Power Analysis

DMG Blockchain - CEO, Sheldon Bennett & COO, Steven Eliscu Q&A - Q1 Earnings & 2026 AI Outlook!

• Anthony Power & Bryce McNallie • Season 1 • Episode 522

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0:00 | 52:06

We break down DMG's Q1 results, why we’re keeping cash and BTC, and how market softness creates chances to buy efficient hardware and cheap power. Then we map our pivot: a 50 MW AI build at Christina Lake, Core+ software revenue, and a Malahat partnership to scale without heavy dilution.

• Q1 revenue and profits with 68.5 BTC mined
• Cash, BTC, and short-term investments strengthening liquidity
• Outlook for miner economics amid price dips and ETF flows
• Secondary market for machines and efficiency targets near 10 J/TH
• Wholesale power costs, hydro cooling, and $1.5m incentive
• Helm, Reactor, and Terrapool as Core+ revenue drivers
• Reporting milestones to validate software revenues
• U.S. site diligence delays and focus on Christina Lake
• Tier 3 design, backup power, and off-taker requirements
• Funding paths that avoid ATM dilution and use partnerships
• Malahat JV progress across AI and utility planning
• Capital allocation between hashrate growth and AI build
• Heat reuse explored but deferred to post-AI build
• Adding general compute to increase utilization and jobs
• 50 MW AI target as the definition of near-term success

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Q1 Results At A Glance

SPEAKER_00

Hey guys, welcome or welcome back to the channel McNally Money, the official home of Power Analysis. In today's episode, we're joined by Sheldon Bennett, the CEO, and Steve Elliskew, the C O O of DMG Blockchain Solutions, hot off the heels of their Q1 results. Before we get into it, take a second, smash the like button, guys. Big help to myself and the channel, Anthony Lovesdett. If you're not already subscribed, McNally Money, feel free to join. And let us know in the comments section below if you're currently holding shares of DMG and what you thought about their results. With that being said, let's get into today's interview. All right, guys, away we go. A great interview in store for you today. We've got the team from DMG Blockchain Solutions, Sheldon Bennett, the CEO, Stephen Elliskew, the COO, hot off the heels of Q1 earnings. We're excited to get into it. And as always, gentlemen, great to have you on the program. Well, thanks for having us, right?

SPEAKER_03

Thank you.

SPEAKER_00

Now let's get into it. The first question here highlights from Q1. You guys obviously don't operate on a traditional uh calendar year. You're off to the races in 2026. What were some of the key takeaways on the financial and operational side?

SPEAKER_02

Yeah, it was another, you know, I will say good quarter for our Q1. So uh where it sits. Uh as usual, I let Steven run through the highlights, but uh you know, nothing shocking and nothing disappointing.

SPEAKER_03

Sure.

Mining Outlook And Balance Sheet Strategy

SPEAKER_03

And the our revenue was 11.2 million, uh four and a half million gross profit, one point nine million operating profit, excluding depreciation amortization, and stock-based comp. Uh we did gain the benefit of a one and a half million dollar energy incentive. And we had 1.76 exahash, 68.5 Bitcoin that we mined. Uh we ended with a balance of 403 Bitcoin and a total balance of 59 million if you include cash, short-term investments, and our digital assets.

SPEAKER_02

So all in all, you know, for the size of company we are, um, we're quite strong. You know, we have cash in the bank, uh, we're we're creating strong revenue for our size of our fleet. Um, so I think um Q1 was, like I say, uh a good quarter for the company of our size.

SPEAKER_01

In terms of the um obviously the Bitcoin price, we've seen that fall away from the end of uh uh December, where I think it was about 87,000 or just over 87,000. So we had the benefit of the last quarter um with it with a with a uh a relatively higher average than potentially going to have during this quarter. How are you seeing Bitcoin mining um at the moment and what you're expecting to see you know as we as we go through the remainder of 2026 in

Hardware Prices And Secondary Market Openings

SPEAKER_01

terms of uh you know the the challenging facing some of the or most of the North American public miners?

SPEAKER_02

Yeah, no, that's a great question. Please tell us the future, is what you've asked. Uh I'm not sure if I can do that. Um but uh I do think 2026 will be a tough year for crypto miners. Um, you know, all crypto miners, crypt miners as well. Steve and I have seen this a few times. Um it's not unexpected. I know there's this kind of dichotomy where people are saying Bitcoin's broken out of its four-year cycle and institutions are in it, and there's ETFs and all this kind of stuff, um, which is great, but it is a double-edged sword. It can be good and bad because you know, ETFs will shed Bitcoin and get add Bitcoin and do whatever they do right. But you know, we've always taken the stance that we should be ready for uh cooling off, hopefully on a full-on freeze in the winter, but a cooling off, as we have for many years. One of the reasons why we've sort of kept our cash balance uh a bit higher than normal, kept a lot of Bitcoin. We've always been low-cost operations in how we run our company. Um, so you know, we're sort of always going off the idea that it won't be pretty. And if it is pretty, that's great news for us, even better. So I think we're you know

