Author: Joy Lou
BitDeer (stock code BTDR in the US) updated its operating figures for November. The market-focused A2 mining machine (Sealminer A2) began mass production, with the first batch of 30,000 units sold to the outside world.
The first growth curve: self-developed chips, sales of mining machines, and self-operated mining farms.
The ability to develop chips on its own has always been the core competitiveness of mining machine manufacturers. Xiaolu successfully completed the production of A2 mining machine chips and A3 mining machine chips in the past six months.
Figure 1: BitDeer Technology Roadmap
Source: BitDeer official website
Figure 2: BitDeer main mining machine parameter prediction
Source: Model forecasts, company guidance
According to public information, the current operating parameters of the A2 mining machine are at the historical leading position among all the mining machines currently on sale and in operation on the market. Although the A3 has not yet been officially released, judging from the known parameters, it will become the world's largest single hash computing power mining machine with the leading energy efficiency ratio. The possibility of this product being sold to the outside world in the short term is extremely low, and it will be used first to deploy self-operated computing power.
Figure 3: The latest mining machine companies and mining machine parameters in the world
Source: Bitmain, BitDeer, Shenma Miner, Canaan Technology official website
In terms of power plants, as of the end of November, the company has completed the deployment of 895MW of power plants in the United States, Norway and Bhutan. There are also 1645MW projects under construction, of which 1415MW will be completed in mid-to-late 2025. According to the minutes of Guosheng's conference call, the company has set up a special department to acquire more power plant projects, and it is expected to add more than 1GW of power plants in 2026; the average electricity price of all self-operated power plants is less than US$0.04/kWh, which is absolutely leading compared with its peers.
Figure 4: BitDeer’s built and under-construction electric fields
Source: Company website
Given the above operating figures, the BitRoad 1EH/s model is as follows:
Figure 5: BitDeer single EH/s model
Source: Model predictions
The key assumptions of the model include that the mining machine depreciation period is 4 years (5 years under North American financial standards), the electric field depreciation period is 15 years (20 years under North American financial standards), and other costs (including manual operation and maintenance, etc.) account for 5% of revenue (the company's historical operating figures are only 1-1.5%). According to the model, the shutdown price of BitDeer's self-operated mining farm is 35,000 US dollars in Bitcoin.
Figure 6: Relationship between pre-tax profit margin of BitDeer’s self-operated mining farm and Bitcoin price
Source: Model predictions
When the price of Bitcoin exceeds $150,000, the pre-tax profit slope of BitDeer's self-operated mine will exceed the rate of increase of Bitcoin. If the price of Bitcoin reaches $200,000, the pre-tax profit margin of BitDeer's self-operated mine will be close to 80%.
The company filed Form 6-K and Form 3-F on December 11, adjusting the shelf offering from $250 million to $580 million, and announced that it would issue $1 billion in common stock debt securities warrants.
As mentioned above, Xiaolu is expected to reach a power reserve of 2.3GW by mid-2025. If all the above mines are equipped with A3 mining machines, the self-operated computing power will be close to 220EH/s (calculated according to the A3 mining machine 325Th, corresponding to about 700,000 units). According to the linear growth of the computing power of the whole network, it will account for about 20% of the computing power of the whole network by the end of 2025. According to the company's third quarter report, the company has cash and general equivalents of US$291 million and US$40 million options. At the end of November, it will complete the convertible bonds of US$360 million, and complete the issuance of US$410 million of the shelf (the original plan of US$250 million has been issued, and the additional US$330 million) and US$1 billion of warrants. The company's cash on hand will reach US$2.1 billion. According to TSMC's current wafer prices and Guosheng's latest conference call, 3NM process costs 200 million USD for every 10,000 wafers, corresponding to 90,000 A3 mining machines, and 700,000 mining machines for 80,000 wafers, corresponding to 1.6 billion USD in capital expenditure. TSMC's latest quarterly financial report shows that the current 3NM production capacity is about 80,000 wafers/month, which will be increased to 100,000 wafers/month in 2025. After increasing its financing efforts, Xiaolu will actively lock in future wafer production capacity to prepare for the earlier lighting of its own mines.
Figure 7: After BitDeer completes all financing and additional issuance, its cash on hand will reach US$2.1 billion
Source: BitDeer company announcement
Regarding the competitive relationship between Bitmain and Deer. The core of the commercial competition relationship is still the performance of mining machines and the cost of self-operated computing power. According to public data and laboratory data, Deer has sufficient competitive advantages in both the mining machines it has produced and the cost of self-operated computing power. With the development of high-end process chips, mining machines, as the downstream of the industry, will also be affected by the upstream competition pattern.
Second growth curve: AI computing power
In addition to mining machine sales and self-operated mining farms, the company's November operating figures showed that it has begun deploying NVIDIA H200 chips in the TIER3 data center of intelligent cloud services for the construction of AI computing power.
Mr. Wu Jihan wrote an article entitled “The Beauty of Computing Power” in 2018: Computing power may be an effective means for human beings to reach a higher civilization, and it is also the most effective way to fight against entropy increase.
The original intention remains.
Nvidia's latest 13F report shows that by the end of the third quarter of 2024, the company has added 7.72 million shares of Applied Digital (APLD), accounting for 3.6%. The latter is committed to transforming to high-performance computing and artificial intelligence infrastructure solutions and cloud services; on December 2, Nvidia, as a strategic investor, led the additional issuance of Nebius (NBIS), a Dutch artificial intelligence infrastructure service provider. The company issued approximately 33.33 million new shares at a price of US$21 per share to accelerate the promotion of the artificial intelligence manufacturing industry. The latest research report from JPMorgan Chase predicts that global artificial intelligence capital expenditure will reach US$480 billion in 2025. Recently, major North American SAAS companies have begun to promote B-side artificial intelligence AI Agent services and will increase investment in 2025, which will increase overall ROI expectations. As a mine owner with a large amount of electricity resources, the transformation from mining business to artificial intelligence cloud services is in line with expectations. Xiaolu has now begun to contact large North American technology companies (MEGA7) and will allocate more electricity to artificial intelligence cloud services in the medium term.
Investment advice and valuation
The right time, the right place and the right people are the best description of investing in BitDeer at the current point in time. The company has accumulated strength and is ready to make a breakthrough. The first growth curve and the second growth curve are expected to rise simultaneously, forming a synergy. It is the most cost-effective target among the current US mining stocks.
However, how to value a company and how to define the company's value in a profit model are challenging. Neither the profit valuation generated by the sale of mining machines alone nor the valuation of self-operated mines is sufficient to cover Xiaolu's actual operating conditions. Therefore, two types of business models are fitted as follows:
Figure 8: Calculation of BitDeer Miner Sales Model
Source: Model predictions
Figure 9: BitDeer self-operated mining farm prediction model
Source: Model predictions
The current average valuation of 170 million USD/EHs for mainstream mining companies in North America is the closest to the market consensus. It is reasonable to believe that in the next two years, Xiaolu's actual self-operated mines will reach between 120-220 EH/s, with a market value of approximately US$20.4 billion to US$37.4 billion, which is 4.8-9.7 times the current share price.
Figure 10: Valuations of major North American mining companies
Investment risks:
1. Bitcoin price fluctuation risk;
2. TSMC wafer risks caused by sanctions.