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Hut 8 – Bitfury Backed Portable Cryptomining
Equity Grades Posted On April 26, 2018


 

The Structure:

Ticker HUT
Current Share Price $4.40
52 Week High $2.11
52 Week Low $7.91
Shares Outstanding (MM) 82.4
Warrants Outstanding (MM) 1.3
Options Outstanding (MM) 0.6
Fully Diluted (MM) 83.7
Market Cap (MM) $ 362


The Chart:

Hist (3)

 

The Pitch:

Hut 8 is a cryptocurrency mining and blockchain infrastructure company established through an exclusive partnership with Bitfury, the biggest Bitcoin miner outside of China. Bitfury have 172 megawatts of data centers globally and has mined over a million tokens and estimates its most recent annual revenue was $350-million. Hut 8 is the only miner in the world who has guaranteed access to the chipsets used to mine cryptocurrency, through their partnership with Bitfury.

 

The Details

The ASIC (application-specific integrated circuit) chips for bitcoin mining are produced predominately by Bitmain (based In China) and secondly by Bitfury, who sell the chips, mining rigs, along with their unique BlockBox AC system.

The BlockBox AC is a self-contained bitcoin data centre in a 40-foot marine container, complete with an innovative air cooling system and 100,000 ASIC chips. All the BlackBox AC needs to be up and running is a suitable and affordable power source and internet access.

HUT BlackBOX

 

The BlockBox AC is one of the first mobile Bitcoin mining units that has the scale of a full-size data center and allows for mobility. This feature allows Hut 8, to be very nimble and select locations based on electricity costs and other factors.

Hut 8’s current locations have secured power at an average price of 3.5 U.S. cents per kilowatt-hour, which is one of the lowest costs in the world.

Hut 8 have plans on building out their modular data centers in Alberta and potentially Quebec. With the Maintenance of the data centres to be provided Bitfury. They have purchased 22 of the BlockBox AC data centers and they intend on having 57 BlockBox data centres operational by September 2018.

Here is the profitability of each BlockBox AC (source: www.cryptocompare.com)

HUT 8 profit

Disclosure Hut.JPG

If you multiple that by 57 Blockboxes you begin to see the picture (57 x $1.44M USD = $82M USD)

Hut 8 has mined a total of 1000 bitcoins and has also reserved both ASIC and GPU chips from Bitfury to fulfill up to an additional 157 MW of capacity in 2018.

Hut 8 has raised over $200 Million from PP subscription receipt financing prior to the listing on the TSX-V including investments from over 45 financial institutions from US and Canada. Bitfury currently own 43% of Hut 8 and this essentially gives Bitfury / Hut 8 a nimble vehicle to get access to the capital markets so they can quickly build their large infrastructure across Canada and internationally.

 

 

The Team:

Bill Tai (Chairman and Director) – Originally trained as a semiconductor chip designer became an early Silicon Valley investor and Board member of Bitfury and Treasure Data.

Michael Novogratz (Director) – Billionaire investor and former hedge fund manager-turned-crypto evangelist.  Former principal and a member of the board of directors of Fortress Investment Group and CIO of the Fortress Macro Fund.

Valery Vavilov (Director); – Founding member and CEO of Bitfury. Entrepreneur with +15 years of experience in IT and Business management.

Andrew Kiguel (President and CEO, Co-founder) – Newly appointed and former Managing Director of GMP Securities. He has over 20 years of capital markets experience along with a solid knowledge of the Blockchain industry.

Kyle Appleby – CFO – Over 10 years experience as a public and private company CFO both domestic and international and previously worked as an accountant for several public accounting firms in Canada.

 

The Catalyst:

Hut has secured sustainable cheap power sources, favorable land leases, and have exclusive access to purchase BlackBox AC Data centers. Those 3 factors put them miles ahead of the competition and they have a funded capacity for 62 MW of operations (Hive has a funded capacity of ~44 MW).

Hut 8 also have the benefit of being able to pay for part of the Blackboxes $~2M sticker price in Hut 8 shares (800,000 shares and $1.2M in Cash), which highlights Bitfury’s commitment to Hut 8.

