It isn’t every day that one of the largest midstream hemp companies in the US decides to expand into Bitcoin mining, but Evergreen Sustainable Enterprises Inc (OTCQB:EGSE) sees a clear link between the two.
The company formerly known as Generation Hemp carved out a niche for itself processing hemp biomass for different industries. Launched in 2019 in Texas, Generation Hemp went on to become the largest hemp processor in the US. In 2020, the company processed over six million pounds of wet hemp for clients in Kentucky and Tennessee and approximately 11 million pounds of wet hemp in 2021.
Processing that much hemp left a pressing issue for a company with sustainability at its core: what should it do with the leftover biomass? As it turns out, hemp biomass is very similar to wood waste, which can be burned in boilers to make electricity. There were several options to consider, but one stood out in 2021, when everyone was talking about cryptocurrency.
Bitcoin mining is an incredibly energy-intensive activity. Around 1,449 kilowatt hours (kWh) of energy is needed to mine a single Bitcoin – nearly the same amount of energy an average US household consumes in 13 years.
EGSE CEO Gary Evans knew something about the Bitcoin manufacturing process, having invested personally in some startup coin companies that went public over the past several years and performed “pretty well” before the crash of the Bitcoin prices last year, according to his own account. A former oil and gas executive, the Evergreen CEO felt it was time to focus his expertise on greener solutions.
Bitcoin is a huge electricity consumer, so Evans and his team started thinking about opportunities to burn the excess waste hemp to make electricity for Bitcoin, Evans said.
“Being an oil and gas executive for most of my career, I saw a lot of similarities in what was going on in the Bitcoin space versus my expertise. When Bitcoin prices crashed, I started thinking that it might be a great time to enter the business as I have done in the oil and gas business over the years.”
Ideal operation, ideal location
After studying a number of projects around the US, the EGSE team turned its attention to Costa Rica. As Evans explained, the electricity that came from a hydroelectric dam located there that it had purchased is some of the cheapest in the world at around two cents per kilowatt hour (a typical Bitcoin site would be five to six to eight cents a kilowatt hour). What’s more, the dam was already set up hosting Bitcoin mining for others.
EGSE acquired the operation in January 2023. Essentially, the source of approximately one megawatt of power produced from the hydroelectric dam (six generators) will be used to power new Bitcoin mining machines at an extremely low cost. Its recently-acquired Bitmain S19J Pro+ mining machines are state-of-the-art application-specific integrated circuit (ASIC) miners, specifically designed for mining Bitcoin, with a hash rate of 122 terahashes per second (TH/s) and a power efficiency of 27.5 joules per terahash (J/TH).
“We're just now in the process of installing new machines that we acquired for (the Costa Rica) site,” Evans said. “After getting that up and going, we're now looking at other locations in Kentucky, Arkansas, Missouri, and Costa Rica that we like, and that’s got us very excited.”
The rates of return on some of these operations are “off the charts,” Evans told Proactive.
The combination of cheap energy and highly efficient machines, which cost about 20% of what they did a year ago, give EGSE a major competitive edge.
Today, EGSE’s Costa Rica operation boasts some of the lowest cost power, colocation and hardware arrangements that integrates green energy sources for electricity, making them some of the most sustainable cryptocurrency mining operations in the Americas.
Remarkably, for such a shift in strategy, EGSE was able to use its existing talent to effectively run both a hemp company and a Bitcoin company. The goal is to intertwine them at some point in time, as using the hemp biomass as biofuel is still in the development stage due to limited supply. In the future, rather than have one or two operations, EGSE is looking to have multiple projects around the country. The smaller the footprint the better, because it means the company can get it up and running in less than 90 days – making money sooner.
Bitcoin price gaining strength
It's a good time to be mining Bitcoin, something that is not lost on Evans and his team. The company can make money at as low as $9,500 Bitcoin prices. Of course, the coin is trading at much higher prices today – closer to $28,000.
“We will be making really good money,” Evans said. “It's phenomenal how well this business can grow and contribute significant cash flow.”
Bitcoin broke above US$30,000 for the first time in 10 months in April, sending short liquidations spiralling to US$50 million and opening the possibility for a move above $31,000. Year to date, BTC/USDT is over 80% higher.
Evans is bullish. “I'm a big believer that Bitcoin is headed to $100,000-plus,” he said.
“You can imagine if we're making really good money at these current prices, where it's going to be, six months, a year, two years down the road. That’s why we're trying to get as many low cost green energy projects up and going as soon as possible.”
Contact Angela at angela@proactiveinvestors.com
Follow her on Twitter @AHarmantas