Tag: Company News

Strong annual revenue of $150.7 million including $16.9 million from the high performance computing business

 

Bitcoin holdings increased 64.7% in 2022 to 9,086 at year end

 

Achieved Adjusted EBITDA of $32.0 million in 2022

TORONTO, ON, March 9, 2023 — Hut 8 Mining Corp. (Nasdaq | TSX: HUT) (“Hut 8” or the “Company”), one of North America’s largest, innovation-focused digital asset mining pioneers, and high performance computing infrastructure provider, is pleased to announce its financial results for the year and quarter ended December 31, 2022. All dollar figures are in Canadian Dollars (“CAD”), unless otherwise stated.

“While 2022 was a challenging time for the entire industry, we fared well thanks to our team’s commitment to operational excellence, our diversified lines of business, and our strong growth profile,” said Jaime Leverton, CEO. “As we look ahead, we will continue to uphold these operating principles as we work to close our business combination with USBTC and begin operating as a US-domiciled, digital asset mining, hosting, managed infrastructure operations, and high performance computing organization.”

“We continued to fastidiously manage our finances through Q4, which allowed us to navigate sustained Bitcoin price suppression, fluctuating power prices, and increased network difficulty,” said Shenif Visram, CFO. “As a result, we increased our mining production by more than 28% year over year, and increased our fiat revenues by $16.9 million with the addition of our high performance computing business.”

2022 HIGHLIGHTS

• Revenue decreased by $23.1 million to $150.7 million during the year ended December 31, 2022 compared to $173.8 million during the year ended December 31, 2021.
• The Company mined 3,568 Bitcoin in 2022, a 28.1% increase compared to 2021 due to an increase in hashrate from the expansion of the Company’s fleet of miners and mining activities.
• Hut 8’s high performance computing operations generated $16.9 million of revenue in 2022, the majority of which is monthly recurring revenue.
• The Company installed an aggregate of 21,455 new MicroBT M30S, M30S+, M30S++ and M31S+ miners at its three mining sites during the year ended December 31, 2022. The installation of these miners brought Hut 8’s installed hashrate to 2.5 EH/s (excluding the Company’s North Bay facility and GPU mining) as of December 31, 2022, an increase of 25.0% in hashrate compared to December 31, 2021. The Drumheller facility experienced diminished production as a result of electrical issues.

HASHRATE UPDATE

Hut 8 currently has an installed hashrate of approximately 2.5 EH/s, which excludes the Company’s North Bay facility that is not operational as of March 9, 2023.

BITCOIN INVENTORY AND VALUE

As at December 31, 2022, the Company had a total self-mined, unencumbered and held in custody Bitcoin balance of 9,086 with a market value of $203.6 million. During the fourth quarter of 2022, 100% of self-mined Bitcoin was deposited into custody.

• Revenue for the year-ended December 31, 2022 was $150.7 million compared to $173.8 million in the prior year. The decrease was primarily driven by the Company’s digital asset mining operations, where the Company mined 3,568 Bitcoin and generated $133.0 million of digital asset mining revenue, versus mining 2,786 Bitcoin and generating $165.4 million of digital asset mining revenue in the prior year. The Bitcoin price decrease during 2022 offset the impact on revenue of mining an increased number of Bitcoin compared to the prior year. The increase in the number of Bitcoin mined is due to the increase in Hut 8’s average hashrate compared to the prior year. This was partially offset by electrical issues at the Company’s Drumheller facility which impacted Bitcoin production, digital asset mining curtailments at the Company’s Drumheller facility, and the suspension of mining operations at the Company’s North Bay facility during the fourth quarter of 2022. The Bitcoin price decrease during 2022 resulted in average revenue per Bitcoin mined of approximately $37,300 in 2022 compared to average revenue per Bitcoin mined of approximately $59,400 in 2021. The Company’s hosting services contributed $0.8 million of revenue during the year compared to $8.4 million in the prior year. Hosting services revenue decreased as Hut 8 acquired the remaining hosted digital asset miners during 2022 to allocate toward self-mining operations. The Company’s newly-acquired high performance computing operations generated $16.9 million of primarily recurring revenue in 2022.
• Cost of revenue consists of site operating costs and depreciation and was $175.6 million for the year ended December 31, 2022, compared to $85.0 million in the prior year. Site operations costs for 2022 were $81.8 million, $8.4 million of which relates to our high performance computing (“HPC”) operations. The average site operating costs of mining each Bitcoin for 2022 was approximately $20,600, compared to approximately $22,100 in the prior year period, with the decrease primarily due to more efficient miners deployed at the Company’s mining facilities, partially offset by higher energy prices in the year and increased network difficulty as compared to the prior year. Depreciation expense increased to $93.9 million during 2022 compared to $23.3 million in 2021, driven by the increased number and overall cost of miners deployed during the year along with $5.1 million of additional depreciation from the newly acquired HPC operations. Notably, Hut 8 employs a two year depreciation schedule for its miners, which is a conservative timeline by industry standards.
• For the year ended December 31, 2022, the Company identified indicators of impairment for its digital asset mining cash generating units (“CGUs”) and tested its digital asset mining CGUs for impairment. Management has determined the recoverable amount as the Value in Use (“VIU”) for the three digital asset mining CGUs based on geographical area and distinct cashflows: Medicine Hat, Drumheller, and North Bay. These CGUs include mining infrastructure and mining server plant and equipment. For the year ended December 31, 2022, the Company assessed the VIU of the digital asset mining CGUs. Due to depressed digital asset mining economics, specifically decline in the price of Bitcoin throughout periods during 2022, the Company recorded an impairment charge on its digital asset mining CGUs. The difference between the pre-impairment carrying value and recoverable amount of the Company’s digital asset mining CGUs is $98.6 million.
• For the year ended December 31, 2022, the Company identified indicators of impairment for its graphics processing unit (“GPU”) mining group of assets and tested its GPU mining group of assets for impairment. Management has determined the recoverable amount of GPU mining group of assets to be its fair value less costs of disposal (“FVLCD”). Due to the Ethereum Merge in 2022, where the Ethereum network changed its consensus mechanism from proof-of-work to proof-of-stake, the Company was unable to mine the Ethereum network using the GPU mining group of assets. The Company was unsuccessful in finding an alternative digital asset to mine with profitable mining economics using the GPU mining group of assets. As a result, the Company recorded an impairment charge on its GPU mining group of assets. The difference between the pre-impairment carrying value and the recoverable amount of the Company’s GPU mining group of assets is $15.2 million.
• Net loss for 2022 was $242.8 million and net loss per share was $1.29, compared to net loss of $72.7 million and net loss per share of $0.54 in the prior year. The change reflects the lower revenue from digital asset mining operations, higher cost of revenue, $113.9 million of impairment on digital asset mining CGUs and GPU mining group of assets, and loss on revaluation of digital assets recorded to net loss of $134.8 million due to the Bitcoin price decrease during 2022.
• Mining Profit(i) was $60.4 million in 2022, compared to $108.1 million in 2021. The change is mainly due to a lower average Bitcoin price and increased average power costs, which were partially offset by the impact to revenue from the higher number of Bitcoin mined.
• Adjusted EBITDA(i) was $32.0 million, compared to $96.6 million in 2021. Contributions from high performance computing operations were offset by compressed mining margins.

