Mawson Infrastructure Group Inc (MIGI) 2022 Q1 法說會逐字稿

Greetings and welcome to Mawson Infrastructure Group Inc. first-quarter 2022 earnings results conference call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nick Hughes-Jones, Chief Commercial Officer. Please go ahead, sir.

Hello, everybody, and thank you for taking the time to hear about Mawson Infrastructure Group. My name is Nick Hughes-Jones, Chief Commercial Officer of Mawson. Joining me today is James Manning, our Chief Executive Officer and Founder; and Hetal Majithia, our Chief Financial Officer. We look forward to taking you through the investor presentation today. But first, I need to read you a short disclaimer around forward-looking statements.

Please be aware today, we will be making forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks that could cause actual results to differ materially from those expected. Please be sure to refer to the cautionary text regarding forward-looking statements contained in this presentation on slide 2.

Okay, Mawson at a glance. As of last Friday night's close, Mawson has a market cap of approximately $180 million, is listed on the NASDAQ under the code MIGI, and has five Bitcoin mining sites across the USA and Australia. Now for those of you that aren't aware of what an exahash is, abbreviated as EH in these slides, currently speaking, an exahash is a measure of computing power. The more exahash you have online, the more Bitcoins you produce on a daily basis.

As of the end of May 2022, we expect our Bitcoin self-mining to be operating at approximately 1.8 exahash, producing approximately 8 Bitcoin per day. Based on current network difficulty and a Bitcoin price of $30,000, this equates to around $88 million in annualized revenue.

Today, we are pleased to announce a new 120-megawatt Bitcoin mining facility in Texas, in collaboration with JAI Energy and Texas Pacific Land Corporation, one of the largest landowners in Texas with over 880,000 acres in their land portfolio and listed on the New York Stock Exchange under the ticker, TPL.

As a result of this new Texas facility, we are today upgrading our energy infrastructure capacity available for Bitcoin mining by 35%, from 350 megawatts to 470 megawatts. This is a significant strategic advantage for Mawson, given the very high levels of demand for energy infrastructure in the Bitcoin mining industry today.

We are also reiterating our targets of 4 exahash online by Q3 2022 and 5.5 exahash by early Q1 2023. This would see us producing 18 Bitcoin per day and 24.5 Bitcoin per day, respectively, based on current network difficulty. Mawson is also proudly a net-zero-carbon miner and hosting co-location provider, something I'll touch on later in the presentation.

With that, I'll hand over to CEO and Founder, James Manning.

Thanks, Nick. Q1 was an exciting period for the group. Our hosting co-location business expanded materially as we signed major hosting customers, Celsius Mining and Foundry Digital, generating new revenue stream to Mawson, which is all paid in US dollars. Our team has expanded, with the Mawson family now over 50 hardworking individuals based in the USA. We continued the rapid scale-up of our self-mining operations.

Turning to the Q1 results, quarter one was a solid quarter financially and operationally for our business. Mawson generated $19.4 million in revenue, up 178% compared to Q1 2021. Revenue was flat in Q1 2022 versus Q4 2022, a good result in an environment where Bitcoin price fell from a high $69,000 in November to a low of $33,000 in January. This is a result of the substantial increase in our self-mining operations between Q4 2021 and Q1 2022. And we've seen this rapid scale-up continue into Q2.

Gross profit came in at $11 million, up 138% compared to Q1 2021. And non-GAAP EBITDA came in at $4.5 million, up 160% versus Q1 2021.

Some of our operational highlights in Q1 include -- we completed the build-out of our 80-megawatt facility in Georgia. And in very exciting news, we gained approval to expand this facility nearly threefold to 230 megawatts, which is capable of operating 7.5 exahash. We expect this expansion to come online in Q3 2023.

We signed our largest hosting co-location customers today -- Celsius Mining for 100 megawatts and Foundry Digital for 12 megawatts -- generating significant additional revenues for Mawson in addition to our Bitcoin self-mining revenue.

