Consolidating Cryptocurrency Miners

  • Riot Blockchain, a listed cryptocurrency mining company, has announced that it would be acquiring Whinstone U.S., one of the largest Bitcoin mining facilities in North America 
  • Consolidation of cryptocurrency miners comes amidst growing heat from environmentalists over the heavy carbon footprint from cryptocurrency mining 
Give a man a fish, he eats for a day. Teach a man to fish, he eats for a lifetime. But give the man a fishing fleet? Well now that’s a different story altogether.
Now the man can take leverage, grow his fleet of fishing boats, acquire smaller competitors and consolidate so that he can command a greater price for his fish.
Cornering the market in fish in his specific location, he can now fan out wider to cover larger geographies and fish deeper waters. Next on the agenda? A listing on a stock exchange.
In similar fashion, give a man a Bitcoin and he’s filled his pocket, teach a man to mine Bitcoin and he maybe has a big power bill.
But give a man a mining facility, now that’s something else altogether.
Yesterday, cryptocurrency mining company Riot Blockchain (+2.44%) announced that it would be buying North America’s largest Bitcoin facility Whinstone U.S. for about US$651 million in a mix of cash and stock.
Riot Blockchain will purchase all of Whinstone’s assets and operations for US$80 million in cash plus a fixed 11.8 million shares of Riot Blockchain’s common stock, valuing the deal at around US$651 million based on yesterday’s share price.
In a statement, Riot Blockchain CEO Jason Les, said that Whinstone will be the “foundation” of the company moving forward and anticipates the purchase will make it the largest publicly traded Bitcoin mining and hosting company in North America, measured by total developed capacity.
Bitcoin mining which essentially uses purpose-built ASIC (application specific integrated circuit) cards in an industrial facility to solve complex mathematical problems to secure the Bitcoin blockchain, has drawn a lot of criticism for its environmental impact.
With the bulk of Bitcoin mining taking place in China, and concentrated in regions like Inner Mongolia, which relies heavily on cheap, but highly pollutive coal, to generate power, environmentalists have long derided the industry for its heavy carbon footprint.
And while some Bitcoin mining facilities are located near hydroelectric and geothermal power sources, the bulk still rely heavily on the consumption of fossil fuels.
Whinstone’s facility has a power capacity of 750 MW, with 300 MW currently developed, an important asset for power-hungry Bitcoin mining.
Whinstone will purchase an additional 42,000 S19j Antminers for US$138.5 million from Bitmain Technologies, one of the earliest entrants into the design and manufacture of cryptocurrency mining equipment and itself a potential candidate for an eventual IPO.
Riot Blockchain’s acquisition of Whinstone U.S. will mean that Northern Data AG (-0.74%), which acquired Whinstone in 2020, will now have exposure to the cryptocurrency space as well, and post-acquisition will be expected to own about 12% of Riot Blockchain’s common shares.
Riot Blockchain’s acquisition is expected to complete by the end of June.

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