For more information, please refer to the Company’s management’s discussion & analysis (the “MD&A”) and the Company’s consolidated financial statements for the years ended December 31, 2022 and 2021. These documents are available on the Company’s website at hut8.io, under the Company’s SEDAR profile at www.sedar.com, and under the Company’s EDGAR profile at www.sec.gov.

NON-IFRS MEASURES

This press release makes reference to certain measures that are not recognized under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore not necessarily comparable to similar measures presented by other companies. The Company uses non-IFRS measures including “Mining Profit” and “Adjusted EBITDA” as additional information to complement IFRS measures by providing further understanding of the Company’s results of operations from Management’s perspective and should not be viewed as alternatives to, or replacements of, measures of operating results and liquidity presented in accordance with IFRS.

The following tables and definitions reconcile non-IFRS measures used by the Company to analyze the operational performance of Hut 8, to their nearest IFRS measure and should be read in conjunction with the consolidated financial statements for the years ended December 31, 2022 and 2021.

Mining Profit

“Mining Profit” represents gross profit (revenue less cost of revenue), excluding depreciation and revenue and site operating costs directly attributable to hosting services and high performance computing operations. Mining Profit shows profitability of the Company’s core digital asset mining operation, without the impact of non-cash depreciation expense. Mining Profit measure provides investors the ability to assess the profitability of the mining operations exclusive of general and administrative expenses.

The following table reconciles gross profit (loss) to our non-IFRS measure, Mining Profit:

Adjusted EBITDA

“Adjusted EBITDA” represents EBITDA (net income or loss excluding net finance income or expense, income tax or recovery, depreciation, and amortization) adjusted to exclude non-cash share-based compensation, fair value gain or loss on revaluation of digital assets and warrants, non-recurring impairment charges or reversals of impairment, and costs associated with one-time or non-recurring transactions. Adjusted EBITDA is used to assess profitability without the impact of non-cash accounting policies, capital structure, taxation, and one-time or non-recurring transactions. This performance measure provides a consistent comparable metric for profitability of the Company across time periods.

The following table reconciles net (loss) income to our non-IFRS measure, Adjusted EBITDA:

CORPORATE UPDATES

On February 7, 2023, Hut 8 Mining Corp. and U.S. Data Mining Group, Inc. dba US Bitcoin Corp (“USBTC”), builder and strategic operator of four Bitcoin mining centres across the United States, announced that each of their boards of directors had unanimously approved a definitive business combination agreement under which the companies will combine in an all-stock merger of equals (the “Transaction”). The combined company will be named “Hut 8 Corp.” (“New Hut”) and will be a U.S.-domiciled entity. The Transaction is expected to establish New Hut as a large scale, publicly-traded Bitcoin miner focused on economical mining, highly diversified revenue streams, and industry-leading best practices in environmental, social, and governance (“ESG”).

New Hut will have access to approximately 825 MW of gross energy across all six sites with self-mining, hosting, and managed infrastructure operations.

• It will have 5.6 EH/s of installed self-mining capacity and 244 MW of total energy available at five sites with current self-mining operations: Medicine Hat, AB; Drumheller, AB; Niagara Falls, NY; Granbury, TX; and King Mountain, TX. The 1.7 EH/s installed self-mining production at the King Mountain, TX site is owned by the King Mountain Joint Venture in which USBTC has a 50% membership interest alongside a leading energy partner (the “King Mountain JV”). USBTC continues to address a legal dispute with the City of Niagara Falls, NY over operations at the site in the same city. While operations continue uninterrupted, the team has a contingency plan in place that it will pursue should a resolution not be met.
• New Hut will manage 220 MW of hosting infrastructure at its King Mountain, TX site, powered by a mix of sources including wind and nuclear, supporting multiple clients, including some of the industry’s largest miners. Hosting is owned by the King Mountain JV.
• New Hut will manage 680 MW of infrastructure operations powered by energy from a mix of sources including renewable and zero-emission in Kearney, NB and Granbury and King Mountain, TX. This unique, leading-edge service offering gives Bitcoin mine site owners the opportunity to have USBTC’s professionals manage all day-to-day operations, hosting, site management, and maintenance using purpose-built site management software.
• Notably, the USBTC team brings significant leadership in energy origination, development, demand response, hedging, grid stabilization, and analytics to New Hut, significantly enhancing New Hut’s ability to better plan around stable and predictable energy usage and mitigate fluctuating prices across markets.

