Dive into Cipher Mining’s Q3 2024 efficiency. From income challenges to strategic funding in fleet upgrades, knowledge heart growth and plans for AI/HPC. Uncover what’s subsequent for this Bitcoin miner!
The next visitor put up comes from Bitcoinminingstock.io, offering complete knowledge, in-depth analysis, and analyses on Bitcoin mining shares. Initially printed on Nov. 21, 2024, it was penned by Bitcoinminingstock.io writer Cindy Feng.
Cipher Mining (NASDAQ: CIFR) has delivered one of many strongest YTD performances amongst public Bitcoin miners as of November 19, 2024. Inside funding circles, comparisons between TeraWulf and Cipher have sparked curiosity, with some noting the latter’s stronger efficiency in particular areas. Having concluded TeraWulf as a rising Bitcoin miner in my earlier evaluation, now it’s time to take an in depth have a look at Cipher, a miner that has quietly carved out its place available in the market.
Fundamental Profile
Cipher Mining is a U.S.-based Bitcoin mining firm that positions itself as an information heart developer. Its operations are primarily positioned in Texas, leveraging the state’s favorable power infrastructure. The corporate’s working amenities embody:
- Odessa Information Middle: A completely owned facility in Odessa, Texas, accounting for 7.1 EH/s, representing 76% of Cipher’s whole hash fee.
- Joint Ventures with WindHQ LLC: Alborz, Bear and Chief amenities positioned in Pleased and Andrews, Texas, contributing an extra 2.2 EH/s to the corporate’s total capability.
Picture Background Supply: ciphermining.com/websites
Past Bitcoin mining, Cipher additionally participates in grid curtailment applications to optimize profitability. Much like Riot Platforms, Cipher leverages ERCOT’s low-cost power grid and applications just like the 4 Coincident Peak (4CP) to handle electrical energy utilization throughout high-demand durations. In Q3 2024, Cipher reported $1.4M in energy gross sales, generated by promoting electrical energy to ERCOT when worthwhile. This extra income stream helps the corporate’s working prices.
Not So Fairly Q3 2024 Efficiency
In Q3 2024, Cipher reported $24.1M in income, a 35% QoQ and 20.5% YoY decline. This drop was primarily pushed by diminished Bitcoin manufacturing. The corporate mined 493 BTC in Q3, down from 638 BTC in Q2. Seasonal surges in electrical energy charges throughout ERCOT’s summer time 4CP durations additional compounded the influence.
Throughout this era, Cipher’s price of income rose to $15.1M, up from $13.0M in Q3 2023. Web losses widened to $87M, a stark distinction to the $19M loss in Q3 2023. Contributing components included larger depreciation prices related to new mining rigs and amenities, in addition to by-product losses linked to energy contracts. Because of this, Cipher’s gross margin declined considerably, from 57.1% in Q3 2023 to 37.5% in Q3 2024.
Cipher Mining: Quarterly Income, Price of Income, and Gross Margin Tendencies (Q3 2023 – Q3 2024)
These numbers collectively painted an undesirable operational stress for Cipher.
A Change of Perspective
Amid operational challenges, Cipher’s whole property grew to $775.4M as of Q3 2024, up from $566.1M at first of the yr. This progress displays vital investments in its Bitcoin treasury and mining infrastructure.
Bitcoin Treasury Technique: Maintain Some and Promote Some
As of September 30, 2024, Cipher held 1,512 Bitcoin valued at roughly $138.1M, up from 796 Bitcoin valued at $32.98M on the finish of final yr. Nonetheless, in comparison with Q2, Cipher had a 33.4% (923 BTC) QoQ decline as a result of strategic gross sales. In September, Cipher offered a great portion of its Bitcoin holdings, elevating $67.5M to finance the acquisition of the 300 MW Barber Lake facility. This method permits the corporate to leverage its Bitcoin treasury for liquidity whereas minimizing fairness issuance.
Cipher Mining’s Bitcoin holdings (August 2023- October 2024)
Fleet Improve: Strengthening Operational Effectivity
Investments in fleet upgrades considerably impacted Cipher’s price construction. Since This fall 2023, Cipher entered agreements with Bitmain and Canaan to accumulate cutting-edge mining rigs:
- The Bitmain settlement entails 7.1 EH/s of miners, initially scheduled for supply for 2025 however accelerated to This fall 2024 by means of an modification in June 2024. Cipher paid $97.5M in deposits through the 9 months ended September 30, 2024, with $26.9M remaining.