Power Costs And Energy Incentives

SPEAKER_02

very strong, strong balance sheet, you know, lots of asset, uh ability to uh access debt if we want to. Um, so you know, we're kind of looking at this as a time where we look at our Bitcoin um operating amount and go, you know, should we invest more, bring up our hash rate, you know, past sort of the 1.7, 1.8, move up into two or three, like like we thought about doing in the past. Um it's a good time. Um, we're not uh as focused on Bitcoin mining as we are on AI, but in the interim, that transition time, you know, Bitcoin mining pays our bills and you know it's paid our bills from day one. Um so we don't uh we don't take that for granted as a company. Um so you know, if we did uh decide to invest a bit more in Bitcoin mining, it would be sort of a short-term few years of extra revenue while we work on our AI strategy, um, because it takes a while to get that AI off the ground and running. And we think we can do sort of a bit of it at the same time together, some megawatts in Bitcoin mining, megawatts in AI as we transition more over to uh to AI. Um and some of the sites that we've been looking at for a while, um, I think those

Core+ Software: Helm, Reactor, Terrapool

SPEAKER_02

um would end up being potentially Bitcoin mining sites, as you know, we're looking at uh cooler regions and areas that aren't you know close to cities, uh, which would be better for AI.

SPEAKER_03

The one thing we don't do is listen to prognosticators of Bitcoin pricing. People said the four-year cycle is dead, it seems alive and well. Bitcoin has tracked software stocks, as software stocks have gotten hit by concerns about AI. Bitcoin actually followed a very similar trajectory. Who would have thunk that? So it's just we know that the next couple quarters at least are gonna be somewhat challenging, not just for us, but the industry. We're keeping it tight, we're gonna stay really focused, as Sheldon just said. Our focus now is to build out in AI, and there will be a transition period between Bitcoin mining at our Christina Lake facility and AI, and we will Bitcoin mine as long as we can at that site, and we are still looking at other sites for kind of where we think the future of Bitcoin mining is going to be.

SPEAKER_01

Just as a follow-up to the question on mining, I mean, we've we've noticed a few peer miners also been growing hash rate, whereas the majority seem to be focused on using their power elsewhere. Um, can you tell us what's happening in the in the space with regards to machine prices then? Because generally there seems to be some sort of correlation between um overprices and the bitcoin price because Bitcoin price falls, machine falling price, but are you seeing that? Are you seeing it being opportunistic? And also, with the amount of companies looking to switch and move away, we know some have literally been selling a significant amount of their fleet um to do that. Are there opportunities to buy on the second hand market um at size and scale that meets your requirement?

SPEAKER_03

Yeah, and we've been talking about this for a while, where we thought there would be a secondary market as Bitcoin miners in North America uh start to transition to AI. And we're starting to see that. So there's very much availability in the secondary market. I would say in the the primary market, we've

Proving Revenue And Reporting Milestones

SPEAKER_03

only seen some incremental movement. Uh, this is gonna take time, most likely. And people also want to see is this temporary dip? I've seen prognosticators say this is gonna be the shortest downturn on record. Hopefully that person is right. But we need, I think the the industry needs to see how this downturn is gonna settle out.

SPEAKER_02

Yeah, I think this, you know, at least for a smaller company like us, this downturn in some ways is positive. We were fighting some really large, you know, crypto mining companies in the US and other parts of the world that have now moved to AI. Um, you will see if that affects the hash rate and the difficulty. But um there are definitely great buying opportunities for used fleets. Um, there's less buying of new generation miners that we're aware of now happening with the larger manufacturers. So, you know, we're getting all sorts of great offers for new equipment. So, you know, just a lot of options have opened because the market's dried up considerably with less capital going in, at least from North America. And we do we don't really know what's happening globally as well. We do know there are hot spots of still investment and purchasing of equipment in other parts of the world. But for us, you know, it's opened up some opportunities. You know, we do

Hydro Cooling Grant And ROI Impact

SPEAKER_02

have cash available. We are we do have some megawatts available that we could add more fleet to. So we are actively looking at, you know, what could we do? We if we did do something, I'm not sure if we would buy sort of used S21s versus something newer. Um, we'd try and get uh our joules per terahash as down as close to 10 as we can. Sort of, you know, a significant uh efficiency gain for us over our what we're running right now.

SPEAKER_01

Just one final one before I hand back to Bryce. Um, obviously, with the number of sort of like conflicts that have uh around the world at the moment, we saw a a spike in the oil price this week. Are we expected to see any change in energy costs in in North America? Is this going to be affecting you guys? Are you are you on any sort of PPA agreements there? Or uh where do you see energy in this short-term position at the moment?

SPEAKER_02

I don't think we've seen it yet. We do uh have two energy contracts, as we've discussed before. Um, the one of them is wholesale power, like you would find in a deregulated market. Um, that price for us over the winter has been the lowest we've seen in many years. Um, so we've actually paid a lot less for the bulk of our energy over the winter period uh than previously. Um I haven't seen any real spikes in that market yet. Um

Volatility, Accounting, And AI Appeal

SPEAKER_02

I think usually oil and gas, uh, you know, kind of their prices go into electricity eventually. Um but we haven't seen it yet. We can go check the market, but so far it's it's been pretty consistently around the same price within a few dollars on every hour that's that's that's bid out. Yeah, thank you.

