Hey everyone me kevin here welcome back to another episode of the meet kevin's show. Today we are talking to our favorite executives over at hot aid mining and it's crazy that we get to talk to them like 30 minutes. After this pricing, madness happened over at coin market cap, so we're going to start by asking about that and then we've got so many questions. We've got 30 minutes lined up and we've got some great questions.

So i'm super excited to have you back on. It's been actually, since i think the chinese mining band that y'all have been here so welcome back uh. Let me just start with giving y'all an opportunity, feel free to introduce yourselves and let me know how things been the last six months: uh well they've been wild as always kevin, incredibly busy um, certainly a great benefit to all of us. The the chinese mining ban, as as everybody knows, our our financials, were spectacular for q2 and q3 um and we we're now trading on the nasdaq, which is which is huge.

We we um accomplished that earlier in the summer, so yeah very, very busy. Very we're really pleased with everything the team's accomplished, since we were last on also so exciting. Since we were last one um, hud 8 mining were actually going to be rebalanced into the smb tsx composite index on december 20th, which is huge. That's top 250 traded companies.

In canada, there's a ton of funds and pension plans who build their mandates around that, so, if you're holding out it's definitely something to be aware of. On december 20th, uh and yeah we're pretty pumped about that too and um. We are the first and only crypto company ever to make that composite. Wow.

That's super exciting. I cannot wait until it's more mainstream that we can get, for example, an actual bitcoin etf in america, and we can normalize this already because it's going to be so amazing for the entire community, but this is a great milestone. Thank you for sharing that yeah. I know we're super proud to share it, so i i don't know if you had a chance to to see the drama that unfolded in the last hour at all and i'd love.

If, if you did i'd love to know, if you have any comments on why coin market cap for those who don't know coinmarket. coinmarketcap.com uh, all of their pricing was multiplied essentially by roughly 10 million plus or minus uh, everybody felt like they were a trillionaire which Was really great for the time that it lasted a coinbase had to start removing coins from people's profiles, because people thought they were all of a sudden billionaires, uh and and uh binance had the issue with errors showing with tether crypto.com had the same issues with all Of these sort of con different platforms, showing a similar issue and we're trying to figure out is, is this something to be nervous about for the crypto industry? We so that we recognized it about an hour ago um through our yahoo finance, app that actually dropped bitcoin by 30 and it just completely clipped and we're actually all physically in the office today. So i went peter pattering into sue's office, i'm like what happened, and then we were just kind of scouring um, the internet and twitter twitter sphere, trying to figure it out and we don't have any good answers. Yet it's so funny.

You say that because i i was, i was here, uh thinking myself well coin market cap looks weird and i get a text uh from two staffers and we run over. We get together like what's happening. They showed me the same thing yahoo and we're like what's happening. That's crazy! No idea! Absolutely this isn't that you know bitcoin has been hacked or ethereum's been hacked or something like that.

There's no fundamental disruption. So i don't. I don't think this is bad. I think this is just a technical glitch that we have seen in traditional markets as well.

So that's a good point and that's a really good way to put it is hey. You know the underlying block chains, no indication of any issues here. Just pricing discrepancy via the exchanges and it was really listed, uh listed prices. I don't think anybody actually traded under these weird prices, not as far as we've seen now no perfect so uh with that said, i want to jump right into uh crypto mining a little bit because uh y'all have just recently uh and motley fool had a piece That would that, like misstated, some information on on uh, how much bitcoin you were mining and they had to fix it and there was there was a lot of confusion and i think it came out of potentially i'm not trying to make excuses for them.

But i think it came from this. You all are now also mining ethereum with nvidia chips. Can you give the community a little bit of a breakdown as to uh? Why nvidia? Why not a different chip manufacturer? Why ethereum, as opposed to just bitcoin, oh sure, so yeah? This was an announcement that we initially made back in the spring when we purchased a limited uh series of gpu cards directly from nvidia, so nvidia made these purpose-built cards specifically for mining. They manufactured 30 000 of them.

