IREN Ltd Q3 FY2023 Earnings Call

Welcome to the Iris Energy Fiscal Year 2023 Results Conference Call. At this time all participants are in a listen-mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Robert Lincoln. Please go ahead.

Good afternoon to those of you in North America, and good morning to those of you in Australia. Welcome to the Iris Energy FY '23 Earnings Conference Call. My name is Lincoln Tan, Senior Manager of Investor Relations. And with me on the call today is Daniel Roberts, Co-Founder and Co-CEO; and Belinda Nucifora, CFO. I would like to remind you that certain statements that we make during this call may constitute forward-looking statements and Iris Energy cautions listeners that forward-looking information and statements are based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of the company. Listeners should not place undue reliance on forward-looking information or statements. Please refer to the disclaimer on slide two within the accompanying presentation. Thank you, and I will now turn the call over to Dan Roberts.

Thank you, Lincoln. Dan Roberts, Co-Founder, Co-CEO, it's great to be here for another results presentation. We're excited about the progress we've made over the past year in consolidating and positioning our organization for the future. There are two significant numbers on the slide in front of us that we believe establish a solid foundation for growth, albeit with some context that we'll discuss. As we go through the slides, please take a moment to read the disclaimer that Lincoln mentioned. In simple terms, we've built a scalable platform at Iris Energy, particularly highlighted by our 600-megawatt site in Childress, Texas, which we’ll elaborate on today. We have achieved 30 exahash of bitcoin mining capacity, supported by available power, land, and an executable plan. Additionally, we're exploring next-generation generative AI computing and are eager about the forthcoming deployment of our NVIDIA H100 chips. The $0.014 power cost at Childress comes with caveats, as this figure is based on actual performance since our inception. Adjusting for expected ERS, which we qualify for, we have effectively delivered around $0.02. While this figure is lower than anticipated, it results from market volatility and our strategic location near low-cost wind and solar sources impacted by congested transmission lines. Nonetheless, our operational setup allows us to engage dynamically with energy markets, optimizing our power costs through strategic power market trading alongside Bitcoin mining. However, power costs can fluctuate significantly, as shown in August when we recorded a net electricity cost of minus $0.08 per kilowatt hour at Childress. This translates to an effective earning of $28,000 per bitcoin mined, which we then sold, resulting in a profit of $56,000 per bitcoin. The power dynamics at Childress provide a strong foundation for scaling our mining capacity to 30 exahash, which involves a site expansion. We have 600 megawatts of power capacity, and currently, 20 megawatts are operational, with another 80 megawatts under construction and expected to be commissioned early next year. Our teams are actively building out additional capacity, transitioning data centers efficiently. We’re also evaluating funding strategies. We respect market conditions, but we have developed a funding plan of at least $626 million, which includes $69 million in existing cash, $57 million from a previously announced e-lock facility, and a $500 million shelf—$300 million for an ATM and $200 million for other products. We intend to reinvest our operating cash flow into business growth. Unlike other miners, we do not hold bitcoin on our balance sheet as we believe it creates inefficiencies and lowers risk-adjusted returns for shareholders. We aim to reinvest in expanding capacity to increase returns and bitcoin equivalent exposure for our shareholders. The trajectory we are on has shown substantial growth over the last year, and we anticipate this trend will continue. Lincoln, I’ll turn it back to you.

Thanks very much, Dan. So this page just maps out the peer landscape and in particular, outlined two specific key metrics from August. So in the darker blue shaded columns, that represents bitcoin production in August. And overlaid on top of that in the light blue outline that represents disclosed exahash capacity across the sector. And as you can see, shaded in the green column that's Iris Energy, third largest production of Bitcoin and the NASDAQ with 410 bitcoin mined in August. So if we just take a quick step back here. In terms of the relationship that you would expect to see between disclosed exahash capacity and bitcoin production, the greater hash rate that you have means you've got a greater share of the global hash rate and therefore, you would expect that our bitcoin mining production should be higher. So really, it should come down to relatively simple math and probability. However, as you can see from the chart, it appears quite evident that not all of the disclosed hash rate capacity is being utilized to mine bitcoin. Some things are not quite matching up as we look across the peer landscape. And to Dan's point earlier, even if we do consider the impact of curtailment particularly in deregulated markets like Texas, from an Iris Energy perspective, we just use our capacity to mine bitcoin, and it's our experience that we are still operating at very close to full output over that four, five month period. So in terms of what this means, a few key takeaways from our perspective. Firstly, in terms of how Bitcoin mining companies generate revenue, we don't get paid based on our disclosed exahash capacity. We get paid based on our actual bitcoin production, and that is purely a function of exahash that is on the ground actually operating and hashing within our facilities 24/7. But the second key point here is I think this clearly highlights some potential differences in operating models across the sector and potentially exposes some of the challenges that might be associated with, for example, third-party hosting, old shipping containers, abandoned warehouses, single-source generation and behind the meter arrangements and other business models, which may prioritize speed or other factors over sustainable levels of Bitcoin production. And just finally, before I hand back over to Dan, we don't see this as a particularly recent phenomenon. This is nothing new. We've been tracking these metrics fairly closely and the same sort of monthly data across the sector since our IPO. And we don't really get it. We just think that this is potentially overlooked by the market and potentially something that investors should pay a bit of closer attention to. Over to you, Dan.

