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Edited Transcript of IREN.OQ earnings conference call or presentation 13-Sep-22 9:00pm GMT

·58 min read

Q4 2022 Iris Energy Ltd Earnings Call Sep 14, 2022 (Thomson StreetEvents) -- Edited Transcript of Iris Energy Ltd earnings conference call or presentation Tuesday, September 13, 2022 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Belinda Nucifora Iris Energy Limited - CFO * Daniel Roberts Iris Energy Limited - Co-Founder, Co-CEO & Director * Lincoln Tan;Senior Manager, Corporate Finance * Lindsay James Ward Iris Energy Limited - President ================================================================================ Conference Call Participants ================================================================================ * Chase White Compass Point Research & Trading, LLC, Research Division - Research Analyst * James Dickey Suva Citigroup Inc., Research Division - MD & Research Analyst * Joseph Anthony Vafi Canaccord Genuity Corp., Research Division - Analyst * Joshua Michael Siegler Cantor Fitzgerald & Co., Research Division - Research Analyst * Paul Alexander Golding Macquarie Research - Analyst * Reginald Lawrence Smith JPMorgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst * Stephen William Glagola Cowen and Company, LLC, Research Division - VP of Technology, Media and Telecom ================================================================================ Presentation -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [1] -------------------------------------------------------------------------------- Good afternoon to those of you in North America, and good morning to those of you in Australia. And welcome to the Iris Energy Earnings Conference Call for the Fiscal Year Ended June 30, 2022. My name is Lincoln Tan, Senior Manager of Corporate Finance. And with me on the call today is Daniel Roberts, Co-Founder and Co-CEO; Lindsay Ward, President; and Belinda Nucifora, Chief Financial Officer. Before we begin, please note this call is being webcast live with an accompanying presentation. There will also be an opportunity for some Q&A following the main presentation. I would like to remind you that certain statements that we make during this conference call may constitute forward-looking statements, and Iris Energy cautions listeners that forward-looking information and statements are based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of the company. Listeners should not place undue reliance on forward-looking information or statements. Please refer to the disclaimer on Slide 2 within the accompanying presentation. Thank you. And I will now turn the call over to Dan Roberts. Dan? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [2] -------------------------------------------------------------------------------- Thanks, Lincoln. Good morning, good afternoon, everyone. Thanks for joining us for our inaugural annual earnings call. We've done a couple of quarterlies already, but this is the first annual, and appreciate everyone's support and time to dial in today. Very excited to go through a quick update on the business, where we're at, where we're going and go through some of the details. So without further ado, I thought it's worth recapping at the top of the presentation, who are we? Why are we here? And really, it comes down to 3 fundamental beliefs. One is, we believe as a team that Bitcoin is here to stay. If it's here to stay, there's only $21 million, you can't stop it, you can't change it, then it feels like it's likely to go up in value over time and be proven as a store of value asset. The second thing is we believe Bitcoin mining can be done better. Bitcoin mining has evolved rapidly over the 11 years Bitcoins been around. It's evolved from hobbyists on their computers and laptops through to graphics cards, through to the start of the ASIC era to where we are today, which is hitting a level of maturity where we've caught traditional computing in terms of efficiency levels. And really, as we all know, the game is now more about that large scale energy data center infrastructure, where everyone's got access to the same technology, it's really about the energy component now and how you access energy markets and how you do that in a socially responsible way. And then finally, we believe Bitcoin mining can be done better. As I said, it's evolved hobbyist enthusiasts at home on their laptops or computers to early mining farms with shipping containers, old warehouses, and now we're really starting to see the emergence of an institutional asset class. Last year alone, 2021, USD 15 billion of revenue line. The sector is growing. It's growing really rapidly, and it's maturing and evolving accordingly. So we've really set this business up over the last 4 years focused on doing it the right way, really not taking shortcuts, building an institutional-grade platform, where we're really building an asset base for the long-term. We haven't held any coins. That's not because we're not bullish Bitcoin. We're very bullish Bitcoin. But we just don't believe it's in the best interest of our shareholders, for us as a business to be holding Bitcoin. We believe you double down on risk, i.e., when Bitcoins going up, happy days. But when Bitcoin goes down, you're getting hit on your P&L as we're seeing at the moment, and you're getting hit on your balance sheet as well. If you then gear up against those balance sheet coins, then we can see the issues that quickly arise. For us, the optimal strategy is to liquidate daily, lock in those profits. As you can see there, we're mining Bitcoin at $8,000 a coin, lock in that profitability and then make a capital allocation decision with that profitability left over. Today, even in the current market, Bitcoin mining is profitable, incremental returns on CapEx are profitable. Why would you hold a Bitcoin on balance sheet if you have the ability to reinvest that Bitcoin in additional infrastructure and computing capacity to generate an additional Bitcoin every 12 months to 15 months. I understand that not every business can do that. But when we've set up our business as a growth platform with the substantial number of development sites, it does continue to appear to be their optimal strategy from our perspective. The second point, we've delivered. We really pride ourselves on doing what we say we're going to do and we have. We -- without preempting an announcement a little bit later on, we're pleased to report that we continue to hit our milestones. We said 3.7 exahash by the end of September, we will hit 3.7 exahash by the end of September. Every milestone along the way, we've at least met, if not exceeded in terms of time frame. Not only that, but the facilities that we're building are highly efficient, and we've been saying this for a year. We don't do shipping containers. We don't take shortcuts with temporary facilities. We don't retrofit old warehouses. We build, own and operate our own proprietary data center infrastructure, where we have now invested 4 years in optimizing ventilation, airflow, networking, design infrastructure to really house these chips in the optimal operating environment, and that's now proven results. We're in a very good balance sheet position as of 30 June, USD 110 million of cash on the balance sheet. No corporate debt. Again, we've got some hardware financing, but that is limited to asset level. Again, potentially a key differentiator with other listed firms. We have not given parent company guarantees. We do not have cross defaults. We do not have cross collateralization. Those financing are limited recourse specifically to the individual computers and the SPVs they're held in. And further to our recent announcement as a result of negotiations with BITMAIN, we're pleased to have 6 exahash locked and loaded. We've got the hardware. It's all in the process of being on the ground operating or being delivered, and we're excited about installing that over the coming year. Low operating costs, again, this comes down to the benefit of what our energy strategy has been since day 1, target low-cost excess renewables. But almost by definition, the cheapest power out there is marginal cost renewables. There is no feedstock cost. There's no commodity input. If there is overbuilt renewables, the marginal cost of that power fundamentally is lowest cost power, and we're really now starting to see the benefits of that play out given what's happening in the macro environment. So I mentioned the efficiency gains. And here's a chart that seeks to really highlight that. What this chart shows is how many Bitcoin we are mining per exahash of installed capacity over the course of this year. It's a very simple metric. 