CleanSpark Announces Strategic Agreement for up to 160,000 Bitmain S21 Miners, Path to 50 EH/s

Rhea-AI Summary

CleanSpark Inc. (CLSK) announced the purchase of up to 160,000 Bitmain S21 miners, positioning the company to expand into the next bull market. The agreement includes a strategic call option to purchase an additional 100,000 machines at a fixed price of $16.00 per terahash until the end of the calendar year. Delivery of the initial 60,000 units is expected between April and June 2024, with the potential to increase CleanSpark's hashrate to approximately 50 EH/s, a 400% increase from its current hashrate of 10 EH/s.

Market Research Analyst

The acquisition of 160,000 Bitmain S21 miners by CleanSpark illustrates a significant expansion strategy within the cryptocurrency mining industry. This move is poised to substantially increase the company's hashrate, which is a measure of the computational power per second used when mining. A higher hashrate increases the likelihood of a miner successfully adding a block to the blockchain and receiving the associated Bitcoin reward.

From a market perspective, the timing of this purchase aligns with CleanSpark's anticipation of a 'next bull market' in cryptocurrencies. This suggests a strategic move to capitalize on potential future increases in Bitcoin value. The fixed-price call option for additional units mitigates the risk of price volatility in mining equipment, which can be significant in the crypto sector. This fixed cost allows for more predictable financial planning and can be a competitive advantage if equipment prices rise due to increased demand.

For investors, the long-term implications of this expansion could be substantial. If CleanSpark successfully deploys the additional hashrate and the price of Bitcoin appreciates, the company's revenue could see a significant increase. However, the volatile nature of the cryptocurrency market means that this expansion also carries considerable risk. The initial capital outlay and ongoing operational costs must be weighed against the potential for future earnings, which are highly unpredictable.

Financial Analyst

With CleanSpark's announcement of a large-scale purchase of mining equipment, the financial implications are multifaceted. The investment in 60,000 units, with an option for 100,000 more, represents a capital expenditure that will likely affect the company's cash flow and balance sheet in the short term. Investors should note that the cost efficiency of $16 per terahash is competitive within the industry, potentially leading to lower operational costs per Bitcoin mined.

Furthermore, the company's positioning to expand into a bullish market could be indicative of aggressive growth strategy. This move can be seen as a vote of confidence in the future of cryptocurrency mining profitability. However, the industry is known for its cyclical nature and dependency on Bitcoin prices. While the expansion could lead to increased market share and profitability during a bull market, a downturn in Bitcoin prices could lead to underutilization of assets and increased financial strain.

Analyzing the company's financial health, including its debt levels, cash reserves and the terms of the purchase, would be critical in assessing the sustainability of this expansion. Investors should also consider the company's ability to scale operations and manage the increased complexity that comes with a larger infrastructure.

Cryptocurrency Industry Analyst

The strategic call option included in CleanSpark's purchase agreement is a notable aspect of this deal. It allows the company to potentially secure additional miners at a predetermined price, which is a hedge against future price surges for mining equipment. This is particularly relevant in the cryptocurrency mining industry, where hardware prices can fluctuate dramatically with the price of cryptocurrencies and supply chain conditions.

By locking in a fixed price for additional miners, CleanSpark is mitigating one of the primary operational risks in the industry: the unpredictability of mining hardware costs. This could give them a stability advantage over competitors who may face escalating prices in a bull market. Additionally, the increase to a 50 EH/s hashrate would position CleanSpark as one of the leading mining operations in terms of computational power, which is a significant competitive differentiator.

However, the reliance on the future state of the market, which is inherently uncertain, means that the company's success is closely tied to factors beyond its control, such as regulatory changes, technological advancements and energy costs. Stakeholders should monitor these variables closely as they can greatly impact the profitability and viability of cryptocurrency mining operations.

Initial batch of 12 EH/s, or 60,000 units, expected to ship next quarter

Agreement includes strategic call option to purchase 100,000 S21s at a fixed price of $16 per terahash

Company is positioned to expand into the next bull market, while continuing to secure ASICs at fixed prices well into the next cycle

LAS VEGAS, Jan. 8, 2024 /PRNewswire/ -- CleanSpark Inc. (Nasdaq: CLSK), America's Bitcoin Miner™, today announced the purchase of up to 160,000 Bitmain S21 miners, or the equivalent of 32 exahashes per second (EH/s).

"We are ready to expand into the next bull market," said Zach Bradford, CEO.