In addition, New Hut is committed to supporting and growing the HPC business, which continues to be a cornerstone of New Hut’s diversified strategy, generating monthly recurring revenue from approximately 370 North American customers.

CONFERENCE CALL

Hut 8 Mining Q4 2022 conference call will commence at 10:00 a.m. ET, today, March 9, 2023.

• To join the conference call without operator assistance, you may register and enter your phone number at https://bit.ly/3YEOkEJ to receive an instant, automated call back that will place you in the conference
• Those joining via operator should dial in 5-10 minutes early to: 1-888-664-6392 (toll-free, North America) and use access code: 42748613#

Analyst Coverage of Hut 8 Mining:

A full list of Hut 8 Mining analyst coverage can be found here: https://hut8.io/investors/

About Hut 8

Hut 8 is one of North America’s largest innovation-focused digital asset miners, led by a team of business-building technologists, bullish on bitcoin, blockchain, Web 3.0 and bridging the nascent and traditional high performance computing worlds. With two operational digital asset mining sites located in Southern Alberta, Hut 8 has one of the highest capacity rates in the industry and one of the highest inventories of self-mined Bitcoin of any digital asset miner or publicly-traded company globally. With over 36,000 square feet of geo-diverse data centre space and cloud capacity connected to electrical grids powered by significant renewables and predominantly emission-free sources, Hut 8 is revolutionizing conventional assets to create the first hybrid data centre model that serves both the traditional high performance compute (Web 2.0) and nascent digital asset computing sectors, blockchain gaming, and Web 3.0. Hut 8 was the first Canadian digital asset miner to list on the Nasdaq Global Select Market. Through innovation, imagination, and passion, Hut 8 is helping to define the digital asset revolution to create value and positive impacts for its shareholders and generations to come.

FORWARD-LOOKING INFORMATION

This press release includes “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities laws and United States securities laws, respectively (collectively, “forward-looking information”). All information, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future business strategy, competitive strengths, goals, expansion and growth of the Company’s businesses, operations, plans and other such matters is forward-looking information. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information. Specifically, such forward-looking information included in this press release include, but are not limited to, statements with respect to the following: the Company’s position and ability to seize opportunities in the digital asset industry; the Company’s ability to advance the HODL strategy in the long-term; the Company’s growth strategy; expectations for other economic, business, regulatory and/or competitive factors related to the Company or the Bitcoin industry generally; projected hash rate, expenses and profitability; the ability of the Company to react to digital asset price volatility; fluctuating power and energy costs; the ability of the Company to navigate increased network difficulty; the expected outcomes of the Transaction, including New Hut’s assets and financial position; the ability of Hut 8 and USBTC to complete the Transaction on the terms described herein, or at all, including, receipt of required regulatory approvals, shareholder approvals, court approvals, stock exchange approvals and satisfaction of other closing customary conditions; the expected synergies related to the Transaction in respect of strategy, operations and other matters; projections related to expansion;  expectations related to New Hut’s hashrate and self-mining capacity; expected ESG efforts and commitments; and the ability of New Hut to execute on future opportunities, among others.

Statements containing forward-looking information are not historical facts, but instead represent management’s expectations, estimates and projections regarding future events based on certain material factors and assumptions at the time the statement was made. Material assumptions include: assumptions regarding the level of demand and financial performance of the digital asset industry; effective tax rates; the U.S./Canadian dollar exchange rate; the expected impact of the COVID-19 pandemic; inflation; access to capital; timing and receipt of regulatory approvals; acquisition and divestiture activities, operational expenses, returns on investments, transaction costs, fluctuations in energy prices and the Company’s energy requirements, the ability to obtain requisite approvals (including shareholder, stock exchange, regulatory, and court approvals) and the satisfaction of other conditions to the consummation of the Transaction on the proposed terms or at all; the anticipated timeline for the completion of the Transaction; the ability to realize the anticipated benefits of the Transaction or implementing the business plan for New Hut, including as a result of a delay in completing the Transaction or difficulty in integrating the businesses of the companies involved (including the retention of key employees); the potential impact of the consummation of the Transaction on relationships, including with regulatory bodies, employees, suppliers, customers, competitors and other key stakeholders; the outcome of any litigation proceedings in respect of USBTC’s legal dispute with the City of Niagara Falls, New York; and the outcome of any litigation proceedings in respect of the Company’s legal dispute with Validus Power Corp.

Forward-looking information is necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by Hut 8 as of the date of this press release, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to: security and cybersecurity threats and hacks; malicious actors or botnet obtaining control of processing power on the Bitcoin network; further development and acceptance of the Bitcoin network; changes to Bitcoin mining difficulty; loss or destruction of private keys; increases in fees for recording transactions in the Blockchain; erroneous transactions; reliance on a limited number of key employees; reliance on third party mining pool service providers; regulatory changes; classification and tax changes; momentum pricing risk; fraud and failure related to digital asset exchanges; difficulty in obtaining banking services and financing; difficulty in obtaining insurance, permits and licenses; internet and power disruptions; geopolitical events; uncertainty in the development of cryptographic and algorithmic protocols; uncertainty about the acceptance or widespread use of digital assets; failure to anticipate technology innovations; the COVID-19 pandemic (or a material escalation thereof); climate change; currency risk, lending risk and recovery of potential losses; litigation risk; business integration risk; changes in market demand; changes in network and infrastructure; system interruption; changes in leasing arrangements; counterparty risk; failure to achieve intended benefits of power purchase agreements; potential for interrupted delivery, or suspension of the delivery, of energy to the Company’s mining sites; the ability to implement business plans, forecasts, and other expectations; the ability to identify and realize additional opportunities and other risks related to the digital asset mining and data centre business. For a complete list of the factors that could affect the Company, please see the “Risk Factors” section of the Company’s Annual Information Form dated March 9, 2023, and Hut 8’s other continuous disclosure documents which are available on Company’s website at hut8.io, under the Company’s SEDAR profile at www.sedar.com and under the Company’s EDGAR profile at www.sec.gov.