We were lucky enough to be the only entity in north america as far as we know to get a batch, so a batch of ten thousand. We then put them into enter enterprise grade dell chassis dell, server, chassis and and we've stood them all up in our um in our site in medicine, hats. We now have 1600 gigahash of ethereum mining underway, which, if you kind of convert on using spot economics, ethereum blockchain to bitcoin mining um, the equivalent is about 340 pata hash. The last time we ran that conversion last week, um, but it allows us to mine ethereum using these, these really high performance, um and highly efficient cards.

We mine ethereum, using the luxor mining pool but get paid directly in bitcoin and because gpu mining uses a significantly lower power profile and it allows us to mine a bitcoin um for less than three thousand dollars canadian, because for that entire 1600, giga hash or 340 Petahash converted we're using less than three megawatts of power, so a much much lower operating cost to mine um that compute, but to continue to settle directly in bitcoin and put that bitcoin on balance sheet. I think almost sorry go ahead too yeah i was gon na say. Another thing that we really like about this strategy is the fact that for 2022 we think there's so much opportunity. Not just i mean we're always going to be core bitcoin miners always, but when you see what's happening, you know with the developments in the metaverse web 3.0.

You've changed like matt. You have chains like maddox, selena, algorand um, really getting some traction in terms of dev activity. This does give us a lot of optionality to play in the different sort of spheres of web 3.0 that are coming down the pipeline and we love the agility. Another thing that's really exciting about these gpu miners is that they actually sit in traditional hardware.

High performance, compute hardware servers. So you know there is a potential one day that we will look to build out ancillary lines of revenue, maybe in the traditional high performance compute space, but i think at the end of the day, the amount of agility and diversification. This gives us to our business and effectively continuing our trajectory of being the infrastructure. Providers for web 3.0 is incredibly exciting, but for right now we're just making 95 margins on bitcoin on bitcoins so yeah.

It really feels like a mining arbitrage, because you got these incredible chips, uh, and so that actually also answers another question, because you know if we go from proof of work to proof of stake with ethereum. What do you do with all these chips? But you just answered it: hey we'll go to another coin, we'll provide that infrastructure. Am i right about that? Absolutely right? What do you have like a priority list that you could say in terms of which you'd mind? First, it's all about uh irr! So it's about. What's the profitable next thing to mine and then again working with luxor, we can move that compute within 10 minutes onto another block and again get paid in whatever we want to get paid in and which for now, of course, is bitcoin.

So really you don't hold risk of that underlying currency, you're mining, because you're just settling in bitcoin correct within the next 20 minutes. If we wanted to, we could technically start mining matic um and for those of you, i'm personally obsessed with matic. This is not a headache thing. I'm really excited about sort of how that, and this is not investment advice, not investment advice, either obsession yeah um, just just the fact that it really is the swiss army knife of the ethereum of the ethereum blockchain um, and you see staking rewards on matic of, Like four to four hundred and twenty percent and again the the fact that hut eight is now positioned to be agile in play as as this ecosystem continues to grow, we think is a super competitive advantage, because another thing that i should probably just remind everybody, we Run all of our own infrastructure, it's our own staff that runs our sites.

24 7.. We do our own on-site, repair and maintenance of equipment and and so having our staff skilled and trained to operate and maintain uh gpu based compute. In addition to asic compute is is really what gives us that optionality over time with a highly skilled staff that works directly for hudai, and then i'm not sure if you saw the announcement, but we also introduced a new at revenue stream a couple of months ago, When we announced that we're now an authorized repair center for micro bt, i did not see that yeah. So not only do we um maintain and repair our own equipment, but we also now service other miners equipment from across north america and northern europe.

It gives us an ancillary revenue stream, of course, but it also gives us a really nice strategic position with our our key vendor in the in the asic marketplace. Oh that's interesting! So not only does it improve your relationship with where you can buy the a6, but it also keeps your employees busy who might otherwise be idle if your stuff's all good, because if you've got a staff of, i don't know five ten repair folks and they got Nothing to do because your stuff's running uh, at least now you have that opportunity right, correct, there's, always something to do on site, but yeah. No, now it's an increment incremental revenue stream, that is, that is uncorrelated to direct mining economics. You know i was looking at.