 

The Grade:

With a solid and vested (43% ownership of Hut 8) partnership in place with Bitfury and the ability to quickly access additional capital via the capital markets, Hut 8 should be in a position to accelerate their growth and plan to be the lowest cost vertically integrated miner in North America. Hut 8 is a great way for institutional and retail investors to get exposure to crypto-mining market and certainly have the team to execute on their lofty plans. It feels like the mass selloff of crypto and blockchain stocks is largely over and this is a quality name that could see some tremendous growth and trade as a proxy to Bitcoin.

 

 

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Crypto  / Mining  / Tech
The Failure of SX
Equity Grades Posted On January 18, 2018


After our earlier article went out on Monday, we were shocked at the thousands of visitors to our website within the first hour.

 

What a disastrous week it has been for the shareholders and for the people taking shorts, it has been a great week.

 

The quick rise and fall of SX, can be a lesson to speculative investors – sometimes a very costly lesson:

 

  1. Always take some profits off the table
  2. Only play with money you can afford to lose
  3. It’s not profit unless it is sitting in cash in your hand

 

Right after posting our article earlier this week, it was apparent by the number of notifications we got instantaneously that something was up.

 

It had gotten out of control, almost like a herd mentality with lots of likes and re-tweet etc and blowing up the message boards.

 

Twitter “personas” were always pumping the stock but now it had started to get turned up a bit and they were getting cocky and making outlandish and far reaching assumptions such as:

 

  • Share price at the end of the week will be $5 – $10
  • A $100 stock by end of year
  • They are going to Silicon Valley, must be a Google buyout imminent
  • Chinese company Alibaba is acquiring them
  • This is a Multi billion dollar company, the new Google

 

The list goes on and on. A little bit of advice if it seems too good to be true it probably is.

 

The SX “Long and Strong” were keeping this momentum long into the downward spiral. Cognitive dissonance set in and they kept telling themselves what they wanted to hear.

Once you lose the momentum and the people bullish on the stock are telling you one thing while doing something different (i.e selling) you are in trouble and it is hard to keep the ship afloat.

 

Some conflicting views of what happened:

 

  • Elaborate Pump & Dump orchestrated by SX’s IR firm, or an independent party
  • An organized Bear Raid by Institutional Investors to shake out the small retail investors, so they can acquire a large stake in the company cheaper
  • Short attack turning growing stronger as momentum picked up
  • High Frequency algorithm trading which drove the share price down
  • Etc, etc, etc.

 

In the end, the quicker they rise the harder they fall, the price over the last 2 weeks rose up from ~$0.30 up to $2.90. Then came crashing back down in 3 days back down to $0.30, with over 91 Million Shares exchanging hands in 3 days. With one more trading day left this week, it is anyone’s guess where it goes now.

 

Here is what we can confirm:

  • they have an non-binding LOI with a Chinese company Qingdao Tiande Technologies for all of their Blockchain and smart contract technologies assets
  • Their website is www.tdchain.cn (you can view with google translate if interested)
  • They need to close their financing for $150M in their subsidiary

 

With the recent share price downturn and investor pessimism, this puts risk into the possibility of this deal closing. If they do close, this could potentially be a big win for the company, if not watch this get beat up even more.

But then again you never know with speculative plays like this only time will tell.

 

 

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Cannabis  / Crypto
LGC Capital – Lean and Green Growing Machine
Equity Grades Posted On January 17, 2018


LGC Capital Ltd (TSXV: LG) Has grow tremendously in the last few months and has acquired strategic partnerships around the globe with the aim of producing medicinal and recreational marijuana products.

What makes the company unique is that they are focusing on nascent marijuana markets with huge growth potential, all outside of the United States. Moreover, LGC only partners with established businesses that add strategic value to the company’s portfolio.

 

South Africa JV

HOH.png

LGC Capital has begun a joint venture with AfriAg South Africa Ltd, one of southern Africa’s largest agro-consultants and logistics companies. The LGC and AfriAg South African JV, own 60% of House of Hemp, with the goal of supplying marijuana for the medical market in southern Africa.

House of Hemp is South Africa’s first private company with the license to import, cultivate, and process hemp. LGC Capital has clearly chosen an excellent strategic partner.

The facilities, located in the government sponsored and protected Dube Agriport Zone, are already built, state-of-the-art, automated, and ready-to-go. Currently boasting 405,000 square feet, the facility will eventually total 1.5 million by full operation.

LGC

 

Phase 1 of production will see 7,000 KG of dried marijuana produced. Phase 2 will see 19,000 KG produced. Management expects their cost per ounce to be $1 / gram, meaning excellent margins for the company’s bottom line.