These factors are not intended to represent a complete list of the factors that could affect Hut 8; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, sought, proposed, estimated, forecasted, expected, projected or targeted and such forward-looking statements included in this press release should not be unduly relied upon. The impact of any one assumption, risk, uncertainty, or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and Hut 8’s future decisions and actions will depend on management’s assessment of all information at the relevant time. The forward-looking statements contained in this press release are made as of the date of this press release, and Hut 8 expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

Investor contact:

Sue Ennis

sue@hut8.io

Media contact:

Yamini Coen

yamini.coen@hut8.io

(i) Non-IFRS measure – see “Non-IFRS Measures” section below. Certain comparative figures have been restated where necessary to conform with current period presentation.

Transaction is expected to dramatically enhance trajectory of the digital asset mining business: 

5.6 EH/s installed self-mining capacity at five sites across North America  

Combined Company’s diversification strategy to expand significantly, establishing new, fiat revenue generating lines of business: 

220 MW of hosting infrastructure at King Mountain, Texas 

Managed infrastructure operations powered by 680 MW at Kearney, Nebraska, Granbury, Texas, and King Mountain Texas sites 

Gross energy across self-mining, hosting, and managed infrastructure operations sites totaling approximately 825 MW  

Transaction expected to accelerate achievement of ESG objectives by adding renewable energy and zero carbon emission energy from wind, hydro, and nuclear sources 

Bill Tai to maintain role as Board Chair, Jaime Leverton to continue as CEO, Asher Genoot to continue as President, Michael Ho to become Chief Strategy Officer, Shenif Visram to continue as CFO 

Combined Company to be named “Hut 8 Corp.” and domiciled in the United States 

This news release constitutes a “designated news release” for purposes of the Company’s prospectus supplement dated August 17, 2022 to its short form base shelf prospectus dated August 5, 2022. All dollar amounts in this release are in USD unless otherwise noted. 

TORONTO, ONTARIO and MIAMI, FLORIDA February 7, 2023 – Hut 8 Mining Corp. (Nasdaq | TSX: HUT) (“Hut 8” or the “Company”), a large, innovation-focused digital asset mining pioneer and high performance computing infrastructure provider, and U.S. Data Mining Group, Inc. dba US Bitcoin Corp (“USBTC”), builder and strategic operator of four Bitcoin mining centres across the United States announced today that each of their Boards of Directors have unanimously approved a definitive business combination agreement (the “Business Combination Agreement”) under which the companies will combine in an all-stock merger of equals (the “Transaction”). The combined company will be named “Hut 8 Corp.” (“New Hut” or the “Combined Company”) and will be a U.S.-domiciled entity. The Transaction is expected to establish New Hut as a large scale, publicly traded Bitcoin miner focused on economical mining, highly diversified revenue streams, and industry-leading best practices in ESG.  

“Our established track record of creating shareholder value through organic growth and strategic acquisitions while maintaining a balance sheet-first approach has positioned us perfectly to advance our growth trajectory through this business combination,” said Jaime Leverton, CEO, Hut 8. “Bringing together Hut 8’s operational track record and diversified revenue streams with US Bitcoin’s scalable mining sites, sizeable hosting business, and industry-leading managed infrastructure operations not only accelerates our diversified strategy and positions us for near-term growth, but also establishes us as a strong, U.S.-based player that is ready and able to seize additional opportunities as they arise.”  

New Hut will have access to approximately 825 MW of gross energy across all six sites with self-mining, hosting, and managed infrastructure operations.  

• It will have 5.6 EH/s of installed self-mining capacity and 244 MW of total energy available at five sites with current self-mining operations: Medicine Hat, AB; Drumheller, AB; Niagara Falls, NY; Granbury, TX; and King Mountain, TX. The 1.7 EH/s installed self-mining production at the King Mountain, TX site is owned by the King Mountain Joint Venture in which USBTC has a 50% membership interest alongside a leading energy partner (the “King Mountain JV”). USBTC continues to address a legal dispute with the City of Niagara Falls, NY over operations at the site in the same city. While operations continue uninterrupted, the team has a contingency plan in place that it will pursue should a resolution not be met.  
• New Hut will manage 220 MW of hosting infrastructure at its King Mountain, TX site, powered by a mix of sources including wind and nuclear, supporting multiple clients, including some of the industry’s largest miners. Hosting is owned by the King Mountain JV.  
• The Combined Company will manage 680 MW of infrastructure operations powered by energy from a mix of sources including renewable and zero-emission in Kearney, NB and Granbury and King Mountain, TX. This unique, leading-edge service offering gives Bitcoin mine site owners the opportunity to have USBTC’s professionals manage all day-to-day operations, hosting, site management, and maintenance using purpose-built site management software.  

“We’ve been searching for the right partner to join us on our ambitious growth journey for some time and are confident that Hut 8 is the perfect fit,” said Michael Ho, co-founder and CEO of USBTC. “We were initially attracted to Hut 8’s strong track record, admirable fiscal management through all market cycles, and like-minded approach to generating diversified lines of revenue. Through this process, we’ve determined that the strategic impact this Transaction will drive is significant: we see a clear path to leveraging our collective vision to drive innovative technology advancements and become a second-to-none operator.” 