SPEAKER_00

Yeah, great to hear. Hey, I wanted to talk a little bit about Core Plus uh before we get into the AI strategy, specifically how you guys view Core Plus as a uh revenue opportunity in 2026, and if any of the technology you're developing for the Bitcoin mining side can be transferred over to the AI GPU operation, HPC side of things.

SPEAKER_02

No, there's two in there. So um maybe I'll start with the last one, the any of our technology work in in AI. Um, I think you know, Helm, which is our um software to run uh uh our data, our data center, or crypt, you know, which is you know a crypto mining data center, that was actually made uh to run

U.S. Site Diligence And Christina Lake Focus

SPEAKER_02

any kind of data center, um, and even GPUs that we do have in our data center. So um I think that moves right across because it talks to our utility, it talks to all of our unit subs, it talks to any kind of HVAC system. So we have some dry coolers and things like that. Uh, it talks to every server, it talks to them continuously. We've started introducing AI agents so that our staff can just start talking and typing to their computer and asking it what's going on, why is the hash rate coming down. And it'll start saying, well, it's this miner over here, that mine over here, and sort of interventions. Um, that that software helm, I think, is going to be one that it doesn't matter what we do, that will be sort of like the guts of running our operation. So that will cross over quite quite easily into uh into the AI world. Um when you look at our other software, which is more Bitcoin-centric, and that's kind of what we bundled in as digital asset financial services, um, you know, a systemic trust kind of sits in the center there. We do believe, you know, Terrapool and Reactor will be sort of the two uh main pieces of software that will be revenue generating outside of the trust itself. Um Reactor, um, for those that don't know what it is or can't remember, you know, don't remember what we said last time, it's basically a software that uh uh ensures the delivery of hash rate contracts. So it's the way it's set up. And uh if I was to buy two xahash um from power mining analysis, um, they would say, okay, well, two xahash for um a month is 20 Bitcoin. Um I'd say, okay, well, then make sure that 2x hash gets delivered to me. Um and so if they had any outage or if something happened or you know the delivery wasn't consistent at 2x every minute, the software of reactor ensures that it catches up, it calculates if there's an outage or or it's underpaying, and then it overprovides for that just to uh it does the math to ensure that the full 2x for 730 hours are delivered to us uh as per the contract. And there's no software out that does that. Um, so that it becomes a really unique tool. And obviously, we make some fees off of that, um, but it becomes a great tool for us to buy and sell our own hash rate as well. So, you know, we're probably gonna see us getting involved in buying and selling our own hash rate when we can be opportunistic uh using our software. Um so we think that's a really interesting uh piece of software.

Capex, Partners, And Tiering For AI Data Centers

SPEAKER_02

There are a lot of companies out there that buy and sell hash rate, but it's very manual. It's not an automated system uh like we've created. Um and obviously, you know, Reactor was around before DMG, a company called Navier, uh, created that software. Lots of companies used it. Um uh and uh you know we bought that software from from Navier, uh which are good friends of ours. And then on Terrapool, um, you know, we've we've had Terrapool on and off over many years. There's been um issues with Terrapool. And when I see issues, it's not technical issues on our side. Um we have for those that are Canadian miners, we have issues with the Canadian government. I think we've solved a lot of those around taxation and running software that do pooling. So um we do see ourselves relaunching Terrapool uh a little bit different than before, but fully compliant. Um and so we are excited to get Terrapool up and running again. Um, the the tenets of why we created it and what it does haven't changed. Um we've ran into some you know difficulties uh where we reside as a company, but I think that that's uh that's coming to an end or pretty much come to an end, and you'll see more information about Terrapool coming out in the coming months.

SPEAKER_01

What milestones should investors be sort of like looking at over the next 12 months, which would prove that these additional strategies that you're implementing um are meaningful revenue contributors rather than sort of longer dated options?

SPEAKER_02

Yeah, I I think like any anybody, you know, uh starting to see us report some revenue on them is really good at having the proof is in the balloting. So, you know, um it's pretty easy for for any investor for us to say, well, we're not making any money on this yet because we're not reporting any revenue on it. Yeah, but the RD costs are coming down, as you can see, like we're kind of wrapping things up um and figuring things out, testing's going on, this stuff is you know, sort of running in its um in its beta phase. I don't know if beta phase is the right word, but it's running in uh on it like a test net system. I just I think as the next couple quarters come out, you know, we'll we'll either prove that we've done it and you'll see some numbers on it and we'll be talking about them, or you'll be saying, when are we gonna see some numbers? So, you know, it's up to us to really push the the last little mile here and get it done.

SPEAKER_00

Another quick one I had, uh you mentioned the energy efficiency incentive grant, one and a half million dollars. Can you talk to us a little bit

Funding Without Dilution And Malahat JV

SPEAKER_00

about uh what the plans are with this money and is there additional opportunity for incentives like this moving forward?

