Dive into Cipher Mining’s Q3 2024 efficiency. From income challenges to strategic funding in fleet upgrades, knowledge middle enlargement and plans for AI/HPC. Discover what’s subsequent for this Bitcoin miner!
The following visitor publish comes from Bitcoinminingstock.io, offering complete knowledge, in-depth analysis, and analyses on Bitcoin mining shares. Originally revealed on Nov. 21, 2024, it was penned by Bitcoinminingstock.io creator Cindy Feng.
Cipher Mining (NASDAQ: CIFR) has delivered one of many strongest YTD performances amongst public Bitcoin miners as of November 19, 2024. Within 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 a detailed take a look at Cipher, a miner that has quietly carved out its place available in the market.
Basic Profile
Cipher Mining is a U.S.-based Bitcoin mining firm that positions itself as a knowledge middle developer. Its operations are primarily positioned in Texas, leveraging the state’s favorable vitality infrastructure. The firm’s working amenities embody:
- Odessa Data Center: A completely owned facility in Odessa, Texas, accounting for 7.1 EH/s, representing 76% of Cipher’s whole hash charge.
- Joint Ventures with WindHQ LLC: Alborz, Bear and Chief amenities positioned in Happy and Andrews, Texas, contributing a further 2.2 EH/s to the corporate’s total capability.
Image Background Source: ciphermining.com/websites
Beyond Bitcoin mining, Cipher additionally participates in grid curtailment applications to optimize profitability. Similar to Riot Platforms, Cipher leverages ERCOT’s low-cost vitality grid and applications just like the Four Coincident Peak (4CP) to handle electrical energy utilization throughout high-demand intervals. In Q3 2024, Cipher reported $1.4M in energy gross sales, generated by promoting electrical energy to ERCOT when worthwhile. This further income stream helps the corporate’s working prices.
Not So Pretty Q3 2024 Performance
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 firm mined 493 BTC in Q3, down from 638 BTC in Q2. Seasonal surges in electrical energy charges throughout ERCOT’s summer season 4CP intervals additional compounded the impression.
During this era, Cipher’s price of income rose to $15.1M, up from $13.0M in Q3 2023. Net losses widened to $87M, a stark distinction to the $19M loss in Q3 2023. Contributing components included greater depreciation prices related to new mining rigs and amenities, in addition to by-product losses linked to energy contracts. As a end result, Cipher’s gross margin declined considerably, from 57.1% in Q3 2023 to 37.5% in Q3 2024.
Cipher Mining: Quarterly Revenue, Cost of Revenue, and Gross Margin Trends (Q3 2023 – Q3 2024)
These numbers collectively painted an undesirable operational stress for Cipher.
A Change of Perspective
Amid operational challenges, Cipher’s whole belongings grew to $775.4M as of Q3 2024, up from $566.1M at the beginning of the 12 months. This progress displays important investments in its Bitcoin treasury and mining infrastructure.
Bitcoin Treasury Strategy: Hold Some and Sell 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 12 months. However, in comparison with Q2, Cipher had a 33.4% (923 BTC) QoQ decline as a result of strategic gross sales. In September, Cipher bought a very good portion of its Bitcoin holdings, elevating $67.5M to finance the acquisition of the 300 MW Barber Lake facility. This strategy permits the corporate to leverage its Bitcoin treasury for liquidity whereas minimizing fairness issuance.
Cipher Mining’s Bitcoin holdings (August 2023- October 2024)
Fleet Upgrade: Strengthening Operational Efficiency
Investments in fleet upgrades considerably impacted Cipher’s price construction. Since This fall 2023, Cipher entered agreements with Bitmain and Canaan to amass 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 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 consists of 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 amass 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 amass mining rigs
Bitmain’s Antminer S21 Pro and Canaan’s A1566 can be utilized to interchange much less environment friendly machines at Cipher’s Odessa facility, quite 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 change added $9.4M and $12.2M in depreciation amortization expense for Q3 2024, which closely contributed to the online loss. In Q3 2024, the corporate built-in Bitmain’s Antminer S21 Pro and Canaan’s A1566 miners at its Odessa facility, Cipher’s largest wholly-owned knowledge middle.
However, 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 Rate Target (screenshot from its presentation)
Forward Looking Growth Potential
Data Center Expansion Pipeline
Looking forward, Cipher is endeavor substantial enlargement of its knowledge middle capability. The Black Pearl facility (acquired final Dec), a 300 MW knowledge middle below growth in Winkler County, Texas, is anticipated to be energized by Q2 2025, including roughly 21.5 EH/s of mining capability. Similarly, they lately acquired a Barber Lake facility in Colorado City, Texas, boasting 300 MW of capability and is prepared for development. The 70 MW Reveille website positioned in Cotulla, Texas was one other latest acquisition. This website has the potential to be expanded right into a 200 MW knowledge middle, pending regulatory approval (word: Cipher hasn’t issued a proper PR about this acquisition, however it was talked about of their latest 10-Okay submitting).
On Oct 15, 2024, Cipher introduced buying choices for 1.5 GW of further knowledge middle 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 atmosphere, like many different miners I beforehand mentioned, Cipher can be diversifying into AI/HPC internet hosting to scale back reliance on Bitcoin mining. As of Q3 there is no such thing as 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.
According to a latest firm presentation, their workforce consists of veterans from Google, Vantage, and Meta, bringing deep experience to its AI infrastructure and tier-3 knowledge facilities. On Oct 31, its CEO Tyler Page mentioned the corporate has “made great progress in our discussions with hyperscalers in recent weeks as we seek our first HPC tenants”. This appears to sign promising income potential in HPC internet hosting for Cipher within the close to future, presenting a big long-term progress alternative.
Some Things Remain Unclear
As of September 30, 2024, Cipher reported $39.7M in money and money equivalents (together with $14.4 M restricted money). While this offers some liquidity, it raises issues about whether or not the corporate has ample sources to fulfill its formidable enlargement plans. With over $30.2M funds due for brand new mining rigs and important capital necessities for knowledge middle developments and HPC enterprise ventures, Cipher might have to discover further financing choices.
Cipher’s latest financing actions spotlight its skill to boost capital, producing $213.5M throughout 9 months ended September 30, 2024. These funds have been primarily raised by the issuance of frequent inventory. However, 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 steadiness its progress ambitions and protect shareholder worth.
Final Thoughts
Cipher Mining’s Q3 2024 outcomes replicate the challenges of working in an more and more aggressive Bitcoin mining atmosphere, particularly throughout summer season months for these positioned in Texas.
However, Cipher’s forward-looking technique and impressive enlargement plans might place it effectively for future progress. If these initiatives are executed successfully and supported by enough sources, Cipher has the potential to emerge as a compelling participant within the present market cycle.