1 exahash worth of computers, how many Bitcoin did you produce from that 1 exahash. And again, there's a lot of good miners. There's a lot of different people doing different strategies, different approaches, but we're very pleased and pride ourselves on being #1 in that list. And for us, this has 2 benefits. One is the obvious operating cash flow benefit, along with the CapEx efficiency benefit, i.e., we're obviously generating a better return on investment as a result of generating that additional Bitcoin. But for us, asset life, asset integrity, we are looking after our assets, the electrical infrastructure, the computing infrastructure. We're not living at overheat. We're not living dust getting there. We're not living humidity. These chips, they're extremely profitable, we are looking after them for the long-term and managing those assets for the long-term. I did say that I didn't want to preempt some news that Lindsay was going to address, but this chart basically does. Sorry, Lindsay, we energized 50 megawatts at Prince George literally in the last hour. It's a fantastic milestone for the business and really rounds out that 3.7 exahash objective or stated guidance to the market that we've had for a long time now. It will take another week or 2 for the individual sections to be lit up. The miners are installed. But that takes us to 3.7 exahash and one of the largest listed Bitcoin miners already, which is very pleasing and a relatively short period of time from only reaching 0.7 exahash about a year ago now. And we look forward to obviously continuing to grow that, not only into the 6 exahash that we've got secured that we're building out, but obviously beyond as well. So again, this just shows the track record of delivery and the growth pathway that we've been on and also the near-term growth pathway that we're guiding the market towards. As you can see, it was only 12 or so months ago that we're at 0.4 exahash, 0.7 exahash. We've continued to deliver these projects, and Lindsay will go into more detail around our operational and executional excellence. But fundamentally, it comes down to a team with substantial experience in building very similar data center energy, renewable energy assets. Just to recap where we're at in terms of balance sheet and profitability. This is -- on the right-hand side, if I start right to left is a matrix or a table that many of you will be familiar with. And it contains a link to an online website where you can validate this firsthand. And the beauty of Bitcoin mining is that it's very objective, it's very mathematical in terms of how the profitability and the revenues work. And as you can see, we're obviously leveraged to the Bitcoin price. We understand that. But where we're at in terms of 6 exahash of capacity and over $100 million of annualized mining profit based on that 6 exahash, we feel like we're in a very good position from a P&L perspective. And then balance sheet, absolutely critical to manage, particularly when you are exposed to a volatile exponential asset, such as Bitcoin, $110 million of cash as I mentioned at the outset. And importantly, from that $110 million, our expected spend post June 30 to deliver the 6 exahash of operating capacity is around $76 million. So around $76 million of that $110 million is expected to be utilized to deliver the full 6 exahash of capacity, which leads to the profitability metrics on the right. In terms of net assets, $462 million of net assets on balance sheet, and our market cap is slightly below that today. As I've mentioned a couple of times, we are building multi-decade institutional-grade infrastructure. We are here for the long-term. We believe in Bitcoin. We believe it's here to stay. We believe in the value of our underlying asset base, locking up that low-cost excess renewable energy, building out the electrical infrastructure, building out industry-leading data centers and monetizing that into the digital exponential age. In terms of our sites, recapping where we're at today, that 160 megawatts across British Columbia as of 1 hour ago is now all energized. The computing capacity will be coming online progressively. The 30 megawatts at Mackenzie is obviously a Q4 exercise, but the 50 megawatts at Prince George as of this morning now has energy. That will take us up to around 4.7 exahash by the end of Q4 this year, up from the 3.7 exahash expected at the end of this quarter being the quarter ended September with an additional 1.3 exahash to be installed at Childress early next year. I've mentioned the management team a few times. Again, just to recap, we do this as a very large team. We've got about 100 people globally, all with substantial experience in associated sectors around data centers, electrical engineering, construction, energy, et cetera. Many of them are construction contractors, but we've got a fantastic core group with substantial experience. Many of those who are on this slide will hear from Lindsay in a moment, who will really drive through a lot of what we've done around the operations and the execution and why we've been able to deliver what we've been able to deliver. And then we'll also hear from Belinda around the financials at the last third of the presentation. Finally, alignment incentives around 1/4 of the business is owned by us. We're all laser-focused. We're really committed to the business. We treat every dollar as our own. We believe in where we're going into the business. We're extremely proud of the infrastructure we've built, the team we work with, it's a fantastic environment. We very much appreciate all that third-party investment and support of our business and internally feel like we're very well aligned to the future of this business. So on that note, I'll pass over to Lindsay, who will now go through a bit of an operational update on the business. Thank you, Lindsay. -------------------------------------------------------------------------------- Lindsay James Ward, Iris Energy Limited - President [3] -------------------------------------------------------------------------------- Okay. Thanks, Dan. I just wanted to start today to talk about operational excellence. It is a key factor to our success. As a company, we're consciously building out our operational culture that has extremely high standards. It's the only way to be successful is to set yourself high goals and make sure you achieve them. Recruiting is a key part of that. Getting the right team in place allows us to achieve excellence in everything we do from safety, flowing into the environment, community, governance, operations, maintenance, asset management, construction and financial control, it's all about people once you get to the point of getting these buildings underway. We recently welcomed Heather Miller as our Vice President of People, Culture and Community; Javier Garcia as our Engineering Manager; [Leonard Bulchak] as our Construction Manager down in Childress, and [Martin Szlagowski] as our IT Manager, all of them recently joined the Iris team. Having a motivated, flexible and focused team is the key to success. Our air-cooled data centers continue to outperform our competitors as Dan went through on that slide, and that's not a fluke. It's the outcome of very focused R&D trial and error and really learning from our mistakes and a constant focus to build out excellent infrastructure. We are confident that our operating performance will continue. We're continuing to build out. We've got a further 30 megawatts at Mackenzie to come online by the end of the year and that's progressing well. And as Dan said, we'll have 4.7 exahash online by the end of the year. Supply chain management, it certainly remains a challenge. But I think we've found the right formula to minimize the risk, particularly to Mackenzie. We ordered the long lead items for Mackenzie well in advance of construction and really well in advance of final design. And that really is a key strength of ours that we understand their data centers. We've done all the engineering. We understand what we need, and we can order ahead of final design, and that make sure we get ahead of the queue. We've got a construction team, an in-house construction team. We've got key subcontractors who we're moving progressively now. They were at Mackenzie, went down to Prince George, heading back to Mackenzie, and they'll also supplement our Childress team. And that's really important for us, not only does it help us with our procurement because we know what we need, when we need it and where to go and get it, but it also gives us a high level of certainty of building out our infrastructure on schedule. And I think it's just worth talking about a recent example of how focused we are on procurement. We had an issue, and it's around looking at the small items within a larger package often a subcontract will come to you or you'll place an order and the supplier will say, that, that long lead item is X weeks, but it's not every component within that package that is a long lead item. What you've got to do is get behind