SPEAKER_02

No, it's a great question. So um we are quite close to our utility uh uh in British Columbia. Um they have a program open to any business uh and a variety of different uh retail levels as well. So we we just had a meeting, talk to them a little bit about some of the stuff we were doing. Um, this idea of converting and using um fluid to take the heat away from chips uh and the amount of power it saved was really interesting for them. Uh so we you know hired uh an energy consultant, did a study. We talked about that study a few years ago, um, did that study. They liked you know the results of it. So uh we went ahead and invested money. And this is why we, you know, was part of when we built other six megawatts of uh uh hydro cooling machines, used that as the basis to uh uh have another consultant come in and and verify that what we said in the original study was true. We actually did a bit better than the original study in the energy savings, and um that resulted in an incentive. So the idea of the incentive is to um cut down our ROI time um to making it you know a shorter period, so we're more interested in spending that capital. And so obviously, with the one and a half million dollars of uh of incentive that really helped cut our ROI on the equipment we had to put in. And so it's worked really well. Um, it's been seen as a success uh as a project in in BC and with our utility. They've asked us if there are anything else we'd like to do. So we're we're we're looking at uh doing another project. Um, our team's kind of looking at a couple other ideas. Um they may be very similar to what we've done before, as there's a lot more energy and efficiency we can do. Um, as you know, we only did this on six megawatts, and we have many more megawatts. So we're looking at and just discussing

Capital Allocation Between Mining And AI

SPEAKER_02

whether utility, a second project, um, probably similar kind of dollar value, um, but you know, every dollar counts, uh, especially you know, where Bitcoin mining's at and the the hash rate price right now. So um if there's some incentives to help us uh do some conversions and put in some new technology, you know, we're we're definitely interested in doing that.

SPEAKER_01

Now, in terms of obviously um uh mining, and you know, we we've seen this uh quarter you had a uh a 14.3 million unrealized loss, and and and previous similar quarters it was a 15.3 million gain. Um, with this sort of like volatility of Bitcoin price, how should investors uh think about the underlying operating performance, which separates that from the obviously the the crypto mark-to-market volatility?

SPEAKER_03

Yeah, remember that is comprehensive income that you're referring to, and that's most investors refer uh to net income, so the comprehensive income is additional portion that's reflected on the balance sheet. I notwithstanding that clearly there is volatility in the business, and hence you know, we've talked about our focus on AI and what we think that can do in terms of bringing the type of PL that will be more attractive to investors, while the Bitcoin mining part that will continue is will support what we're doing in digital assets. Yeah, okay, great.

SPEAKER_00

And and we can shift right into the AI strategy now, actually. So my first question, kind of a double header again for you, Sheldon. Uh, update on the U.S. site procurement activity. I know you guys talked about some additional due diligence at that initial site uh discussed on our last podcast. Can you give us an update there? And how should

Heat Reuse Ideas Put On Hold

SPEAKER_00

we think about priorities in terms of the US expansion versus the Christina Lake conversion?

SPEAKER_02

Yeah, it's a great question. So um we don't have much movement yet on the US site. You know, we're you know in the backseat on this. So in our due diligence, some things came up as we told you last time. Um the the seller uh is dealing with those. There were things I think they were not uh they were a bit surprised with as well that our our due diligence team found. As we've said, once those those those issues are rectified, you know, we will go ahead. If those issues aren't rectified, then we'll you know have to you know stop the deal and and and and have a breakup. Obviously, we want to go ahead. So we were standing by this deal. We're you know doing what we need to do to keep this deal alive, but we don't know the outcome, and that's why we plan. Our guidance on it. So we're not controlling whether or not everything gets rectified. We're sort of a party waiting for it to be rectified and then do a purchase. So it really has nothing to do with us. So once you know issues are worked out, you know, DMG's there and wants to finish this deal. If um it takes an ordinary amount of time, six months, a year, whatever, probably we'll we'll pivot and go somewhere

Designing For Off‑Taker Needs And Uptime

SPEAKER_02

else and do something else. There are some other um opportunities in the US that we're pursuing. So it's not that this uh one site is uh a you know one deal and done, we're never doing anything else in in getting more power or more sites in the US. This is just the first of a few that we're looking at and that we're working on. So that's kind of where we're at. But because of this, uh obviously um and and as you've heard, we are much more focused on uh Christina Lake, and you know, we're really focused on uh figuring out how to properly um present that to potential off takers. And what I mean by that is you know, hyperscalers, neo clouds are kind of what we're looking at, and um you know there's a lot of work uh behind the scenes, uh things that need to be understood and disclosed so that you know a company uh or organization wants to potentially put in hundreds of millions to billions of dollars, you know, there's no stone unturned. So you really have to understand everything. Um, and so we've done a huge amount of work on that over the last few months. Um, and that's it's going along nicely. So um, you know, it's really our focus right now is to is to get the Christina Lake site uh under some type of agreement uh as quickly as possible, uh while we develop a few other sites.

