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HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) (TSX.V: HIVE)

HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) (TSX.V: HIVE) is in the business of providing infrastructure solutions in the blockchain industry, including the mining of digital currencies. The company’s projects include the Iceland Cryptocurrency Mining Project.

HIVE reported record second-quarter fiscal 2021 numbers, and then followed those up two months later with record crypto mining production figures for November 2021. The company reports in that month it produced 218 Bitcoin, along with $13.2 million in Bitcoin mining revenue and 1.31 ExaHash of Bitcoin mining capacity. In addition, the company reported 2,334 Ethereum produced, with $10.4 million in Ethereum mining revenue and 4.36 TeraHash of Ethereum mining capacity.

HIVE uses 100 percent green energy to mine both Bitcoin and Ethereum, with a committed ESG strategy since the company’s founding. HIVE strives to create long-term shareholder value with its unique HODL strategy, bridging the blockchain and cryptocurrencies with traditional capital markets. Blockchain technology is revolutionizing finance and there are very few ways for investors to gain exposure to businesses in this space. HIVE is a relatively new public company that uses high powered computing assets to mine cryptocurrencies on the cloud. The company’s deployments provide shareholders with exposure to the operating margins of digital currency mining, as well as to a portfolio of crypto-coins.

For shareholders, HIVE provides a pure play blockchain investment in the capital markets while creating long term value. The company’s low working capital requirements do not require immediate sale of mined coins, allowing HIVE to strategically sell coins to maximize profit. The company’s operations are situated in cool and politically stable jurisdictions, including Canada, Sweden and Iceland, with access to low-cost green and/or renewable energy.

Operations

HIVE is a cryptocurrency mining firm. The company validates transactions on blockchain networks in exchange for rewards paid in cryptocurrencies. Every day, HIVE earns new crypto-coins which it can monetize for revenue and cash flow. Cryptocurrency is extremely competitive, hence the need for efficiencies of scale. HIVE sells digital currencies that it has mined in order to pay its ongoing expenses, including operating and maintenance costs.

The company holds its inventory of digital currencies in cold storage solutions not connected to the internet. HIVE owns state-of-the-art green-energy-powered data center facilities in Canada, Sweden and Iceland, which produce newly minted digital currencies continuously on the cloud. The company’s data centers have access to a total of approximately 50 megawatts (MW) of power, placing HIVE among the largest and most diversified of any publicly listed cryptocurrency miners.

The company is dedicated to mitigating its environmental impact and is building sustainable operations that will power the blockchain of the future. HIVE’s dedicated mining operations in Quebec include 30MW of green energy capacity and installed SHA 256 ASIC miners of Bitcoin. HIVE enjoys competitive costs for green energy, access to skilled labor and low taxes, as well as significant capacity for expansion of future operations. The company is currently mining Ethereum in Sweden. The country’s government is actively exploring blockchain opportunities beyond cryptocurrencies. The company there owns GPU rigs for mining Ethereum powered entirely by hydroelectricity, with about 17 MW of capacity.

HIVE also mines Ethereum in Iceland, where it owns a state-of-the-art blockchain infrastructure facility consuming total energy of about four megawatts and producing cryptocurrency around the clock. Mild year-round temperatures there result in less energy dedicated to cooling mining facilities. Electricity for mining is provided by geothermal or hydropower resources to mitigate HIVE’s environmental footprint.

Market Overview

According to a market analysis report from Grand View Research, the global blockchain technology market size was valued at $3.67 billion in 2020. Grand View forecasts the market could expand at a CAGR of 82.4% from 2021 to 2028. That CAGR projects a market worth a whopping $450 billion by 2028.

Grand View points out that blockchain has emerged as a highly promising technology. Blockchain provides an open, immutable, distributed public ledger that can be accessed by several parties involved in a transaction, and it acts as a universal depository of all transactions between the involved parties.

The increasing worldwide acceptance of cryptocurrencies is one of the major drivers of market growth, Grand View reports. Commercial and central banks across the world are now using blockchain technology for payment processing and issuance of their own digital currencies. The technology enables cross-border payments that are less expensive and faster as compared to traditional systems.

Management Team

Frank Holmes is executive chairman at HIVE. He leads the board of directors and is interim CEO. He also is chief executive and chief investment officer at U.S. Global Investors, a leading mutual fund and asset management firm. He is a sought-after keynote speaker at international investment conferences and a regular guest in business media. His Frank Talk CEO Blog is one of the most widely read in finance.

Aydin Kilic is president and COO at HIVE. He has more than 20 years of experience as an entrepreneur and electronic engineer. He founded Fortress Blockchain Corp. in 2017 and took it public on the TSX Venture Exchange, raising $30 million. Kilic will lead HIVE’s global expansion and development of data centers. He holds a degree in engineering science from Simon Fraser University.

Darcy Daubaras is CFO at HIVE and has more than 20 years of experience in corporate accounting and public company service. Prior to joining HIVE, he was a member of the executive team at FinancialCAD Corporation. He has previously served as the CFO for Canadian listed public companies, as well as serving as the director of corporate accounting with Mercer International. Mr. Daubaras holds a CPA, CA designation and received a bachelor’s degree of commerce from the University of Victoria.

Investment Considerations
  • HIVE revenue grew 384% to $52.6 million for the 12 months ended September 30, 2021.
  • Income per share grew from 3 cents in the quarter ended September 30, 2020, to 16 cents in the same quarter of 2021.
  • As of December 3, 2021, HIVE held a balance of 1,584 Bitcoin.
  • For the month of November 2021, the company reported a record 218 Bitcoin produced and $13.2 million in mining revenue.
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