the package, look at each individual item and track each individual item, not the longest item because it gets a bit lost in the overall challenge of meeting deadlines. And so we were told by a supplier that there was a part that we needed. It was only a small part. It's amazing quite low costs couldn't be found. And we managed to talk to an electrical contractor in Childress, we went to a small supplier in Utah, we then flew down there, put it in a suitcase and brought it back up to Prince George, handed it to the service provider and kept ourselves on track. It's just that focus and dedication to winning that really is inherent in the way in which we go about building out our facilities. And I think just touching again, we lead this construction effort ourselves. We don't have an EPC or an EPCM sitting between us and the subcontractor. We've got one fully integrated team. We're all focused on outputs, making things happen safely, low cost. And it's really exciting when you see the subcontractors come on board, it's not a contractual relationship at all. It's a relationship to succeed in building out our data centers on time and ahead of budget. And I think from that perspective, that's been one of the things that I've really enjoyed watching is teams with different motivations, different outcomes coming together for the better good of getting us on track and getting our supply chain management enabled. In terms of technology, we're very focused on improving our systems and processes through technology. There's a lot of work going on in the background, looking at how we can do things quicker, smarter, more efficiently cheaper, how we really enable technology to improve our business. We've got our own in-house IT team led by Denis Skrinnikoff, our Chief Technology Officer, and they monitor every aspect of our operations. It's amazing the amount of data points that we're gathering data from air temperatures, the airflow, the dust, ingress, chip temperatures, energy usage, efficiency of each miner and much, much more. And what's exciting is the guys on the ground who really make the difference to how efficient we are, are hungry for this data. You see it up in the -- on their large screens in their offices. We see it out in the field on their iPads, they're really looking for that 0.1 exahash every day, how can we just add a little bit more, what can we change to make it more efficient, it's all data led. And to have this site team that's interested in the data and absorbing that data is really exciting and just a testament to the culture that we're building across our organization. Community, community is at the heart of everything we do. We generally operate in small communities where our presence makes a real difference through the local employment that we create and through the expenditure that we do within those local communities. And it's -- you employ locals, it allows you to quickly get in touch with the community. And so they know what the community needs. They know where the community gaps are. And quite quickly, we can get involved and help contribute to great community outcomes. I recently was in Mackenzie, attended a Community Luncheon for the successful grand applicants. We handed out about $70,000, and it really makes a difference in a small community. And the feedback has been positive, and we're not a check-writing organization. We get involved with the community. We had a kickoff lunch. We'll regularly touch base with each of the community groups, see how they're going, see where our money is being spent, see how else we can offer further support and look at longer-term relationships with some of these community organizations so that they can really plan for the future. So it's something really at the heart of what we do. Excitingly, we're also starting a scholarship program. We've got our first successful applicant, a female apprentice who's going off to finish her studies. Financially, it wasn't possible for her to do that. And with our assistance, she can now finish the third and fourth year studies, and then will come back and work for that post that scholarship opportunity. So I think that's another thing we want to do more of and look at how do we get more females into the electrical space and into engineering. Community Grants in Childress are going quite well. They're now closed. I'll be there in a couple of weeks' time in Childress. And again, we'll have a luncheon with the successful participants. It's a great opportunity for me to better understand the community, what things we can do differently, how we can better -- be a better community citizen. And so that's a really important part of my travels when I'm in North America. And equally around Canal Flats, our other operating center, we sponsor a number of local charities, sporting events, and we'll kick off a Community Grants Program in Prince George in 2023. So just like to touch on our operating centers. Our first one was Canal Flats. It's been -- it's ramped up quite impressively. It's operating consistently above nameplate, and that's a testament to the guys on site who are very focused on improving the performance. Canal Flats is our center of excellence. We've got a majority of our engineering team based there. We've also got a fabrication shop, it's an in-house fabrication shop, which makes it really easy to trial new ideas and concepts because the engineers are there, we can engineer on the run, we can manufacture on the run, and we're not relying on third parties who aren't incentivized to try things and make mistakes. And so the work we do there rolls out to our other data centers as we progressively build them out, but also small operational tweaks and then rolled out progressively to the other sites. And what's key is that core group of people where we started this business, great culture, great ownership of Iris Energy, we utilize them to go out and initiate the production teams at each of the sites. So we keep embedding that great culture as we progressively build out our business. And the Childress team also get involved in the construction down in Mackenzie, Prince George, and they'll also be involved in that construction down at Childress as well. So we're just getting that consistently -- consistency of approach, certainty of approach by sharing our workforce -- excuse me, more broadly across the business. In terms of Mackenzie, pretty exciting. I went there when we were just had a bit of a patch of dirt, and about 8 months later, all of a sudden, we've got 50 megawatts up and running and another 30 megawatts under construction at the moment. We switched that facility on in August. Since then, it sat at 50 megawatts consistently from day 1, a great effort by the [Child] team, the site team to get all that commissioned and tested ahead of ramping up. We really have not had any issues at all. And so to be able to just run consistently from day 1, it's been fantastic. And we'll have 2.5 exahash built out at Mackenzie by the end of this calendar year. The ops team is in place, all locals that have worked in other industries in the local area have been able to track them to our business. And we're really happy and excited that we've brought a brand-new industry to Mackenzie that's contributing to the community, contributing to their economy. And with this certainly for the next 20 years or 30 and 80 megawatts by the end of the year, it's going to be a really significant facility. Prince George is our third operating site, again, up in British Columbia. It is now the home of an additional 50 and 1.4 exahash across 3 data center buildings. The construction is all complete. As Dan mentioned, the energization happened at about [4 minutes to 7] Australian time. So just in time for this call, which was great. And everyone said just excited as watching on the WhatsApp to come through and photos, it's another big milestone for the business. And again, we hadn't done anything on that site for about February of this year. So in 7 months, we've gone from a paddock through an operating data center. We've done that very safely. We've had no major, no material safety incidents. We're a really motivated team, and that group of individuals came down from Mackenzie and then now heading back to Mackenzie. So again, that consistency approach is really important to building great data centers. And finally, just on to Childress. You can see a photo there of the earthworks are well advanced. It's in the Panhandle region of Texas. There's a lot of excess renewables there that we'll be able to take advantage of. We're planning to build out an initial 40 megawatt development in 2023, that will host the additional 1 -- or the remaining 1.3 exahash of miners that we received recently from BITMAIN. And in '23, we'll be a 6 exahash business, which, again, is a fantastic achievement. All the construction permits are in place, earthworks