Bitcoin Miner Stronghold Digital bolsters bottom line by cutting costs and reducing debt by over 60%

Bitcoin miner Stronghold Digital Mining (SDIG) terminated a cost-to-miner hosting deal with miner Northern Data (NB2X:GER) and reduced some of its debt, in its latest attempt to turn around its balance sheet. in difficulties.

The end of Stronghold’s deal with Northern Data will remove all profit-sharing obligations, which it estimates would have been $10 million to $25 million (depending on the price of bitcoin) through September 2024, according to a statement Friday. The cash outflow under the previous agreement would be approximately 35% of mining revenues, net of $0.027 per kilowatt-hour (kWh) in energy costs, according to the statement. On top of that, Stronghold is cleared of around $2.6 million payable to Northern Data.

Hosting is a service that data centers provide to crypto miners so that customers, like Stronghold, can store their mining equipment and mine their preferred digital assets for a fee or profit share without having to build the infrastructure themselves. correspondent. Norther Data mines bitcoins and operates a data center to house other miners.

Trouble for Stronghold began earlier this year, when it missed Wall Street earnings expectations and cut its own hash rate expectations for 2022. Since then, challenges for the company have continued to mount as crypto markets cryptocurrencies and stocks continued to fall. However, the miner has been actively trying to strengthen its balance sheet and turn the company around by restructuring its debt, cutting costs and raising capital. The miner said in a filing on Friday that it has also reduced the principal amount of its debt load by almost 60% since May to $59.1 million.

Read more: Bitcoin Miner Stronghold Digital Significantly Restructures Debt

The termination of the deal provides Stronghold with “enhanced operational control of our bitcoin operations” and “material improvement” in cash flow generation over the next two years, as well as optionality, co-chairman and CEO Greg Beard said in a statement. the notice. “Overall, we believe we continue to make significant progress toward improving our balance sheet, liquidity and cost structure to create shareholder value,” he added.

Under the terms, Stronghold will also gain the right to operate around 50 megawatts (MW) of bitcoin mining bins from Northern Data for $1,000 per year for two years, and retain the option to purchase the bins at the end of the term for some time. place. between $2 million and $6 million.

Stronghold will save up to $27.6 million by ending its hosting deal with Northern Data. (Fortress Digital Mining)

In exchange for the termination of the agreement, Stronghold has to pay Northern Data $2 million, on top of the $2.5 million it has already given its hosting partner. The miner has previously returned 2,675 mining machines to Northern Data, which removes Stronghold’s obligation to pay some $8.8 million to the data center operator.

Stronghold also managed to extinguish $65 million in credit obligations under a previous agreement with lender NYDIG to hand over 26,000 mining rigs in exchange for debt relief, the firm said in the filing. Another $2 million will be written off as soon as Bitmain’s mining rigs are released from customs, according to the filing. The miner hopes to be able to buy these machines for less than $40 million at current market prices, which have fallen considerably this year.

Stronghold has been struggling, along with other bitcoin miners, amid low bitcoin price and high energy prices. The mining industry has been looking to cut costs and stay afloat this year as Bitcoin has lost over 50% of its value. Shares of the miner have fallen around 93% this year, while shares of the largest bitcoin miners such as Marathon Digital (MARA), Riot Blockchain (RIOT) and Core Scientific (CORZ) have lost more than 70% of their worth. .

Northern Data has also had a challenging year and said in a Sept. 19 letter to shareholders that it will abandon client hosting as self-farming has been more profitable and predictable for the company. The firm also cut its year-end mining rig deployment expectation by more than half to a maximum of 42,000 and announced a “tightened investment strategy.”

Read more: Crypto miners face margin calls and defaults as debt matures in bear market

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