Here’s how a new escape route could open up for SNC-Lavalin

A government agency is proposing changes to an obscure policy that could help SNC-Lavalin Group Inc., the embattled-Montreal engineering and construction firm, move past a national political scandal and survive any potential federal conviction on looming fraud charges.

Public Services and Procurement Canada is reviewing and finalizing changes to the ‘Ineligibility and Suspension Policy’ under the Integrity Regime — which governs whether corporations convicted of crimes can bid on federal projects. The proposed changes would give the government greater discretion to decide on whether a ban makes sense, and if so, an appropriate length of time.

Under current policy, SNC faces a possible 10-year ban from bidding on federal projects if convicted on charges it sent tens of millions of dollars in bribes and gifts to Libyan officials, including the son of former dictator Muammar Gaddafi, to win lucrative contracts in that country. Because the giant engineering and construction firm derives significant revenue from federally funded infrastructure projects, any ban could have crippling consequences.

The media relations office of the PSPC said the updated policy is “being studied and finalized” and acknowledged there was no minimum period of suspension mandated under the proposed changes.

That could provide SNC-Lavalin — whose efforts to settle its criminal charges have led to a national furor about whether Prime Minister Justin Trudeau improperly pressured former attorney general Jody Wilson-Raybould — an alternative way to escape the potentially debilitating effects on its infrastructure business that a conviction would bring.

“Theoretically, they could propose … that ineligibility be six months, a year or no debarment at all,” said Timothy Cullen, an Ottawa-based lawyer at McMillan, about the proposed changes. “Whether they (the government) will feel that’s appropriate, we don’t know because it’s never been done before.”

Cullen, who advises corporate clients on the government procurement process, said a contact in the registrar’s office of Public Services and Procurement Canada suggested enactment of the changes is imminent.

A draft of the proposed changes was released several months ago, and they were scheduled to take effect in January, he added. Although the proposed changes could face further revisions, Cullen said it is likely the draft will not feature any substantial changes.

If so, it marks a significant change from the current policy, which mandates an automatic 10-year suspension for any corporation that violates the Integrity Regime, which could be reduced under certain circumstances to five years.

Some lawyers said there may have been ways to negotiate with the registrar and find loopholes to reduce a 10-year, or even five-year penalty, but the perception of the policy has been that it was inflexible.

“It was very much intended to be a strict regime,” said Gerry Stobo, a procurement lawyer with Cassidy Levy Kent. “If you were convicted of one of the (qualifying) offences, the government of Canada would not be doing business with you.”

Records indicate that SNC lobbied Public Services and Procurement Canada, including assistant deputy minister Barbara Glover eight times between 2016 and 2017, although no detail is provided about the substance of these meetings.

The company is the only entity that currently has an administrative agreement with PSPC that allows it to continue bidding and working on federal contracts despite the pending charges against it.

SNC-Lavalin declined to comment for this article.

Lawyers who practice in the procurement area said corporate suppliers have long expressed concerns that the current debarment and ineligibility system is inflexible in that it automatically mandates 10-year suspensions.

PSPC initiated a public consultation on its ‘Ineligibility and Suspension Policy’ in the fall of 2017, and incorporated feedback such as the need for “greater flexibility in debarment decisions” in its proposed changes.

SNC-Lavalin faces a possible 10-year ban from bidding on federal projects if convicted on charges it sent tens of millions of dollars in bribes and gifts to Libyan officials to win contracts.

The proposed changes have other effects, including to widen the scope of what can lead to debarment to include human trafficking, environmental crimes and labour violations.

Still, it would mark the second recent change in policy or law, which could potentially help SNC-Lavalin, one of Canada’s oldest and largest companies, as it battles the fallout from its overseas bribery scandal.

Last May, a provision added to the federal budget enabled prosecutors to strike a remediation agreement with corporations. In essence, it allows prosecutors to defer prosecuting companies that can show over an extended period of time that they have rooted out the causes of the crime. This means the companies may need to acknowledge culpability, make retributions, install corporate compliance monitors and remove individuals linked to the crime.

