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Stronghold Digital Mining Inc. (NASDAQ: SDIG)

Stronghold Digital Mining Inc. (NASDAQ: SDIG) is a vertically integrated crypto asset mining company currently focused on the environmentally beneficial mining of Bitcoin. Stronghold houses its miners at its wholly owned and operated Scrubgrass Plant and Panther Creek Plant, both of which are low-cost, environmentally beneficial, coal refuse power generation facilities in Pennsylvania. Both plants are recognized as Alternative Energy Systems, because coal refuse is classified under Pennsylvania law as a Tier II Alternative Energy Source.

Stronghold is committed to generating its energy and managing its assets sustainably, and the company believes that it is one of the first vertically integrated crypto asset mining companies with a focus on environmentally beneficial operations. Simply put, Stronghold employs 21st century crypto mining techniques to remediate the impacts of 19th and 20th century coal mining in some of the most environmentally neglected regions of the United States. The company’s low-cost, environmentally beneficial power generation facilities have combined capacity of 165 megawatts (MW).

Stronghold has entered into four separate agreements to acquire 9,080 Bitmain and MicroBT Bitcoin miners since the company’s third quarter 2021 financial results were announced on November 30, 2021. The aggregate hash rate capacity of these miners is approximately 826 petahash per second, and Stronghold expects 4,800 miners (representing 426 PH/s of hash rate capacity) to be delivered by early January, with the remainder expected in the first half of 2022.

All miners will be installed at Stronghold’s wholly owned reclamation and power generation facilities. The aggregate purchase price for the first 4,800 miners was approximately $35.7 million, representing less than $84 per terahash per second (“TH/s”). The remaining 4,280 miners were acquired under a profit share arrangement with the company’s existing partner, Northern Data, under commercial terms that Stronghold considers highly favorable. To date, Stronghold has executed definitive purchase agreements or has installed over 54,000 miners with hash rate capacity of approximately 5.2 exahash per second (“EH/s”).


Stronghold’s power generation facilities convert coal refuse into power that is used to mine Bitcoin. Coal refuse is classified by the Commonwealth of Pennsylvania as a Tier II alternative energy resource equivalent to large-scale hydropower. The process of converting it into power allows for the reclamation of large geographic areas that have been ravaged by its presence. This once-unusable waste material was left in expansive piles throughout the area, because the technology then did not exist to efficiently burn it. Today, the circulating fluidized bed technology used by Stronghold allows for the efficient and emissions-controlled conversion of coal refuse into energy. The company’s Scrubgrass Plant, located on a 650-acre site in Scrubgrass Township, Venango County, Pennsylvania, has a generation capacity of 85 MW.

On November 2, 2021, Stronghold closed on the acquisition of the Panther Creek Plant, an 80 MW coal refuse reclamation-to-energy facility located on a 33-acre site in the Borough of Nesquehoning, Carbon County, Pennsylvania. The Panther Creek Plant utilizes the same circulating fluidized bed technology as Stronghold’s Scrubgrass Plant to generate power from coal refuse, making the facilities eligible to earn renewable energy credits. In conjunction with the acquisition, the company entered into an agreement with the seller to provide operations and maintenance services support to Stronghold for both the Scrubgrass Plant and the Panther Creek Plant. The support services from an experienced operating group are expected to facilitate durable uptime and efficiency for Stronghold’s power assets.

With the acquisition of the Panther Creek Plant, Stronghold’s owned power generation capacity expanded to approximately 165 MW. Stronghold continues to evaluate opportunities to acquire additional power generation assets, including a third coal refuse reclamation facility that is under a non-binding letter of intent to purchase.

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 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

Gregory A. Beard is co-chairman and CEO at Stronghold. He was the Global Head of Natural Resources, Senior Partner, member of the Management Committee and Senior Advisor at Apollo Global Management from 2010 to 2020. Prior to his time at Apollo, Mr. Beard was a senior Managing Director at Riverstone Holdings, an energy, power and infrastructure-focused private equity firm. He began his career as a financial analyst at Goldman Sachs.

Ricardo R. A. Larroudé is CFO at Stronghold. Prior to joining the company, he was the General Manager of APFM Emerging Businesses division. He joined APFM from Anheuser-Busch Inbev, where he led the company’s global financial risk management operations from 2017 to 2020. Prior to that, he served at Apollo Global Management. He began his career as a Financial Analyst at Lehman Brothers, in the Communications and Media Group, in 2003.

Richard J. Shaffer is Senior Vice President – Asset Manager at Stronghold. Prior to taking that role, he served as General Manager of the company’s Scrubgrass Plant. From 2013 to 2016, he was the Fuel and Environmental Manager for the plant. He started at the Scrubgrass Plant in 2003 as Environmental Manager. Prior to that, he worked for an environmental remediation and consulting company that provided remediation and service work to the industry.

Thomas B. Tyree III is Vice President, Finance at Stronghold. From 2019 to 2021, he worked at Riverstone Holdings, an energy and power private-equity firm with funds totaling over $40 billion. He began his career as an Investment Banking Analyst at D.A. Davidson & Co., before going to Scotiabank, where he assisted in the execution of over a dozen transactions in the energy and industrials spaces. He received his bachelor’s degree in mathematics from Bowdoin College.

Investment Considerations
  • Stronghold remains on track to reach its hash rate capacity goal of 8,000 PH/s by the end of 2022.
  • As of September 30, 2021, the company had approximately 3,000 miners deployed with total hash rate capacity of approximately 185 PH/s.
  • Revenues in the third quarter increased 527% to $6 million, compared to $1 million in the same quarter a year ago.
  • Adjusted EBITDA for the third quarter increased to $9,700, compared to a loss of $500,000 for the three-month period one year earlier.
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