I’ve said previously that Global Blockchain (BLOC.C) seemed to be a big shiny company with big shiny execs and a big shiny market cap but no big shiny projects.
Well they just announced one, and it’s not the type they initially promised.
They’re buying into a crypto-mining-streaming deal.
Admitting that “the company did not originally plan to invest in mining,” Chairman Stephen Nerayoff said in a news release Tuesday that the opportunities were just “too big to ignore.”
In other words, the market is bonkers for Bitcoin mining deals.
The details of this one look interesting, in that it guarantees Global Blockchain 2500 BTC per annum, which at today’s value, minus the $1000 per BTC in costs, would come to $16.25 million.
That’s not a bad deal for $10 million in BLOC.C stock as down payment.
The deal also requires BLOC to raise US $30 million, and inject $10 million more into the project when that happens. Coinstream, the company they’re getting 49.9% of in return, will spend $10 million on its mining equipment, which it will own until the $10 million is repaid, after which it will retain half.
Confused? Yeah.
It’s basically a streaming deal, where BLOC gives Coinstream enough cash to build out a bigger facility and Coinstream guarantees enough Bitcoin in return that BLOC should make serious dough. If BTC prices stay where they are.
Coinstream, at the same time, keeps anything else it manages to make with that computing power, which could be a good amount more, and in other cryptocurrencies as they emerge. BLOC.C won’t mind that, as it’ll own 49.9% of that operation.
This deal, while complex, is not dissimilar to the one HIVE Blockchain (HIVE.V) has with Genesis, which owns and operates two crypto mining facilities in Iceland, and has one more coming online in Sweden.
There are several factors involved in what separates a bullshit crypto mining play from a real one. First, you need cheap energy, as that’s one of the bigger expenses in the whole operation. This one is setting up in Manitoba where it says it’ll be getting 4c per kilowatt hour.
The second part is in actually locating enough server power to make the facility happen, and paying for said servers. Graphic Processing Units (GPUs) are not easy to come by right now, because the Genesis kids are picking them up from the factory in Boeings, so they can get them to the facility quickly enough to make money stat, reasoning that waiting for the post office to deliver them would cost millions in delays over renting an airplane.
I can confirm this: I know a company in Vancouver that builds infrastructure for video game developer studios, and they say of a three week delivery time for processors, two and a half weeks of that is delivery times between the factory in Asia and the warehouses in North America.
Also, they have priority access to GPUs from the source – “call me.”
Shidan Gouran, president of Global Blockchain, stated: “Coinstream is answering the call from those who seek to fully leverage the regularly forecasted potential parabolic price growth of the mainstay cryptocurrencies, from a net long bias, contracted and derisked against the need to maintain operations, and secured by the value of the operating equipment which represents the majority of the capex allocation.”
This strategy also allows Coinstream to scale aggressively with multiple teams in multiple geographies, reducing risk further. The response and inflow of interest in this form of capital has been tremendous. The company expects this to be the first in a series of streams that its subsidiary Global Blockchain Mining will conclude and encourages other miners globally to reach out at the email address provided below.
There is no provided email address, but this is the game right now – raise as much public money as you can, but into existing or new crypto mining facilities while you can, crank as much Bitcoin or Ethereum or Ethereum Classic or Ethereum Classic Classic as you can, while you can.
The urgency is real – every day that passes between planning a miner and starting the actual mining means others are sucking up that cheaper (read: easier to mine) product. As less BTC exist to be mined over time, it takes more energy to actually mine one, which is a financial consideration.
This is why the miners, who make fine money on their own, thank you very much, are looking to the public markets at all for cash. They need as much as they can get, right now, to capitalize on the opportunity – right now.
That’s why HIVE has such a high valuation. And it’s why every broker in town has a crypto deal.
I literally start every call I have with a broker, banker, large investor or promoter currently with the words, “So tell me about your crypto deal,” and over the last three weeks, I’ve yet to have one say, “What crypto deal?”
Far more often I hear, “Who told you?”
Credit where it’s due – BLOC now has an asset, and it’s going to make a little money.
Also credit where it’s due: The market didn’t lose it’s mind when it heard about it and, in fact, BLOC stock dropped 2.3% on the news.
This isn’t a cheap deal, and requires BLOC to raise serious HIVE-like dough. Also, it appears from the language in the news release that the facility doesn’t exist yet. That’s an issue, because there are a seemingly infinite number of these things in the planning stages, all bottlenecking for the same hard to get GPUs. It could be a while until this one actually starts cyber printing cyber money.
UPDATE: BLOC has announced after market that they’re going to raise $30 million to execute this deal. The bought deal will run through Canaccord and brings on 11m shares at $2.65, a discount to today’s close price of $2.98.