Thanks, Lincoln. So I think that's a good segue link into the next slide. We are positioning ourselves as a next-generation computing platform. We're not a crypto miner. If we buy computers, we actually operate them. As you can see from the previous slide, if we tell you we have an amount of capacity, we will operate it and generate revenue from it. Just as we have put a purchase order in for NVIDIA chips, we don't intend for them to sit there idle either. We intend for them to be operated. As we previously advised, we've ordered 250 NVIDIA H-100 GPUs; they're on order. They're expected to arrive in the coming months, and we continue to have a number of promising customer conversations. We're talking terms, we're talking pricing, we're talking growth ambitions of these customers. And in due course, we are hopeful and would expect to sign a customer and provide a further update to the market. I think what's really exciting for us, the more time that we spend on this sector is just the enormous growth ahead. This is like the dial-up days of the Internet. Remember in the '90s, you'd have to dial up your modem, it would be slow. It would be clunky. You would go into a messenger service, it again would be slow. There would be latency. And it was a bit of a hurdle to adoption because you really have to be committed to pursue and utilize those services. The exact same dynamic is happening in this space. For those of you on the call that have used generative AI, whether it's large language models or it's generative images like mid-journey, it takes time, particularly the images, text is a bit quicker. But when you're sitting there waiting two minutes to generate an image, that is an indication of why we believe we're at the dial-up phase of this sector. Because, A, it is an indication of the demand. If there is no one using it, those images would be produced faster. Secondly, more GPUs, more capacity will make that quicker leading to greater utility out of the service, greater adoption and that positive flywheel effect. So we're super excited, and a large number of the team are currently in Los Angeles at a conference that we've sponsored. We've spoken there to a number of customers. We're excited about the sector. We look forward to providing a further update in due course. Belinda?

Thank you, Dan. Good morning, everyone. I want to review some key financial figures for the year ending June 30, 2023, as stated in our financial reports and 20-F. The adjusted EBITDA for the past 12 months was $1.4 million, with a $16.5 million increase in Bitcoin mining revenue compared to the previous year. Our self-mining operating capacity grew by 390%, rising from 1.2 exahash to 5.6 exahash, with an additional 1,860 bitcoins mined in FY '23, bringing the total for the year to 3,259 bitcoins. The average realized price per bitcoin mined was $23,200, down from $42,200 in FY '22. The average electricity cost per bitcoin mined during FY '23 was over $11,000, compared to $7,900 in FY '22. Total other costs, which encompass site and corporate expenses, reached $38.3 million for FY '23, an increase of $16.5 million from FY '22, primarily due to the commissioning of three new sites—Prince George, Mackenzie, and Childress—as well as higher professional fees and additional costs related to our global expansion beyond the 5.6 exahash. Moving to the next slide, our consolidated profit and loss statement shows a net loss of $71.9 million after income tax, significantly reduced from a loss of $419.8 million in FY '22. This decrease is attributed to the noncash mark-to-market effect of convertible instruments that were converted into equity at the IPO in the prior period. The loss for FY '23 also includes substantial noncash items, notably asset impairments totaling $105.2 million, which mainly relate to limited recourse financing of $66.5 million and mining hardware impairments of $25.7 million. Other significant noncash items include a share-based payments expense of $14.4 million, primarily due to $11.8 million in amortization of the 75 exercise price options granted before the IPO. Moving to the next slide, our balance sheet reflects strong financial health as of June 30, 2023, with total net assets of $305.4 million, cash and cash equivalents of $68.9 million, and no debt. We fully utilized all major mining hardware prepayments during FY '23. Our total property, plant, and equipment at the end of June 30, 2023, is $241 million. We maintain a current asset ratio of 3.7 times, supporting our future growth strategy, and a liabilities to asset ratio of 8%, offering us flexibility with no debt obligations. I will now turn it over to our Q&A. Lincoln, would you like to begin?