“The combination of Hut 8 and USBTC is an important step, but it’s truly just the beginning,” said Asher Genoot, co-founder and President of USBTC. “We believe that New Hut will challenge industry paradigms and set the standard for operating rigor and team culture. We are laser-focused on identifying opportunities to capture untapped value across the mining ecosystem. Together, we will become an exceptional self-mining operator, hosting provider, strategic operator of managed infrastructure, purveyor of high performance computing infrastructure, and industry-leading ASIC repair and sales hub, underpinned by world-class operating technology and IP to drive growth.”  

The Transaction will create a leading Bitcoin mining company operating in North America with strong financial and operating metrics. Under the Business Combination Agreement, New Hut will be led by a combined Board of Directors and management team of Bitcoin miners, energy experts, and business leaders, bringing together the proven cultures, strengths, and capabilities of both companies.   

“This Transaction has given us the opportunity to leverage the significant, unencumbered Bitcoin stack we have HODLed to date,” said Jaime. “During the interim period, we plan to cover our operating costs through a combination of selling the Bitcoin we mine, selling from our stack and/or exploring various debt options, as agreed under the terms of the Business Combination Agreement. Upon a successful close of the Transaction, we will take the opportunity to carefully review and determine our go-forward treasury strategy.”  

Details of the Transaction and strategic rationale  

Pursuant to the Business Combination Agreement, shareholders of Hut 8 will receive, for each Hut 8 share, 0.2 of a share of New Hut common stock (the “Hut Consideration”), which will effectively result in a consolidation of the Hut 8 shares on a 5 to 1 basis. Stockholders of USBTC will receive, for each share of USBTC capital stock, 0.6716 of a share of New Hut common stock (the “USBTC Consideration” and together with the Hut Consideration, the “Consideration”). Based on the 5-day VWAP for the Hut 8 shares on the Nasdaq as of the last trading day prior to the date of this announcement, the aggregate Consideration implies a combined market capitalization of approximately U$990 million.  

Upon consummation of the Transaction (“Closing”), existing Hut 8 shareholders and USBTC stockholders will each collectively own, on a fully-diluted in the money basis, approximately 50% each of the stock of the Combined Company. Following completion of the Transaction, Hut 8 and USBTC will each become wholly-owned subsidiaries of New Hut.  

Key strategic, financial, and operational advantages of the combined business include1: 

• Strengthens financial position and flexibility. The combined balance sheet creates greater financial stability through market cycles and allows New Hut to grow and invest in new opportunities. Through increased scale and U.S. headquarters, the Combined Company anticipates being included in new indices and enjoying improved access to capital. 
• Catapults New Hut’s diversification strategy forward. New Hut is expected to generate monthly recurring fiat hosting revenues from long-term clients, Bitcoin mining sites looking to maximize the potential of their facilities through managed infrastructure operations, from equipment sales to customers, and from the MicroBT-certified repair centre business serving customers across North America and Northern Europe. 
• Maintains commitment to advancing the high performance computing traditional data centre business. New Hut remains committed to supporting and growing the HPC business, which continues to be a cornerstone of the Combined Company’s diversified strategy, generating monthly recurring revenue from approximately 370 North American customers.  
• Creates a strengthened, proven, and trusted senior leadership team and Board of Directors with a track record of value creation. The combined executive team will lead New Hut’s approximately 210 team members to deliver on the existing and proven strategy of growing long-term sustainable operations. 
• Grows pipeline of opportunities. The Transaction combines a pipeline of growth opportunities at existing, greenfield, and brownfield sites.  
• Enhances position in one of the world’s high-potential Bitcoin mining regions. The merger solidifies New Hut as a Bitcoin mining entity with operating capacity at high-quality sites in Alberta, Canada, and Texas, Nebraska, and New York in the United States. 
• Advances commitment to driving improvements across all ESG metrics. While the team is committed to shared ESG goals, the Transaction improves New Hut’s overall energy mix to include wind, hydro, and nuclear sources.  
• Improves energy expertise and hedging capabilities. The USBTC team brings significant leadership in energy origination, development, demand response, hedging, grid stabilization, and analytics to New Hut, significantly enhancing the Combined Company’s ability to better plan around stable and predictable energy usage and mitigate fluctuating prices across markets.  

Transaction Summary and Timing 

Under the terms of the Business Combination Agreement, the Transaction will be effected by way of a court-approved plan of arrangement (the “Arrangement”) involving Hut 8 under the Business Corporations Act (British Columbia) and a statutory merger (the “Merger”) involving USBTC under the laws of the State of Nevada. The Arrangement will require the approval of at least 66 2/3% of the votes cast by the shareholders of Hut 8 voting at a special meeting of Hut 8’s shareholders (the “Meeting”). The Merger is also subject to the approval of USBTC stockholders.  

Completion of the Transaction is subject to regulatory and court approvals and other customary closing conditions. Regulatory approvals expected to be required include receipt of approval under the Competition Act (Canada) and under the United States Hart-Scott-Rodino Antitrust Improvements Act. In addition, the Arrangement will require the approval of the Supreme Court of British Columbia, New Hut’s common stock will require approval for listing on the Toronto Stock Exchange and The Nasdaq Capital Market. The Business Combination Agreement includes non-solicitation provisions for both Hut 8 and USBTC, with Hut 8 maintaining a fiduciary out to accept a superior proposal, subject to USBTC’s right to match and other customary exceptions. Hut 8 is required to pay USBTC a termination fee of US $10.0 million in certain circumstances.  