Currently, House of Hemp is in the late stages of research and development.

 

Australia Partnership

LGP

LGC Capital has partnered with another strong company, this time in Australia, where medical marijuana production has recently become legal but is heavily regulated. Currently, there are thirteen companies licensed to produce medicinal cannabis in Australia, but only a select few have a permit to actually begin production.

Little Green Pharma (LGP), the only company in Western Australia to have both a license to produce medicinal cannabis and a permit from the Office of Drug Control to commence growing locally, is another great example of LGC’s ability to acquire excellent strategic partnerships. LGC has recently increased its stake to 11.91% in Little Green Pharma.

LGP’s core competency is creating accurate medicinal cannabis products, mostly oral, that contain high bioavailability of the active cannabinoids, meaning a lower dosage is needed. This is important for patients who are sensitive to cannabinoids or who are apprehensive about trying them.

They has begun cultivating there first crop, which represents the first time medicinal cannabis has been cultivated locally. Products should be available for patients in the first few months of 2018.

 

Estonia JV

 fYFP0wqX.jpgviru-logo.png

LGC Capital recently announced a joint venture with Creso Pharma Ltd and Baltic Beer Company Ltd (CLV) to produce hemp-derived beverages. Each partner owns a third of the joint venture.

CLV is on target to ship its first test batch containing a four-beer range with cannabis-derived terpenes (fragrant oils that give cannabis its aromatic diversity) for May delivery of this year. Commercial sales are expected to begin in July of 2018.

CLV also plans to build a R&D brewing facility in Estonia that will allow innovative recipes and intellectual property to form.

With the global craft beer market expected to grow at a compound annual growth rate of ~11% between 2017 and 2022, and the European, Middle East, and African markets to reach US$38.36 Billion by 2021, it seems LGC is ahead of the curve with yet another strong joint-venture.

 

Canada Partnership

LGC Capital has provided Quebec based Tricho-Med Corporation (AAA Trichomes) with a $4 million loan, which, upon the latter receiving a license to produce marijuana, will convert into 49% of AAA Trichomes stock. LGC will also be receiving a 5% royalty on AAA Trichomes’ net sales.

A 30,000 square foot state-of-the-art production facility is expected to be completed in fall of 2018. Management expects the facility will be expanded to around 1 million square feet some time around 2021.

In the event that AAA Trichomes is denied TSX Venture listing status in the following twelve months, LGC’s ownership will be increased to 54%.

This represents LGC’s first venture into the Canadian marijuana market.

 

Blockchain

They recently announced that they are establishing a Global Cannabis Blockchain platform to to create a new transparent workable global cannabis supply chain platform. This is the over view of the Blockchain initiative they are working on for the global cannabis industry.

  • Enabling global transparent payment record for cannabis product, supply and payment
  • Allow regulatory compliance with government entities
  • Give consumers assurance on product sourcing and quality
  • Offer an efficient and compliant payment infrastructure for the supply chain
  • Provide global supply chain register and smart contract framework to track physical product across the supply chain.

This initiative fits well with their international portfolio they are building out and its whitepapers they will be sharing with the industry participants for comments, as the project will need global consensus for it to be adopted.

 

The Takeaway

As we have seen, LGC Capital Ltd has a knack for acquiring strong strategic partners in world markets that are becoming more marijuana friendly. It has focused on the medicinal approach, which allows it to be a first mover in most countries as medicinal usage is often legalized prior to recreational.

We can expect the value of LGC to increase as the world opens up to marijuana and if they continue on their pathway with creating global joint ventures with local organizations.

 

 

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Crypto  / Mining  / Tech
The Success of SX
Equity Grades Posted On January 15, 2018


We have been following the story of St Georges Eco-Mining Technologies (CSE: SX) a little over a month now as the company has diversified and grown into a huge global player and their share price has risen from $0.05 back in November to $2.46 and is shares were halted from trading on Monday.

SX’s original focus was on developing new technologies to solve the biggest environmental problems in the mining industry. They had right of first refusal for all of the active mineral projects in Iceland, and some small exploration projects in Quebec for nickel, lithium and rare earth metals. They have gone way beyond that realm since.

