Q3 2024 Stronghold Digital Mining Inc Earnings Call

Gregory A. Beard; Chairman & CEO; Stronghold Digital Mining Inc

Matthew J. Smith; CFO; Stronghold Digital Mining Inc

Operator

Good morning and welcome to the Stronghold Digital Mining conference call for the third quarter ended September 30th 2024. My name is Tanya and I’ll be your operator this morning before this call. Stronghold issued its results for the third quarter, 2024 in a press release which is available in the investors section of the company’s website at www.strongholddigitalmining.com. You can find the link in the investor section at the top of the home page.
Joining us today on the call are Stronghold’s, Chairman and CEO, Gregory A. Beard and CFO, Matthew J. Smith.
(Operator Instructions)
Now, I would like to turn the call over to Strongholds Chairman and CEO, Gregory A. Beard. Mr. Beard, you may proceed.

Gregory A. Beard

Good morning everyone and thank you for joining our third quarter, 2024 call given our pending merger with Bitfarms which we announced on August 21st. Today’s update will be relatively brief to recap. We’re thrilled about this transformative next step for Stronghold, a definitive merger agreement with Bitfarms, a global leader in Bitcoin mining. After a thorough strategic alternatives review process, we are confident that partnering with Bitfarms offers the optimal platform to realize the full potential of our assets, accelerate growth and build value for the company and its shareholders. The transaction could result in a pro former company with an energy portfolio exceeding 950 megawatts by year end 2025, and there are multiple studies underway related to the Stronghold assets that have the potential to add significant capacity incrementally.
We believe this growth pipeline combined with the opportunity to leverage bitfarms proven expertise to successfully enhance operational efficiency and merge HPC AI with Bitcoin mining operations is a recipe for success.
The transaction is structured as a stock for stock merger, whereby Stronghold shareholders will receive 2.52 Bitfarms shares for each Stronghold share, which at the time of the announcement valued Stronghold equity at approximately $125 million plus $50 million in debt to be paid at close. Upon closing, Stronghold shareholders will hold around 10% of the combined company positioning them to benefit directly from the growth potential of this expanded platform.
Together we’ll leverage the unique capabilities of the Scrubgrass and Panther Creek facilities in Pennsylvania to deliver low cost power, support the local grid and improve the environment through the conversion of mining waste into energy, advancing our commitment to sustainability. Additionally, we believe that the platform will better position the facilities to integrate high performance computing, diversifying the business beyond Bitcoin Mining.
In addition to the merger, we recently strengthened our Bitcoin mining operations through two hosting agreements with Bitfarms, which will high grade the fleet at our facilities. On September 12th, we entered into an agreement to host 10,000 Bitmain T21 Bitcoin miners at Panther Creek. We received some of these miners with the remainder expected in November and December of this year. Bitfarms will pay us a monthly fee of 50% of profit generated by the miners subject to certain adjustments to account for upfront payments made by Bitfarms taxes and the net cost of power associated with the operation of the miners. Building on this on October 29th, we entered a second hosting agreement to host an additional 10,000 minors at Scrubgrass at the same economic terms. Minor deliveries are expected to begin in late December or early January.
Before I hand over the call, I want to address a recent leadership transition. Our CFO Matt Smith will be stepping down effective November 15th, following the filing of our third quarter report. Matt was instrumental in navigating through a difficult time for the business and ultimately to an attractive merger with Bitfarms. His efforts and success in raising capital establishing operational procedures and enhancing how the company tracks and uses data have been critical. We’re grateful for Matt’s contributions to Stronghold over the past three years, and we look forward to working with him in a consulting role to ensure a smooth transition. With that, I’ll turn it over to Matt.

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