Hut 8 Responds to Coronavirus (COVID-19) Pandemic Concerns and Drop in Bitcoin Price
Toronto, Ontario--(Newsfile Corp. - March 13, 2020) - Hut 8 Mining Corp. (TSX: HUT) (OTCQX: HUTMF) ("Hut 8" or "the Company"), one of the world's largest publicly listed bitcoin mining companies by operating capacity and market capitalization, provides an update to shareholders regarding risks due to the impact of the coronavirus (COVID-19) pandemic and the significant drop in the price of bitcoin.
To combat the significant drop in the price of bitcoin over the last 48 hours, Hut 8 is optimizing its mining operations by running its mining equipment in cost-efficient modes. This has the ability to reduce its electricity consumption and costs by approximitely 50% while only reducing the hashrate output by approximitely 35%. While this optimization reduces total output, the overall overall margin is maximized and our costs are reduced. This is being performed in real-time on a 24/7 basis. Management is monitoring the movement in the price of bitcoin relative to operating costs to either further curtail production or increase production. This is a unique advantage of Hut 8 that its electricity supply agreements and equipment allow for this reduction in consumption.
Several new policies have been put in place for employees working at the sites with respect to keeping work environments clean to prevent an outbreak of the coronavirus (COVID-19). Employees are prohibited from non-essential work travel and urged to stay home if feeling ill. Employees that have traveled outside of Canada have been asked to report this and monitor their health. Management has been carefully monitoring the work environment to prevent any potential disruption to operations as a result of the virus.
The coronavirus (COVID-19) pandemic has had a significant negative impact on most asset and commodity values around the world, including bitcoin which has dropped as much as 46% in the last 48 hours. As a result of lower selling prices for bitcoin, Hut 8 will have to sell bitcoin at lower bitcoin prices to cover ongoing fiat currency based costs.
Hut 8's relationship with its lender, Genesis Global Capital LLC ("Genesis"), remains positive. However, the volatility in the price of bitcoin may have an adverse effect on the value of the bitcoin collateral held with Genesis that may cause a margin call that Hut 8 is unable to meet. Management continues to monitor the situation and the bitcoin price to mitigate and adverse consequences to what the Company believes is temporary extreme volatility.
The Company also notes the bitcoin SHA-256 algorithm halving, which occurs approximately every four years, is set to occur across the entire bitcoin network in mid-May 2020. The impact will be that the compensation paid to miners for mining a block will be cut in half. The desired impact is to limit the number of bitcoin in circulation and create scarcity. However, the impact on all bitcoin miners could be negative if there isn't a corresponding increase in the price of bitcoin or a decrease in the network hashrate. This could have the effect of making much of Hut 8's operations uneconomical if the bitcoin price doesn't appreciate or the network hashrate doesn't fall.
ABOUT HUT 8 MINING CORP.
Hut 8 is a bitcoin mining company with industrial scale operations in Canada. In total, Hut 8 owns and operates two sites in Alberta, Canada utilizing 94 BlockBox AC data centers with current maximum operating capacity of 107 MW and 952 PH/s.
Hut 8 creates value for investors through low production costs and appreciation of its bitcoin inventory. The company provides investors with direct exposure to bitcoin, without the technical complexity or constraints of purchasing the underlying cryptocurrency. Investors avoid the need to create online wallets, wire money offshore, and safely store their bitcoin.
The Company's common shares are listed under the symbol "HUT" on the TSX and as "HUTMF" on the OTCQX Exchange.
Key investment highlights and FAQ's: https://www.hut8mining.com/investors.
Hut 8 Corporate Contact:
Chief Executive Officer
Tel: (647) 256-1992
Chief Financial Officer
Tel: (647) 256-1992
Certain information in this press release constitutes forward-looking information. In some cases, but not necessarily in all cases, forward-looking information can be identified by the use of forward-looking terminology, such as "plans", "targets", "expects" or "does not expect", "is expected", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts, but instead represent management's expectations, estimates and projections regarding future events.
Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by Hut 8 as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the factors described in greater detail in the "Risk Factors" section of the Filing Statement dated March 1, 2018 relating to the Qualifying Transaction of Oriana Resources Corporation and Hut 8, which is available at www.sedar.com. These factors are not intended to represent a complete list of the factors that could affect Hut 8; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. The forward-looking statements contained in this press release are made as of the date of this press release, and Hut 8 expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/53427