It has been a fun story to follow as their CEO Frank Dumas’ twitter account  ) has been teasing out cryptic messages and his loyal shareholders and twitter followers are jumping on board and drawing conclusions as to possible future plans.

 

Recent Events

In late November, SX began to pick up some buzz in the investor community when they announced that they were going to apply for a patent for their Lithium clay extraction technology. This technology allows extraction from sites that before were not economically feasible. They also stated that they were going to look at Blockchain technologies based on their boards expertise in the industry.

Early investors began to unearth the background of their board member, Dr. Tsai Wei-Tek. He is a world renowned pioneer of Blockchain technology, back in China, who published numerous papers….more on him later.

In early December, SX signed a technology licensing agreement with Iconic Minerals to allow Inconic to utilize their Lithium recovery technology throughout their sites. So at that point in time we had some buzz on the Blockchain front and they began licensing out their technology.

Right after Xmas, SX gave its shareholders a late Xmas present when Agoracom interview CEO Frank Dumas, there were tons of little tidbits of intel that investors began to look further into, as this company looked like it had a lot of things potentially going on.

 

 

The buzz surrounding the mysterious board member Tsai Wei-Tek, and their technology licencing arrangements stated a rumor mill on social media, with investors digging more and more into the company.

Then Frank Dumas (CEO of SX), was added as an Advisor to Sheldon Inwentash’s (founder of Pinetree Capital) ThreeD Capital. ThreeD invests in disruptive technology in the junior resources, Artificial Intelligence and Blockchain sectors.

Then a few days later SX released news that Sheldon Inwentash has come one board as an advisor for SX. That send the rumor mill into full swing as why would someone with that pedigree come on board for a small cap mining tech company like SX.

ThreeD Capital had recently launched Blockamoto.io, an early-stage investor platform that supports companies which use Blockchain to enhance the value of new and existing ventures………..

They a few days later SX announced that their wholly owned subsidiary Zeu Crypto Networks Inc. signed a Blockchain and smart contract technology licence agreement with Qingdao “Tiande” Technologies  (A private Chinese company which Dr. Wei-Tek Tsai was previously in charge of) for the use of Tiande’s proprietary technologies, patents and know-how to develop and commercialize novel mineral commodity production chain control, tracking and trading exchanges.

 

There was a trail of breadcrumbs across twitter as to what the team was up to.

 

  • Tweets on technology from TV shows like Silicon Valley talking about Internet of Things & Internet of Blockchain, #DFT (Still don’t quite know the DTF reference is about yet, but it might play out in the coming weeks)
  • Tweeted the translation of Dr. Tsai, Wei-Tek into Chinese – Cai Weide (for investors to begin googling to see his pedigree)
  • Tweeted references about Gatcoin
  • Liking and commenting certain tweets from his followers and commenting on the the speed of  blockchain protocol
  • Posted pictures of the team working away (Gatcoin founder, Sheldon Inwentash, Wei-Tek Tsai, Frank Dumas etc) –  leading investors to speculate on what they were doing.

 DS9uysXVMAA-kjL

It was a cryptic puzzle for investors to solve, those who did early stood to reap the rewards as the share price skyrocketed based on speculation and the rumors were growing by the day.

Eventually investors began to connect the dots that Tiande, has patents on a number of fast Blockchain technology,………fast for 1998, using computer processors from 20 years ago.

With modern processors and their patents intact, there was and article from 2016 stating that Tiande had a new generation of Blockchain system. They did a trial run back in 2016 (source) which obtained a speed of 20,000 Transactions Per Second.

The CEO has since confirmed that it is 3x that speed, so 60,000 TPS but that was as of 2016 last year……

Captureewr

 

One of the biggest setbacks to the mass adoption of Blockchain is the time it takes to process transactions, see below how the 60,000 Transactions Per Second (TPS) compare to the competitors:

 

crypto-transactions-compared-ce3b

 

Then the Big announcement

On Sunday Jan 14th, they went all in and announced that Zeu Crypto (SX subsidiary) has entered into a LOI to acquire all of the Blockchain and Smart Contract Technologies assets of Tiande for $150M in equity (+$75M in warrants) of Zeu Crypto through share issuance.

This was a huge move as they knew what they had on their hands and had the tiger by the tail. They stated that they have a plan to deploy what experts have stated to be a world class Blockchain ecosystem that stands at the threshold of a new, far-reaching technological revolution.