I was trying to understand because some of these outdoor rigs you have, i think you can buy the rigs for for a few hundred thousand dollars, but it's all of the stuff you have to put in it. That turns into millions of dollars. I mean you're talking four to five million ten million dollars in some cases, just for one of the rigs, but then i was thinking to myself. Somebody's got to maintain it somebody's got to secure it.

I mean what happens if someone just walks over there starts taking your chips, so have you ever had issues like that? No our sites are they're all perimeter secured. We, of course, have um have security and we've got people on site 24, 7., and the other thing is these. Are these are big heavy compute servers? You can't really just even if you walked in with a bolt cutter. What are you going to do? You're going to walk away with one server, there's no there's no honeypot and you're going to be absolutely on camera and you're going to have to get through our staff, but the actual infrastructure involved like if you're talking about the containers themselves and and um.

You know the cabling and power infrastructure, it's it's a very small fraction versus the cost of the mining equipment itself. Most of the capital goes into the mining equipment, but the nice thing about the infrastructure is: that's, got a 10 to 20 year, useful life depending on on what the component is so it it will carry you through many many cycles of mining equipment, whereas if we Were using like a third-party hosting facility or something that premium that you pay for somebody else's infrastructure somebody else's labor, that's there for the lifetime of your mining equipment. You! Never you never get out of that tax. If you will, plus you, don't you don't control your own, your own destiny you're, not creating internal uh ip, which is critically important when we think about the future and the the ability to um to be fluid in in this ecosystem and as it continues to evolve.

That's a good point, uh and - and i think that's really interesting - because a lot of folks, they wonder you hold somewhere just over 5000. A bitcoin now, which i think now is a market cap, is somewhere over 240 250, a million dollars yeah. It's just 5200 coins that we've got right now. Sorry, could you say that one more time it's just over 50, 200, 5242, 5200, perfect and so a lot of folks.

Then look at your market cap as a stock which i think is somewhere around 1.4 billion dollars. Uh - and so you see this multiple somewhere between six to seven times is usually where that multiple is uh, and so i usually explain, but i'd like to hear from your point of view, that that difference is really your ability to negotiate things like that. Nvidia chip deal that you've got, which is incredible. Am i right to say that yeah absolutely scale this? This business has a ton to do with scale and your ability to get access to low cost capital.

Your ability to get access to um to mining equipment at scale at competitive price points, your ability to get access in this environment to to transformers and other um power infrastructure. That's involved at scale at competitive price points and that that's critically important in this business. That makes sense what about uh competition in canada. Another thing i was researching was folks wanting to start up in texas or washington, but then washington, taxes, it california is impossible to get the cheap energy unless you're out in the desert and then the stuff's too hot and too dusty.

So you've got this really unique. Generally, cooler place for much of the year in medicine hat. Have you ever thought about expanding to texas or have you seen more competition? Come to your neck of the woods, uh look we've! We! We have a third site under construction um in north bay, which is in ontario, so a different province within canada, but northern ontario. So it's still of that very cold climate and for us mining and cool climate is critically important.

It allows us to take advantage of free air cooling, so we don't have to worry about um added infrastructure from a capex or an opex perspective to cool the equipment. We we get to. Let mother nature do that. For us, it's also uh better from from a pue story or which is better for from an esg perspective, you're using less power to mine and because the climate is so cold in all of our locations for so much of the year.

And we can still overclock the machines, because it's it is it's so cold and a lot of what we see for people looking at immersion, be willing to pay that incremental capex and incremental objects to have have immersion brought in it's, because the climates are so hot. That, in order for the machines to perform properly and be able to to get overclocked from time to time and ultimately just survive the life cycle, that's that they're expected to survive and that that hot hot climate is is a difficult one to operate in and therefore Immersion makes a lot of sense, but when you're operating in a cold climate, the business case isn't there. So i this is extreme, but but uh would it ever make sense uh? If, if the there were enough utilities to some degree to um to just go mine in the north pole - and i know it sounds crazy but like where it's just literally cold all year round, if you could set that up, is that? Would that be a future goal, potentially you're out of the way of other people? Nobody really wants to be there. I mean jamie.