are underway. First data center building earthworks of 20 megawatts is nearing completion. We placed all the required long lead time items. So we're ticking along there at Childress, and certainly, it would be great to have a fourth operating site up and running in 2023. And I think in closing, I'd just like to thank our team, they're a amazing group of individuals to bring on 50 megawatts in August and another 50 megawatts in September, parallel builds has been a great achievement and a great milestone for the business. So thank you for listening to me today. Certainly happy to take any questions after this around the operational side of the business. But I'll now hand over to Belinda, our CFO, to talk about our financial results. Thank you. -------------------------------------------------------------------------------- Belinda Nucifora, Iris Energy Limited - CFO [4] -------------------------------------------------------------------------------- Hi, all. Thank you, Lindsay. I'm pleased to be presenting our first full year results following our successful listing in November 2021. As the graphs show, we have seen strong revenue and earnings growth over the year as our sites become operational. For the year ended 30 June 2022, we mined 1,398 Bitcoins, being a 422% increase year-on-year due to our average operating hashrate increasing by 611%. This generated $59 million revenue and $26.2 million adjusted EBITDA with an adjusted EBITDA margin of 44%. Management uses adjusted EBITDA as the year was marked with significant adjustments as a result of the IPO and noncash expenses, which I'll explain on the next slide. Adjusted EBITDA provides management a better picture of our underlying operations and allows comparison with our peers. Adjusted EBITDA, so this is a reconciliation back to our loss after income tax expense. Whilst our net loss after tax for the year was [$422 million], it is important to call out that the impact of nonrecurring and significant noncash items. The hybrid financial instruments converted to equity just prior to the IPO and resulted in noncash, $419 million expense in the P&L. All the instruments have now converted and will have no further P&L impact. The share-based payments expense, which also is noncash is split between the co-founders and other executives. The co-founders' shares, which accounts for $11.4 million of the expense is predominantly made up of options that have a strike price of $75, and vesting conditions of between $370 per share and $1,850 per share. Amortization takes place over the life of the options, and as such, they will continue to be an expense taken to the P&L. $4 million of one-off expenses predominantly relates to the IPO were incurred during the period. After these one-off expenses and noncash items, the year produced an adjusted EBITDA of $26.2 million being a margin of 44% on revenue of $59 million compared to adjusted EBITDA in 2021 of $1.4 million being a margin of 18% on revenue of $7.9 million. So looking at our consolidated statement of profit and loss. This is our year ended 30 June 2022 financial statement. And as mentioned, the results were significantly impacted by noncash items, including the amortization of employee share plans and the conversion of the convertible notes at the IPO. So as highlighted on the previous slide, the noncash movements relating to the options as well as the convertible notes. Finally, we move on to the statement of financial position, which is a quick update on our balance sheet. We ended the year with $110 million of cash and cash equivalents of total assets of $570 million. Our property, plant and equipment increased by $232 million and mining hardware prepayments by $83 million. The increase in our assets were funded from our IPO cash reserves as well as an additional $71 million for asset financing deal with NYDIG. As at 30 June 2022, our current and non-current borrowings includes a $71 million, which was $108 million in total. So that's a brief summary of our financial statements. And I'll now hand over to the operator, Melanie, to commence the Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from Chase White with Compass Point Trading and Research. -------------------------------------------------------------------------------- Chase White, Compass Point Research & Trading, LLC, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- So you guys are continuing to develop the Childress site. So how should we think about the timing just roughly to getting to the 40 megawatts? And then after that, how much work is there to get to the original 100 megawatts Phase 1 target? Like is there a time by which you need to make a decision on that or do you have flexibility? That's my first question. -------------------------------------------------------------------------------- Lindsay James Ward, Iris Energy Limited - President [3] -------------------------------------------------------------------------------- Dan, do you want to answer the first bit and I'll answer the second half. -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [4] -------------------------------------------------------------------------------- Yes, absolutely. No problems. Thanks, Chase. Appreciate you dialing in. Good to see you. In terms of the first 40 megawatts, we're currently working through our procurement processes. We've previously advised that our original target for energization of Childress was in early 2023. Having now secured the hardware to fill out a reasonable portion of that site or at least initial capacity of 40 megawatts, we're now working through what that timetable looks like to build the data centers, the infrastructure and actually install and commission those computers. We haven't got any more specific guidance other than to say that it won't be prior to at the end of December this year. So will be a 2023 project. We'll announce more specifics as we gain additional confidence in our project timetable. -------------------------------------------------------------------------------- Lindsay James Ward, Iris Energy Limited - President [5] -------------------------------------------------------------------------------- And just add to the -- answer the second part of the question. The connection being built by [AEP and ATT] is for 600 megawatts. And so that will be completed in 2023 as well. And so that allows us to build out at a rate of our choosing. There's no limitation or time constraint against how we build out the remaining megawatts at Childress. -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [6] -------------------------------------------------------------------------------- And I think that's a really important point, Lindsay, and one should really highlight is, we've now got as a result of energizing that first 40 megawatts at Childress, access to 600 megawatts of power. We don't need to go and do anything more to access that 600 megawatts in the network. So what that allows us to do is we essentially get to amortize all the upfront time investment, the work over that 2-year period to get that site up and running to build out relatively swiftly and at low marginal cost above the 40 megawatts as we grow into that [full] 600 megawatts over time. -------------------------------------------------------------------------------- Chase White, Compass Point Research & Trading, LLC, Research Division - Research Analyst [7] -------------------------------------------------------------------------------- Got it. That's helpful. And then could you remind us when the power price in British Columbia is reset? And any indications on where the rate could go in the next rate setting? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [8] -------------------------------------------------------------------------------- It's set annually and then it's the same price for every electron, 24/7, 365 days of the year. And the way the British Columbia power market works, it's a regulated market where that price is set by the regulator. And it's done with reference to a regulated pricing model. And this goes to the heart of what our energy strategy has been, which is about chasing low-cost excess renewable energy around the world. And British Columbia, as we've outlined previously, has an enormous oversupply of hydro power. They're still building large scale facilities in the North, but they've seen the removal of the closure down of a lot of their manufacturing and industrial base. The issue in a regulated market is they need additional users of that power. Otherwise, power prices need to go up. So somewhat counterintuitively, the introduction of our load into the market, us paying a market price to BC Hydro for that power, which now happens to be a very low market price relative to many of the markets globally. The additional revenue to BC Hydro actually puts a downward pressure on that power price in the sense that they're now receiving a greater amount of revenues on their asset base, and they can afford to potentially lower prices for all the other users of power in the province. We haven't had any guidance around where that power price is likely to go. Historical changes indicate that it's a relatively immaterial adjustment year-on-year. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Your next question comes from Jim Suva with Citi Research. -------------------------------------------------------------------------------- James Dickey Suva, Citigroup Inc., Research Division - MD & Research Analyst [10] -------------------------------------------------------------------------------- I just wanted to ask a question about your CapEx plans, given both, say, labor costs, material costs have been changing, things like that. Can you maybe walk us through some of your CapEx plans as we think about them? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [11] -------------------------------------------------------------------------------- I'll let Lindsay talk to labor costs, material costs and how we've been managing that. In terms of CapEx planning, our advice is really clear. 6 exahash of capacity, that's what we're committed to, that's what we're building out. Post June 30, that requires $76 million of incremental investment. In reference to that, we've got USD 110 million of cash as at June 30. We feel that, that's the right amount of CapEx to be committed to in the current environment as mentioned to Chase just now by doing that and energizing the first 40 megawatts at Childress, that opens up an incredibly attractive scaling opportunity at Childress, unlocking that 600 megawatts, the opportunity to scale with relatively low marginal cost and time to continue building out capacity is a really attractive growth prospect for us in terms of committing to additional capacity above that 40 megawatts, that is just purely market dependent, access to capital markets, debt, equity, everything in between, just working through when the right time is to take additional capital and to pursue those -- that additional growth. -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [12] -------------------------------------------------------------------------------- In terms of... -------------------------------------------------------------------------------- James Dickey Suva, Citigroup Inc., Research Division - MD & Research Analyst [13] -------------------------------------------------------------------------------- Great. And a follow-up question there -- go ahead. -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [14] -------------------------------------------------------------------------------- Just -- so a [30 second] explanation on labor and capital costs. We placed our high expense long lead items, some of them 12 months ago. So we were -- and they were at fixed pricing. So we've been pretty isolated from some of the more recent increases in costs, where we are seeing cost increases in the overall scheme of the build, they're manageable. We always run with a little bit of contingency, and we're certainly in within that contingency. We're not seeing difficulties in attracting labor. We had 85 people on site at Prince George over this -- the August period and July period. And again, we're not seeing major blowouts in labor costs. So I think from our perspective, we've been fortunate in the way in which we managed to build. We're not having an EPCM contractor sitting between us and the direct subcontractors, I think gives us much better price discovery. And so I think we've been quite fortunate in not facing a lot of the blowouts that other projects have seen. -------------------------------------------------------------------------------- James Dickey Suva, Citigroup Inc., Research Division - MD & Research Analyst [15] -------------------------------------------------------------------------------- Thank you for the details and clarifications. Thank you. That was greatly appreciated. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Your next question comes from Paul Golding with Macquarie Capital. -------------------------------------------------------------------------------- Paul Alexander Golding, Macquarie Research - Analyst [17] -------------------------------------------------------------------------------- Congrats on a great first year. I wanted to ask about Childress with the 600 megawatts of capacity there. Any consideration to opening up some of that excess to hosting other miners and generating cash through that kind of a relationship? And then secondly, on Childress, I was curious, given the smaller initial footprint now, how that impacts the power relationship in terms of rate setting going forward? Are we going to be facing a sort of a floating spot rate environment? How should we think about how that capacity is going to sort of see a gross profit picture unfold? -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [18] -------------------------------------------------------------------------------- And you're on mute, Dan. -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [19] -------------------------------------------------------------------------------- Thanks, Lindsay. Thank you. Great question. So in terms of utilizing that excess 560 megawatts of capacity, that's a big number when you say that loud. Look, all options are on the table. We've really prided ourselves on being a proprietary miner and owning a fully vertically integrated stack. Would we rule out completely ever doing hosting, I don't think we'd rule it out. We don't rule anything out to be honest. It's probably a lower probability. But given the current market, if we kind of step back, we've always positioned this business through the lens of the 4 Ms, the key ingredient, management, miners, megawatts and money. And you've got to bring all those together to continue growing this business. Management, I think we've well and truly demonstrated that we've got an industry-leading team and platform now. Megawatts, we've got 560 megawatts of potential spare capacity next year. And then we still have over a gigawatt of additional growth projects globally. We are not short of megawatts. Miners, we understand the market is softer. We have the relationships with the manufacturers. We understand what models that we like, what models, we're a little bit more cautious on. We can procure the machines as we require it in the current market, which really only leaves the fourth M, money. It's a hard market, it's a hard market from a macro perspective. The broader digital asset space has come off. Yes, we're still mining Bitcoin at $8,000 a coin. It's still very good gross profit margins, even at $20,000 Bitcoin. But in a market where money is our sole constraint on growth, then yes, we're naturally going to consider alternative options and pathways to continue building and monetizing all the work that we've done to date. Now in terms of power procurement, we've just concluded an RFP process to secure our energy partners for Childress. That isn't concluded in terms of the negotiations, so I won't comment on specifics. But as part of that, we will naturally be looking at the market structure and optimizing our power price. The demand response programs, the ability to operate in a flexible manner, I again highlight the location of where our site is specifically in Texas. We are not down in the Southeast. We're not close to the big load centers. In fact, we're the opposite. We're up in the Panhandle region, where there's around 32 gigawatts of renewable energy, wind and solar, and only around 12 gigawatts of transmission line capacity to actually move that power down to the load centers. So again, our strategy has been around finding that low-cost excess renewables and monetizing it in a way that supports these energy markets. And again, a reason for choosing that Northern part of West Texas was because of the congestion that we're now seeing in West Texas. There's a lot more complexity around the interconnections, the market structure, when you go West, West Texas as compared to the North, where our Childress site is located. Yes, power prices in that market are currently elevated, but there's still substantial opportunity to optimize power pricing and have a very profitable project there over the long-term. -------------------------------------------------------------------------------- Paul Alexander Golding, Macquarie Research - Analyst [20] -------------------------------------------------------------------------------- Thanks, Daniel. And just a quick follow-up on vertically integrated mining with this excess capacity if the Bitcoin price or capital markets were to unlock, do you see yourself -- I guess, any color on lead time would also be valuable. Do you see yourself going back to BITMAIN to order machines depending on lead time or how do you see the market unfolding in terms of ASICs that are may be available state site already? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [21] -------------------------------------------------------------------------------- Another good question. So clearly, we're not here for 6 exahash. We're a growth business. We've invested 4 years building a growth platform to really take on this industry, and we believe we're doing it the right way. But we are beholden to market conditions, as you should suggest, should those capital markets open up in terms of hardware procurement, we are manufacturer-agnostic. We are independent. We have no exclusivity. We have no restrictions. We talk to all the manufacturers. We have our views. Every manufacturers had their ups and downs over the journey, but we'll continue to keep optionality on that. We've never touched secondhand hardware. I find that difficult to think that we would, why take the risk. And again, this business all comes down to managing risk. The most likely outcome is to deal with BITMAIN, by virtue of that USD 83 million, we still have as payments against that 10 exahash contract. So again, for everyone's benefit to recap, we unlocked 1.7 exahash of that 10 exahash by making that circa $6 million payment to BITMAIN a couple of months ago. We monetized around $47 million of the previous $130 million of prepayments we had made to them. I know there's a lot of numbers in there, but hopefully, you're following, which now means that we've got $83 million of deposits paid against the residual amount of capacity being 8.3 exahash. That's around $10 a terahash. Now clearly, we aren't making payments under that 10 exahash contract as we've continued to tell the market, we speak to BITMAIN regularly. Our hope would be that we raise additional capital, and we can seek to deal with BITMAIN and come to an appropriate resolution around that existing contract that remains on foot. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Your next question comes from Stephen Glagola with Cowen. -------------------------------------------------------------------------------- Stephen William Glagola, Cowen and Company, LLC, Research Division - VP of Technology, Media and Telecom [23] -------------------------------------------------------------------------------- Dan, I just want to drill in more on your overhead cost structure ending the calendar quarter here. It appears the corporate overhead expense increased pretty significantly quarter-over-quarter. I just want to ask what was the driver of that one? And then 2, on site overheads, are you at sufficient headcount here at Mackenzie and Prince George? And how should we expect site overhead cost on Childress over the second half of the year in that ramp? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [24] -------------------------------------------------------------------------------- Thanks, Stephen. So, the word corporate overheads is probably a bit misleading to be frank in the sense that everything gets bundled into that bucket and we've got a lot of construction development and other activities, which are being captured in that line item. And the question often pops up in the context of if you only stayed at a 6 exahash business, what would your overhead line look like. Because to look back and look at 12 months where we've grown [5x, 6x] in capacity, we've listed on the NASDAQ. We can get back on all these growth activities in many respects. I wouldn't suggested that corporate overhead line, as it's classified, would be indicative of what a business corporate overhead line would look like from this point. There are challenges around accounting and audits and whatnot around reclassifying corporate overheads into construction and development costs. There's also some large costs that are associated with insurance, et cetera, that we're working on. But in terms of that status quo business, really, you need the site overheads, which Lindsay can talk to in terms of where we're at there with people, resourcing, et cetera. And then you need a small centralized corporate function to pay invoices, monetize the Bitcoin, et cetera. Really a large part of that corporate overheads line is both related to construction activities as well as the fact that we are a growth business and still committed to growth in this industry, subject to those market conditions, obviously. Lindsay, would you like to talk about... -------------------------------------------------------------------------------- Lindsay James Ward, Iris Energy Limited - President [25] -------------------------------------------------------------------------------- Yes. In terms of our site teams, we've got a well-established operational and engineering team at Canal Flats. So, I talked about Canal Flats being our center of excellence and certainly well supported by our own fabrication shop. At Mackenzie, we've got our operational team in place. We've got maximum of 12 people we require for operations. We think that probably, in time, get that down to 10. And that won't change, whether we've got 80 megawatts or 50 megawatts, we're very focused on our operational efficiency and the number of people that we need. Equally, Prince George will be a sort of a 10 to 12 person operation. And down in Canal Flats, sorry, in Childress, again around that number will be both operations and construction. And so we're trying into mix the construction and the operational team. We don't double up. We think people can manage both as we progressively bring miners on. But certainly, we don't expect having large workforces. And even when we get to 600 megawatts at Childress, we think probably around 56 people is all that we'll need at that site. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Your next question comes from Regi Smith with JPMorgan. -------------------------------------------------------------------------------- Reginald Lawrence Smith, JPMorgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst [27] -------------------------------------------------------------------------------- I had 2 quick ones. I appreciate the disclosure on Childress. My question is, I guess, you guys have called out a 40 megawatt, I guess, kind of initial build-out. Is 40 megawatts kind of like your minimum effective dose? Is that small as you'll go for build-out. It shows us for incremental expansion? And what -- I'm not sure if you guys have shared this in the past, but how should we think about the, I guess, incremental CapEx needed at Childress as you expand beyond 40 megawatts? Like is there some rule of thumb that we can kind of look to? And I have a follow-up. -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [28] -------------------------------------------------------------------------------- Lindsay, do you want to do this one? Would you like me to? -------------------------------------------------------------------------------- Lindsay James Ward, Iris Energy Limited - President [29] -------------------------------------------------------------------------------- Look, I think we're comfortable building out 20 megawatts and we're equally comfortable building out 40 megawatts. I think the key is to get that site connected, have the switchyard built that gives us the flexibility to scale to that 600 megawatts over time. And so, we're building 20 megawatts, we then move into 40 megawatts, and then we'll just see how we go from there as to what we do to further out to 100 megawatts over time. I think incrementally, capital-wise, I'm not sure we've disclosed down to that level of detail before. But certainly, the majority of the capital is going into the connection facilities, the incremental build out of each of the data centers, the capital required is quite modest, particularly when we've already secured the 1.3 exahash from BITMAIN at really competitive pricing to fill up that first 40 megawatts at Childress. -------------------------------------------------------------------------------- Reginald Lawrence Smith, JPMorgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst [30] -------------------------------------------------------------------------------- And so, if I'm hearing you right, you can do as little as 20 megawatts and that the incremental cost once you set the initial switch up, it's pretty low, is that what I heard? -------------------------------------------------------------------------------- Lindsay James Ward, Iris Energy Limited - President [31] -------------------------------------------------------------------------------- I think without wanting to disclose absolute numbers, the incremental build out of each 20 megawatt facility is, I would say, modest in the overall scheme of things. 