Australia’s IoT Group (ASX:IOT) has struck a “cornerstone” agreement with Royalti Blockchain Group to kit out its proposed Hunter Valley power plant cryptocurrency mining project with Bitfury servers, but the deal has a very long way to go before becoming a reality.
The Australian Securities Exchange (ASX)-listed IoT Group said on 7 May that its subsidiary IoT Blockchain had signed a conditional binding terms sheet with Royalti Blockchain Group, an authorised Australian integrator for blockchain technology company Bitfury.
The idea behind the deal is that Royalti Blockchain Group will house Bitfury’s cryptocurrency mining servers in Australia at IoT Group’s proposed Blockchain Applications Complex in the Hunter Valley, NSW.
The publicly-listed company, which claims on its website to be currently focused on designing and developing a range of selfie drones, made headlines in April over its proposal to establish a cryptocurrency mining hub at the Hunter Valley’s decommissioned coal-fired Redbank Power Station.
As reported by sister publication CIO, IoT Group signed a partnership agreement with Hunter Energy, which is working to acquire the decommissioned power station, to build the proposed two-hectare mining complex on the site, which will be able to draw energy from the power station ‘before the grid’ – at wholesale prices.
“There are no crypto miners in Australia currently because power is too expensive. To make crypto mining work you need cheap power and IoT will change that. IoT has created the biggest and only opportunity for global crypto miners to come to Australia,” a spokesperson for the company said at the time.
Now, the company has taken the next step in firming up its power station crypto mining plans thanks to its conditional binding terms sheet with the Sydney-based Royalti Blockchain Group.
It should be noted that IoT Group said in a statement to media that the deal could be worth over $190 million, a detail that was markedly absent from its official ASX release to shareholders, likely to due to disclosure compliance rules.
Subject to the satisfaction of the conditions stipulated in the agreement, IoT Group will provide Royalti Blockchain Group with land at the RedBank Power Station to incorporate the Bitfury blockchain hardware facility and 20 megawatts of power at an estimated cost of 11 cents per KWh.
However, the conditions required for the completion of the deal to see the light of day present a litany of obstacles and roadblocks that could see the project lose steam before the power station even gets a chance to make steam again after being closed down in 2014.
For the deal to reach fruition, the proposed acquisition by Hunter Energy of all the right, title and interest in the Redbank Power Station needs to be completed to the “absolute satisfaction” of IoT Group. This alone is far from being a certainty.
At the same time, it is also dependant on completion occurring under the binding terms sheet between IoT Group and Hunter Energy, with Hunter Energy agreeing to grant IoT Group the right to develop the site behind the grid with direct transmission of power.
Moreover, Hunter Energy is still working to recommission the power station and acquire all of the associated assets, and IoT Group’s agreement with Hunter remains subject to certain conditions, while also involving the parties entering into commercial negotiations in respect of long form definitive agreements.
“Accordingly, there is a significant risk associated with the completion of the proposed transaction/s and investors should be aware of these risks,” IoT Group told shareholders.