If you technically could get internet access, you probably could you could you need? You need reliable internet of course, and you need labor. So those and you have to get the infrastructure there. So when you go into more remote, uh communities, you're dealing with really significantly higher transport costs to get your equipment in um. And then you need the labor and the cost to support the labor.

And you need the internet, so your business case might not hold just because of the remoteness involved, but certainly from a climate perspective. It would be great got it and speaking of climate, i believe you released. This was not that old of news that you now have a goal of going carbon free by 2025.. How are you going to pull that one off yeah, so we're doing all kinds of creative things i mean.

Obviously there are offsets involved given we do have. We are dependent on carbon sources in alberta. Historically, although the province of alberta is doing an incredible job of adding a significant amount of renewables to the grid. They're already around 20 renewables on the grid and they've got they've, got an aggressive goal to get that to 30 within in the short to medium term, and so we're actively working working with with them to be helpful.

The new site in north bay is a combination cycle plant, it's using a mix of steam and natural gas, we're also looking at supplementing with some hydrogen and geothermal at that site. So we're doing a lot of work around how we can drive innovation into into the power sources that we have working not just directly ourselves, but also with the local communities, of course, and i think there's uh one of the things we love about alberta and we've Talked about that before is the this we're taking advantage of and really monetizing a power source that was otherwise idle, we're not taking power for a grid that needs it. We're monetizing power that that's there for peak load and otherwise was sitting idle and when it's required for peak load, we give it back to the grid so we're very much a stabilizing source um. For those those grids that we operate in in alberta and in the case of our new site in north bay, that's a behind the fence um site, so we're not taking any power off grid at all and over time we may actually be able to help support The grid, if it becomes required, uh, okay, so that's possibly a way you can kind of uh net zero.

The operation, if you're creating more in one place to offset somewhere else, we're looking at everything that's available to us and working really closely with. Obviously, the communities and our our uh power partner in north bay, validus power. We also um, as i think everybody knows, we actually have a head of power and sustainability whose full-time role is to is to look at where we can drive innovation into this space. How we and when we put out the goals we did last week and we were very uh specific about what goals we put out, not just the e but the s and the g.

The the standards that we're following how we're going to be able to be held, held accountable and audit the results and which i think is very, is very important. It's not just putting out a headline. It's actually putting out a program and commitments that follow um standards that are that are best practices. Today.

It's also doing little things too from the ground up like we've partnered with a company that takes our styrofoam, that the machines come in and instead of that styrofoam hitting the landfill. It then gets packaged up and resold back into the marketplace. Um we've electrified our gas vehicles, so even just little little things like that um, you know we really do think make a difference in our priority. Yeah all of our sites are, are all led lighting.

Now, like we're really taking a top-down bottom-up approach to how we look at it and again, it's not just about the e the ease of hot topic right now, yeah, but bitcoin has an incredible ability, um to drive a social and community narrative. That's that's very important and how we work in communities is very important to us and to the bitcoin community in general and then, of course, good governance for public companies in this space is is critical and we we really like to make sure we're at the forefront When it comes to best practices yeah, so how um you know, some of the other miners have considered uh, you know selling bonds or issuing new shares and then buying and not just equipment. But if you look at microstrategy just straight up buying bitcoin, what's your take on that? Well, look, i think uh, i think michael saylor has executed a brilliant strategy. Um, with with bringing bitcoin on to balance sheets, certainly paved the way for that and that thinking around institutions bringing bitcoin on balance sheet as a way to preserve um preserve their cash and hedge against inflation that that he saw coming before many others did and we're.

Incredibly, lucky to have welcomed last week, rick rickardson onto our board, who also sits on the micro strategy board um and look we joke, but we've been holding bitcoin on balance sheet uh much longer than michael saylor, so um. We i i feel like we were his inspiration. He just doesn't also honestly rick rickardson who's been on microstrategy's board, since 2002 is an absolute beauty and we just love. Like he's an author he's in the film industry, he's been in the pe private equity space.

