Bitfarms’ LATAM Development Plans

Posted By: Damian Polla

Please see the disclaimer at the end of this presentation.

As the only publicly traded Bitcoin mining companies with multiple farms operating and under development in Latin America, Bitfarms is uniquely positioned to strategically expand on a global basis and continue to take advantage of the region’s low-cost, surplus electrical generation capacity.

Still, developing in basically untapped territories requires careful and thorough planning, assessment, and gradual testing to mitigate risks overall and undertake only investments which have a high probability of yielding superior results. Here are our plans for LATAM and the state of development in the region.

Current Status and Projected Growth

Currently, we are established in three cities in LATAM, split between Argentina and Paraguay. We have our headquarters established in Buenos Aires, with our first project in the center of Argentina in Rio Cuarto in the province of Cordoba. Our second farm which was put into production in January 2022 is in Paraguay, in the city of Villarrica, about three hours southeast of Asunción, the country’s capital.

In establishing our presence in South America, our first goal was to put in place a solid team for our LATAM projects. We started by building out an engineering and administrative team of 15 people in Buenos Aires and putting together an ops team in Rio Cuarto. In Villarrica, we also have about 15 people under contract to support the project. The team comes from a diverse background of various industries, such as automotive and construction, with transferable skills and a keen interest in crypto mining.

  • Paraguay

We have been identifying opportunities not only in Argentina, but also throughout Paraguay. In Villarrica, we already have a small operation that utilizes about 10 megawatts, and we are looking for ways to do more. We are working with local suppliers and local ‘know-how’ to adapt some of the latest farm designs to suit local conditions.  For example, at our Villarrica farm, we have installed a ‘wet wall’ to cost-effectively lower operating temperatures and increase the performance and longevity of our assets.  We started investing in the Villarrica operation in Q4 of last year. It has been up and running since January and is fully operational right now. We have installed and operating 2,900 T3s, generating about 144 petahash with an energy cost of $36 per MWh.

Our strategy has been to pursue risk managed gradual growth. Villarrica’s operation was a test project for Paraguay and our Río Cuarto farm will have its first 50 megawatts farm by the end of 2022 and a second 50 megawatts farm by Q1 2023.  If conditions permit, we can develop an additional 110 MW at our Rio Cuarto farm.

The opportunities for future development are dependent on several factors, one of which is the energy matrix in both Paraguay and Argentina. As a Bitcoin mining company that prioritizes low input costs and sustainable energy sources, we pay close attention to the amount and type of energy available in a region.

In Paraguay, the energy sector is controlled by Administración Nacional de Electricidad (ANDE). ANDE is a state-owned utility that controls all transmission and distribution assets. They buy power primarily from two hydro dams, Itaipú, a bi-national dam owned by Brazil and Paraguay, and Yacyretá, which is a bi-national dam owned by Argentina and Paraguay.

The only private distribution company in Paraguay is La Compañía de Luz y Fuerza S.A. (CLYFSA) and it serves a small population of about 17,000 people utilizing about 60 megawatts. The first project we started in Paraguay was partnered with CLYFSA. Going forward, anything else that we do, most likely, will be done directly with ANDE.

Currently, there are some noteworthy favorable developments in the market in Paraguay. First off, the Itaipú agreement has been renegotiated. This agreement will likely result in the tariff responsible for electricity rates coming down. Secondly, Paraguay is in the midst of developing and enacting into law its first crypto legislation.  It is likely to be passed in the coming months. The most interesting feature about the law is that it sets a ceiling on energy prices for crypto mining relative to industrial tariffs. The current draft of the legislation limits crypto mining tariffs to no more than 15% higher than the industrial tariff.

  • Argentina

Turning to Argentina, this region is very rich in energy resources. It holds the second largest shale gas reserves in the world while also offering strong renewable energy potential in both solar and wind. Right now, the installed capacity of Argentina is about 50 gigawatts, with more than half of it produced by natural gas generation. There is excess capacity here, as the most energy consumed was about 27 gigawatts in December 2021. Bitfarms has an eight-year private PPA with an established industrial company called Albanesi. Through several generation facilities, Albanesi provides about 1.5 gigawatts of installed capacity in different locations in Argentina.

The first warehouse commenced production on September 19, 2022, ahead of schedule. The initial start-up adds 10 MW of capacity, increasing total corporate capacity to 176 MW. Construction on the second warehouse has begun, adjacent to the first facility, and is expected to be complete around the beginning of Q2 2023. Each of our warehouses will have a capacity of about 50 megawatts and are about 5,200 square meters (about 56,000 square feet) with 5 modules plus a service area. The layout of the project in Río Cuarto is relatively unique in terms of infrastructure. We are building a high-voltage 132 kV line that will carry the energy to our own substation at the rear of the property.

The key takeaway for LATAM is that, for an experienced miner with a strong operational focus, there are numerous opportunities for expansion that can involve electricity generated from hydro and natural gas and other renewable energy production facilities powered by wind and solar.  These opportunities exist natural gas, and not only in Argentina and Paraguay, but beyond. As we monitor the dynamics in each of these markets, Bitfarms has found numerous opportunities in the region that satisfy our evaluation criteria.

Having geographic diversification like this is a huge advantage as the industry searches for stability. Regulations can continue to change in Canada, the US, in LATAM, and beyond. But by having multiple baskets, Bitfarms can mitigate those risks and bring improved returns for our shareholders. As a crypto miner, it makes a great deal of sense to have multiple geographies in the portfolio, and Bitfarms is off to an excellent start.

Disclaimer Regarding Forward-Looking Information:

This blog presentation has been issued as a matter of interest to investors and other followers of Bitfarms Ltd.  This presentation contains forward-looking information and Bitfarms cautions readers that forward-looking information is based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of Bitfarms.  Readers should not place undue reliance on forward-looking information.  Please refer to those risks set out in the public documents of Bitfarms filed on https://www.sedar.com/.  Securities regulators including the Toronto Stock Exchange and Nasdaq have not reviewed the information disclosed in this blog presentation and no securities regulator accepts responsibility for the adequacy or accuracy of this content.