RIOT Q2 2024: $27/MWh Power Cost Enables 60MW Block Mining Expansion
- Expansion & Strategic Acquisition: Riot is advancing its growth target by both organic development and strategic acquisitions. For example, the acquisition of Block Mining in Kentucky immediately adds 60 megawatts of capacity and a clear development pathway for significant hash rate expansion, while management emphasized having a best-in-class corporate development team to drive such deals.
- Cost Leadership with Low Power Costs: Management highlighted that Riot achieved an average power cost of $27 per megawatt hour during the quarter, which helps maintain a competitive low cost per Bitcoin mined even in a challenging market with rising network difficulty.
- Operational Improvements & Efficiency Focus: Executives discussed efforts to improve uptime and operational efficiency—especially at Corsicana and Rockdale—through deploying advanced mining equipment and optimizing infrastructure. These initiatives are expected to enhance overall performance and positioning for long‑term profitability.
- Reliance on the existing MicroBT purchase option: While management claims that this option is sufficient to reach the 100 EH/s target, future miner supply and evolving contract terms could introduce execution risk if growth targets are not met or if negotiations with suppliers do not deliver as planned.
- Litigation of third-party hosting contracts: The uncertainty stemming from ongoing litigation related to third-party hosting revenues and costs poses a risk, as it could impact revenue clarity and lead to unforeseen liabilities.
- Competitive pressure from HPC/AI for power capacity: Increased competition for power from AI high-performance computing may pressure access to low-cost energy, potentially impacting Riot’s operating costs and mining margins over time.
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Mining Economics
Q: What is the outlook for mining economics?
A: Management noted a challenging environment with mining rates at $46 per terahash per day amid the halving and rising network difficulty, emphasizing their focus on low-cost production, which underpins potential M&A opportunities and resilient margins. -
Expansion & Acquisitions
Q: How will you scale hash rate and capacity?
A: They plan to expand organically by securing power assets while selectively pursuing acquisitions—illustrated by the Block Mining deal—to boost their self-mining capacity toward the 75 EH/s and eventually 100 EH/s target. -
Operational Efficiency
Q: How are you improving operational uptime?
A: Management admitted past uptime issues but stressed improvements at Corsicana and Rockdale, with initiatives already showing promise and further gains expected in the near term. -
Power Strategy
Q: What is your power cost strategy this summer?
A: They achieved an overall power cost of $27/MWh in Q2 and will monitor summer volatility closely—while SG&A rises were attributed to one-time M&A advisory fees, not ongoing operations. -
Kentucky Operations
Q: What are the challenges in the Kentucky acquisition?
A: The Block Mining team’s local expertise is set to drive expansion from 1 EH/s to about 15.8 EH/s by next year, as Riot leverages its strong balance sheet to address operational challenges and scale capacity. -
Miner Procurement
Q: How will you secure enough miners for 100 EH/s?
A: The current MicroBT purchase option secures sufficient supply to reach 100 EH/s, with additional efficiency upgrades on the horizon to further enhance capacity. -
M&A Criteria
Q: What factors guide your acquisition decisions?
A: Key considerations include access to affordable power, the overall cost structure, and local market expertise, whether in domestic or select international opportunities. -
Bid Farms Governance
Q: What’s the update on the bid farms proposal?
A: There are no active proposals at bid farms; management highlighted governance concerns and is awaiting outcomes from a special shareholder meeting. -
AI/HPC Competition
Q: Will AI/HPC pressures affect Bitcoin mining?
A: Management believes Bitcoin mining’s flexibility in power usage offers a competitive edge over AI/HPC, which are less adaptable, thereby keeping their focus firmly on core mining operations. -
Cooling Technologies
Q: What cooling methods are planned in Kentucky?
A: A hybrid approach is envisioned—with the existing air-cooled systems maintained and future expansions likely to adopt immersion cooling to optimize cost per megawatt.
Research analysts covering Riot Platforms.