Earlier this month, a scandal erupted after the Globe and Mail reported the Prime Minister’s Office had pressured Wilson-Raybould to abandon charges against SNC-Lavalin and instead pursue a deferred prosecution agreement. Wilson-Raybould was moved to another ministry and, subsequently, resigned from cabinet.

Liberal MP Jody Wilson-Raybould.

The result of a bar from bidding on federal projects could be crippling for SNC-Lavalin, though probably not a death blow: Last October, the company announced a remediation agreement was not likely.

Afterwards, Devin Dodge, a BMO analyst, noted about 15 per cent of its $9 billion in revenue in 2017 derived from the Canadian government fall within the company’s infrastructure business. The risk of a guilty verdict and the resulting 10-year debarment, plus any fines, creates “a significant burden” on the value of the segment, he wrote, estimating its enterprise value at between $276 million and $414 million.

But its other business segments, including its nuclear facilities maintenance, mining and metallurgy, oil and gas and others could also suffer from a finding that the company violated Canada’s Integrity Regime.

“The fact that we’ve not been invited to negotiate a remediation agreement makes no sense,” Neil Bruce, chief executive of SNC-Lavalin, wrote in a letter to shareholders last October.

He argued that because a corporation cannot be put in jail, the prosecution of SNC will only hurt the company’s 9,000 employees in Canada who may lose their jobs if the company is convicted. Instead, he argued prosecutors should target the individuals involved in the alleged bribes, which took place between 2001 and 2012.

“The truth is, the events prior to 2012 that led to the federal charges should have never taken place,” Bruce wrote.

The arguments apparently did not persuade prosecutors who continue to move the case closer to trial. Whether the changes Bruce argued have taken place at the company will satisfy government officials responsible for deciding who can bid on contracts remains open, if the proposed changes to the Integrity Regime are enacted.

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‘Crisis of our own making’: Regulatory logjam has cost $100B in cancelled resource projects

CALGARY – A new report shows $100 billion in planned spending on resource projects in Canada has evaporated, and a further drop should be expected without substantial amendments to the Liberal government’s planned regulatory overhaul in Bill C-69.

As Senate hearings into the controversial bill continued Thursday, the C.D. Howe Institute released a report detailing how recent declines in planned energy, mining and forestry investment in Canada totalling $100 billion is equivalent to erasing 4.5 per cent from Canada’s gross domestic product.

TransCanada Corp.’s $15-billion Energy East pipeline, CNOOC Ltd.’s Aurora LNG and Petronas Bhd’s $36-billion Pacific NorthWest LNG project are among the major resource projects that have been cancelled in recent years after long and uncertain regulatory processes, contributing to the $100-billion figure.

The declines in planned investment in Canada’s resource sector have continued even as investments in competing jurisdictions have rebounded following a years-long decline in commodity prices, said C.D. Howe Institute associate director of research Grant Bishop, who co-authored the report.

“U.S. and global investment in oil and gas has rebounded while in Canada it has continued to plunge,” Bishop said, adding, “Global planned investment in mining has dropped but it has dropped further in Canada.”

Industry groups across the resources sector including the Canadian Energy Pipelines Association and the Mining Association of Canada are asking the Senate to amend the bill. Other think tanks, including the Canada West Foundation, have also called for substantial changes to the bill.

Part of the issue is long regulatory timelines. The study shows it can take up to 15 years to get a mine approved in Canada, compared with six years in Australia. Or it can take up to 11 years for pipeline approvals in Canada, compared with two years in Australia or five years in the U.S.

More important, he said the bill and regulatory overhaul does not fix the biggest obstacle facing major resource projects: the federal government’s own approach to consultations with Aboriginal people affected by development.

“The critique is that Bill C-69 is being pitched as being necessary to fix major resource projects,” Bishop said. “The legislation is not addressing the problem that has tripped up major resource projects.”

Approvals for the Trans Mountain pipeline expansion project, for example, were overturned in August 2018 when the Federal Court of Appeal found Ottawa did not properly consult with affected First Nations.

