Bitfarms still betting on Quebec despite growing pains in cryptocurrency field
Miners are seen at the Bitfarms bitcoin mine in Magog, Que., on May 8, 2019. Paul Chiasson / THE CANADIAN PRESS
MONTREAL -- Bitfarms marketed itself last spring as a socially conscious company, harnessing unused, sustainable hydroelectricity to help power Quebec's digital economy while also providing much-needed revenue for the province's struggling regions.
But since that time, the cryptocurrency mining firm has run into difficulties.
Bitfarms lost its president and co-founder last month, along with three managers and other lower-level staff. Its stock price is trading roughly 30 per cent lower than when it was first listed on the TSXV exchange in July. And residents living near the company's operations in Sherbrooke, Que., say the noise emanating from its operations is intolerable.
Bitfarms executives says they are not worried, explaining the recent departures as nothing more than growing pains. The company says it's confident investors will come around to its stock's true value. And as for the noise, Bitfarms says the 23-metre wall it has proposed to build outside its Sherbrooke factory will help restore peace and quiet to the neighbourhood.
But residents along the Magog River aren't so sure. Marcel Cyr, who lives across the river from Bitfarms, says people in the neighbourhood have complained about the noise and vibrations coming from the factory. But since then, the company has only increased its capacity and announced a further expansion.
"They say they are acting in good faith," Cyr said of Bitfarms in a recent phone interview. "And in the beginning we believed them. But we no longer believe them. How can we?"
Bitfarms was until recently seen in Quebec as a nascent Bitcoin giant, led by a millionaire co-founder Pierre-Luc Quimper, who started his first IT company at 14 years old. Bitfarms has invested roughly $80 million in the province since it began operating in 2017.
It currently runs five cryptocurrency mining centres across the province, which are essentially large spaces hosting thousands of small computers designed to "hash," meaning they conduct trillions of attempts per second to solve a complex math problem.
The first computer to solve the problem -- in competition with similar machines around the world -- is awarded Bitcoin currency, which is Bitfarms' main revenue source. Each Bitcoin is currently worth about $11,000.
Bitfarms' computers generally run 24 hours a day, seven days a week, and consume massive amounts of energy. It's that appetite for energy that has attracted Bitfarms and similar companies to set up shop in Quebec and take advantage of the province's comparatively cheap and abundant hydroelectricity.
The deal between Sherbrooke and Bitfarms secured the company 98 megawatts. Sherbrooke officials say the city stands to receive roughly $3 million a year from Bitfarms' use of electricity.
But while Sherbrooke welcomed the money, some residents are fuming. The machines consume so much power that large ventilators are needed to keep the factories cool so they don't overheat. And those massive fans operating night and day are driving people like Cyr crazy.
Sherbrooke councillor Marc Denault said had the city known about the noise problem, it wouldn't have let the company move into the abandoned hockey-stick factory. "And I'm convinced Bitfarms wouldn't have chosen that area either," he said in an interview.
Cyr says he and many other residents want Bitfarms to stop mining for currency until they can find a solution. "The noise destroys the environment, destroys people's health because of the stress," he said. "We had peace and quiet, and we want peace and quiet to return."
Back in May, Quimper, the Bitfarms co-founder, exuded optimism. "Everything is in front of us," he told The Canadian Press. But in October he quit, along with vice-presidents Anthony Levesque and Louis Valois and the head of public relations, Bahador Zabihiyan.
A source with knowledge of Bitfarms' operations, who spoke on condition of anonymity because they feared repercussions from the company, talked of tension between the Toronto and Quebec sides of the firm. "The operations and revenues are in Quebec," the source said, "the corporate offices are in Toronto."
Wes Fulford, Bitfarms' Toronto-based CEO, said any talk of conflict between Toronto and Quebec is just "business gossip." But his description of Quimper's departure suggested a clash of personalities.
"He's never had a boss. He's never had a board of directors," Fulford said of his former business partner, Quimper. "He's been involved in growing small companies. We are now a much larger, professionally traded organization, and you can read into that what you like."
Quimper, in an emailed statement to The Canadian Press, said: "We built up that great infrastructure together with the three other founders. We hired Wes to help implement our vision. At some point, my vision as an entrepreneur and businessman, was different from Wes' vision, who has a traditional banking background.
"When you are building a business, it's very hard to say which vision is right and which one is wrong, and these kinds of situations are common. As one of the important shareholders, I closely follow the company and I hope it will continue to develop."
Back in Sherbrooke, Denault, the councillor, said Bitfarms has shown a willingness to address the noise problem. Fulford said the company will renovate inside the factory and build a wall outside to help muffle the sound from the ventilators.
"We expect significant improvement versus what the residents are allegedly complaining about today," Fulford said. He added that the increased capacity his company has planned for Sherbrooke will not result in more noise.
The company does have a track record of fixing its noise problems. Patrick Melchior, mayor of Farnham, Que., also home to a Bitfarms operation, said residents in his town had similar noise complaints in 2017.
"They were very co-operative. Their goal was really not to be a bad corporate citizen," Melchior said in an interview. "They reduced the noise considerably .. and the citizens were very satisfied. The case is closed."
And while it works to fix the noise issues in Sherbrooke, Bitfarms is also trying to get more investors interested. Fulford said the cryptocurrency market is new, and there aren't many companies in the field with strong records in the stock market, which has made investors hesitant.
He admitted the stock's performance has been disappointing so far -- but he said he's convinced it is underpriced. The company recorded a net loss of $1.3 million in its last quarter that ended June 30, 2019.
"It's been a tough educational exercise to help people understand the merits of our business," said Fulford. "It takes time, and we'll get there."
This report by The Canadian Press was first published Nov. 20, 2019.