Hut 8 Corp. (NASDAQ: HUT) (TSX: HUT) has decided to close its Drumheller bitcoin mining site in Alberta, owing to ongoing restructuring initiatives intended to bolster the company’s overall financial performance.
The company made the announcement on Wednesday that the site would stop operating as a Bitcoin mining site, effective immediately. Hut 8 will continue with its lease and the option value of re-energizing the site if market conditions happen to improve.
Hut 8 plans to relocate the site’s most efficient miners, which collectively account for approximately 130 PH/s of hashrate, to its Medicine Hat site. The company intends on having the miners up and running later on this month in order to capitalize on the superior infrastructure and economics of the site.
“Following a comprehensive analysis, we have determined that the profitability of Drumheller has been impacted significantly by various factors, including elevated energy costs and underlying voltage issues,” said Asher Genoot, CEO of Hut 8.
“Our restructuring plan aims to drive maximum value from our assets and position the company for profitable growth. With the nominal lease expense, we will also have a low-cost option to re-energize the site if energy rates in the AESO grid decrease or hashprice increases.”
Miners at Drumheller with efficiency worse than 38 J/TH will be retired from operations.Efficient miners will be relocated while inefficient miners will be decommissioned. The aim is to produce improve Hut 8’s cashflow, reduce its cost to mine a Bitcoin, and drive a pro forma increase in Bitcoin mined per EH of approximately 11 per cent.
Image from Hut 8 Corp.
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Bitcoin has reached a new all-time high
Bitcoin has achieved a new record value, surpassing its previous peak from more than two years ago. On Tuesday, the digital asset exceeded its previous peak of just under USD$69,000 from November 2021, although it subsequently eased back to slightly above USD$64,000. Bitcoin’s current value stands at about USD$1.3 trillion, constituting a significant portion of the total USD$2.6 trillion cryptocurrency market.
One major factor contributing to bitcoin’s rise since the beginning of the year has been the approval by the US financial regulator in January of exchange-traded funds [ETFs] – a basket of assets that investors can buy and sell like shares on an exchange – that track the price of bitcoin.
Additionally, the upcoming “halving” event – where the amount of bitcoin released into circulation via mining is halved – has also contributed to boosting prices in the past, as a reduction in supply leads to higher prices.
Miners stand to make more money with Bitcoin’s new record numbers, but that also means more competition and higher costs. Some companies might struggle to keep up especially if they use old equipment or pay a lot for energy. For small scale miners, that can be the difference between staying alive month to month.
For larger scale miners like Hut, however, lack of optimization can mean giving up profit to a competitor. In these cases, they might need to shut down their mining sites because they’re spending more than they’re making.
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