Yes, that's sounds good. Thanks very much Belinda. In terms of the Q&A, let's start with questions from the conference call line. And then to the attendance time we can move to the questions on the webcast.

And our first question will be coming from Mike Colonnese of H.C. Wainwright. Your line is open, Mike.

Hi, good morning guys. Dan and team, congrats on the tremendous growth in operations over the past year here. First for me, it would be great to get some more detail on the expansion build-out and energization of the miners at Childress. I know your guidance calls for about 3.5 exahash as of miners to come online in early 2024. So I was wondering, should we expect that to come online all at once? And when you say early 2024, are we looking sometime in 1Q?

I can respond to that, Lincoln. It's great to hear from you and see you, Mike. As we've mentioned before, the expansion of this site occurs in 20-megawatt increments. Each 20 megawatts corresponds to about 800 to 850 petahash, depending on the specific Milo model we install there, typically achieving low-20s efficiency. Essentially, when each data center is operational, it allows us to connect around 800 to 850 petahash. Regarding minor procurement, we will inform the market once we officially sign a purchase agreement for delivery. For now, our position remains unchanged; we see considerable flexibility in holding. We are engaged in several discussions about the best way to procure models regarding their economics and structure. Our plan is to quickly fill those data centers as they go live. However, at this point, we prefer not to provide more specific details on how we're approaching this.

Great. Well, fair enough, Dan. I appreciate that. And just looking beyond Phase 1 of this 100-megawatt build-out at Childress, in light of the upcoming halving and thinking about future scale, scaling of that facility. How do you plan to approach future expansion? If you could just talk through some of the dynamics there and your thought process as we navigate into future expansion?

Absolutely. And I think this is what I was alluding to at the start of the call, the hard work has been done. We've got the platform. We've got the site. We've got the team. It's just a continual cookie cutter exercise, quite frankly, where we just have teams on site that roll from one building to the next rolling out 20 megawatts at a time. We don't need any more power. We don't need any more land. We don't need new supply chains, new ways of doing things. We've proven our data center design. We've proven how it interfaces with the energy market. So from a practical implementation perspective, it's just continuing to do more of the same, which is really exciting. And frankly, it's freed up a lot of our time to focus on new growth areas for the business like this generative AI, GPU, looking at new sites globally and the development opportunities there. Funding is a big part of how quickly you can scale. As we saw during the presentation, we do have almost $70 million of cash in bank, which allows us just to continue to push ahead. We've got other funding loans in place and coming in place. We're going to continue having those conversations. We're going to be respectful of capital markets, liquidity, cost of capital, et cetera, but our intention is to capitalize on the opportunity in front of us for our shareholders and to continue to build into that.

Got it. Thank you for taking my questions.

And our next question will be coming from Josh Siegler of Cantor Fitzgerald. Your line is open Josh.

This is Will Carlson on for Josh Siegler. First question, can you walk us through the delta between the CapEx required for HPC versus bitcoin mining?

That's a very open-end question, Will, in terms of how you add to that because it is a little bit apples and oranges in the sense that one is an ASIC, one is a GPU. They both require different amounts of data center capacity. They both require slightly different configurations in terms of networking and storage infrastructure. They're both different revenue models. So it is a little bit difficult to say. I have seen a question that relates to this come through on the chat, which is adjacent to your question, which is around how to returns and payback periods interface between the two business lines. This is something that we're working through live time. But I think it's fair to say that with Bitcoin mining, you're generally going to have a higher starting return on investment in terms of annualized cash yield. It is going to be more volatile, notwithstanding as a low-cost producer, you do have that natural volume hedge if the price goes down too far. With GPU and generative AI, the model is more around selling GPU hours. So in the market, someone will contract with you and pay you X dollars per GPU hour for the right to use your capacity. Now for on-demand spot pricing, that's high for long-term contracts, one, two, three years. It obviously drops lower, partly because you're locking up 100% utilization of that capacity. I think it's generally being fed elsewhere in the market that you can expect two, 2.5-year paybacks on GPUs, but again, it's a very live dynamic market at the moment in terms of those returns. And it also should be said that our focus on what we see as a test case, this initial 250 is less about the discrete ROI on 250 machines as it is of our proven product market fit, building customer relationships and exploring whether a business scale exists and what that could look like going out into the future.