In Q1, we upgraded our self-mining exahash targets to 4 exahash in Q3 2022 and 5.5 exahash in early Q1 2023. We secured a $20 million debt facility from Celsius Network. And exciting news today, we have announced a new Bitcoin mining facility in Texas, in collaboration with JAI Energy and Texas Pacific Land Corporation, one of the largest landowners in Texas, which is listed on New York Stock Exchange under the code, TPL.

With that, I'll hand over to our CFO, Hetal Majithia, to run through the financials in a little more detail.

Thanks, James. Okay, turning to the balance sheet, cash and cash equivalents in quarter one 2022 rose to $5.8 million from $5.5 million in quarter four 2021. In addition to this modest rising cash, we also paid down approximately $3.2 million of our Foundry Digital debt facility over the course of quarter one and have continued to pay this down in quarter two. We currently expect this debt facility to be paid off in full in quarter three 2022.

Property and equipment rose to a $102.5 million in quarter one, up from $76.9 million in quarter four, reflecting the ongoing expansion of our Bitcoin mining fleet and energy infrastructure deployment across our Australian and US facilities. Equipment deposits declined to $41.7 million in quarter one, down from $51.4 million in quarter four, as Bitcoin miners continued to be delivered to our facilities and no major Bitcoin mining purchases were made in quarter one. Bitcoin miner hardware deliveries related to these deposits have been delivered consistently throughout quarter one and have continued on into quarter two.

Our total assets grew to $166 million in quarter one, up from $145.3 million at the end of quarter four. Total liabilities rose to $62.1 million in quarter one from $30.7 million in quarter four, which was predominantly the result of a new $20 million debt facility secured with Celsius Network LLC.

We expect to continue to use debt facilities and equipment finance facilities where appropriate. This is a very capital-efficient way of expanding our Bitcoin mining fleet and expanding our infrastructure, in turn, increasing the number of self-mined Bitcoin we produce on a daily basis, as well as increasing our ability to bring on additional hosting co-location customers.

With that, I'll hand it back to CEO, James Manning.

Thanks, Hetal. As you can see, between May 2022 and Q3 of 2022, Mawson will deliver a substantial increase in our Bitcoin self-mining operational footprint, moving from 1.8 exahash to 4 exahash, a 122% increase in our self-mining hash rate in just over six months. As slide 6 demonstrates, this would increase daily self-mining Bitcoin production from approximately 8 Bitcoin per day at the end of May to approximately 18 Bitcoin produced per day by Q3 2022.

It's important to note that the revenue numbers on this slide are based on current network difficulty, Bitcoin at 40,000, and the current expectations are around our miner and energy infrastructure deployment. What's genuinely exciting is, as we move to early Q1 2023, we expect to hit our 5.5 exahash target, producing 24.5 self-mined Bitcoin per day, and generating $357 million in annualized revenue.

Turning to slide 7, pleasingly, our hosting co-location business has continued its rapid expansion. At Mawson, we have energy infrastructure capacity surplus to our own self-mining requirements. We are able to use this surplus infrastructure to generate additional revenue streams, where we are paid in US dollars for providing hosting services to third-party customers.

The revenue and the cash flows from this business are highly predictable and the vast majority of our customers are very large businesses. We now have 116 megawatts hosting co-location customer agreements in place, making us one of the largest NASDAQ-listed hosting co-location providers. And we expect to expand this further to 140 megawatts by the end of 2022 and then up to 220 megawatts in 2023.

As -- at the end of May, we expect our hosting co-location business to be operating at approximately 52 megawatts, nearly halfway to our fully contracted deployment of 116 megawatts. We will continue to report our hosting revenues at the end of each quarter, enabling investors to work at just how positive this additional revenue stream is for Mawson Infrastructure Group.

Turning back to our own self-mining business, at Mawson, we have a very disciplined approach to infrastructure to ensure that we can deliver our expansion on time and on budget. Slide 8 shows in more granular detail our expected deployment up to Q3 2022 and then on to early 2023. Reaching these targets would make us one of the largest Bitcoin self-mining businesses on the NASDAQ.

