continue to improve and the economics look good and the payback periods look good, we will view the timing for it to having in mind, it's probably about April 30 of '24, see if we can build that facility and have it contribute to accretive growth for our operations and our shareholders. Those are some of the factors that we're looking into. But we're not going to jump into it quickly. We're going to evaluate all the variables and make a smart and prudent decision when the time comes. But the gating item is getting the power turned on at the power plant with the government approval and the ability to bring miners into the country. If we can get both of those things achieved in the next number of weeks, then we will have a good fortune of being able to make those decisions.
Got it. I understand with what is existing. I guess what I'm referring to as more so what you haven't built yet, sort of if you get what you're talking about online and the machines in, like do you see any more potential hiccups that could exist with the government, if you did decide to go through? Or you think once you get the first building online, then it's sort of a bit more smooth sailing from there?
It should be smooth sailing. See the power permit will allow for not just the power of the first facility but should be the lion's share of the second facility as well. So that should be covered all with the power permit approval. In terms of bringing miners into the country, we think that's imminent. The government has made their changes. It's good for the government that our application should be clear. We're able to then layer on additional applications very quickly for additional amounts to come into the country. And I think over the last 2 years, we've learned a lot. And we've learned that this is a country that's not quite as nimble as what we're used to in North America, but we have now approximately 40 people on the ground there between technicians and our regional office. And we know the system a lot better. We know the people a lot better. We were probably a bit naive to start with, but we've overcome those things. We're on the ground. The government is well aware of us and is supportive of us. So I think we paid our dues and now we're going to get the benefits of it.
Got it. And then as a follow-up, you talked a bit about potentially looking at strategic acquisitions. Do you think that's in markets where you already operate i.e., countries? Or is it something where you're looking at net new countries? Just sort of what are your thoughts in terms of something that might already be built out or something that you're just buying access to wind and power?
Dillon, let me give you a little background on that and some metrics. The beginning of 2022, we decided because we thought consolidation was coming and acquisitions would be becoming that we should develop a corporate development group. We have 3 talented individuals within that group. And over the last 14 months, they have reviewed 80 opportunities in 17 countries with over 6,500 megawatts of power. We have issued 15 LOIs. We are very busy in looking at opportunities, but very disciplined at what might work for us. Often, there is a mismatch of our value expectations versus their value expectations. But I think given the tightness of the marketplace in the fourth quarter last year, the difficulty rises and so far in this quarter, people have realized that this is a very challenging business sector and that you need industrial scale and experience to be able to do it successfully. And we are seeing better opportunities, more realistic pricing, and we are hoping that we're going to be able to complement our organic expansion with some acquisitions. And those -- and just to follow on with your question, yes, they are particularly good if they are already in geographies that we reside in because we have people there that just makes sense. And there are also areas in which we know the laws and the rules far better, but it doesn't keep us out of looking at other jurisdictions that might be favorable for growth as well.
And this concludes our question-and-answer session. I would now like to turn the conference back over to Geoff Morphy for any closing remarks.
I would like to reiterate 3 points about Bitfarms. First, we mined 5,167 Bitcoin in 2022, placing us high in total production for the year and further validating our capabilities to scale the business. Second, we've maintained profitable mining operations each quarter as a result of our determination to maintain stable low energy and operating costs. Three, we've delevered our balance sheet. As of February with $22.4 million in available equipment credits and just $23 million in total indebtedness, we have ample flexibility to grow in 2023. Organically, with little capital outlay, we expect to reach 6 exahash per second by year-end from our existing portfolio, and we expect that 1 or more acquisitions will bring us even further value to shareholders. 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 in our Q1 conference call in May. Thank you very much.
The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.