The Appeals Court judge found that the third phase of Ottawa’s consultation consisted primarily of note-taking rather than a meaningful dialogue, which is similar to the issue that caused the same court to overturn appeals for Enbridge Inc.’s Northern Gateway approvals in June 2016.

Bishop said Bill C-69 will not change anything about the regulatory process that would have resulted in different outcomes for either Northern Gateway or Trans Mountain, as it doesn’t update the federal government’s consultation guidelines.

The last time those guidelines were updated was 2011, before either of those pipeline decisions were rendered.

Those guidelines were based in part on interim guidelines developed in 2008 following Supreme Court of Canada decisions from 2004 and 2005.

“We inherited a broken system, and we are fixing it by listening to Canadians, stakeholders and Indigenous Peoples,” said Vanessa Adams, spokeswoman for Natural Resources Minister Amarjeet Sohi.

She did not say if the legislation should included updated guidelines for Indigenous consultation.

She said Bill C-69 would provide “early, inclusive and meaningful public engagement” that would help provide investors with certainty to proceed with projects.

In response to the Appeals Court decision on Trans Mountain, Sohi asked the National Energy Board to provide a new review of the project and launch fresh consultations with affected First Nations. The board is expected to release its findings on Friday.

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Startup will store energy by forcing compressed air in a defunct zinc mine

An energy storage startup called Hydrostor is planning to build an Advanced Compressed Air Energy Storage (A-CAES) project in Australia, using an out-of-operation underground zinc mine as a container for the compressed air.

Hydrostor announced its plans this week after being awarded AUD $9 million (USD $6.4 million) in grants from Australian government institutions.

Compressed air energy storage (CAES) is a sort of physical battery (as opposed to a chemical battery) that uses excess electricity to compress air. The compressed air is stored in a tank, in a balloon, or in an underground cavern. When more electricity is needed, the compressed air is heated, which drives a turbine as it expands.

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HyperSciences wants to ‘gamechange’ spaceflight with hypersonic drilling tech

It’s no coincidence that Elon Musk wants to both tunnel down into and soar above the Earth. If you ask the team at HyperSciences, the best way to get to space is to flip drilling technology upside down and point it at the sky. In the process, that would mean ditching the large, expensive fuel stages that propel what we generally think of as a rocket — massive cylindrical thing, tiny payload at the tip — into space.

This month, the company hit a major milestone on its quest to get to suborbital space, capping off Phase I of a research grant with NASA with a pair of successful proof-of-concept launches demonstrating the company’s one-two punch of ram acceleration and chemical combustion.

HyperSciences put its vision to the test at Spaceport America, conducting a series of low altitude tests at the desolate launch site an hour outside of Truth or Consequences, New Mexico. The company launched “a number of projectiles,” ranging from 1.5 ft long to over 9 ft long. HyperSciences sent up some off-the-shelf electronics in the process, in a partnership with an aerospace research group at the University of Texas.

“We targeted hitting 600 to 1000 G’s (multiples of Earth’s gravity) on the payloads and accomplished that,” HyperSciences Senior Adviser Raymond Kaminski said. “The payloads felt similar levels to what commercial off-the-shelf electronics (like a cell phone) would feel when getting dropped on the floor.” Kaminski returned to aerospace with HyperSciences after a turn in the startup world following an earlier career with NASA, where he worked as an engineer for the International Space Station.

While the 1.5 ft. system launch was enough to meet its goals for NASA’s purposes, the company was testing the waters with an admittedly more impressive 9 ft. 18” projectile. “We’re going to launch a nine foot section — you can’t deny this anymore,” Kaminski said.

Oddly enough, the whole thing started after HyperSciences founder and CEO Mark Russell drilled a bunch of really, really deep holes. Russell formerly led crew capsule development at Jeff Bezos space gambit Blue Origin before leaving to get involved in his family’s mining business. At Blue Origin, he was employee number ten. Russell’s experience with mining and drilling led him to the idea that by elongating the chemical-filled tubes that he’d use to drill in the past, the system he used to break up rock could go to space.

