An Open Letter from the CEO
Dear Shareholders,
It has been four weeks since I shared my reflections on TeraWulf’s achievements in 2022 and stated goals for 2023. And in that short period, our team has accomplished key milestones that we believe will be foundational in achieving our goal of being the preeminent miner producing bitcoin from zero-carbon energy resources at the lowest marginal cost in the sector.
We believe these strategic steps will position TeraWulf for long-term, sustainable growth. Our priority continues to be reducing costs and deploying those resources towards the Company’s path to positive cash flow from operations in 2023. In doing so, we believe that we will be able to generate increasing cash flow throughout the year, which will give us further financial leverage to scale our mining operations.
Debt Modification
After several weeks of constructive dialogue with our lenders, we have reached an agreement on modifying the terms of our debt to eliminate near-term amortization and thereby optimize TeraWulf’s financial flexibility through market cycles. Let me be clear – we have a deal that should enable the Company to pay down principal when we have available free cash flow, instead of adhering to a mandatory payment schedule. This is HUGE.
Path to Positive Cash Flow from Operations in 2023 and Beyond
In the matter of just a few weeks, we raised what we plan to be the final funding needed to bridge the Company to self-sustaining operations, only a few months away. We have said all along the amount of monies required to achieve free cash flow positive operations, and we have now reached that important milestone.
Unparalleled Management Investment
Last month, I highlighted the industry-leading investment level our executive team has made in the Company and the commitment it demonstrates. I said that I was right alongside you as a shareholder and that I would continue to invest personally in TeraWulf. As part of our recent and likely final capital raise, my co-founder and COO, Nazar Khan, and I purchased an additional $2.5 million of equity at the market price. That’s right, we bought at market while this transformational equity raise came at a modest discount to the market. Why? Because our confidence in TeraWulf is stronger than ever as we build upon, and begin to realize, our distinguishing advantages.
I also want to address the confusion out there regarding the perceived sale of stock. For the avoidance of doubt, I did not sell 12 million shares. I exchanged shares for warrants to free up available authorized common stock, ahead of our shareholder meeting later this month, to increase the Company’s authorized common shares. These warrants will convert back to common stock without any price differential.
The WULF Advantage
Let me quickly highlight what undeniably sets WULF apart from our peers:
- Leading Facilities : As we have learned from decades in energy markets, it’s location, location, location! In only a year, we have developed our two premium locations into world-class mining facilities that are arguably the best in the industry. With excellent power costs, ideal climate, and meaningful immediate growth capacity, Lake Mariner and Nautilus are far ahead of the pack. I have no doubt that our facilities are unmatched. You can rank our sites in the bitcoin mining sector as #1 and #2.
- Rapid Growth : We launched TeraWulf just over a year ago and are proud of what has been accomplished in this short period, far ahead of industry peers at the same point in their trajectory. In the next few months, we expect to be at 5.5 EH/s and 160 MW of power capacity – and we’re just getting started. To exceed the accomplishments of peers in such a short time is a testament to the excellence, perseverance, and professionalism of our development and operations teams. Just take a look at what we have built in a year relative to what took other bitcoin miners several years to achieve. As a vertically integrated miner, we own our sites and our destiny.
- Expansion Capability : When it comes to bitcoin mining, size matters! Our two sites were developed with expansion potential as a key characteristic, and everything from our power import capacity to the layout of our warehouses and racks was designed to grow. Scalability and adaptability are vital, and our Lake Mariner and Nautilus facilities have both. TeraWulf has the ability to nearly double our hashing capacity at our existing sites. In contrast, some of our peers need to find a new site, permit the site, source the requisite data center and mining infrastructure, and then pay for it. That takes an exceptionally long time. We are here now and we OWN it.
- Capital Investment in Miners and Infrastructure : Looking across a challenged industry landscape, we remain confident in our infrastructure-first approach. Vital to growing the platform, we believe our focused investment in miners and infrastructure has translated into a strategic advantage vs. our peer group. So far, we have invested almost $400 million to ensure TeraWulf infrastructure facilities and mining equipment lead the pack today and in the future. The time and cost to replicate our business are substantial and represent a significant barrier to entry.
- Energy Advantage : We are excited for our Nautilus Cryptomine to start hashing this quarter. Connected to a zero-carbon nuclear facility, Nautilus will enjoy a FIXED power cost of just two cents for five years with no margin requirement (and with options to extend and expand). That’s an exceptionally low power price, and this contract represents millions of dollars of value created. Our power tastes are simple: low-cost and zero-carbon. There are power purchase agreements and there are lesser power purchase agreements. Our team has been together and in the energy business for 25 years – look at what we have.
- Price and Efficiency : As we continue to scale, it has been great to see both our price per EH and efficiency per EH metrics improve. Our development and operations teams will continue to differentiate TeraWulf as the preeminent developer and operator.
Every move from this point forward is about advancing our mission and pushing the boundaries of what is possible – for our business and our shareholders. We will remain laser-focused on scaling mining operations at our existing sites while opportunistically pursuing strategic opportunities in a financially responsible manner.
Finally, as you consider investing in the space, look at our public disclosures. Read our most recent investor deck here. Compare what we share: the breadth and depth of real data, with unbridled transparency, in a timely way. If you want to invest in a bitcoin mining company, come to TeraWulf. And if you don’t want to invest in a bitcoin mining company, call us. We are prepared to demonstrate the importance of what we do and how we do it.
Thank you to all our investors, partners, and fellow WULFpack members for working with us to build the leading mining company.