Got it. And then how are you thinking about energy monetization at Childress moving forward? And how do you expect it to contribute during the summer months versus other months of the year?

Yes. Part of the benefit is we don't need to think. It just does it all automatically. So it's a really simple equation. We contract for power and then our algorithm basically looks at revenue from Bitcoin mining or spot market pricing it makes the decision for us. So we're already using generative AI a little bit actually in terms of how we iterate that in the systems internally. The simple way to think about it is the greater volatility the lower our effective power cost will be because we can tap into that. So every 15 minutes, there's a market price signal in ERCOT. Our systems look at that price signal, they look at the opportunity cost of diverting electrons away from our machines and say where is the highest and best use of that electricity and they send those electrons to that. So whether that's through the Bitcoin network to deliver Bitcoin denominated revenues or whether it's back into the market. So we have come through summer months. That has been a volatile period for a number of reasons. As we look out into the future, it's fair to say volatility is expected and potentially likely to increase in the future transmission line congestion, the ongoing increased penetration of intermittent renewables et cetera. But all we can do is continue to have our system set up to monetize that volatility and lower our overall cost going forward. The final point I would add is, we've mentioned this before, it is choose your own adventure, I can go seek what our power cost is. If you want us to have $0.02 power, we can do it. If we want $0.01 power we can do it. It's all about the parameters that we set in our software and what we trade around.

Got it. Appreciate you answering my questions.

And our next question will be coming from Joseph Vafi of Canaccord Genuity. Your line is open.

Good morning, everyone. It's great to see the solid progress in the business. Congratulations. Daniel, could you elaborate a bit more on the power aspect, especially regarding your approach to the power markets given the amount of power used over the summer? If Childress scales, do you think the same methodology or energy strategy will apply? Essentially, can your energy strategy be effectively scaled to 200 or 300 megawatts? I have a follow-up question after that.

Thanks, Joe. In terms of scale, we've had 20 megawatts operating. If that increases tenfold, the volume would impact the economics. The short answer is no, I don't believe so. That amount of power is still very small compared to the overall liquidity and the total electricity in the market. We’ve previously disclosed that there are about 20 to 25 gigawatts of wind and solar farms in the Panhandle region of Texas. So, a couple of hundred megawatts is unlikely to make a significant difference. However, there is uncertainty in the power market. It is dynamic, with a considerable amount of new generation permitted, including tens of gigawatts of new wind and solar in Texas. No additional transmission lines are planned for our region around Childress, although about $10 billion in other transmission lines are planned over the next five years. The congestion and the prevailing dynamics of low-cost renewables are likely to persist. We aren’t close to load centers like Dallas and Houston, where power prices tend to be higher and a long-term cheap hedge would provide less volatility. So, while there is considerable uncertainty, we can only focus on what is in front of us. This is the reason we established this business—to take advantage of the cheap power available when the wind blows and the sun shines, amidst market volatility, which has given us a significant competitive edge.

Sure, that's helpful. I know it's early days on the generative AI side, but do you have a sense of how constrained that market might become in terms of power? Bitcoin miners have done well at finding inexpensive power close to where it's produced. If this market ramps up, when do you expect power to become constrained, keeping in mind that Childress has a lot of megawatts available over time?

Yes. Look, it's because it's such an early market and it's so disparate and the forecasts are all relatively subjective right? Like what's the adoption curve for generative AI, but the range of variability in that hedge are alone is just going to cause an enormous amount of noise in any answer that I say. All we can say is everywhere we go, everyone we speak to speaks about the infrastructure choke on building out more generative capacity. Yes, before I jumped on this call, I spoke to Will Brother Co-CEO, Co-Founder who's in California at this AI conference, watching a presentation from Meta and their presentation is dedicated to the infrastructure challenge, if they start onboarding of billions of people into using generative AI. So it does feel like it's flavor of the month in terms of the narrative. But again, we prefer to validate these things rather than just get caught up in market hype. Let's see where we get to with its initial GPU purchase, see what it leads to in terms of tangible customer orders and revenue and then we'll obviously be better positioned to work out our own view on where we're going.