Further having focused on securing our energy infrastructure early, this has ensured that we now amongst the lowest-quartile cost producers of Bitcoin, as well as one of the lowest-cost deploys of infrastructure of our NASDAQ-listed peers. Mawson continues to focus on substantial operational expansion ahead of us in both Bitcoin self-mining and hosting co-location businesses.

Turning to slide 9, at Mawson, we spend considerable time and resources focusing on our energy and energy infrastructure. In an industry where energy infrastructure is in very high demand, this puts us at a strategic advantage. Central to our infrastructure-first thesis, we focus on securing long-term, high-quality, and low-cost energy infrastructure. Evidenced by the 7- to 26-year terms we have across our global facilities, we option to buy the facilities in some locations.

Pleasingly, today, we have added Texas to our portfolio of Bitcoin mining facilities, providing us with not only additional megawatts in a very tight market, but also further geographic diversification of our facilities. Our current and available energy infrastructure capacity sits at 470 megawatts, with a pipeline of over 1,000 megawatts, providing Mawson -- we run the largest genuine energy pipelines in the industry. And we have demonstrated today, with the signing of our Texas facility, our ability to convert pipeline into reality.

It's no accident that we are at the front of the pack in energy infrastructure, given the depth and experience of our Board and managers inside of Mawson. At Mawson, we understand the importance of building a solid infrastructure platform upon which to expand our Bitcoin self-mining and hosting co-location business.

Now, securing our infrastructure pipeline is about more than just locking up land and energy. In slide 10, we illustrate how we are focused on looking at ancillary infrastructure required to stand up large-scale, low-cost, and highly efficient data centers in the Bitcoin mining industry. We are in a very strong position to not only deliver on our guidance, but critically, we have the underlying infrastructure in place to take us to 5.5 exahash in self-mining and 116 megawatts of hosting co-location and beyond.

As of March 31, 2022, we have agreements in place for over 45,000 ASIC Bitcoin miners. We purchased over 250 modular data center units, which could accommodate up to 20 exahash of ASIC Bitcoin mining operations. And we purchased 160 low-side electrical transformers, which could accommodate up to 13 exahash of ASIC Bitcoin mining operations. As you can see, we have the infrastructure in place to scale well beyond 5.5 exahash of self-mining and 116 megawatts or 3.8 exahash of hosting co-location.

With that, I'll hand back to Nick to take you through our current mining facility profile as well as our ESG and community engagement priorities. Thanks, Nick.

Thank you, James. Expanding on our established energy pipeline from slide 9, our current exahash capacity plus potential brownfield expansion opportunities at current sites sees us with the opportunity to be producing at approximately 21.8 exahash over time, split appropriately between self-mining and hosting co-location operations.

And of course, the speed in which we expand beyond our guidance will be subject to market conditions. As always, the best idea wins.

Critically, Mawson is committed to being a long-term, sustainable Bitcoin miner. We target carbon-free and renewable energy at our sites, with our current mix of over 75% carbon-free energy.

In Pennsylvania, we are using 100% nuclear energy. And we source our nuclear power from Energy Harbor, who owns three of the local nuclear power plants in Ohio and Pennsylvania. The Beaver Valley nuclear power plant is just a mile from our Midland, Pennsylvania facility.

In Georgia, where we have recently been approved to expand our facility threefold to 230 megawatts, the vast bulk of our energy comes from nuclear and hydro. And importantly, there are two brand-new nuclear reactors coming online in the next 12 months -- the Vogtle 3 and Vogtle 4 -- two 1,100-megawatt Westinghouse pressure water reactors. This is one of the major reasons we select this site. And we expect a lower carbon footprint and potentially lower energy prices as these new reactors come online.

We are excited today to include Texas in our investor presentation, where we have secured a site that is capable of operating at up to 4 exahash. And importantly, at this facility, we have collaborated with JAI Energy and Texas Pacific Land Corporation, one of the largest landowners in Texas with 880,000 acres across their land portfolio, providing us with a substantial opportunity to expand into the State of Texas over time.

