CleanSpark is gearing up for an efficiency race that is poised to intensify among bitcoin mining operations ahead of the halving next year with a preorder of 4.4 EH/s in Bitmain’s newest AntMiner S21 equipment.
One of North America’s largest public mining operations by realized hashrate, CleanSpark said that the miners carry a valuation of $61.6 million (or $14/TH/s) and that shipments will commence in January 2024. The company noted it would only need to make an initial payment of $11.2/TH/s, as Bitmain is providing financing for the remaining 20%, which won’t be due until one year after delivery.
The deal follows CleanSpark’s purchase of 1.76 EH/s of AntMiner S19XP in June. CleanSpark anticipates that once the AntMiner S21s are fully deployed, it will enhance its mining fleet’s efficiency to 23.5 J/TH.
CleanSpark is the latest company to preorder the AntMiner S21 model as the mining industry intensifies its efforts to improve efficiency. On Oct. 6, Iris Energy said it purchased 1.4 EH/s of the AntMiner S21 for the same unit price per TH/s. Similarly, Iris Energy will pay $11.9 TH/s prior to the shipment with the remaining 15% deferred until one year after delivery.
Efficiency race
Bitmain launched the AntMiner S21 in September as the next generation of equipment, boasting a power efficiency of 17.5 J/TH. This marks a 20% improvement over its predecessor, the AntMiner S19XP. Other Chinese mining equipment manufacturers, such as Canaan and MicroBT, are also introducing the next generation of equipment with power efficiency below 20 J/TH.
This leap in efficiency proves to be crucial for the survival of mining operations, especially with the impending margin squeeze expected after the upcoming halving.
As shown in the chart below, the implied cost of bitcoin production of various mining operations in North America in Q2’23 fell within the range of sub-$10,000 to $25,000.
With bitcoin’s price stagnating at $27,000 while the hashrate shooting over 450 EH/s, the cost of bitcoin production will inevitably increase prior to the halving if everything else is held constant and it will double immediately after the halving, putting greater existential risks on mining operations. It is hence critical to keep energy costs low while improving fleet uptime and efficiency.
Cash flow crunch?
Notably, the willingness to extend financial support to attract potential buyers coincides with recent reports indicating financial challenges at Bitmain, as the bear market's impact reaches bitcoin miner manufacturers.
Indeed, data from more than a dozen publicly traded mining companies reveals a sharp decline in net spending on property, plant, and equipment (PP&E) throughout Q3'22, remaining low over the past four quarters.
This trend suggests a shrinking influx of cash into miner manufacturers, even as they continue to invest heavily in research and development for the next generation of Bitcoin ASICs.
Bitcoin mining site image via Danielle Nazareno / CleanSpark