Hut 8’s Ontario expansion fighting several hurdles as Bitcoin slides

By COLLIN GALLANT on December 8, 2022.

cgallant@medicinehatnews.com@CollinGallant

Cryptocurrency miner Hut 8 says it is performing well despite a steep decline in Bitcoin prices, but it says its expansion foray in Ontario is facing challenges, according to recent financial reports.

The dataprocessing firm with major operations in Medicine Hat, announced Nov. 28 it would suspend operations in Ontario related to a contract dispute.

Last month, company officials addressed deep decline in Bitcoin in financial reports, stating the publicly trading company was operating well and awaiting an upturn.

“The industry continues to face global headwinds,” said CEO Jaime Leverton during a conference call with investors on Nov. 10. “Taking a balance sheet-first approach has allowed us to continue to operate thoughtfully and strategically.

“We optimized operations … and reduced our costs per coin during the quarter … We continue to be bullish on Bitcoin in spite of prolonged downward pressure on the asset over the preceding months.”

Revenue for the recent quarter was $27.3 million in Bitcoin mined over the three months, compared to $47.9 million for a similar number of tokens in the same quarter of 2021. That reflects a near 50 per cent decrease in the trading value of Bitcoin (averaging about $27,700 over the summer).

Leverton said the company’s strategy to hold Bitcoin will pay off when prices improve.

“We’ll remain conservative and maintain our long-term strategy,” she said.

The company also said in its third-quarter statement on Nov. 10 that Hut 8 would default on its agreement with Validus Power to power an expansion project stating Validus has “failed to achieve certain key operational milestones … and demanded … payments for delivery of energy that are higher than those negotiated under the terms of the power purchase agreement.”

That expansion, to convert a mothballed natural gas-fired power plant in North Bay, Ont., came after the companies announced in 2021 they would work together to seek out new opportunities in the power-intensive process.

“(Hut 8) intends to pursue all legal remedies available to it to enforce the terms of the PPA,” the statement concludes.

Subsequent to the quarter, the company announced it had completed equipment upgrades at the Medicine Hat.