Officers and Directors of Hut 8 have entered into support and voting agreements with USBTC, agreeing to vote their Hut 8 shares in favour of the Arrangement. Officers, Directors, and certain stockholders of USBTC have entered into a stockholder support agreement with Hut 8, agreeing to vote their USBTC stock in favour of the Merger.  

It is anticipated that the Meeting and the receipt of the written consent of USBTC stockholders will occur in the second quarter of 2023. Closing is expected to occur thereafter, subject to satisfaction of the closing conditions under the Business Combination Agreement. 

Pursuant to the Business Combination Agreement, Hut 8 has also agreed to provide USBTC with secured bridge financing during the interim period, with the expected amount of such financing ranging from US$6.0 – $6.5 million, subject to the completion of definitive loan documentation.  

Following completion of the Transaction, the shares of New Hut will trade on the Toronto Stock Exchange and the Nasdaq Stock Market, subject to approval or acceptance of each exchange in respect of the Transaction. 

Board of Directors’ approval 

Each of Hut 8’s and USBTC’s respective Board of Directors have unanimously approved the Business Combination Agreement and the Transaction. Stifel GMP provided a fairness opinion to the Board of Directors of Hut 8 stating that, as of the date of such opinion, and based upon the scope of review and subject to the assumptions, limitations and qualifications stated in such opinion, the USBTC exchange ratio provided for in the Business Combination Agreement is fair, from a financial point of view, to Hut 8. The Board of Directors of Hut 8 also received a second, independent fairness opinion from the Duff & Phelps Opinions Practice of Kroll, LLC stating that, as of the date of such opinion and based upon the scope of review and subject to the assumptions, limitations and qualifications stated in such opinion, the USBTC exchange ratio provided for in the Business Combination Agreement is fair, from a financial point of view, to Hut 8.  

Governance  

Following the closing of the Transaction, the Combined Company will be domiciled in the United States and will be led by a proven leadership team that builds on the strengths and capabilities of both companies. The senior executive team and Board of Directors of Hut 8 will be enhanced by the addition of new members of USBTC who have significant knowledge and experience to support the combined operations. The Board of Directors of New Hut will consist of 10 directors, comprised of 5 directors from Hut 8 and 5 directors from USBTC.  

The key senior management team and directors will include: 

• Chair of the Board – Bill Tai 
• Chief Executive Officer – Jaime Leverton 
• President – Asher Genoot 
• Chief Strategy Officer – Michael Ho  
• Chief Financial Officer – Shenif Visram 

Advisors and counsel 

Hut 8 has engaged Stifel GMP as its exclusive financial advisor and Bennett Jones LLP and Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisors in connection with the Transaction. USBTC has engaged Needham & Company as its exclusive financial advisor and Stikeman Elliott LLP, Greenberg Traurig, P.A., and Brown Rudnick LLP as its legal advisors on the Transaction.  

For further information on the terms and conditions of the Transaction, please refer to the Business Combination Agreement in its entirety and the management proxy circular to be mailed to Hut 8 shareholders for the Meeting in due course, which will be available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Additional details about the Transaction can be found in a joint investor presentation, which will be available on www.hut8.io/investors and www.usbitcoin.com. Shareholders are encouraged to read the management proxy circular and other relevant materials when they become available.  

Analyst call  

The conference call will begin at 8:30 a.m. ET on February 7, 2023.  

• To join the conference call without operator assistance, you may register and enter your phone number at https://app.webinar.net/JB0rqRaVWYj to receive an instant, automated call back that will place you in the conference 
• Those joining via operator should dial in 5-10 minutes early to: 1-888-664-6392 (toll-free, North America) and use access code: 28360816#  

(View related materials and filings here.)

About Hut 8 

Hut 8 is a large innovation-focused digital asset miner, led by a team of business-building technologists, bullish on Bitcoin, blockchain, Web 3.0, and bridging the nascent and traditional high performance computing worlds. With two digital asset mining sites located in Southern Alberta and a third site in North Bay, Ontario, all located in Canada, Hut 8 has high capacity rate and large inventory of unencumbered, self-mined Bitcoin. With 36,000 square feet of geo-diverse data centre space and cloud capacity connected to electrical grids powered by significant renewables and emission-free resources, Hut 8 is revolutionizing conventional assets to create the first hybrid data centre model that serves both the traditional high performance compute (Web 2.0) and nascent digital asset computing sectors, blockchain gaming, and Web 3.0. Hut 8 was the first Canadian digital asset miner to list on the Nasdaq Global Select Market. Through innovation, imagination, and passion, Hut 8 is helping to define the digital asset revolution to create value and positive impacts for its shareholders and generations to come. 

About US Bitcoin Corp 

Founded by a team of visionary entrepreneurs and experienced executives, USBTC is an efficient, eco-friendly, and large scale North American mining company. Through cutting-edge technology and a relentless commitment to operational excellence, USBTC seeks to set the standard for what is possible in its industry.  

With campuses in New York, Nebraska, and Texas, USBTC aims to monetize electrons at scale, operating hundreds of megawatts of Bitcoin mining infrastructure both independently and on behalf of clients. USBTC prides itself on deploying next-generation software and hardware innovations to deliver results across its self-mining, hosting, and site management verticals.  

