Iris Energy (NASDAQ:Airen) is one of the Bitcoins with a small market capitalization (BTC-US Dollar) a stock market minor with a market capitalization of just $246 million. Iris is smaller than many other listed miners, but similar. Level of exahash installed:
|iris energy||Airen||3.7||$246 million|
|clean spark||(CLSK)||3.4||$219 million|
|marathon digital||(Mara)||3.2||$2.2 billion|
|Hut 8 Mining||(hut)||3.0||$397 million|
Source: Iris Energy, Seeking Alpha (as of September 15, 2022)
Inside me last news At Iris Energy, my articles focused broadly on property ownership, institutional ownership, and miner profitability in the industry. In this article, we take a look at Iris’ annual updates, current balance sheet, production/exahash trends, and regulatory risks facing mining operations in North America.
Miners still work together
An interesting point about listed miners is the difference in models. For example, Marathon Digital and Riot Blockchain (Riot) is one of the largest Bitcoin mining operations, but they have very different infrastructure models, one being vertically integrated and the other relying on hosting. Despite these differences, both companies perform similarly in the stock market. Iris Energy and Hut 8 Mining (hut) are priced similarly in terms of market capitalization but have significantly different financial strategies. .
For Iris and Hut 8, performance has been about the same since Bitcoin’s recent cycle low on June 18th. Iris down 71%, hat down 73%. Each of these stocks has lagged Bitcoin’s performance, but only Hut8 probably lags so badly. While Iris sells its produce monthly, Hut 8 takes a “HODL” approach. For this reason, Hut 8 should theoretically outperform most of its peers if the price of Bitcoin is rising. Hut 8 should theoretically underperform most of its peers if the Bitcoin price is falling. like now. The market treats all of these stocks more or less equally, so I think there is an opportunity to allocate more to Iris Energy if the Bitcoin price doesn’t seem to rise significantly in the short term.
In the last few days, investors have received Iris Energy’s latest quarterly results and August production results. On the company’s conference call, CEO Daniel Roberts shared that as of the end of August, a cumulative 3.7 EH/s was running thanks to Prince George’s locations being online. On average for August, Iris’ energy production was 2.2 EH/s, well above the previous month’s average EH/s.
Given the significant increase in EH/s, it is not surprising that BTC production from Iris also increased significantly in July, mining 301 BTC compared to 154 BTC the previous month. Due to the additional EH/s he can expect in September, Iris’ monthly BTC production should exceed 500 BTC this month, given the efficiencies seen so far from Iris’ mining operations.
The company claims to generate 137 BTC per EH/s. This makes it the most efficient miner in the industry. These numbers are very impressive and show the company’s strong execution, but despite its efficiency relative to its peers, the company’s average cost per BTC is trending slightly higher than last year. I would like to point out one thing.
|Quarterly average||BTC energy cost|
Source: Company announcement. *Q3 completed only 2 out of 3 months
While the energy consumption required to generate bitcoin has so far declined in Q3, this general trend remains high despite the significant drop in the price of the coin itself. It should be noted that This is bad news for margins and should be taken seriously going forward. Especially when power costs continue to be a broader issue.
Mining profitability in this area is still close to a two-year low. That said, Iris’ higher production efficiency compared to its peers, combined with its strategy of selling monthly production rather than holding it in the national treasury, has led to strong pressure from regulators to halt PoW mining altogether. It is unlikely that Iris will need to turn the machine off unless asked to do so.
Forward Exahash Guidance
Growth in the rejuvenated mining footprint within the company was strong last month, but the company is set to lead even more capacity online in the coming months.Iris Energy reported 4.7 EH by the end of the fourth quarter Aim for /s. This is up from his original guidance of 4.2 EH/s. The company also expects 6 EH/s in 2023.
If the company can hit that target, it will be able to mine over 800 bitcoins per month in 2023 when it hits 6 EH/s. This makes him one of the largest producers in the industry and a very rapid build-up of its production.
Financial Performance/Balance Sheet
Year-to-date Bitcoin price declines have resulted in two consecutive quarterly revenue declines. At the end of the second quarter, Iris posted her $16.2 million earnings on her $3.8 million production budget. That’s still a great margin, but it marks her second straight quarter of decline in gross margin.
Specifically, administrative expenses increased significantly sequentially, from $3.8 million to $7 million. Depreciation expense increased to $3.8 million from $2.3 million in the prior quarter. After a quarterly decline in total operating costs from Q4 to Q1, he increased from $12.5 million to $21.1 million in Q2. This resulted in a significant negative operating profit of $8.6 million.
These costs are a bit off the page, but Roberts said: Conference call A company’s overhead costs are often attributed to building a company’s business growth. As for the balance sheet, I think it looks pretty good at the end of the second quarter.
|Total current assets||$201.5||$160.3|
Source: Seeking Alpha, millions
At the end of the quarter, the company had $110 million in cash, of which $76 million will be used to deliver 6 EH/s. But again, that exahash capacity is used to realize profits from production, not to keep BTC on the balance sheet. There should be strong cash flow from operations.
Aside from Bitcoin’s price falling near or below mining costs, I think the biggest risk to Iris Energy’s success is regulation. I’m an Ethereum (ETH-US Dollar) The successful transition from Proof of Work to Proof of Stake does the same for Bitcoin developers, given the story given that Bitcoin mining is not green. It will put a lot of pressure on you.
Bitcoin currently holds 94% of the proof-of-work mining market, so BTC mining has its sights set and we are already look at the emotions The White House Office of Science and Technology Policy has revealed that the administration is paying attention to the environmental impact of PoW mining. Iris Energy certainly makes the case that the company is an eco-friendly business, but it sometimes ignores nuances in favor of politics when it comes to regulators. Mining restrictions could theoretically come under attack if the US and other G7 countries decided to ban or significantly restrict crypto mining.
Those who follow my work or are active subscribers of the Blockchain Reaction service will know where I stand with Hut 8 Mining. It’s part of my portfolio. Because I think it will do very well if bitcoin goes up. But I also really like Iris Energy. Because the company’s approach to finance is diametrically opposed. I believe that exposure to both ideas is the right way to play the bitcoin mining space. Especially in a Bitcoin bear market.
I think it makes a lot of sense to buy a miner that is efficient and has less obligation to financial strategies that may not be working. Miners that use production to fund their operations and have low mining costs are theoretically the last to turn off their machines if the bear market gets worse. So far Iris Energy has shown strong execution and guidance overdelivery. If we can continue to produce even if . IREN is the ticker I’m scaling in to for crypto winter.