Adding General Compute Beside AI

SPEAKER_02

Um and you know, we thought that our UF first US site was good to go. We, you know, signed some agreements, you know, had our due diligence period on, you know, we found something. Fortunately, we found it in time, but now we're a bit more hesitant to talk about any deals we're working on until the deal is completely over. So, so we've kind of um, you know, we're quite excited about this deal. Now we have some other deals that we're excited about, but we're we're stepping back and we're not really gonna announce anything until the deals are pretty much done. I don't I don't think we're gonna sort of pre-announce a deal that we're in the process of doing again.

SPEAKER_03

Christina Lake, there's gonna be there's just a tremendous amount of work that needs to be done, just even in conjunction with finding an off-taker, whether it has to do with uh how we're gonna just work uh connectivity to the site, the type of construction we're gonna do with the site, the type of technology we're gonna enable, how we're gonna best utilize the land. And there's a whole bunch of folks that we're talking to all in parallel, because we

Defining Success: Secure An AI Deal

SPEAKER_03

know this is gonna be the hardest project that we've ever done in the history of the company. Even if it's just, let's say, a powered shell, what we have to do to get a deal and to be able to execute on it is gonna be hard. And we know that. And there's a whole financing element as well that goes in conjunction with that. So Sheldon and I are really focused on that. We're focused on what we can control. We can't control what's happening at the boardman site. So uh we're kind of as Sheldon said, we're kind of bystanders in that. But with regards to Christina Lake, that's really where we're spending a good chunk of our time right now.

SPEAKER_01

Uh yeah, you you've you've highlighted, I mean, quick Christina Lake, I just want to focus on it because that is your site, it's uh 65 megawatts, and potentially you could deliver 50 megawatts of compute power there with the PUE, probably that you'd be able to achieve in North America at your at your uh particular site. Um you've already highlighted the funding side of things. And um, I just want to, before we talk about funding, I just to touch on um you've also been witnessing the market uh a number of different strats from some of the poor mines in terms of the amount of capital they're spending on very different projects. So we've got some coil one uh bills going on. I know that you're very familiar with uh in the Rockdale area there. Um, and also um with the likes of core scientific, I think that their infrastructure looks to be probably the cheapest of all the refurbishment bills that are going on at the moment. And then other ones called, you've got the likes of children where they're planning to spend up to $16 million per megawatt. Now, for the faint happening out there, um, you know, even if you turn around and say we're gonna go do some sort of hybrid, 50 megawatts is going to require, you know, um a significant um amount of capital. What sort of um potential options are open to sort of like, you know, do a way of partnering, or is it something we can do uh from a scale perspective and then build up scale is sort of like uh so that you can deliver uh you know how the lobby miners have been doing often and so that the concept is approval? I mean you're one of the old people in the Bitcoin mining space, but probably requires an amount of different technical skills, and and Steve was alluding to that, I think, in the conversation there. Um how how you know how how do you go about bringing that expertise into the industry as well to help you build data centers for the requirement of uh HPC?

SPEAKER_02

That's that's a great question. Um we we have gone out and started hiring some consultants that are specialized in this area in Canada. Uh, they've been giving us uh a great amount of information, you know, people that have 25, 35 years of experience in data centers in Canada. Um, so that's that's very useful. Um that gets you so far, we will have to obviously hire and bring in some talent uh as we get closer to a deal being done. Um but I think the financing question is a great question. You know, we spend a lot of time thinking about that. You know, uh we're not a core scientific or you know, an IRAN or something like that that has you know much bigger balance sheet and and uh uh so you know we are figuring out different ways of doing this. Um you know, there's there's just sort of no way around having to put money into it. Uh you're not gonna get a major off-take agreement without some of your own cash involved in there and you're sort of skinning the game. Um Steven's really been at the forefront of working on different strategies. I don't know if he wants to say a few words, but um, he's really been looking at the cost on our side, what we can do with our partners. Uh, I think you know, as we get closer to a deal, you're gonna hear more about the Malahat and some of the things that we can do with with them that could make the the funding of this uh a little less painful. And so we we have some strategies. Um it's a bit early for us to say this is exactly what we're gonna do to fund this. But I think there's three or four different levers out there of things we could do. And you know, we're getting some good advice, you know, from different investment banks and you know, different companies that are in our peer group that have made the transition. So we we're pretty open to talking to a few of them of how they've done it and what they've done to sort of make that that change over to uh to HPC.

SPEAKER_03

A lot of this is gonna the requirements are gonna be driven by what the off-taker needs. And so there's a lot we don't know at this point and that range in CapEx. Yeah, we kind of get that. If this is gonna be a state-of-the-art Vera Ultra Rubin data center with 800 volt DC, it's gonna look very different than if we do GB300s as an example. So we're not necessarily saying it's gonna be like this or like that, it's gonna cost this or that, but we're very much aware of a lot of the different options that we have. A lot of the costs end up being to support uh the backup power generation that uh we are directly connected to a transmission line. We do have a lot of confidence in the ability of our utility to deliver power, but we're still gonna need contingency plans. No utility runs absolutely 100% uptime. And there's costs associated with that, but that's gonna again be based on the requirements of the off-taker and uh how we can most cost effectively implement it.