Cautionary note regarding Forward–Looking Information

This press release includes “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities laws and United States securities laws, respectively (collectively, “forward looking information”). All information, other than statements of historical facts, included in this press release that address activities, events or developments that Hut 8 expects or anticipates will or may occur in the future, including such things as future business strategy, competitive strengths, goals, expansion and growth of Hut 8’s businesses, operations, plans and other such matters is forward-looking information. Forward looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “allow”, “believe”, “estimate”, “expect”, “predict”, “can”, “might”, “potential”, “predict”, “is designed to”, “likely” or similar expressions. In addition, any statements in this press release that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information and include, among others, statements with respect to: (i) the expected outcomes of the Transaction, including New Hut’s assets and financial position; (ii) the ability of Hut 8 and USBTC to complete the Transaction on the terms described herein, or at all, including, receipt of required regulatory approvals, shareholder approvals, court approvals, stock exchange approvals and satisfaction of other closing customary conditions; (iii) the expected synergies related to the Transaction in respect of strategy, operations and other matters; (iv) projections related to expansion; (v) expectations related to the Combined Company’s hashrate and self-mining capacity; (vi) acceleration of ESG efforts and commitments; and (vii) the ability of the Combined Company to execute on future opportunities, among others.

Statements containing forward-looking information are not historical facts, but instead represent management’s expectations, estimates and projections regarding future events based on certain material factors and assumptions at the time the statement was made. While considered reasonable by Hut 8 and USBTC as of the date of this press release, such statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to: the ability to obtain requisite shareholder approvals and the satisfaction of other conditions to the consummation of the Transaction on the proposed terms or at all; the ability to obtain necessary stock exchange, regulatory, governmental or other approvals in the time assumed or at all; the anticipated timeline for the completion of the Transaction; the ability to realize the anticipated benefits of the Transaction or implementing the business plan for the Combined Company, including as a result of a delay in completing the Transaction or difficulty in integrating the businesses of the companies involved (including the retention of key employees); the ability to realize synergies and cost savings at the times, and to the extent, anticipated; the potential impact on mining activities; the potential impact of the announcement or consummation of the Transaction on relationships, including with regulatory bodies, employees, suppliers, customers, competitors and other key stakeholders; the outcome of any litigation proceedings in respect of USBTC’s legal dispute with the City of Niagara Falls, New York; security and cybersecurity threats and hacks; malicious actors or botnet obtaining control of processing power on the Bitcoin network; further development and acceptance of the Bitcoin network; changes to Bitcoin mining difficulty; loss or destruction of private keys; increases in fees for recording transactions in the Blockchain; internet and power disruptions; geopolitical events; uncertainty in the development of cryptographic and algorithmic protocols; uncertainty about the acceptance or widespread use of digital assets; failure to anticipate technology innovations; the COVID-19 pandemic; climate change; currency risk; lending risk and recovery of potential losses; litigation risk; business integration risk; changes in market demand; changes in network and infrastructure; system interruption; changes in leasing arrangements; failure to achieve intended benefits of power purchase agreements; potential for interrupted delivery, or suspension of the delivery, of energy to the Combined Company’s mining sites. For a complete list of the factors that could affect the Company, please see the “Risk Factors” section of the Company’s Annual Information Form dated March 17, 2022 and Hut 8’s other continuous disclosure documents which are available on the Company’s profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com and on the EDGAR section of the U.S. Securities and Exchange Commission’s (“SEC”) website at www.sec.gov. 

These risks are not intended to represent a complete list of the factors that could affect Hut 8, USBTC, or New Hut; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, sought, proposed, estimated, forecasted, expected, projected or targeted and such forward-looking statements included in this press release should not be unduly relied upon. The impact of any one assumption, risk, uncertainty, or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and New Hut’s future decisions and actions will depend on management’s assessment of all information at the relevant time. The forward-looking statements contained in this press release are made as of the date of this press release, and each of Hut 8 and USBTC expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law. Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date of preparation. 

Additional information about the Transaction and where to find it  

In connection with the Transaction, that, if completed, would result in New Hut becoming a new public company, New Hut is expected to file a registration statement on Form S-4 (the “Form S-4”) with the U.S. Securities Exchange Commission (the “SEC”). USBTC and Hut 8 urge investors, shareholders, and other interested persons to read, when available, the Form S-4, including any amendments thereto, the Hut meeting circular, as well as other documents to be filed with the SEC and documents to be filed with Canadian securities regulatory authorities in connection with the Transaction, as these materials will contain important information about USBTC, Hut, New Hut and the Transaction. New Hut also has, and will, file other documents regarding the Transaction with the SEC. This press release is not a substitute for the Form S-4 or any other documents that may be sent to Hut’s shareholders or USBTC’s stockholders in connection with the Transaction. Investors and security holders will be able to obtain free copies of the Form S-4 and all other relevant documents filed or that will be filed with the SEC by New Hut through the website maintained by the SEC at www.sec.gov or by contacting the investor relations department of Hut 8 at info@hut8.io and of USBTC at info@usbitcoin.com. 

No Offer or Solicitation  

This press release is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended (the “Securities Act”) or in a transaction exempt from the registration requirements of the Securities Act. 

For further information

Hut 8 investor contact:  

Sue Ennis 

sue@hut8.io   

Hut 8 media contact: 

Erin Dermer 

erin.dermer@hut8.io 

USBTC contact:  

Matt Prusak  

mprusak@usbitcoin.com  

Shenif Visram replaces Shane Downey, effective immediately

This news release constitutes a “designated news release” for purposes of the Company’s  prospectus  supplement  dated  August  17, 2022 to its short form base shelf prospectus dated August 5, 2022.

TORONTO, December 12, 2022 /CNW/ – Hut 8 Mining Corp. (Nasdaq: HUT) (TSX: HUT), (“Hut 8” or the “Company”) one of North America’s largest, innovation-focused digital asset mining pioneers and high performance computing infrastructure provider, is pleased to announce the appointment of Shenif Visram, CPA, CMA as the company’s Chief Financial Officer (CFO), effective immediately. With more than 20 years of financial management experience in the infrastructure and technology businesses, Shenif brings a wealth of leadership expertise working in medium and large public and private companies.

