Iris Energy Limited (NASDAQ:IREN)’s recently announced three-way deal reached with application-specific integrated circuit (ASIC) chip producer Bitmain and a third party is a big recovery step for the Bitcoin miner after a challenging year for the digital assets sector, according to analysts at Canaccord Genuity (TSX:CF, LSE:CF).
In a note to clients, analysts wrote that with Bitcoin solidly off its recent bottom, they had started to see deal activity across the Bitcoin mining sector pick up.
Regarding Iris’ “quite positive” three-way deal, they noted that the company was able to utilize its remaining $67 million balance of prepayments to Bitmain to acquire 4.4 exahash (EH) of brand new miners while concurrently selling the remainder of contracted miners to a third party. They added that no additional cash outlays were required by Iris.
READ: Iris Energy expands capacity in 2Q despite 'challenging year' for digital assets
“Once this 4.4 EH is fully installed, we would estimate by the end of the year or so, Iris will have approximately 5.5 EH of output capacity in place, a material move up from current levels,” the analysts wrote.
They also pointed out that Iris was also considering options for the sale of surplus miners to re-invest in growth initiatives and for corporation purposes.
“We like the path Iris is now on, with a nice exahash ramp ahead, some of the cleanest cheapest power in North America (hydro in British Columbia), and more optionality to the business moving forward as its large Childress, Texas, site becomes operational,” they wrote.
As such, they maintained their ‘Buy’ rating on the stock with a reduced price target of US$8, down from $US12. Iris' shares are currently trading at about US$3.83.
“If Bitcoin spot prices can remain near current levels, we believe the company will be nicely profitable over the next 12 months on an operating basis,” the analysts concluded.
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