20 megawatts makes sense, that's one building. And so it just makes sense to build out a full building at about 500 feet, 300 meters long. And so, we build them incrementally side-by-side. We progressively do the earthworks. So, each building is effectively a self-contained addition and doing it in 20 megawatt increments makes sense. And that's at 40 megawatts matches the additional miners that we're able to achieve through negotiation with BITMAIN, allows us to then deploy all our miners that we have. -------------------------------------------------------------------------------- Reginald Lawrence Smith, JPMorgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst [32] -------------------------------------------------------------------------------- And then I guess, going to that negotiation with BITMAIN, and I'm not asking for any, any details on how that works, but curious, the [1.7 exahash] that you guys negotiated, were you guys a limiting factor in that? Like could you have secured more? Have you had more capacity? You follow my question? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [33] -------------------------------------------------------------------------------- Yes, we are. Capital was the limiting factor given the current market and our ability to continue making all the milestone payments under that contract was challenging given those market conditions. The conversations with BITMAIN have obviously been very constructive. We've already had one result on that contract. And really, as capital markets continue to improve and access to capital improves, that will certainly help the conversations with BITMAIN from here as well. -------------------------------------------------------------------------------- Reginald Lawrence Smith, JPMorgan Chase & Co, Research Division - Computer Services and IT Consulting Analyst [34] -------------------------------------------------------------------------------- And I guess, am I right in doing the math, it works out to like a low $30 price per terahash? Is that -- prices are now? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [35] -------------------------------------------------------------------------------- That's exactly right. Yes, that's where the pricing was that we negotiated with BITMAIN. And that's one of the unique things about this industry where your CapEx is partially hedged. When Bitcoin rips, you're paying more for the computers, but you're still earning a fantastic return on investment. And equally, when Bitcoin has a drawdown like we're seeing at the moment, you see hardware prices dropping from what a peak at $70 a terahash down to that data point you just referenced in the low-30s. But it does raise interesting questions around the ability to grow through the cycle in terms of the theory and the return on investment, it actually looks reasonable, but it's more about access to absolute dollars and the capital to build that out and turn that theory into reality. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- Your next question comes from Joseph Vafi with Canaccord. -------------------------------------------------------------------------------- Joseph Anthony Vafi, Canaccord Genuity Corp., Research Division - Analyst [37] -------------------------------------------------------------------------------- Nice to see the exahash ramp continuing. Just one -- a lot of questions have been asked already. Maybe if you look at energy prices globally and some of the cheap power that you have coming online at Childress, at what point does optionality around using that power for other uses come into play versus just mining Bitcoin? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [38] -------------------------------------------------------------------------------- Look, we are always thinking of it. We've done work internally on mapping out what green hydrogen looks like. We signed an MOU with Dell Computing a couple of years ago about bringing their customers and hardware out to our first site in Canal Flats at the time, things like data analytics, machine learning, rendering for augmented reality, et cetera. The reality is, up until now, it's been sole focus. Bitcoin, scarce resources, time, hours in the day, we've just had to focus, and that focus has obviously delivered us today in a really, really good position. In terms of going forward, as I've continued to reiterate, we're not a status quo business. We're not here for the 6 exahash. We are here to continue growing. Not only do we believe Bitcoin is here to stay and if Bitcoin has a drawdown for a period of time, then we're big believers in this digital transition and technology transition that the world is going through. We're all going online. The demand for renewable energy and electricity and monetizing that into the new world, we don't believe is going away. And if we step back and look at our business through a macro lens, what we're really good at is identifying where this low-cost excess renewable energy is, how to get access to quality sites, navigate the grid connection, the connection requests, the negotiations with the utilities, build out high-quality institutional-grade infrastructure and then operate that infrastructure. Whether we're monetizing Bitcoin or whether we're tapping into one of these other exponential demand drivers to monetize that asset base, in some respects, we're agnostic. Sitting here today, we still believe there's a lot of interest in Bitcoin on our side. The profitability is still good. When you're mining at $8,000 a coin and the current market price is still over $20,000, those gross profit margins are really attractive. So, it's not really fast tracking per se a drive into those adjacent revenue streams, but equally, it's something in our minds that we're monitoring closely and may accelerate at some point in time. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- Your next question comes from Josh Siegler with Cantor Fitzgerald. -------------------------------------------------------------------------------- Joshua Michael Siegler, Cantor Fitzgerald & Co., Research Division - Research Analyst [40] -------------------------------------------------------------------------------- With over $100 million of cash on the balance sheet as of June 30, how are you feeling about your cash position given your current expansion plans? And are there any near-term plans for a shift in capital allocation strategy? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [41] -------------------------------------------------------------------------------- Feeling pretty good. $110 million of cash, as we outlined in the presentation, $76 million of expected expenditure since that date to deliver the 6 exahash. That feels like a really good allocation of capital that gets the balance right between both growth and ensuring that we're managing for the rainy day. That excludes operating cash flow as well from the analysis. It also excludes debt service on some of the machines for the hardware financing, but hopefully gives you a high-level feel for what our balance sheet looks like. And again, we're continuing to have conversations with various market participants around leveraging that strong balance sheet, but doing it in a prudent way, where we're looking at risk first, return, second. If we are able to secure an attractive instrument of some sort, attractive source of capital, then the growth opportunities are still there. Per the conversation with Regi a couple of minutes ago, when you've got a natural hedge in your industry economic model where hardware prices fall broadly in line with the Bitcoin price, it allows you to continue reinvesting through the cycle at relatively attractive returns. But if you don't have the capital, you don't have the dollars, you can have all the good Excel spreadsheets and theoretical return on investment that you like, but you can't catalyze it. So look, that's still a focus for the business. We'll continue working through that, but we're certainly not going to do anything brash or take on any form of financing that we think detracts from the business proposition and risk profile long term. -------------------------------------------------------------------------------- Joshua Michael Siegler, Cantor Fitzgerald & Co., Research Division - Research Analyst [42] -------------------------------------------------------------------------------- I'd also appreciate some more color on the ongoing optimization of your supply chain. Typically, do you expect that supply chain improvement to help accelerate some of your infrastructure targets? -------------------------------------------------------------------------------- Lindsay James Ward, Iris Energy Limited - President [43] -------------------------------------------------------------------------------- We're very comfortable with BC. We're obviously, Prince George energized today, so nil supply chain risk there. In terms of the extra 30 megawatts at Mackenzie, we remain very confident that we'll have that online by the end of the year. So, we've de-risked that supply chain exposure there. There are some challenges at Childress and we're working through those. I touched on before, it's often the little thing within a bigger package that you've got to focus on. And what we've been doing is identifying those smaller items and putting small focus groups together to source those. Again, interestingly, they're often low cost. And so we'll actually run parallel sourcing streams such that we'll be -- we'll end up buying 2 of them, but we'll always need them in the future, but the cost of them is relatively modest. And so, I think there are some challenges for Childress that we're working through. Each day, we seem to have a win and then another issue comes up and we just get on and deal with that one. We've got some great sort of partners around Childress as well, a couple of smaller more local techs and firms that are working with us. And we're just finding it's great that they're just so energized to get the supply chain problem solved. So, I think we're not seeing any massive blowouts in schedule, but we've set some internal goals and I think they're probably going to be challenging, but we keep looking at alternate ways to narrow those time lines. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- There are no further phone questions at this time. I'll now hand the call back to Lincoln. -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [45] -------------------------------------------------------------------------------- Thanks. Just conscious we're running a bit over time. I think with the remaining time left, we might just go through a couple of questions that have come through, through the pre-submissions and through listeners on this call. First question to Dan, when can we expect new investments in Australia? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [46] -------------------------------------------------------------------------------- So, what we've -- I'm going to answer this without answering it, sorry, I apologize upfront for that. We previously announced that we've got over a gigawatt of development sites spanning North America and Asia Pacific. That remains the case. That's unchanged. In fact, we continue to move them all along. Infrastructure and energy, infrastructure development is actually a game or a process that takes a long time to go from site acquisition, negotiating option agreements with farmers, grid connection requests, connection negotiations can take many years in many jurisdictions. But the best thing about it is it's just time. The expenditure is relatively low. It's just people and consultant costs and moving that all along. So in some ways, this quieter period in the market just allows us to push on in the background and continue developing all those sites and retaining enormous optionality to monetize those sites at a future point in time. To answer the specific -- the question more specifically, we've advised Asia Pacific. We're all Australian. At some point in time, you would expect us to be looking closely at Australia. -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [47] -------------------------------------------------------------------------------- Thanks, Dan. Next question. All of the public miners are priced like Bitcoin is going to 0. What do you think the biggest thing Wall Street is missing or doesn't understand about Bitcoin or this business? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [48] -------------------------------------------------------------------------------- Look, it's -- the market is the market, right? It's been a bit of a perfect storm. Fortunately or unfortunately, we IPO-ed at the top of the market last November. The vast majority, in fact, most of our book was institutional investment. So, we've never really had a retail presence in that. But if you look at the macro and I think that's obviously changing over time. We're seeing fantastic engagement across our socials. But I think if you step back, you've seen risk off, the Fed do its work, crypto has its own unique challenges where the broader digital asset space, there's some pretty questionable goings on. And you've seen businesses go under, over-leverage, et cetera, the NASDAQ has come off. And I think we, as we Bitcoin miners get thrown in the basket where it's off risk, it's still crypto, even though Bitcoins in my view fundamentally a different asset class to all these other crypto stuff going on. And then you look at what we're building, it's a real asset business. We're building proprietary data centers, building out energy infrastructure, locking up low-cost renewable energy. Yes, we're monetizing that into Bitcoin, but it's a real asset base generating real cash flows. Yes, I'm sure the market will sort itself out over time. I think the other thing is there's probably 20 different listed Bitcoin miners today. And everyone's got their own strategy, their own take, doing things different way. So, it just takes time for the market to work out what their preference is over time. -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [49] -------------------------------------------------------------------------------- Thanks, Dan. The next question is just about the asset purchase contracts. How much money is outstanding regarding the purchase order contracts for our assets? And what credits if any has BITMAIN provided against the remaining payments? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [50] -------------------------------------------------------------------------------- So if we step back, there's that 10 exahash contract with BITMAIN that had a headline cost or price cap of $40 a terahash, i.e., $400 million. We paid $130 million out of that $400 million before the market turned south and we stopped making additional payments. We've converted $46 million -- $47 million of that $130 million into additional miners, which was part of that [1.7 exahash] that's been shipped. So, there's still $83 million of payments we have made against that contract, which is sitting with BITMAIN. In terms of what that looks like longer term, there's uncertainty, right? The contract is on foot. We continue to talk to BITMAIN extremely regularly. At the end of the day, we want to buy chips. They want to make chips. The relationship is good. But equally, there's a high degree of uncertainty as to how that plays out over time. I can't really say more than that. It is what it is. If we secure additional capital and we're working on that, but doing it the right way, then over the next 3, 6, 12 months, we anticipate speaking very closely with BITMAIN on even more detail around accessing more machines. -------------------------------------------------------------------------------- Lincoln Tan;Senior Manager, Corporate Finance, [51] -------------------------------------------------------------------------------- Thanks, Dan. I think just conscious we're running over time. This is probably all we have time for. Dan, did you just want to make a couple of closing remarks before we end the call? -------------------------------------------------------------------------------- Daniel Roberts, Iris Energy Limited - Co-Founder, Co-CEO & Director [52] -------------------------------------------------------------------------------- Sure. Very happy to. Thanks, Lincoln. So, I think thanks, everyone, for dialing in, obviously, another fantastic attendance. Look less than 12 months ago, David Bartholomew, our Chairman and I sat in front of many of you at the IPO. We outlined our vision and plan for the business and we've delivered. And as you've heard today, Lindsay has been an enormous part of that. Lindsay and I have spent most of the past decade working together and have together built, managed and operated what's now billions of dollars in energy infrastructure assets. To take that relationship, to take the systems, processes, learnings, many of the same people and then do it in this emerging sector has been really exciting. Our standards are incredibly high. We solve problems and we challenge. We challenge ourselves. We continually challenge our partners. There's always a better way. There's always a way to improve where a high-performance culture and we're one where we take enormous pride in what we do, having already growing to be one of the largest listed miners globally with additional growth in capacity on our doorstep. It's an incredible journey that we're on and we're really grateful. We're grateful for the dedication of all our people, the communities and the support from them in which we operate. For all of your ongoing support and again, to have so many quality analysts on this call, asking such detailed questions is another testament to that. So thank you, everyone. Appreciate your support. Enjoy your evening if you're in North America and your day in Australia. Thank you.