Our third operational facility is located in Australia, where our energy is 100% renewable. At this site, we are co-located next to the power generation asset. This renewable energy power plant is owned by Quinbrook Infrastructure Partners, a multibillion-dollar global green energy infrastructure fund who are developing approximately 17 gigawatts of green energy assets across their global portfolio.

Turning to slide 12, our strict selection process ensures we are targeting long-life, low-cost, and high-quality sites. We have long-term leases on all of our sites: 26 years of (inaudible) in Sandersville, Georgia; 15 years in Midland, Pennsylvania; 15 years in Sharon, Pennsylvania; 15 years in Texas; and 7 years in Australia.

We use our own internally designed modular data centers, enabling us to be one of the lowest-cost operators in the industry. And we look at all of our sites through our Net Zero Carbon 2030 and ESG strategy lens, ensuring our energy mix is low carbon.

At Mawson, ESG is a core priority for us. We have already touched briefly on our focus on carbon-free energy. In addition to this, we offset any residual carbon footprint using carbon offset credits. In 2020, we offset over 22,000 tons of carbon, supporting wind and native biodiversity projects in the process. We are now in the process of assessing and offsetting our 2021 carbon footprint.

By the end of 2022, we will have planted over 100,000 new trees across the US and Australia, with 75,000 trees planted in 2022 alone. That's approximately 1.5 new trees planted every time a block is created on the Bitcoin blockchain.

Mawson is also a very active member of the local communities in which we operate. We sponsor both the local school football teams in Sandersville, Georgia, and have academic scholarship programs in place in the local county. In late 2021, we sponsored Buhl Park in Midland, Pennsylvania, as well as supporting the local community college of Beaver County, the Lincoln Park Performing Arts Center, Beaver Falls Park, as well as the Heritage Valley Health System.

Importantly, in Pennsylvania, we recently announced a partnership with Voltus, whereby Mawson has committed to deliver up to 100 megawatts back into the local electricity grid in times of need, further supporting the local communities we operate in.

In Australia, we recently became major sponsor of the Far North Coast men's, women's, and junior's rugby union teams.

Slide 14 touches on our Board and management team. The Mawson family has now expanded to over 50 hardworking individuals with the vast bulk of our team residing in the United States.

Our US team is led by our Chief Operating Officer, Liam Wilson; with Chief Development Officer, Craig Hibbard, overseeing the development of our portfolio facilities in the United States. You've already heard today from CFO Hetal Majithia. The other high-quality components of our engine room comprise Tom Hughes, our General Counsel; and Heath Donald, our Chief Marketing Officer.

Our Board is chaired by Greg Martin, who was the CEO of Australia's largest energy business, AGL Energy, for five years. And Greg was at AGL for 25 years in total. Michael Hughes, another of our independent non-executive directors, has extensive experience across capital markets, governance, and audit; and Yossi Keret, who has substantial experience across NASDAQ-listed companies.

With that, I'll hand it back to James to bring the presentation home.

Thanks, Nick. Slide 15 spells out some of the achievements we've had recently across our innovation portfolio. As we alluded to earlier, in March, we announced two large hosting co-location customers: a 100-megawatt agreement with Celsius Mining, and a 12-megawatt agreement with Foundry Digital. These two deals illustrate the tightness in the industry around energy infrastructure at present and how well placed we are to capitalize on this high demand.

Secondly, following on from the listing of Cosmos Asset Management's first product in the Australian market in late 2021, the Cosmos Global Digital Miners ETF, Cosmos recently announced a partnership with Purpose Investments, a multibillion-dollar asset manager who listed the world's first spot Bitcoin ETF 12 months ago. As a reminder, Cosmos Asset Management was filed under Mawson and remained -- but, however, Mawson remains Cosmos's largest shareholder.

In very exciting news last week, the Cosmos-Purpose Bitcoin Access ETF launched in the Australian market, making access to Bitcoin significantly easier for all Australians.