Those are bold words, but they believe that the assets acquired (patents, relationships and human capital) are revolutionary. They plan on deploying their ecosystem later Q1, with a SandBox initiative and quickly followed by the BigData suite of solutions.

Finally, they aim on a mass application project, The “Internet of Blockchains” (IoB), to be released before the end of 2018. They eventually own the patent for the fastest (that I am aware of) Blockchain transaction processing system which they can license to the businesses of the world.

This is groundbreaking news and the stock was halted before open on Monday, with speculation and rumors circling on Twitter about the SX team’s visit to silicon Valley and what the next news could potentially be.

 

 

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Crypto
Trust the Power of Blockchain Power Trust
Equity Grades Posted On January 12, 2018


It’s tough to miss the cryptocurrency craze that is sweeping the world over, but it is easy to miss a little gem by the name of Blockchain Power Trust (TSXV: BPWR.UN). They aim to become one of the world’s lowest cost and largest cryptocurrency miners. The main reason for their bold statement – they will use 100% renewable energy that it produces itself.  

Blockchain Power Trust has several renewable energy production projects in Romania, while being administered in Toronto, Canada.

 

Why Romania?

mromania

 

Romania is a booming tech hub hosting some of the world’s fastest internet connectivity. Moreover, the production of renewable energy there is heavily subsidized by the EU, leading to another revenue stream in the form of EU Green Certificates.

Currently, Blockchain Power Trust have:

  • Three hydroelectric facilities
  • Two wind parks
  • Two solar energy parks

All with a combined installed capacity of 83MW. Annual electricity production is around 144,000 MWh.

 

Green Certs and Energy Sales

One of  the things that we like about the company is that they receive the valuable EU Green Certificates from its PRODUCTION of renewable energy, not its sale. 

Income from EU Green Certificates for the first nine months of 2017 was up 49% to $7.2 million, compared to 2016. This removes the risk from the company and guarantees revenues from production. 

Looking at Blockchain Power’s latest financials provides further confidence in the Trust as they have had a large increase (67% to $2.3M) in their traditional sale of electricity for the first nine months of 2017.

 

Cryptocurrency Mining

Blockchain Power Trust is changing the way we view the traditional business model with its unique cryptocurrency strategy, as one of the largest cost for a cryptomining facility is the energy consumption.

Here are some comments on the energy used 

This slideshow requires JavaScript.

 

Blockchain Power Trust are building an vertically integrated renewable energy-based mining operation. They own their power supply and will be able to mine cheaper than almost all other competitors.

Their ultra-low-cost cryptocurrency mining operation, will have a zero carbon footprint and a combined processing capability of 90.72 PetaHash / Second. 

For those not that familiar with Cryptocurrency mining, a hash rate is the speed at which a computer completes an operation in the Bitcoin code. the reward for all that computing power use is a bitcoin. So in essence, the higher the hash rate the easier it is to mine a Bitcoin or another cryptocurrency.

Their full capabilities are 90,720,000,000,000,000 operations per second.

If they were to go full tilt to their operating capacity of ~90 PetaHash / Second, they would mine (at current mining difficulty levels) around 100 Bitcoins a week.

With the current price of ~$17,000 CAD a bitcoin that would equate to $88 Million in Revenue. 

Based upon their Blockchain Power’s website photo they plan on using  an unique approach to mine called Hash Tank.

GRC-Redesign-960x500_GALLERY-Container2.png

It is essentially a self contained sea-can filled with mining devices and a cooling system, which can be transported anywhere in the world. The mining operators just has to plug in water and power connection and start mining.

The best part is that Blockchain Power Trust owns multiple renewable energy sources near the water so they really can just plug and play to begin mining.

 

HashTank Advantages

hashtank.JPG

 

Here is a video from one of HashTanks competitors showing how seamless the sea-can mining process is

 

This is all speculation as Blockchain Power Trust has yet to release any more information on their operations but the fact that they has the same sea-can picture as HashTank’s website leads up to believe that it is their plan of attack.

It seem like the most logical way for them to mine in remote areas where they have their own power and water supply.

This unique approach will put them miles ahead of all the other operations who are building out elaborate facilities with expensive cooling and infrastructure costs. They also recently closed a $43 Million Private Placement and are using the proceeds to build settle a bunch of outstanding debt and also invest in their cryptocurrency operations.

 

 

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