“You have a tube and you have a projectile. It’s got a sharp nose and you’ve pre filled your tube with natural gas and air,” Russell explained. “It rides on the shock wave like a surfer rides on the ocean”

The team believes that launching something into space can be faster, cheaper and far more efficient, but it requires a total reimagining of the process. If SpaceX’s reusable first stages were a sea change for spaceflight, the technology behind HyperSciences would be a revelation, but that’s assuming the vision — and the hypersonic tech that propels it — could be scaled up and adapted to the tricky, high-stakes business of sending things to space.

A hypersonic propulsion system can launch a projectile at at least five times the speed of sound, causing it to reach speeds of Mach 5 or higher — more than a mile a second. Most of of the buzz in hypersonic tech right now is around defense technology — missiles that travel fast enough to evade even sophisticated missile defense systems or strike targets so quickly they can’t be intercepted — but aerospace and geothermal energy are two other big areas of interest.

Last December, the Washington Post reported that moving from rocket-boosted weapons to hypersonic weapons is the “first, second, and third” priority for defense right now. The Pentagon’s 2019 budget currently has $2 billion earmarked for its hypersonics program and that funding grew by almost a third year-over-year.  “You never want to put out a tech when the government is asking for it,” Kaminski said. “At that point it’s too late and you’re playing catch up.”

In spite of the opportunity, HyperSciences isn’t keen to get into the world of weaponry. “We are a platform hypersonics company, we are not weapons designers,” the team told TechCrunch. “We do not plan on being a weapon provider. HyperSciences is focused on making the world a better place.”

To that end, HyperSciences is maneuvering to the fore of non-weaponry hypersonics applications. The company sponsors the University of Washington lab that’s pioneered applications for ram accelerator technology it uses and has sole right to the tech invented there. 

On the geothermal energy note, with $1 million from Shell, HyperSciences was able to develop what it calls a “common engine” — a hypersonic platform that call drill deep to reach geothermal energy stores or point upward to launch things toward the stars. “HyperSciences is about getting really good on earth first,” Russell said, pointing to one advantage of the cross-compatible system that lets the company apply lessons it learns from drilling to its plans for flight.

“Our HyperDrone technology can be used to test new air-breathing hypersonic engines for NASA or aircraft companies that want to build the next gen super- and hypersonic aircraft to go point-to-point around the world in an hour or two,” the team explained. “Right now, you need a rocket on a big aircraft, just to get experiments up to speed. We can do that at the end of our tube right from the ground.”

Though there have been rumors of acquisition interest, for now HyperSciences is pursuing an offbeat crowdfunding model that’s certainly out of the ordinary in a literally nuts and bolts aerospace business. The company is currently running a SeedInvest campaign that allows small, unaccredited investors put as little as a thousand dollars toward the team’s vision. At the time of writing, the campaign was sitting at around five million dollars raised from nearly 2,000 relatively small-time investors. 

“SpaceX’s seed rounds were run by big VCs,” Russell said. “Where do you get access? These are big industries the public never usually gets to invest in.”

Russell prefers to keep HyperSciences flexible in its pursuits and believes that relying on venture capital would force the company to narrow the scope of its mission.  The team is quick to note that in spite of its relationship with Shell, the oil and energy giant doesn’t own any equity in the company. By hopping between industry-specific contracts with a boost from crowdfunding, HyperSciences hopes to continue pursuing its platform’s applications in parallel.

The next overall architecture for spaceflight will be using hypersonics,” Russell said. “We obviously started this with the idea that you could gamechange spaceflight. By removing the first and potentially the second stage of a rocket [and] putting all of that energy in the ground… you could gamechange spaceflight, no doubt.”

SNC-Lavalin cuts profit forecast again over mining dispute

Canadian construction and engineering firm SNC-Lavalin Group Inc on Monday cut its full-year profit forecast for the second time because of a dispute related to its mining and metallurgy project in Latin America.

The company said the challenges on the project are mainly due to unexpected site conditions, environmental and safety measures, and underperformance from sub-contractors.

Due to the negative impact from the project, the core earnings for the fourth quarter from its mining and metallurgy unit could slip to a loss of up to $350 million, the company said.

SNC-Lavalin said it aims to complete the project in the second quarter of 2019 as it has agreed to settle the dispute with the help of an independent third party.