Great. Thanks very much, Dan.

And our next question will come from Lucas Pipes of B. Riley. Lucas, your line is open.

Thank you, operator. Hi, everyone. This is Nick Giles asking a question on behalf of Lucas. Congrats on all the progress here, in particular, the strong utilizations and power costs. My first question is related to the AI opportunity. What do you need to see in this initial purchase of H100 to promote further expansion? Dan, you noted earlier that ability to scale is a key consideration. And is this at the data center itself, access to GPUs? Thank you for your perspective.

Yes, thanks, Nick. It's great to hear from you. In any business, it's important to establish product market fit and ensure there's a sustainable return on investment. For instance, purchasing 250 GPUs and investing $10 million to $12 million should yield a return. However, it’s a bit of a chicken and egg situation. You can discuss opportunities in the market, but until you take action, you might not be in a position for meaningful conversations. We've observed that firsthand. Many members of our management team met with NVIDIA this week and interacted with customers, which rapidly enhanced our understanding of the market dynamics and customer perspectives. Just like when you acquire these machines and start using them, you learn how to operate them and make necessary adjustments to your data center. This process fosters a deeper comprehension of the risk-return profile associated with investing more resources in this sector. To directly address your question about what we’re looking to see, we want to achieve revenue. We're not just about installing computers and reporting our inventory without generating revenue. Lincoln emphasized this point. It's crucial for us to generate income from these investments. However, the revenue from the initial purchase is secondary to gaining insights into the market and understanding customer readiness for deploying significant capital over time to establish a solid business in this sector. Ultimately, it revolves around risk-return. If we are going to invest capital, we require a long-term sustainable return, which is closely tied to our cost of capital. It's widely recognized that crypto miners operate differently in terms of capital compared to traditional computing technology companies. Therefore, it will be fascinating to see how these elements converge as we develop this business and how they can position us to continue providing returns to our shareholders.

Dan that's really helpful. I really appreciate that color. You alluded to it earlier, but I just wanted to ask, at a high level, how do you think about structuring agreements with AI customers? You mentioned reserve capacity and on-demand opportunities. Would you expect to be primarily reserve, interested to hear your perspective there.

Yes. Our approach is always focused on managing risk first; we aim to transfer risk to others whenever possible. If we can secure a long-term contract, our instinct is to pass that on. Ultimately, it’s about maximizing returns, which ties into the cost of capital I mentioned earlier. Entering into long-term financing agreements for these GPUs is important. We’ve observed other companies doing this in the market. Having a source of funding with a long-term, attractive cost of capital and connecting that to deploy to a customer at a rate that might be lower than usual trade-in spot capacity—if that creates better returns for shareholders, then it aligns with our model. We don't need to focus on trading GPU per hour pricing if we can establish an effective way to raise capital at a good cost and deploy that widely into a market that requires it with long-term customer contracts. This strategy is very appealing.

That's very clear, Dan. Thanks again, and to you and the team, continue, best of luck.

And our next question will be coming from Paul Golding of Macquarie Capital. Paul, your line is open.

Thanks so much. Dan, congrats on the year. I wanted to start by asking if you could give some color on the state of the supply chain. As we were listening to your prepared remarks with respect to Childress expansion. I heard you note that you're looking at the long lead time items and ordering those ahead of capacity expansion. So I just wanted to get a sense of what the lead time is and where there are constraints at the moment in the supply chain?

Thanks, Paul. Great question. Look, the shorter it is, we're not being constrained because we've had this site for a while. We've been planning. We've got Gantt charts that are longer than I would like to read in terms of the project management, and it's just working through it, right? Like every component, every input into construction has an expected lead time. It has an expected risk. It has a number of options. We learned a lot when we built our facilities in British Columbia across Prince George, Mackenzie and Canal Flats. We then learned even more building the first 20 megawatts in Texas. It was a different dynamic, different supply chains, different contractors, different labor dynamic. So working through all that. We've now got a very accurate lay of the land in terms of what we need to order and when to ensure that we don't have choke points along the way. So for every component, we will look at the lead time, we'll look at the risk that, that supplier falls over, what's our contingency, how late can we lead it, leave it, what level of buffer. So the short of it is we would only really be potentially constrained if we had $1 billion in the bank tomorrow and wanted to pull the trigger on building out infrastructure for the full 600 megawatts. And those numbers are not linked, but they're illustrative. At that point in time, yes, we probably face some supply chain challenges getting all the equipment as fast as we need. But generally speaking, it's all manageable, and we don't envisage any major issues.