For our second last slide, I wanted to highlight just how aligned Mawson's Board and senior management is with all our fellow shareholders. Board and management currently own approximately 24% of Mawson. So we all have a huge amount of skin in the game. This is unique amongst our NASDAQ-listed peers and ensures we are extremely focused on shareholder returns.

Lastly, for me -- and before we move on to questions -- in summary, why invest in Mawson Infrastructure Group? Well, over the next nine months, we expect to grow our self-mining business threefold and continue to expand our hosting co-location business. We are an infrastructure-first business, with a significant amount of energy infrastructure in place and strategic advantages in the current environment.

We are one of the most sustainable Bitcoin miners on the NASDAQ, with over 75% of our energy coming from sustainable sources, predominantly nuclear energy. We have strategic relationships with Quinbrook Infrastructure Partners, Purpose Investments, Celsius Mining, Canaan, Foundry Digital, JAI Energy, and now Texas Pacific Land Corporation. We are one of the most efficient and lowest-cost operators in the industry. And we have very high insider ownership at 24%, meaning, we are incredibly focused on shareholder returns.

With the presentation now complete, we wanted to take this opportunity to thank all of our employees and shareholders for their ongoing support in 2022. I'll now hand the floor back for any questions.

Thank you. Ladies and gentlemen, at this time, we will be conducting our question-and-answer session. (Operator Instructions) Kevin Dede, H.C. Wainwright.

Hi, James, Nick, Hetal. Thank you very much for taking my questions. Thanks for hosting the call.

James, apologies for this first one. I understand the target for exahash September, and 5.5 sometime early next year, but I lost you. What was the hash rate at the end of the March quarter? Was that the 1.8 number or is the 1.8 number the current number?

1.8 is the current. That's our May number.

Okay, that's May. Okay. What was March end?

Nick, have you got that by hand?

Yes. Hi, Kev. How are you doing?

Great. Thanks, Nick. How are you?

Full speed ahead. So the end of March self-mining exahash number -- sorry, but you probably -- average hash rate for March was 1.2 exahash. The end of month hash rate was 1.35 exahash. And then, as James has alluded to, we'll be at 1.8 exahash on the self-mining at the end of May.

Okay. Can we talk a little bit about the Texas location? What's the climate like? What sort of work do you have to do with ERCOT or are you behind the meter? What condition is the site in? Just some background there.

Sure. I'll keep it pretty high level, Kevin. But one of the things that really attracted us to this opportunity was that the substations were in place. So it's actually a series of smaller sites all within close proximity to each other. And so no single sites greater than 30 [megs] but not less than 20. So it's a series of sites all within sort of 5 to 10 minutes of each other that we'll build out.

The upside of that is, as you're aware -- no doubt aware -- in Texas, they have changed the rules about bringing large-load generation on -- and we are sort of under that threshold as well with these sites and these scales. So we'll be able to turn on each site pretty quickly. Substations are in place and ready to be energized. So it's just low-side transformers. And then, climatically, we believe we've got the modular container solution work in that climate based on the work we've done.

Okay. Listen, I know you have first-hand experience with immersion. But you are thinking that's not going to be a requirement here.

Look. We're not going to rule it out, Kevin. We might put some in. And I know it's a great spot to do some testing on immersion or scale up one of our emerging plants. But the economics of immersion are getting there. So historically, we've not really wanted to, but they're starting to look attractive. But I think in the short term, we'd definitely be pursuing the air-cooled at this point.

Okay. The power agreement is through JAI and then to ERCOT or how does that work?

No, we've got a separate power agreement. And we're not -- I can't disclose the terms of the power -- the PPA or what we're doing there yet. But JAI facilitated the transaction with Texas, with the landowner.

I see, okay. Just looking at the network overall -- the Mawson network overall, where is your -- on average, where is your cost per power and how is that going to change as more Georgia comes online and as more Pennsylvania comes online?