Under the terms of the agreement, CleanSpark, one of the largest and most efficient publicly traded bitcoin mining companies in North America, has purchased 60,000 units with delivery expected April through June 2024. The agreement also includes a strategic call option to purchase an additional 100,000 machines at a fixed price of $16.00 per terahash until the end of the calendar year. If the full call option is exercised, CleanSpark's hashrate is expected to increase to approximately 50 EH/s, a 400% increase from its current hashrate of 10 EH/s, once all machines are deployed. 

"This strategic agreement enhances our operational efficiency, provides massive optionality, and positions us to maximize opportunities that we expect on the horizon," said CEO Zachary Bradford. "We are ready to expand into the next bull market without the need to worry about an increase in machine prices, since the call purchase option acts as a hedge to this risk."

"For example," Bradford continued, "in the last bull market, machine prices increased by three to five times, and we expect the same to occur in future bull markets. This agreement allows us to manage our capital most efficiently by controlling as many variables as possible. It also provides us the flexibility to time our infrastructure growth with macro events, while providing certainty of cost on the miners."

CleanSpark opted for Bitmain's S21 model over their T21 model or other manufacturers' units because of the S21's commanding performance. The S21 is the most efficient bitcoin mining machine on the market.

"After receiving initial units, and performing real world testing, we have determined that the S21 is more efficient and better suited for our operations," Bradford said. "Being best-in-class is the CleanSpark way and we expect this agreement to keep us positioned as one of the most energy efficient and highest uptime miners in the industry. As we continue to expand our capacity, we are not only confident that we will successfully navigate the halving, but we also believe that we will unlock new avenues of growth, further solidifying our position as a top publicly traded bitcoin miner."

The purchase price for the first 60,000 units is $16.10 per terahash, for a total of $193.2 million, after discounts and coupons. An additional 100,000 units can be purchased by the company at a fixed price of $16.00 per terahash.

About CleanSpark
CleanSpark (Nasdaq: CLSK) is America's Bitcoin Miner™. We own and operate data centers that primarily run on low-carbon power. Our infrastructure responsibly supports Bitcoin, the world's most important digital commodity and an essential tool for financial independence and inclusion. We cultivate trust and transparency among our employees and the communities we operate in. Visit our website at www.cleanspark.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In this press release, forward-looking statements include statements regarding the Company's agreement to purchase new Bitmain S21 miners, including the call option thereunder and expectations for the delivery of the miners, statements regarding a potential future bull market and the impact on pricing of miners and other statements regarding the Company's expectations, beliefs, plans, intentions, and strategies. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "targets," "projects," "contemplates," "believes," "estimates," "forecasts," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions. The forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: the timing, performance, and costs of purchasing and deploying the S21 miners; the Company realizing the hash rate and efficiency discussed in this press release; the risk that the electrical power available to our facilities does not increase as expected; the success of its digital currency mining activities; the volatile and unpredictable cycles in the emerging and evolving industries in which we operate; increasing difficulty rates for bitcoin mining; bitcoin halving; new or additional governmental regulation; the anticipated delivery dates of new miners; the ability to successfully deploy new miners; the dependency on utility rate structures and government incentive programs; dependency on third-party power providers for expansion efforts; the expectations of future revenue growth may not be realized; and other risks described in the Company's prior press releases and in its filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023, and any subsequent filings with the SEC. Forward-looking statements contained herein are made only as to the date of this press release, and we assume no obligation to update or revise any forward-looking statements as a result of any new information, changed circumstances or future events or otherwise, except as required by applicable law.

Investor Relations Contact
Brittany Moore
702-989-7693
ir@cleanspark.com

Media Contact
Eleni Stylianou
702-989-7692
pr@cleanspark.com

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SOURCE CleanSpark, Inc.

What did CleanSpark Inc. (CLSK) announce?

CleanSpark Inc. (CLSK) announced the purchase of up to 160,000 Bitmain S21 miners, positioning the company to expand into the next bull market.

What is the delivery timeline for the initial batch of 60,000 units?

Delivery of the initial 60,000 units is expected between April and June 2024.

What is the potential increase in CleanSpark's hashrate?

The potential increase in CleanSpark's hashrate is to approximately 50 EH/s, a 400% increase from its current hashrate of 10 EH/s.

What does the strategic call option include?

The strategic call option includes the purchase of an additional 100,000 machines at a fixed price of $16.00 per terahash until the end of the calendar year.