Thanks, Dan. And then a follow-up around uptime and power efficiency and utilization, we've seen in prior presentations at prior results and the slide that you provided during this presentation that your utilization and efficiency in power use relative to peers based on those charts has been best-in-class in many cases. And I wanted to ask what you attribute that mostly to? Is it a distinct data center engineering profile? Is it algorithmic in terms of your systems? How should we think about your edge versus the rest of the sector in terms of the capacity at your disposal?

We construct data centers, but while that may seem straightforward, I’m not sure others fully understand it. Many in the industry are still using shipping containers for computers. I believe the sector is evolving. Perhaps we need to reevaluate our position; we might be more of a data center computing business rather than just crypto miners. There are significant gaps that show how underutilized some resources are. Operating thousands of computers in containers remotely can be quite challenging. Regarding immersion cooling, as we've previously mentioned, it is difficult to manage heat effectively in Texas due to the physical laws involved. It becomes increasingly complex to discharge heat when dealing with fluids in high temperatures. Essentially, we're focused on building data centers. We procure computers, set them up, and yes, we have developed numerous competitive advantages and expertise internally. Ultimately, it’s straightforward: we have a PowerPoint presentation, a data center, we connect the machines, and generate revenue. The question remains: why aren't others doing the same? That’s something they should consider.

Fair enough. Thanks for the color, Dan and congrats on the year.

Thanks, Paul.

And our next question will come from Joe Flynn of Compass Point Research & Trading. Your line is open, Joe.

Hi, guys. We're just looking for some color on maybe the initial timeline of AI, HPC and the kind of test runs you guys are offering and what exactly those entail? And on that front, with the customer conversations you're having, would you attribute it to more maybe like legacy businesses looking to expand cloud offerings or like startups that are getting priced out in the market from hyperscalers? Thanks.

Thank you for the question. The delivery schedule is set for the next few months, with arrivals expected at the end of this year or very early next year. We are not waiting for them to engage with customers; ideally, customers will be ready to use the products as soon as they arrive and are set up. We are currently in discussions with a wide range of clients, from large cloud companies and global tech leaders to platform aggregators and various start-ups specializing in generative AI. It's still too early to determine the specific direction of these conversations, although I would guess it is unlikely to be the major tech firms at this stage due to scale considerations. They may not want to engage with just 250 GPUs, and instead, we aim to demonstrate our capabilities and validate our product market fit, using this test case to scale our business over time. Our hope and ambition as a company is to establish long-term contracts with these clients, though we will need to work out the specifics, including whether it will be long-term contracts or spot engagements.

Thanks, that’s all from me.

Thanks. And our next question will come from Reggie Smith of JPMorgan. Your line is open.

Good morning everyone. Thank you for taking my question. I have a few quick ones. Can you remind us of your capital expenditure needs, specifically the incremental needs, to reach 9 exahash as mentioned for early 2024?

I don't think we've disclosed that number specifically Reggie. So let us take it on notice. It's a good question. I wouldn't want to respond.

I can probably provide some color, Dan? So Regin, we haven't provided specific detail in this release, but I think one release back. We provided some guidance around what it would cost to do 20 megawatts. The math hasn't changed materially since then in terms of to do a 20-megawatt building, roughly $35 million of CapEx for both the infrastructure and the miners. If we just look at current data points around where minor pricing is at probably $15 million on the infra and $20 million on the miners thereabouts. So you sort of scale that up times 4, gets you up to $140 million for the 80 megawatts, including the latest generation hiring, which is roughly split sort of $80 million for miners and $60 million for the infrastructure.

Got it. And so just to make sure I'm kind of using apples and apples here, does that figure that you just quoted, should I be comparing that to your cash balance? Or has some of that already been spent, if that makes sense, or paid rather.

Yes. Look, some of that has been spent. I think it's just important to note that construction has been ongoing and that $69 million cash balance is a 30 June number based on the 30 June balance sheet.

Got it, okay. Perfect, and this kind of ties in with that question. But obviously, you've got the halving is going to occur next spring. How much do you guys think about or even evaluate the offers and the pricing for hardware in this environment, given some of the uncertainty around that halving? And maybe you could talk about kind of your base case hash rate assumptions? Or just anything that you guys or how you guys think about it to help investors kind of appreciate that.