So our Pennsylvania power is partly hedged already. And some of that will flow through -- some of that flows through to the end customer where it's in-hosting. So we're on a like a cost-plus-type arrangement of component of that power. Some of that's hedged; some of that's floating. So we'll see some volatility, and I guess, some of the hosting revenue attached to that as well as it'll flex with the power rates.

We are looking to lock in and hedge out as much of the power long term as we can. But over the last couple of months, you've obviously seen a lot of volatility in energy markets. So we are taking a cautious approach to locking anything in too quickly now. Because as you look further out, the prices are looking cheaper further out.

So we're just trying to weigh up what we hedge and what we don't hedge. Obviously, some of the Texas pricing is more attractive at the moment that we've got. And some of that existing PPA contracts are really attractive as well.

Can you give us a ballpark on where the overall Mawson cost per kilowatt hour is?

I haven't got a weighted average one at the moment. But I'm happy to come back to you separately on that, Kevin.

Okay. Fair enough. Thank you, James. Now how about the timeline on your hosting customers' deployment?

Yeah. So as we mentioned, we're on track to have about 50 megawatts deployed -- 50 megawatts to 60 megawatts deployed in PA. And we're at the end of month, and we're really powering all along there. So we are currently deploying about four containers there a week -- four to five containers a week. So between 8 and 12 megawatts a week are going online in PA at the moment.

So the team's working really hard to get that deployed. And I think we're pretty comfortable with that deployment rate at the moment. So we've got ability to flex that up a little bit more, but I think we'll get up to about six containers a week. And that's 12 megawatts to 15 megawatts a week that we can deploy at that rate.

Okay. So all the hosting will be at your two PA sites?

Yes, at this stage.

Okay. Then just to touch on the increase in facility size in Sandersville. So having been there, I -- with Liam's direction, I understand you're going to clear forest, I think, if I understand it correctly. And I'm just -- I guess you mentioned that you expect deployment there to begin sort of the tail end of next year. Is that -- did I hear that all correctly?

Yeah, we'll be looking to start building that facility -- the expansion of that facility next year, starting probably Q1.

Okay. Can we talk a little bit about your philosophy on holding and spending and capital sources, and what you think you're going to need to build that and Texas out?

Sure. So we currently -- I think we're one of the lowest-cost, I guess, infrastructure players in this space at the moment. And I think that's probably been one of our key advantages in deploying what we've deployed to date. So we're just going to continue to be focused on cost and getting a very efficient, low-cost operation, and continue to build that out.

As far as capital requirements for building out additional sites, we have made it very public and we are very clear that we are looking to do a mix of both our hosting clients and our self-mining.

The self-mining, we are looking to fund organically through cash flow as well as short-term facilities. We've typically done a 12-month facility on equipment and amortize those things over 12 months. So where we buy asset miners and so forth, that's the way we'd approach this and with cash flow, the infrastructure as we went.

Where we are looking at taking on larger hosting customers, like we did with Celsius, given the tightness in the hosting market at the moment, we'd be looking to those hosting customers or to other debt providers to lock in some facilities around that infrastructure buildout for that customer. So we can make a very clear economic case about not only bringing on that infrastructure, but the return on that customer over that period and if that's the best use of our capital.

And Kevin, as you're aware also, selling Bitcoin daily regenerates cash flow for us.

You are -- right, right, right, right, right. Yeah, thank you for reminding me. I appreciate that, Nick. Okay. Let me hop back in the queue. Thank you for entertaining my questions.

(Operator Instructions)

Operator, we've got a bunch of questions that have come through on email. I might read those out if you're happy with that.

Yes, sir. Please go ahead.

Okay. So Matt asks, what have Bitcoin mining hardware prices done recently with the market sell-offs? I might take that one, James and Hetal.

So mining hardware prices happily for us have come right back. So if you're looking at a Whatsminer M30, M30S, that was $80 or $90 a terahash. At the beginning of the year, we are seeing prices around the $50, $60 per terahash mark. So hardware prices tend to have a fairly high correlation with the Bitcoin price. So the market has sold off, and that's made hardware much more attractive for us.