- The Canaan settlement contains 1.25 EH/s of miners, with supply anticipated in This fall 2024. Cipher paid $13.1M upfront in Q2, with $3.3M remaining. As a part of this settlement, Cipher secured an choice to accumulate further miners equal to 160 MW of capability by June 30, 2025, by paying $5.3M as deposit (paid in Q2).
Cipher Mining entered agreements with Bitmain and Canaan to accumulate mining rigs
Bitmain’s Antminer S21 Professional and Canaan’s A1566 can be utilized to switch much less environment friendly machines at Cipher’s Odessa facility, moderately than being deployed on the Black Pearl Facility.
To align with these upgrades, Cipher revised the helpful lives of its mining rigs from 5 years to 3 years efficient from June 1, 2024. This alteration added $9.4M and $12.2M in depreciation amortization expense for Q3 2024, which closely contributed to the web loss. In Q3 2024, the corporate built-in Bitmain’s Antminer S21 Professional and Canaan’s A1566 miners at its Odessa facility, Cipher’s largest wholly-owned knowledge heart.
Nonetheless, these upgrades are important for Cipher to achieve its goal of 13.5 EH/s self-mining capability by year-end 2024, up from 9.3 EH/s as of Q3. By making these upgrades, Cipher is laying the muse for improved operational effectivity and profitability.
Cipher Mining’s Hash Price Goal (screenshot from its presentation)
Ahead Wanting Development Potential
Information Middle Enlargement Pipeline
Wanting forward, Cipher is endeavor substantial growth of its knowledge heart capability. The Black Pearl facility (acquired final Dec), a 300 MW knowledge heart beneath growth in Winkler County, Texas, is anticipated to be energized by Q2 2025, including roughly 21.5 EH/s of mining capability. Equally, they lately acquired a Barber Lake facility in Colorado Metropolis, Texas, boasting 300 MW of capability and is prepared for development. The 70 MW Reveille web site positioned in Cotulla, Texas was one other current acquisition. This web site has the potential to be expanded right into a 200 MW knowledge heart, pending regulatory approval (word: Cipher hasn’t issued a proper PR about this acquisition, nevertheless it was talked about of their current 10-Ok submitting).
On Oct 15, 2024, Cipher introduced buying choices for 1.5 GW of further knowledge heart capability in West and North Texas. This brings their lively portfolio and growth pipeline to a complete of 2.5 GW throughout 10 websites. Upcoming amenities like Mikeska, Milsing, and McLennan amenities, every have 500 MW of potential energy capability pending regulatory approvals.
AI and HPC Ventures
In response to the extremely aggressive mining surroundings, like many different miners I beforehand mentioned, Cipher can be diversifying into AI/HPC internet hosting to cut back reliance on Bitcoin mining. As of Q3 there isn’t a income reported from this enterprise sector, however we are able to see knowledge facilities within the pipeline that are strategically designed to help each Bitcoin mining and HPC actions.
In accordance with a current firm presentation, their workforce contains veterans from Google, Vantage, and Meta, bringing deep experience to its AI infrastructure and tier-3 knowledge facilities. On Oct 31, its CEO Tyler Web page stated the corporate has “made nice progress in our discussions with hyperscalers in current weeks as we search our first HPC tenants”. This appears to sign promising income potential in HPC internet hosting for Cipher within the close to future, presenting a major long-term progress alternative.
Some Issues Stay Unclear
As of September 30, 2024, Cipher reported $39.7M in money and money equivalents (together with $14.4 M restricted money). Whereas this offers some liquidity, it raises considerations about whether or not the corporate has ample assets to satisfy its formidable growth plans. With over $30.2M funds due for brand new mining rigs and vital capital necessities for knowledge heart developments and HPC enterprise ventures, Cipher might must discover further financing choices.
Cipher’s current financing actions spotlight its potential to lift capital, producing $213.5M throughout 9 months ended September 30, 2024. These funds have been primarily raised by means of the issuance of frequent inventory. Nonetheless, reliance on inventory issuance might result in shareholder dilution if it continues within the long-run. Now, the query is whether or not Cipher can diversify its funding technique to stability its progress ambitions and protect shareholder worth.
Ultimate Ideas
Cipher Mining’s Q3 2024 outcomes mirror the challenges of working in an more and more aggressive Bitcoin mining surroundings, particularly throughout summer time months for these positioned in Texas.
Nonetheless, Cipher’s forward-looking technique and impressive growth plans might place it properly for future progress. If these initiatives are executed successfully and supported by enough assets, Cipher has the potential to emerge as a compelling participant within the present market cycle.
