Mr. Ben Gagnon reports

BITFARMS ENTERS INTO INITIAL AGREEMENT FOR PRIVATE DEBT FACILITY WITH A DIVISION OF MACQUARIE GROUP FOR UP TO $300 MILLION TO FUND INITIAL HPC PROJECT DEVELOPMENT AT PANTHER

Bitfarms Ltd. has entered into an initial agreement for a private debt facility for up to $300-million from Macquarie Equipment Capital Inc., a division of Macquarie Group's commodities and global markets business. The initial tranche of the facility is $50-million at the parent level and proceeds will be used for project development soft costs and other general corporate purposes. The second tranche of the facility may be up to $250-million and is drawable as the company achieves specific development milestones at its Panther Creek location, at which time the entirety of the loan becomes secured at the project level only, resulting in a total project debt facility of $300-million and termination of the initial loan. The maturity of each facility is two years from the date of closing and each facility bears an interest at a rate of 8 per cent per annum, with interest on the initial draw of $50-million paid in kind for the first three months. Draws under the second tranche of the facility are subject to the entry into definitive documentation, mutually agreed between the company and Macquarie, on terms appended to the initial agreement, in addition to certain other conditions.

Ben Gagnon, chief executive officer of Bitfarms, stated: "We are thrilled to partner with Macquarie, a global leader in infrastructure investment with deep expertise and relationships across the HPC-related [high performance computing] infrastructure value chain. This partnership marks the beginning of our investment in the near-term development of our Panther Creek data centre, strategically located in Pennsylvania's PJM region within close proximity to Philadelphia and NYC [New York City] metropolitan areas. Panther Creek alone has a potential capacity of nearly 500 megawatts, supported by multiple power sources. Having multiple energy sources enhances reliability and redundancy while reducing anticipated capex [capital expenditure] and opex [operating expenditure] for HPC, making these sites particularly attractive to potential HPC customers. We are confident that this partnership will not only accelerate our buildout at Panther Creek but also open doors to future opportunities with Macquarie as we look to scale our project and potentially expand to other sites within our portfolio.

"Amidst the surging AI [artificial intelligence] revolution and the growing demand for power and infrastructure, this financing arrives at a pivotal time following the close of our transformational acquisition of Stronghold Digital Mining and the recent appointments of both James Bond, SVP [senior vice-president] of HPC, and Craig Hibbard, SVP of infrastructure. We believe the analyses provided by our strategic partners, ASG and WWT, along with Macquarie's due diligence and industry expertise, validate our HPC opportunity thesis at Panther Creek, strengthen our HPC pipeline and strategy, and position Bitfarms as a market leader in sourcing and developing large-scale, high-quality HPC data centre projects."

Joshua Stevens, associate director, Macquarie Group's commodities and global markets business, said: "We are proud to partner with Bitfarms and look forward to supporting the continued development of its innovative Panther Creek project as well as future infrastructure that will be essential to the advancement of AI. Panther Creek is well located, within 100 miles of New York City and Philadelphia, and we expect it will be sought after by HPC tenants once construction of the project is under way."

Jeff Lucas, chief financial officer of Bitfarms, stated: "Our highly valued North American assets, strong cash flow from mining operations, and the potential for higher-margin, stable and predictable earnings characteristic of an HPC business model have enabled us to secure this attractive debt financing from a respected infrastructure partner. With an interest rate of 8 per cent, we believe we can fund our energy and HPC infrastructure development at a significantly lower cost of capital and with much less dilution than equity funding, creating long-term shareholder value. The net proceeds from the initial $50-million will accelerate the launch of our HPC project at Panther Creek and finance the soft costs as we move forward with the HPC development. Importantly, this valuable partnership with Macquarie provides the necessary capital and expertise in data centre development to accelerate our next chapter of growth."

Key financing terms

The $300-million project loan is intended to finance the development of the data centre project at Panther Creek.

The $50-million initial tranche of the facility, which is earmarked for project development soft costs and other general corporate purposes, is at the parent level and is secured by a first-priority lien on all assets of the U.S. and Canadian guarantors and the borrower, with customary exclusions. The second tranche of the facility will be for up to $250-million and will be drawable as the company achieves specific development milestones at its Panther Creek location and upon entering definitive documentation, at which time the entirety of the loan will become secured at the project level only and would result in a total project debt facility of $300-million and termination of the initial loan.

The maturity of each facility is two years from the date of closing. Each facility will bear interest at a rate of 8 per cent per annum, with interest on the initial draw of $50-million paid in kind for the first three months.

In connection with the initial tranche of the facility, Macquarie will receive warrants for the purchase of $5-million in shares of Bitfarms at a strike price equal to a 25-per-cent premium to the average of the closing price of the past five days (subject to a minimum strike price floor equal to the last closing price of Bitfarms' shares on the Toronto Stock Exchange) and with a tenor of five years. The warrants and underlying shares are subject to customary registration rights for the resale of the underlying shares. Up until $125-million has been drawn under the second tranche of the facility, Macquarie will receive warrants equal to 10 per cent of the amount drawn under the facility at a strike price equal to a 25-per-cent premium to the average of the closing price of the past five days (subject to a minimum strike price floor equal to the last closing price of Bitfarms' shares on the TSX prior to grant) with a tenor of five years.

The loan agreement for the initial tranche of the facility includes various affirmative and negative covenants for Bitfarms and its subsidiaries, including restrictions on dispositions, dividends, the incurrence of debt and liens, material changes in the nature of its business, related party transactions, and investments, in each case subject to certain customary exclusions and carveouts. In addition, Bitfarms must maintain a minimum of $25-million balance in cash at all times while the initial tranche is outstanding and must deposit additional amounts of cash if the average bitcoin price drops below certain thresholds as provided in the loan agreement (which funds will be returned if the bitcoin price returns to the previous thresholds).

Northland Capital Markets acted as sole placement agent to the company. Skadden Arps Slate Meagher & Flom LLP acted as legal counsel to the company. Latham & Watkins LLP acted as legal counsel to Macquarie.

About Bitfarms Ltd.

Founded in 2017, Bitfarms is a global energy and compute infrastructure company that develops, owns and operates vertically integrated HPC and bitcoin mining data centres. Bitfarms currently has 15 operating bitcoin data centres situated in four countries: the United States, Canada, Argentina and Paraguay. Powered primarily by environmentally friendly hydroelectric and long-term power contracts, Bitfarms is committed to using sustainable and often underutilized energy infrastructure.

We seek Safe Harbor.