The next question is, are you seeing any impacts on miner deliveries out of China? James, did you want to take that one?

Sure. So far, we haven't seen any impact on deliveries. We have -- all our freight and everything's been working fairly well. We always assume there was going to be a delay in some extended shipping times, and we always mobile that in.

We are seeing air freight is difficult. And it's hard to get things up in the air at the moment out of China, and the last month has been particularly difficult. But we haven't seen any material slippages and definitely no slippages relative to our current deployment projections.

I think the other important point there is we've only got a couple more shipments left of mining hardware coming out of China, and then we'll be looking at spot orders here in the US. And hardware prices have come right back, and that's the gear that's landed in the US. And so that's obviously a much better outcome because you don't have any of the supply chain issues that you are seeing globally at the moment.

Okay, our next question, where do you see the global hash rate going over the next 12 months? I'll take that one.

So I think we sort of -- we expected or guesstimated to be around 300 exahash by the end of this year. That's looking a little bit less likely at the moment because you've seen -- obviously, it's at the margin, harder to mine Bitcoin in Russia. You would imagine -- likewise Ukraine, likewise Kazakhstan. I think given energy prices in Europe, it's probably harder or less profitable to mine Bitcoin in Europe.

And then you've seen from a bunch of other US-based miners that they have a lot of Bitcoin miners sitting in boxes at present. So it's very difficult to get energy and energy infrastructure online in the US.

So I think that global hash rate has probably got some downside to it versus our sort of expectations over a couple of quarters ago, which is obviously great for installed miners that are adding hash rapidly like we are.

Next question: why do you sell Bitcoin instead of HODL? I think we sort of touched on that just around generating cash flow to fund our operations and our CapEx.

And the last one here is, what will your split on self-mining/hosting be going forward, given you now have such large energy and infrastructure pipeline?

James, did you want to take that last one?

Sure. So I think we have always sort of said that we'd explore up to a 50/50 hosting and self-mining. As our portfolio expands, we'll consider that mix.

At the moment, we're prioritizing obviously the highest margin and the best use cases for us, which is self-mining. But we're conscious. We'd like to continue to partner and build out with the right partners -- that hosting model.

So while I don't want to put a firm percentage on it, we are really looking at the infrastructure and the counterparties on a case-by-case basis, especially given the recent volatility in the market. We really want to make sure we've got really strong hosting customers, where we do take hosting customers on. And it makes sense from an infrastructure deployment perspective that that's the best use of capital for the business.

Great. Okay. Operator, that's all the questions that we have there. I might pass it back onto you to wrap up.

Thank you. Kevin Dede, H.C. Wainwright.

Sorry, James. Hello, it's me again, Kevin Dede.

There's still a lot of questions, right, to be asked. You talked about a 1-gigawatt pipeline. I was wondering if you could offer some color on the visibility there? Is that through your partnership with JAI, Quinbrook? How are you sort of getting to a number that large?

Yeah, I'll take that one. We've got -- what I could say to you is we are very comfortable around that pipeline. I think what you've seen is we've locked one site away. This month, we've got another site that's a 200-megawatt site that we've got under an exclusive arrangement that we are looking through to contract at the moment. We've got Sharon, which we haven't -- we've contracted the lease on, but we have yet to complete the load studies on.

So I think where we are sitting there on that pipeline, Kevin, is we've got some sites there that we're very comfortable around the energy being there. We're in the process of firming up those energy, the ability to contract that energy, and locking it in. And I think you can see in Georgia, we slowly upgraded that period by period as we've locked away certain upgrades online, some transformers and substations and so forth.

We are doing that in Sharon at the moment. I'm really looking forward to coming to market and telling everyone just how great that site really is. We've got -- Texas obviously came out, and we are firm around that number. And then we've got another site that we're really firm on as well. And we know what's available there. But until that's finalized, we won't be coming to market and really bringing that forward.