For the past 30 years, i think his last fun he run was about 1.4 billion at fair, so we're really pumped that we've got one of my like michael saylor's, right-hand men on our board and uh. What we're going to do with it! That's incredible! What about uh, i mean at any point: do your cards, whether they're, the asics or the nvidia chips? Do they ever become dated to the point where you, where you sell them and trade them in or or can you just keep milking them? Look our the our oldest equipment is still profitable. Most of it. We've walked off because we've upgraded it with more efficient, um, more efficient new equipment.

We use the most conservative depreciation schedule in the industry. We use a two-year schedule for our mining equipment, so we want to make sure that our balance balance sheet is protected. We're not at risk of having to take a write-off if it does um move through a life cycle quicker than we expect, but certainly what we've seen from the oldest equipment? That's still functional, that's still profitable and that's now in in some cases over three years old. So it's exceeding life cycle expectations, it's still profitable, it's just not as efficient and and of course, efficiency is critically important when we think about power as our largest input and but the nice thing is it having staff that takes such good care of it as well, And it just continues to run.

I don't know how long that equipment will continue to run for um, but we'll certainly keep spinning it up and and see what happens over time. So i think there are a lot of folks wondering at least in some of the comments and chats that i'm seeing there they're wondering basically when you're, going to start selling your nvidia chips on ebay. So they can buy them to do vr in the metaverse uh. Metaverse thoughts, uh they're, they're obvious.

I mean this is a brave new world here, metaverse uh. Personally, i think there there are conveniences that that can come from uh sort of uh taking our actual spaces and bringing them into a virtual realm. So we can bring appraisers in or bankers or real estate agents or whatever and minimize travel right, uh, but you've got this whole brave new world of actual virtual land and and uh nfts associated with this. Where, where do you all stand on this, is it ever something that you would consider putting uh nfts like a crypto punk on your balance sheet? I i don't know about on balance sheet um and look it's still very early days.

We are most of our leadership team now sue and i absolutely included, have gone well down the metaverse rabbit hole. We've all at one time come into the office saying we must buy land here, yeah think about setting something up there. So we're absolutely like constantly looking at it, we're excited about where we think the space is gon na go. I think it's a little bit early to like put a stake in um axe infinity, but we are we're very very closely watching the space.

I think there's a ton of future here and it's really exciting to be a part of it and and think about the potential as it evolves over time and we love just being in in the ecosystem period. There's also some really there's also some really interesting projects. Um, even in the open source silicon chip for onboarding into the metaverse space that we've just been doing some research on again, not saying that we're going to necessarily play there. But rest assured that the huddy and mining team we're thinking extremely long term as to how we play all of these up-and-coming spaces in web 3.0 and the metaverse and that sort of thing uh moving on to to another one.

This summer, we obviously saw the drama around china uh at the same time as crypto prices were falling, but they'd also started kind of falling, as we saw sort of a little bit of a breather in how fast inflation was ramping up uh. Since then, we had delta we've seen inflation ramp up even more crypto prices have done very well uh in general, since september. You know recently, last few weeks have a little bit of bumps in the road um. Your thoughts on is there you know.

Is there a possibility, we see inflation rotate down in 2022 and does that negatively affect crypto prices, or are these going to be totally separate? I'd well, i'd be shocked. If we see inflation um come down in 2022, i think we're still in the early days of of what um what this kind of disruption is is going to look like, and this is kind of based on what what we're seeing in in everyday pricing action and Costs around logistics, it's um labor costs. It's it's really you're, seeing it across the board, and i think the introduction of of the latest um cobit variant is creating all new pressures on the system as well um which could force um force more printing, as as we potentially get into more lockdowns. I think it's anyone who says they have a crystal ball for 20 to 20 22 i'd love to sit down with them because uh, i think it's anyone's guess right now.

