Cipher Mining Scraps Plan to Buy Bitfury Rigs, Sticks With Bitmain, MicroBT

Bitcoin miner Cipher Mining (CIFR) abandoned its plan to buy Bitfury rigs this year, saying it aims to be more flexible, CEO Tyler Page said during a call with investors on Friday.

The New York-based company had pre-ordered 28,000 to 56,000 mining rigs from Bitfury at a maximum price of $6,250 per machine, according to a filing with the U.S. Securities and Exchange Commission from October. At maximum values, that brings the order total to $350 million.

"Given our belief that upcoming market conditions may warrant a premium on flexibility, we have decided to continue to push forward with our Bitmain and MicroBT contracts, but not Bitfury rigs for 2022 delivery," Page said.

The miner's projected hashrate will take a hit, but the company will be "nimble and potentially capture opportunities in a fast-moving market," Page said. Given volatile market conditions and a shifting global landscape, cost discipline is vital, he said.
With the Bitmain and MicroBT purchases, the company plans to have 7.2 exahash/second (EH/s) by year-end. It is under contract to buy 60,000 rigs from Bitmain and 27,000 from MicroBT, Page said on the call.

The company may buy Bitfury machines in the future. The contract is "a seven-year arrangement that provides flexibility given that we have a right of first refusal on machines," and a most favored pricing arrangement, Page said during the call. When rigs are in high demand or hard to source, Cipher Mining can exercise its option to buy rigs from Bitfury at a competitive price, Page said.

If market conditions are such that the miner can buy rigs at "attractive prices" later this year, it expects to have the capacity to grow its hashrate by an additional 1.9 EH/s by the end of the year.

Because of the decision to do away with Bitfury rigs, Cipher Mining's price per terahash has increased 10%-11%, a Wells Fargo analyst said during the call. Page said the flexibility it gives is important given that macro and industry factors are in flux. Cipher will be paying $42.81 per terahash/second, according to the presentation.

In February, Cipher Mining commenced mining at a 40 megawatt (MW) site that is 100% powered by wind energy, according to the investor presentation. It signed a back-to-back purchasing power agreement with a wind farm, and doesn't have a grid connection, meaning it cannot sell excess power back to the grid, the CEO said. Cipher Mining also signed a non-binding term sheet for a 200MW site with Luminant, a subsidiary of New York-listed Vistra (VST), including a 15-year deal of energy supply, according to the presentation.

The miner has yet to book revenue from bitcoin (BTC) mined, and instead reported a $72 million net loss for the 11 months ending Dec. 31, 2021.

Cipher Mining expects to spend $0.0273 per kilowatt hour for the next five years, the investor presentation said.