And I think between the two sites that I can't mention at the moment, that goes a long way to the gap between where -- that one gigawatt and where we are today. So they're the existing stuff that's in the pipeline.

And then with our partnership with Quinbrook, we've got a large site we were looking at with them. And there are some other partners that we've got that we are looking at -- we are in advanced stages of discussions with. They're around the large sites as well.

The other thing that's important to mention is the Texas site we announced today is in partnership with Texas Pacific Land Corporation, which is one of the largest landowners in Texas. I think it's 880,000 acres under their portfolio. And so there is substantial opportunity to expand into that relationship as well.

But I think the overarching comment is that we're going to be very disciplined and very aware of market conditions and certainly not overreach ourselves, which is possibly where you were heading with that question.

Oh, no, no, no. I wasn't concerned about that. I know you guys are savvy managers. I just -- the word pipeline is vague. And I just was looking for a little more granularity, which you offered. So thank you very much.

The site in Texas is, I guess, ERCOT supplied. I was wondering if you could talk to the local power sources there and how you might consider the power mix in terms of natural gas or renewables.

Yeah, for sure. So we are going through that process with Priority Power at this point. So we'll probably defer answering that question until we've got a little bit more granularity around that, Kev.

No problem. Thank you. I know I've got --

What I would add to that, Kevin, is we've got that -- our strong ESG mandate. And we're not going to defer from that. So whatever we do there, we'll be looking to either match out with credits or ensure that we contract the right mix.

Okay. Fair enough. Thanks, James. Your team at Mawson has had a close affiliation with Canaan for a long time. I'm wondering, given a host of new entrants, what you've investigated in terms of exploring alternative machine sources.

Well, we've got quite a few of the Whatsminers within our portfolio, not just the Canaan units. I'll say this about the Canaan units. Canaan's been a great partner for us, and I think we've been a great partner for Canaan. We went out on a limb with Canaan when no one else was really buying at large scale from them. And we did that with the benefit of a lot of knowledge.

So we pulled down their unit. We did a lot of reverse engineering and checks to make sure we were really comfortable with them. We asked a lot of tough questions, and we realized that Canaan team were -- they are building really good gear, and it's phenomenal. It's really standing up. We are having as good or, if not, better uptime out of it than we get out of the Whatsminers and the Bitmain units.

So I think that they're a top-tier manufacturer, and we've got a great relationship with them. And I hope that our early support of them at scale, when everyone else wasn't, is going to really reflect in that long-term relationship together. So that's what I'd say about the Canaan relationship.

As to the other equipment manufacturers, look, we are closely watching -- obviously, [we're aware] Intel is entering the market, and we're looking -- we'd like to look and explore that. Look, we're acutely aware of some other manufacturers that have entered the market. Without naming names, we bought some test units to test, and we weren't satisfied. So we've walked away from a couple of those players.

I am very aware that other market participants have bought those units in scale and have performance issues. So I guess the benefit of being a miner that's been around for a little bit more than a couple of years, which some of these miners definitely are only a couple years old in the market, is we have seen some of the bad routes in machine manufacturing. And I definitely remember dealing with that 2019 batch of Bitmain units that had 30% to 50% value rates and working through that resolution.

So we are a lot more cautious, and we've got a lot more processes now about how we quality-control equipment and deployment. So we are very aware of new equipment coming into the market, and we're always looking at it, always testing new equipment, and always exploring this sort of stuff. But we're very also cautious about it, and some things just don't [pass master] for us as far as we're concerned.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to the management for closing remarks. Over to you, gentlemen.

Great. Well, I'd just like to say from -- on behalf of the entire Mawson team, to all our shareholders and anyone else that are on the call, whether its employees, like Board, if you're on the call, it's been a great start in 2022. We've got a lot to deliver, and we are really focused on delivering that this year.

And we're -- hope you are all along for the ride, and we're looking forward to delivering on what we promised moving forward for the later half of the year. And with that, I'll [let you go]. Thank you.

Thank you very much, sir. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.