SPEAKER_01

Yeah, I just wanted to add to the to the fact that since I've been you know following DMG and covering the financials on a regular basis, you're probably one of the few miners out there that haven't really uh utilized any sort of ATM program. You don't you don't tend to sell shares to uh for for for just anything. It's that you've used capital sort of like uh strategies to to utilize Bitcoin and other alternatives before you've hit uh hit the ATM, which has been obviously a tool that many of your peers have been using for the last three or four years.

SPEAKER_02

Yeah, we've never used the ATM. Um trust me, it comes up a lot. But but we've we've resisted uh that temptation. I mean, it's it's very easy to turn on and and have you know the ability to sell your shares for cash every day. Um makes a lot of things easier in in some respects. Um maybe we've picked the harder path, but um, you know, uh a lot of our shareholders you know would like to see us not dilute um our board as well. So we're trying to be very strategic about it, um, you know, when and if it happens. Um an ATM isn't really that strategic. It's it's it's uh it's it's it's a tool. It's just a tool we've chosen not to use.

SPEAKER_00

Sure. Hey, now you just made reference to the Malahat partnership. I wanted to get a bit of an update there again on sequencing priority between the Malahat and the Christina Lake project and any potential synergies as you kind of alluded to there, Sheldon.

SPEAKER_02

Yeah, I mean the Malahat are a great partner. People are waiting for us to sign some definitive agreements. I think that that wait's coming to an end. Um, it's actually really odd the Malahat are pushing us to move faster, which is the opposite. Normally we're pushing them to move faster. So um I think that they've got an AI bug in them as well, um, with kind of watching what's going on and seeing what's happening in industry. Uh obviously, um, as we announced, they are part of our I said, sorry, uh application for the uh the federal government's 100 megawatt request for information. Um, so they're excited about that as well. Um so there's there's a lot of um uh agreement on on how we should work together, what we should do, what the priorities are. Um one of the biggest things in getting from the LOI to a definitive agreement is just sort of how will things work, how will they be funded, who will lead what, you know, all these types of things. When you have a sort of a joint venture, it's really important to get all this worked out ahead of time and not try and discover and negotiate it after we start. So that's taking a little bit longer. But um, like I said, like I've said before, that partnership uh I think it's gotten stronger over time. Um, I think when they first uh started talking to us about AI data centers, um, they weren't really sure what they were talking about. And in some ways, we weren't quite sure what we were talking about, but we kind of knew we wanted to do it. And so now I think there's a lot more of like we understand what we're doing, they understand what they're doing. We've had a lot of discussions and guidance um with them on power on their territory. This is a big part of uh working with us and us working with them is you know, obviously they need more power, uh that's an issue. Um, so you know, we've gotten actively involved in giving them ideas to discuss with the provincial government uh of things that uh we think are important for the Malahat to clarify or ensure they have uh with the provincial government in what they need on their territory for power. So we've been very uh helpful with them. Um, you know, we've broken up our relationship into two parts. One is sort of the AI side, the other is the utility side, the power side. And so we're kind of pushing them both together at the same time. Probably the AI side agreement will come together before the utility agreement, um, the kind of neck and neck, but I think that one will probably happen first. Um, and there's really not much left uh that we're we're kind of working on. Stephen's kind of got the last draft of the agreement that he's gonna gone through. So I think that that's gonna be great to finalize that. But even before it was finalized, we've always been working together like it's done. We've always kind of been working together like we have an agreement. Yes, there's some paperwork to do because you know, lawyers need to be paid. But you know, we've kind of always been marching together at the same uh beat here and and and working on um a shared vision of how we want to do AI and power with them, you know, between Malahat's territory and our territory, but power specifically on their territory. And I I could go into the financial benefits of that again if if if you don't remember, but there's a bunch of tax and uh financing benefits and things like that that um that are good from a corporate point of view, and then there's the intrinsic benefits of Malayhat have investment on their territory and jobs on their territory and jobs for their people, which are all you know important things for them and for us as well.

SPEAKER_01

Yeah. I mean, looking at Christina Lake um uh Sheldon, I mean 65 megawatts, I'm assuming at the moment you're not utilising all that power capacity there to deliver your 1.7x of mining. Um as we move forward and the decision to spend more capital, whichever strategy you've already mentioned about the corporate strategy that you're looking to bring forward as well, and uh, and the AI, and obviously try to increase mining with more efficient uh you know machines added there. What sort of can you talk us through sort of like how you go through the decision process when you want to sort of enable capital for certain projects?

