Bitcoin Miner Iris Energy Craters, Flags Debt Default
CEO Daniel Roberts said creditor NYDIG had no recourse over the assets of the parent company, as Iris now faced a dispute over the $107.8 million financing of the bitcoin mining machines manufactured by China-headquartered Bitmain Technologies.
“The companies [structured as SPVs] who owes them [NYDIG] the money, doesn’t have the ability to pay it back, Roberts said.
“The value of these machines is now substantially below the value of the outstanding debt and the cash flow generated by these machines is insufficient to service their debt financing obligations.
“So, as a consequence, the group made the decision not to provide financial support and in effect the lender now has the right to come and collect these machines for themselves.”
Roberts said Iris’ electricity cost per mined bitcoin was equivalent to US$9,300 in October, which meant it had a gross profit – or profit before energy bills – of just over US$6,000 per mined bitcoin at the latest market price of around US$15. 700 per bitcoin.
The founder declined to provide details on the current bottom line after operating and investment costs, as Iris aims to grow its business with investments in the physical construction of bitcoin mining facilities.
“On a gross profit level, it is clearly still profitable. We just need to find out what level of fixed costs the business can support, says Roberts.
The group had $53 million in cash as of Oct. 31, and Roberts said it had a financing agreement with B Riley Financial, which gave it the right, but not the obligation, to raise up to $100 million in exchange for equity. issued to the American financier at a price “close to the market price” during the next two years.
Perennial lichen
Iris also has $75 million in upfront payments outstanding to Chinese bitcoin hardware giant Bitmain under a previous contract to acquire mining equipment.
It said in a footnote to the Nov. 2 update that it had not made all recent payments under its contract with Bitmain and did not expect to make any future payments over such further future deliveries under that contract.
“In some cases we have kept these computers [bought from Bitmain] for ourselves, Roberts said. “In other cases, we’ve resold those computers to third parties, effectively monetizing that deposit and converting it into cash.”
On Tuesday morning, the price of bitcoin sank to a new multi-year low of $15,504, as falling prices across the cryptocurrency sector fueled a wave of collapses including Voyager, Celsius, 3 Arrows Capital, Luna and Sam Bankman-Fried’s FTX Exchange.
“It’s definitely been tough,” Roberts said. “In retrospect, we were trading near the $60,000 bitcoin peak. Then we had the war in Ukraine, inflation, the Fed Reserve, the broader crypto market imploding, so it’s been a bit of a perfect storm.
“We’ve been dealt the cards we’ve got and all we can do is anticipate future problems, which we did around [SPV] debt facilities by capping them. We are still very excited about the business and the industry.”
Elsewhere, on Monday, shares of America’s largest crypto exchange, Coinbase, hit a record low of $40.61. It has fallen 90 percent from its April 2021 high of $429.
Shares in the world’s largest bitcoin mining trust, The Grayscale Bitcoin Trust, closed at $8.28 to post an 81.2 percent loss over the past year.
The trust has more than 600,000 bitcoins under management worth close to $10 billion, but its market cap of $5.7 billion means it trades at a roughly 43 percent discount to net tangible assets on rattled investor confidence in the future of bitcoin.
