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Thank you very much for joining us today Charlie Kiser, CEO of Atlas Cloud Enterprises (OTC: ATLEF) (CSE: AKE)! Atlas Cloud is one of the firms positioned to lead the crypto mining sector, would you be able to give us a broad overview of the company before we dive into the particulars?
Atlas Cloud is a bitcoin mining company that focuses on being a lowest-cost producer, with wholly-owned facilities, in stable jurisdictions. We currently are completing the upgrades to our 5MW facility in Washington, which is ideally located next to the Coulee Dam. This close proximity to the largest hydroelectric dam in North America allows us to have access to $0.03 electricity – which is incredibly low. We also have 1,000 miners operating at a partner’s facility in Montana.
Congratulations on your recent appointment to CEO of Atlas. How will you apply your 20 years of industry knowledge across the Atlas business model and can you elaborate on some of your key focuses for the next quarter and beyond?
Thank you. The next quarter will be focused on getting our facility in Washington fully operational. As a growing company, we are also always looking for acquisitions that fit our stringent criteria and hope to be able to execute on some of the options that we are looking at.
Given my experience and connections across the cryptocurrency and blockchain ecosystem , we are also looking at new technologies that are near revenue that fit our execution model and could potentially create shareholder value.
Power capacity is everything in the crypto mining sector. What does your grid look like at the Washington facility and how does this setup position you to lead the sector?
That’s an excellent point. Access to consistent, and cheap, power is absolutely necessary. We are fortunate to be in a part of the world with a stable grid and low-cost power. This is the reason Amazon Web Services and many other Fortune 50 companies set up their data centers in the surrounding area. Good infrastructure, cheap power, and favorable climate.
As the price of bitcoin is volatile, it is critical to be a low-cost producer so that we can mine bitcoins for a fraction of their spot price.
With crypto mining being a fairly new sector, we have come across several different business models when it comes to co-location or dedicated facilities and varying differences in the coins mined. Could you elaborate on Atlas’ core competencies and what coins you will be mining?
Atlas Cloud’s core competencies lie in its ability to identify, build, and operate bitcoin mining operations. Before moving into bitcoin mining, Atlas Cloud was a dedicated data center, and bitcoin mining facilities are data centers at their core. Understanding power distribution, Internet connectivity and latency, cooling, supply chain for equipment, are all integral in running these types of operations.
We also have a team that has tremendous experience in the capital markets for if we ever need to take on expansion capital.
We have a co-location facility that we use to mine while upgrading our current facility. Time is money when it comes to mining, so we wanted to get a head start in operating. Going forward, the strategy is to own the facilities that we run, it brings the cost of production down and allows us to have complete control.
We focus on bitcoin and bitcoin cash. Bitcoin is the blue chip player of cryptocurrencies and has, in our opinion, more robust economics.
What is the firms break even for each BTC mined? How does the inherent volatility in the crypto market affect your mining operations and is there a way to hedge against this?
Our co-lo facility is around $3,980/BTC and our Washington facility is expected to be about $1,395/BTC. Clearly, a higher price is better for bitcoin, all things being equal. But as you can see, we can also withstand a substantial decrease in crypto prices and still be fine. One way to hedge is to be a low-cost producer. This allows one to withstand high volatility. As long as you can be profitable, you can withstand volatility.
As impressive as the Washington facility is, what is the expected timeframe for completion and it being fully operational?
Early Q3 the Washington facility should be online. That will be the 3MW that we have access to this year, and we will get the other 2MW – for a total of 5MW – early next year. We have built the facility for 5MW, but it’s just a matter of the power utility company doing some extra work.
Are there any expansion plans on the horizon for Atlas into other markets?
We are actively pursuing other opportunities that fit our criteria. With the recent volatility in bitcoin price, many of these opportunities have decreased in price, which is lucky for us. We have cash that we are looking to deploy in a select few of these operations to take advantage of the lower prices.
With the meteoric rise of crypto in 2018 thus far, what is the firm’s stance on the velocity of the sector going into year end and care to comment on where you think the price of BTC could be at by 2019?
The recent pullback and then stabilization has been somewhat vindicating. Throughout the history of bitcoin, it has always had large spikes, subsequent pullbacks, then stabilization, then appreciation. The last 12 months has not been all that new for bitcoin, except that it was very public. Before it would have this high volatility, but it would not be on the news. So why I say it was vindicating is because it followed a relatively similar pattern as before: spike, pullback, stabilization. Now, just need the appreciation part of the cycle to begin. It’s a story as old as the markets.
With respect to predictions, we do not have a crystal ball and try not to pretend to. One way that we do look at it is through a cost lens. If you take the position that commodities trade around their marginal cost of production, then you can develop some numbers to go on. Estimates vary depending on exact assumptions, but you are most likely looking at somewhere between $30-70k to produce a bitcoin in 2020. The implication being that the price has to be higher than the marginal cost to produce to incentive production.