We've got so many factors conflating so much that's outside of um historical context and really difficult to predict so um yeah, but i'd be shocked if we see a quick ramp down on inflation for sure i think, what's really cool too is, if you look at even If bitcoin were to capture two to three percent of the credit market, 15 trillion of which is currently negative, yield and credit, which is technically a liability on your balance sheet, that alone could make it equate to a btc price of like in the millions. If it were to capture that two to three percent of the credit market, so um no obviously not a forecast that i'm making, but we do think yeah. It's remains to be seen, but there's still a ton of upside for bitcoin yeah. I mean especially look at this.

Like you had mentioned yourself, the staking rates on matic or the staking rates on. Even you usd it's incredible. I mean seven, eight, nine percent. In some cases, uh have you ever thought about uh.

You know just keeping some cash and and then staking it instead of just only btc. We think about everything all the time uh it hasn't. We haven't gotten to a place yet where we, where you have comfort or we think it it makes sense, but it's still very nascent there's a lot of maturity that needs to come to the market. We take counterparty risk incredibly seriously and so um the the counterparties that we deal with are um.

You know gold standard and trusted strategics and so we'll see how how things evolve over time, we'll never say never on anything, but right now, um, it's all about efficient use of our capital, continuing to drive that stacking of bitcoin and giving us increasingly diversified revenue streams. Optionality: um for for how we generate returns on invested capital and because we do need to keep to keep an eye on bitcoin mining economics. There's a ton of activity in this space and we want to make sure we have some protection against bitcoin mining economics as they get squeezed with all of this hash rate. Coming back i mean we're now at pre-chinese exodus levels of the global network, hash rate.

So i think it's important that that um, that we have optionality, that we have fluidity, that we have other revenue streams to to continue to protect, protect the business, protect the balance sheet and protect um the value that we built here. Well, i think, that's well said i've got one quick note and one last question and we're out of time uh, i think, just to clarify for those listening by counterparty risk, essentially the risk that hey yeah sure we could stake over here, but that takes away a And opportunity that you might have, but also b, hey what, if whoever's holding that now default. So i just want to clear that yeah, that's exactly right, uh and then because i think sometimes people see eight percent on usdc and then they think okay risk free right. But but that's not where we are okay, good, good, there's, yeah! Exactly very last question is uh: has it been easier or harder to get chips and, and would you go to amd if nvidia was out of them um? I i haven't seen nvidia or amd tackle this kind of specialized mining compute.

Yet, but we'll see you never know um. We certainly love the relationship that we have with nvidia and and then with respect to asics. We we are in a very strategic position with micro bt. We love the relationship we have with them.

It has allowed us to get access to equipment and because we're we're in such regular communication we're such a trusted uh partner. So we we feel very good about the positions that we have with the strategics that we've we've chosen and we've been very thoughtful about um how we've invested in these relationships to differentiate ourselves. In short, no big issues like if you wanted to buy another 5 000 chips tomorrow would that be available for you asics. We have.

We've already got two at 2.2 x, a hash ordered and inbound so that we're covered on on that side and with respect to the nvidia cmps um. They haven't done another run of those specific cards yet, and there are other options we could use. One of nvidia has some um cards that are high performance that do different types of workloads, uh, which which are um readily available. So there are, there are certainly options and we are.

We've got miners coming in every month, uh between now from now until the end of 2022., so we've made really good investments and the team is uh working incredibly hard day in day out right now, rocking and stacking. So it's great yeah guys sounds like you all. Are busy we're so busy we're so busy? You can see we're in the office uh at night. Yes, we're happy to be doing it.

Thank you any last things either of you want to say we're out of time. Anything you want to leave off on. We just so appreciate you having us here and, of course, all of all of our investors that support us and um are cheering for us. It's we're just very grateful and guys we have a big 2022 we're so excited about what we have planned.

So stay tuned. Perfect way to end it, thank you so much both of you. I appreciate both of you being here. Let me see if i can do this correctly here uh.

I will go ahead and end the live stream. If you can stand by for one just one moment. Folks, if you're watching this you enjoyed this share, the video follow hot 8 mining on twitter and check out their stock as a well a ticker h-u-t thanks. So much and we'll see,.