SPEAKER_02

Yeah, I mean for us it's math, really. It's just can we kind of look at it and say, you know, we've been calculating sort of the future value of uh and the ROI on Bitcoin mining equipment for the better part of 10 years. So we've we've gotten that down pretty good between Steve and I. So, you know, we you know, obviously, you know, you've heard me say this many times, you don't trust Bitcoin, we we don't trust it, but we understand it and we kind of we we start at like what's the worst? What's the ROI on the worst? Is that something we're willing to go into? And then anything beyond that is just all goodness for us. So, you know, um when we look at investing in Bitcoin, I I wouldn't say that there's a bad ROI on Bitcoin, uh buying Bitcoin miners right now and putting more in. I would say it's actually not a bad ROI right now if you're sort of the 21 uh series or higher. Um, but um, you know, what will we do it? That's a different question. Um, you know, Steve's got a couple of models. We're looking at some ideas. We do like the hydros, you know, we've had some issues with the um the CDUs and the dry coolers. I think those are all behind us now. We seem to be running quite steady now. We've solved a few things of you know, working with the new technology. Um so that's that's great. Um, so now it's just really like will we put more money into it? Um, are we gonna put more money into AI? Are we gonna do both? Really, for us, we're gonna look at where does that money come from, what's attached to it. Um, you know, we would like to do something that's non-dilutive, obviously, if it's involving Bitcoin. So we're looking at using our own funds or taking on some debt. If we took on debt, you know, we would like to have low interest debt. Um, most debt for crypto companies is quite high. Um, so you know, we're looking at those things, but um, the model doesn't look that bad. We do have megawatts available. Um we're running our J Pros in the high efficiency mode, so less power, um, a little bit less hashing, but but less cost of power and a and a better return on it. Um our S21 hydros uh are running well, uh obviously making us uh the greater margin than the J Pros. Now, of course, we have the T21s. Um, not known to be a very good miner uh after all, but um our fleet is sort of crunching away, doing its thing. Um we've kept them outside in containers uh with lots of uh air flow, a lot nice and cool. So they seem to be okay inside uh buildings, they don't like it as much. So uh we found that they they enjoy being outside more, so they're free to work outside all they want. And believe it or not, our XPs, uh you know, which are old, a few years old, um, are doing well as well. So um, you know, they're they're still uh generating a good return for us. So um, you know, kind of when you look at our operations, um we're still we're still doing okay with with an older fleet. And you know, we've taken the first step getting some uh 21s in, T21s and S21 hydros. And you know, we're looking at a few more steps um in this, but you know, I don't think you're gonna see us saying anything like we're gonna go to five or 10x a hash or anything like that. But um, you know, we we definitely understand the value of Bitcoin mining. We we think we're a very low-cost provider uh when it comes to our cost to operate and and our ability. And I think you guys have seen sort of the monthly stats of how we do uh the Bitcoin reduce for our hash rate. And normally we're up there um in the top five, I would say. Um so you know it's something we're really good at, and you know, we need money to to grow the business, we need money for AI, so it's it's on the table for us to invest a bit more into Bitcoin mining.

SPEAKER_01

I just wonder, Sheldon, with your background and obviously Steve at your side there, have you looked at anything you can do with the uh with the heat generated from these miners and utilize that for any anything like uh maybe agriculture or for heating uh-buildings?

SPEAKER_02

We've looked at it um you know over the years. When we were all air-cooled, it's just it's uh low quality heat, and there's nothing around us to give that heat to. Okay. Just the location we're in, it's not very populated area. Uh now with hydro, um, we've had some discussions with strawberry farmers and vertical farmers. Um we pause those discussions mainly because of our AI ambitions, and we're not too sure if we'd actually have the space to give them because we have 33 acres, you know, and you have to realize we already have a 27,000 foot foot building there. We already have a bunch of containers outside, we have a substation on there as well. And you know, we have some you know plans to to do the AI on that same property. Um, so we've kind of pulled back a little bit on this idea of uh putting in vertical farming or some type of partnership with a farming uh organization uh until we figure out AI. I mean, right now it's kind of like 2026 for us is AI, AI, and AI. We need to figure that one out. Uh you know, if we have excess heat from AI or crypto, once we figured AI out, then we would be looking at, you know, what could we add that's complementary to for that heat. But right now it's really just how do we how do we execute on AI?

SPEAKER_03

Yeah, we've looked at the models for doing that. I mean, the excess heat helps, of course, in terms of the economics of those models, but uh frankly for us it's best we stick to what we know to minimize complication. Still, if the if the mining goes down, you still need a way of being able to support supply the heat. Uh and so you always need backup support, and then when you start looking at it, it doesn't it it it can help on the margin, but it's not necessarily uh uh the reason that we're in business. I mean, we're in business to execute on high performance computing, whether it's Bitcoin mining or AI.

SPEAKER_00

AI this year will leave the strawberry farm until 2027, maybe then, boys. Last question for me, and I'll hand it back to you, Anthony. In terms of data center construction, and on that topic, you have a long-standing history, various different types of cooling, uh, running different types of machines. You've got m access to modular data centers. Do you talk about the Christina Lake design? For those viewers who are unaware, Christina Lake, it's in the same province as Iran's Canadian assets as well. So this is a very desirable area of the country to operate data centers. Are you leaning one way or another in terms of your tier construction, tier one, tier three? Anthony talked about some of the price differences. Uh, how does the Canadian data center kind of position itself in in relation to some of the things we're seeing in the States?

SPEAKER_03

Well, I think we should just go back to what we indicated before, which is it's going to be based on what the off taker needs. And the tiering of the data center is going to be driven by their requirements. Everything we're planning is assuming that it needs to be tier three, which is to be down less than a couple hours a year. And that is a pretty stringent requirement. That's essentially the gold standard for uh most of these data centers. And uh we're not assuming that the requirements are going to be anything less. Go ahead, Shelby.

