Miner Weekly: A Tale of Two Mining Hodlers

Nov 26, 2022

Mara and Hut8 tapping into their untouched BTC reserves

On Oct. 31, Marathon (Nasdaq: MARA) and Hut8 (Nasdaq: HUT) were the only major public mining firms still holding all of their mined bitcoins (BTC) despite this year’s bearish market. Unless they’ve changed their strategy in November, they should be holding close to 21,000 BTC by month’s end.

Given the bear market, how are they sustaining their operations since 2021 without selling their mined BTC? Would they have to sell at all?

Both Hut8 and Mara incurred ~$20M each in cash expenses in Q3 to cover recurring costs related to mining production, site maintenance, payroll, and interest. By the quarter's end, Hut8 and Mara had an estimated cash runway of four and six months, respectively, excluding their BTC reserves.

Notably, Mara’s shareholders did not approve a share dilution proposal earlier this month. Hut8 raised only $2M of the $200M upper limit in its ATM offering since August. That’s how the equity financing landscape is looking at the moment.

It seems that both are now poised to tap into their BTC reserves as the bear trend continues.

Mara borrowed $50M from Silvergate in October, bringing its total loan payable to the bank to $100M, with BTC as collateral. With $55M in cash as of Sept. 30 and a new $50M loan, Mara should be able to cover its cash expenses for another year without having to sell BTC – assuming the asset’s price doesn’t drop much further.

The Silvergate loans require the value of Mara’s collateral to be at least 155% of the loan value or $155M. Mara will face margin calls if the collateral is worth less than $133M.

Mara had 11,440 BTC as of Oct. 31. Based on a static estimation that it produces 600 BTC a month, it won’t have enough BTC to meet margin calls by the end of November if BTC trades below $11K.

As for Hut8, it did not draw any amount from its $50M credit facility with Galaxy Digital in Q3 but if it does in Q4, the loan will be secured against its BTC reserve too. The loan-to-value ratio in their agreement is likely similar to what Silvergate offered to Mara, based on the terms Galaxy had with Bitfarms.

Per Hut8’s October production, it should be holding almost 9,000 BTC by the end of November. If it borrows $50M from Galaxy, it won’t face any margin call risk unless BTC suddenly tanks to below $8K.