Israeli miner strikes digital gold in Canada
NEW YORK• Israel’ s Natural Resources Holdings Ltd. is the latest company to benefit from blockchain stock magic as it shifts from digging for minerals to mining digital currencies.
Shares of the company, which invest sin metals mines mostly in North America, rallied 159 per cent to 25.40 shekels (US$7.27) Monday in Tel Aviv after disclosing to regulators Sunday it is about to acquire a 75-per-cent stake in Canadian cryptocurrency mining operation Backbone Hosting Solutions Inc., also known as Bitfarms.
Canadian companies are riding the cryptocurrency boom, with digital asset miners to crypto investment firms and online payment platforms, springing up in the past year. Mergers like the one between Natural Resources and Bitfarms give the private company quick access to capital markets, while reviving the public company’s stagnant shares.
“It’s hard to imagine that this operation began in our basement several years ago; by reinvesting our profits, holding on to our surplus coins, and running an entirely vertically integrated operation, we’ve scaled rapidly to become the biggest operation in North America,” Bitfarms founder Emiliano Grodzki said in an email.
“We believe in the future of the blockchain to positively impact society and take our role as miners in this ecosystem very seriously.”
Shares of Natural Resources have soared more than 2,000 per cent since the company said on Oct. 17 it plans to change its name to Blockchain Holdings and that it was seeking an acquisition of a cryptocurrency mining operation. The deal was for 50 million shares, or about US$ 150 million, Natural Resources director Roy Sebag said in an email. Sebag’s other metals firm, Goldmoney Inc., said in September it would start offering cryptocurrency storage.
The acquisition sheds light on Bitfarms, which operates four farms with two more facilities under construction totalling 25 megawatts and 250 petahash, the speed at which a computer completes an operation in the bitcoin code. It ranks as the largest cryptocurrency operation in North America by energy and hashpower, according to the regulatory filing.
Computers held in huge warehouses mine cryptocurrencies including bitcoin, bitcoin cash, ethereum and litecoin. The firm earned $4.4 million from mining the digital assets in November, with roughly 12 per cent of operating costs, Sebag said. Natural Resources had $ 2.3 million of net income in all of 2016, according to the latest reported results.
Canada is an attractive cryptocurrency mining hub as it combines relatively cheap hydro power, while the cold weather during most of the year makes it easier to keep the hardware cool. Bitfarms has become one of Hydro Québec’s biggest clients, and has negotiated discounts on long- term power contracts, according to an investor presentation seen by Bloomberg.