Shenif, who will be based in Toronto and will report to CEO Jaime Leverton, is replacing Hut 8’s CFO Shane Downey, who is moving on to pursue new opportunities after 20 months with the organization.

“With deep financial experience at IBM Canada, Cogeco Peer 1, and Aptum Technologies, Shenif is a senior leader with excellent financial acumen and the skill set we need to lead us through the next crucial growth period at Hut 8,” said Jaime Leverton, Chief Executive Officer of Hut 8. “The Board and I would like to thank Shane for his dedication through a significant period of change at Hut 8, including the strategic expansion of our business into high performance computing.”

Shenif began his finance career with IBM Canada, quickly progressing to take on CFO roles within key business units including Global Business Services, Global Technology Services, and leading as Chief Operating Officer in Global Business Services. He then moved to Cogeco Peer 1 as Vice President, Finance, before assuming the CFO role, which he lead through the company’s rebranding to Aptum Technologies, a multi-cloud managed services provider delivering complex, high performance computing solutions.

“I am incredibly energized by the opportunity to work with a team of seasoned executives with robust backgrounds in this exciting industry,” said Shenif. “Leveraging my previous experience in M&A and driving growth in the infrastructure technology space, I am eager to make a meaningful contribution at Hut 8 by building on our established balance sheet-first approach as we continue to successfully navigate the market by executing on our differentiated strategy and grow as a leader in Bitcoin mining and high-performance computing.”

About Hut 8

Hut 8 is one of North America’s largest innovation-focused digital asset miners, led by a team of business-building technologists, bullish on bitcoin, blockchain, Web 3.0, and bridging the nascent and traditional high performance computing worlds. With two digital asset mining sites located in Southern Alberta and a third site in North Bay, Ontario, all located in Canada, Hut 8 has one of the highest capacity rates in the industry and one of the highest inventories of self-mined unencumbered Bitcoin of any digital asset miner or publicly-traded company globally. With 36,000 square feet of geo-diverse data centre space and cloud capacity connected to electrical grids powered by significant renewables and emission-free resources, Hut 8 is revolutionizing conventional assets to create the first hybrid data centre model that serves both the traditional high performance compute (Web 2.0) and nascent digital asset computing sectors, blockchain gaming, and Web 3.0. Hut 8 was the first Canadian digital asset miner to list on the Nasdaq Global Select Market. Through innovation, imagination, and passion, Hut 8 is helping to define the digital asset revolution to create value and positive impacts for its shareholders and generations to come.

Cautionary Note Regarding Forward–Looking Information

This press release includes “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities laws and United States securities laws, respectively (collectively, “forward-looking information”). All information, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future business strategy, competitive strengths, goals, expansion and growth of the Company’s businesses, operations, plans and other such matters is forward-looking information. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “allow”, “believe”, “estimate”, “expect”, “predict”, “can”, “might”, “potential”, “predict”, “is designed to”, “likely” or similar expressions. In addition, any statements in this press release that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking information and include, among others, statements regarding: Bitcoin network dynamics; the Company’s ability to advance its longstanding HODL strategy; the Company’s ability to produce additional Bitcoin and maintain existing rates of productivity at all sites; the Company’s ability to deploy additional miners; the Company’s ability to continue mining digital assets efficiently; the Company’s expected recurring revenue and growth rate from its high performance computing business; and the Company’s ability to successfully navigate the current market.

Statements containing forward-looking information are not historical facts, but instead represent management’s expectations, estimates and projections regarding future events based on certain material factors and assumptions at the time the statement was made. While considered reasonable by Hut 8 as of the date of this press release, such statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to, security and cybersecurity threats and hacks, malicious actors or botnet obtaining control of processing power on the Bitcoin network, further development and acceptance of the Bitcoin network, changes to Bitcoin mining difficulty, loss or destruction of private keys, increases in fees for recording transactions in the Blockchain, erroneous transactions, reliance on a limited number of key employees, reliance on third party mining pool service providers, regulatory changes, classification and tax changes, momentum pricing risk, fraud and failure related to digital asset exchanges, difficulty in obtaining banking services and financing, difficulty in obtaining insurance, permits and licenses, internet and power disruptions, geopolitical events, uncertainty in the development of cryptographic and algorithmic protocols, uncertainty about the acceptance or widespread use of digital assets, failure to anticipate technology innovations, the COVID19 pandemic, climate change, currency risk, lending risk and recovery of potential losses, litigation risk, business integration risk, changes in market demand, changes in network and infrastructure, system interruption, failure to achieve intended benefits of power purchase agreements; potential for interrupted delivery, or suspension of the delivery, of energy to the Company’s mining sites; changes in leasing arrangements, and other risks related to the digital asset and data centre business. For a complete list of the factors that could affect the Company, please see the “Risk Factors” section of the Company’s Annual Information Form dated March 17, 2022, and Hut 8’s other continuous disclosure documents which are available on the Company’s profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com and on the EDGAR section of the U.S. Securities and Exchange Commission’s website at www.sec.gov.

These factors are not intended to represent a complete list of the factors that could affect Hut 8; however, these factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, sought, proposed, estimated, forecasted, expected, projected or targeted and such forward-looking statements included in this press release should not be unduly relied upon. The impact of any one assumption, risk, uncertainty, or other factor on a particular forward-looking statement cannot be determined with certainty because they are interdependent and Hut 8’s future decisions and actions will depend on management’s assessment of all information at the relevant time. The forward-looking statements contained in this press release are made as of the date of this press release, and Hut 8 expressly disclaims any obligation to update or alter statements containing any forward-looking information, or the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law.

Contacts

Hut 8 Investor Relations

Sue Ennis

sue@hut8mining.com

Hut 8 Media Relations

Erin Dermer

erin.dermer@hut8mining.com