Yes, that's a great question. Part of this relates to our strategy, which involves being flexible with the timing of our mining equipment purchases. It takes about six months to build the necessary infrastructure, but once that's done, we can start bringing miners into the facilities within six to eight weeks. Regarding the halving, our energy strategy remains consistent with our approach to prepare for the worst and hope for the best. We anticipate that Bitcoin might perform well during and after the halving, and historical data supports this view, but we also need to minimize risks where possible. This includes managing our energy costs to ensure we navigate these changes effectively. Currently, we are operating at 5.6 exahash, making us the largest producer on the NASDAQ last month, which is a positive indicator. Efficiency is crucial, and we're exploring flexible capital expenditures related to our miners. We plan to adopt a wait-and-see approach; if coin prices increase, we’re confident in our returns and can invest accordingly. However, if there's a downturn in Bitcoin's price around the halving, it’s a relief that we haven't committed all our capital without clear visibility. Typically, during price declines, lower-cost mines tend to dominate, pushing higher-cost operations out of the hash rate. Our goal is to position Iris Energy optimally compared to the rest of the industry.

Got it. And if I could sneak one more in, and it's probably hard to answer, but is there a rule of thumb that like investors should think about in terms of maybe a framework, a better word, in terms of like how do you evaluate a follow-on offering, if you were to do an equity issuance? Like how should investors think about that the increase in potential around that? Is there any rule of thumb or guidelines for that.

I can take this one, Lincoln. Look, it's something we look very closely at. Sorry, the videos is taking time to appear on my screen. Reggie, it's something we monitor almost live time speaking to all the banks around pricing terms, et cetera. I think it's fair to say these ATMs seem a more efficient way to raise capital. Just the spread on your share price, the lack of I guess, discount. We've seen warrants in the past, which is extremely unattractive. I'm just not sure the feasibility of a placement in the current market versus utilizing products like the ELOC, the ATM, speaking to people about kind of vendor financing options, particularly with GPUs and traditional computing land that is more common. I alluded to the debt and financing facility they put in place. That's all attractive look, equity when you're a growing business and looking to lock down a platform is attractive, but equally, we need to be respectful of our share price, liquidity, et cetera. and not dilute our shareholders unnecessarily. So we've got a lot of metrics that we look at in terms of accretion versus non-accretive dilution of shareholders there's potentially some double negatives in there. It's just something to monitor lifetime. The best thing about putting these products in place is you're not making a point in time decision, you retain that optionality every day that you wake up to ensure that you're optimizing your cost of capital and generating that shareholder return.

I can appreciate that it's a complicated process for sure. Thanks for the time.

And I'm showing no further questions. I would now like to turn the call back over to Dan Roberts.

Excellent. Thank you, operator. Well, thanks, everyone. Thanks for the great questions and support from the analysts that ask questions as they always do. We appreciate the support of all our shareholders. It's been a very interesting 12 to 18 months establishing the platform, getting us to where we are today, has involved an extraordinary amount of hard work from the team internally. Will and I could not be happier, we've got a fantastic group, the passion, the commitment, we know that we're at the forefront of an industry that is the future, the digitization of our world, the electrification the movement of renewable energy into high-performance computing. We had conviction five years ago when we started this business. I know for a fact, there's a number of seed shareholders who are on this call that were there back then, they're here today. We're continuing to pursue that dynamic. And I think it's fair to say over the last five years, nothing has changed, except that conviction around where the world is going is increasing like we are following that digitization electrification dynamic, and we have established a platform, which is at the forefront of innovation to capitalize upon it. Yes, it started with Bitcoin mining, but we said five years ago that high-performance energy dense compute broadening beyond bitcoin, it's likely to happen. And here we are at the forefront of that industry as well with a very unique business model to capitalize on that. We've got a very unique proposition in terms of near-term growth, those 30 exahash numbers, the 1.4 cent power that we discussed during the slide deck. We feel like we've done a lot of the hard work, and we can now execute swiftly and most importantly, efficiently pursuing that Bitcoin mining 30 exahash trajectory and in parallel have put our sales in the position with the fantastic team to pursue these other business lines. And you can probably tell that as usual, I’m super excited and again very appreciative for all your support. Thanks once again for dialing in, I'd say see you next year, but we'll see you well before that. Thank you.

And this concludes today's conference call. Thank you for participating. You may now disconnect.