Hut 8, a Bitcoin mining company, has announced the closure of its mining site in Drumheller, Alberta, Canada, citing power disruptions and rising energy costs as significant factors.
The decision comes amid escalating energy costs and power disruptions, which are severely impacting the site’s profitability. The Drumheller facility, which currently contributes approximately 1.4% of Hut 8’s Bitcoin production but consumes around 11% of its hash rate, will be shut down immediately.
Hut 8 Pauses Drumheller Mining Due to Costs
Asher Genoot, CEO of Hut 8, explained that after conducting a thorough analysis, it was determined that the profitability of the Drumheller site had been significantly impacted by factors such as elevated energy costs and underlying voltage issues. Consequently, all of the company’s Bitcoin miners will be relocated to its Medicine Hat facility in Alberta, Canada.
“We have determined that the profitability of Drumheller has been impacted significantly by various factors, including elevated energy costs and underlying voltage issues.”
Despite the shutdown, the company will maintain its lease on the Drumheller site, leaving the door open for a potential reactivation if market conditions improve.
Several factors, including high energy costs, record mining difficulty, and the anticipated Bitcoin halving and reducing mining rewards, have contributed to stagnation in the sector. In Alberta, Canada, electricity prices per kilowatt-hour (kWh) have surged by 1,000% since 2017, while concerns over power consumption have led the provincial government to restrict new cryptocurrency mining projects.
Unlike many crypto miners, including firms such as Core Scientific and Riot Blockchain, who were forced to sell at least part of their mined Bitcoin holdings due to market headwinds, Hut 8 continued to increase its self-mined Bitcoin stash.
Last week, Hut 8 announced the start of construction of a Bitcoin mining center in Culberson, Texas, with an expected hash rate of 3.6 EH/s. The construction of a facility with a power consumption of 63 MW will cost approximately 40% less than the purchase price.
In September 2023, Hut 8 received the final clearance from the Canadian Supreme Court to complete its merger with USBTC. Following the merger, the company boosted its BTC reserves in October.
Hut 8 Bitcoin Production Declines in February Amidst Operational Challenges
In February, the company’s Bitcoin production decreased compared to January. Last month, Hut 8 mined 292 BTC, compared to 339 BTC in January. The firm held 9,110 BTC at the end of the month. Similar dynamics were observed among other large miners, including Marathon Digital, Riot Platforms, and Bitfarms.
The decline in the percentage of BTC production by these companies ranged from 16% to 23% from month to month.
In a January 5 statement, Hut reported that it had mined 453 Bitcoin in December 2023, bringing its reserves to a total of 9,195 BTC, worth $618 million at current prices.
However, on January 19, Hut 8 shares tanked after the short-selling firm JCapital Research published allegations warning Hut 8 investors of an “upcoming pump and dump.” The company claimed that the merger with fellow miner USBTC could place investors in harm’s way.
Hut 8’s financial performance has also been impacted, with revenue declining by 57% year-over-year to CA$ 55,184 ($40,757) for the first nine months of 2023, primarily due to falling Bitcoin prices—currently, Hut 8 accounts for 1.3% of the Bitcoin network’s total processing power.
In addition to operational challenges, Hut 8 faced a significant stock decline on January 19 following allegations from short sellers regarding legal issues with its partner USBTC in a $725 million merger deal. Hut 8 refuted these claims, citing inaccuracies and speculative assertions in the report. Furthermore, on February 8, the company’s former CEO, Jaime Leverton, resigned from her position.