SPEAKER_02

I was gonna say it's sort of what you said, it really comes down to who the off-taker is. So different ones have different requirements. I think one thing that we haven't really talked about, and we probably won't get into right now because we're kind of ending the time. But um, you know, when we're talking about high performance compute, uh our focus is AI, but there's a second layer, which is just general compute. And we think there's a little bit of room for general compute there, which is sort of storage disaster, recover, things like that, virtual servers. And I think, you know, we're gonna do a bit of that as well. Uh in with our HPC. We'll have the space, we'll have the connectivity. Uh, we think that there's a market for that um across Canada with clients that would be interested in what we're doing if there was that opportunity. So we might um, you know, we've been looking at this as well. So it's a little not as sexy as AI, but it's still uh an interesting business. Not near as big as AI, but if we're spending the money to create the the the shell for AI, it's not that expensive to add a little bit more. Um, and you know, this could be something we do with our skiff-rated mobile data centers as well. So just yeah, you know, there there may be a little bit of data center discussion as well as AI discussion in 2026.

SPEAKER_03

And from the Malahat point of view, they may benefit more with traditional data center because there may be more jobs per megawatt since these aren't necessarily the same kind of density as an AI data center. So uh it's also potentially a way where uh us having being in that business uh gives direct benefit uh to the Malahat community.

SPEAKER_01

Yeah, that's great. My last question for for both of you is is we're just in entering the third month of 2026. Tell me what um you know the the ambition by sort of the next sort of 10 to to 12 months uh forward and what does so success look from a retail investor for that period.

SPEAKER_02

That's a great question. I mean, 2026 for us is all about AI. So, you know, we've kind of said it a few times. A success for us is getting an AI deal, you know, not just agreed, but underway. Um depending on what type of deal, you know, we could potentially be operating in 2026, might be getting a bit tough now as the months are going by. It could be early 2027, but um really it's a construction time because we already have the infrastructure for power and internet and things like that. It's really just you know who we're gonna do business with, uh, how do they want uh, you know, what's the reference design, how do they want it constructed and built, and you know, how fast can we power that up and turn it on? So that's that's really um 2026 for us. Everything else we do is sort of keeping the lights on, regular stuff for us, you know, on the Bitcoin mining and and the digital asset side of the business, but the real push is is for us to to solve AI and and and know what our path is um for ourselves and our investors.

SPEAKER_03

And when we look at 50 megawatts of critical IT load, which is based on the power that we already have, and we kind of think about what kind of valuation that could drive, just looking at our peers, it's a significant step up. And for Shelby and I, it's right there in front of our face. This is what we're this is really where we are focused, looking keep obviously keeping our eyes elsewhere in terms of what comes after that. This isn't Christina Lake, the 50 megawatts at Christina Lake is not a one-trick pony. We're thinking about what is that longer term story. So part of what we're doing in 2026 is yes, get a deal for 50 megawatts at Christina Lake, but also have a story behind that that makes the longer term exciting.

SPEAKER_01

Yeah, you've got to be thinking of probably $2 million a megawatt in terms of revenues, and that's probably US dollars, not Canadian dollars. So um, you know, I I've looked at some of the other deals at the 40 megawatts, and they're in the sort of low to mid 80 megawatts. I'm thinking probably 100 million is probably achievable with 50 megawatts. Um obviously the flip side of that is you've got to have that sort of capsule in place to deliver 50 megawatts as well. So that's the sort of probably the challenge. But having power, 65 megawatts of power, and we keep highlighting the shortage in power in terms of AI growth, you're you're probably sitting fairly pretty, and I would imagine there's more and more conversations happening behind the scenes uh with potential clients going forward. Definitely.

SPEAKER_02

Um, you know, it really is just like you say, if we can convert our 50 megawatts into a few million dollars a megawatt, I mean that's a great win for us. And you know, we're gonna start, you know, uh announcing more projects and plans uh as they're completed. We're gonna do the board with thing again. So uh, you know, I mean, it's it's unfortunate, but um, that's just the way things work. But yeah, we we as as Steve said, we don't want to be uh a one-trick pony here. We we have multiple sites that we're going after. We've never really discussed or put out a slide ever of like, here's our pipeline, and this is what it looks like. And you'll see that with a lot of our peers. They have a pipeline, some stuff they have, some stuff's in progress, some stuff's out there a ways are going after. We've never really done that. I don't think that's a good or bad thing for us to do. We kind of only talk about this is what we have. Um, and so we've kind of debated whether or not we should open that up a bit more, but so far we're kind of keeping everything close to our chest right now. Keeping it real.

SPEAKER_00

Makes sense. There you go. Guys, we appreciate the time today. Uh, if you have any additional questions for the team at DMG, feel free to leave them in the comment section below. Some big numbers discussed in today's program, some exciting developments. We look forward to seeing how 2026 plays out. Thanks so much for the time. We'll see you back here tomorrow.