The company now expects its 2018 adjusted profit to be in the range of $1.20 to $1.35 per share, down from the prior forecast of $2.15 to $2.30 per share.

SNC had earlier cut its profit forecast in January, citing troubles related to the project and ongoing trade challenges in Saudi Arabia.

The company is set to report its fourth-quarter results on Feb.22.

© Thomson Reuters 2019

Central banks bought and stockpiled an incredibly large amount of gold last year

Central banks bought more gold last year than at any time since President Nixon ended the gold standard in 1971 as they used the metal to diversify their holdings.

Stocks soared 74 per cent from 374.8 tons in 2017 to 651.5 tons — the second-highest total since records began. The only time it was higher was in 1967.

“Last year an incredibly large sum of gold was bought by central banks,” said Alistair Hewitt, of the World Gold Council, which compiled the figures.

“Twelve months ago I would have been talking about how Russia, Kazakhstan and Turkey were the three big central banks buying gold. But now so many more central banks are adding to reserves. India has added for the first time since 2009, Hungary and Poland are adding, Mongolia, Iraq, China.”

There were various reasons why gold was appealing to central banks last year. Mr Hewitt said: “India said they were hedging against volatile currency. Hungary says gold lacks counterparty risk of relying on another bank to pay you at a certain point. Russia has a de-dollarisation programme.”

The gold price rallied toward the end of the year amid concerns about Brexit, a falling stock market and expectations for less aggressive U.S. monetary policy and have climbed to their highest level since May.

Central bank buying helped increase total gold demand by 4 per cent to 4,345.1 tons last year. Other areas of demand for gold faltered, however. Lower consumer confidence affected other gold markets including jewellery, where demand fell by one ton to 2,200 tons.

Falling consumer sentiment also affected the technology market, which nudged up 1 per cent to 334.6 tons. Supply of gold rose 1 per cent last year to 4,490.2 tons, while recycling also edged 1 per cent higher to 1,172.6 tons.

The Daily Telegraph

Can the no-premium Barrick-Randgold deal spark an M&A gold rush?

After Ian Telfer, chairman of Vancouver-based Goldcorp Inc., brokered a $10-billion sale of his company earlier this month to Newmont Mining Inc., he characterized it as one of the first in a series of deals coming to the gold sector.

“It was our sense that the industry was going to consolidate,” said Telfer. “It’s becoming a big company game for people who want exposure to gold.”

His remarks echo those made by a chorus of analysts, bankers and mining executives, who for months have been predicting a wave of mergers and acquisitions is about to hit the gold sector, where too many companies are chasing too few investors.

Throughout most of 2018, however, the spate of large mining deals never materialized. Then, Barrick Gold Corp.’s $6-billion acquisition of Randgold Resources Inc. in September, followed by the Newmont-Goldcorp deal this month confirmed many bankers’ views that Canada’s mining industry is finally shaking off the hangover from several years of underperformance and moving closer to consolidation.

“I think there is a view that money is coming back into the space,” said Ted Hirst, global head of resources for Canaccord Genuity. “We’re cautiously optimistic that there’s going to be a lot more M&A, and cautiously optimistic there’s going to be a lot of capital coming in.”

But nearly every banker mentions the shadow hanging over the mining industry. Not quite a decade ago, a spate of ill-considered acquisitions swept the industry, which left many companies labouring to pay off debt, operating mines that could only turn profits at the top of the commodity cycle or running into operational challenges.

Those missteps meant some of Canada’s largest miners spent years cleaning up their balance sheets even as miners from other countries, including Asia and Australia, grew unabated.

Rick McCreary, deputy chair of investment banking at TD Securities.

“It’s a tough environment to do M&A when your investors are already upset at you for messing up a large copper mine, or scrambling to get your leverage back in line,” said Jamie Rogers, co-head of global metals and mining, BMO Capital Markets. “It can be very hard when you go to shareholders with an M&A and say, ‘hey trust me I’m going to do it again’.”

Now, the question everyone is asking is whether the industry has passed its nadir. Cautious optimism abounds, particularly after the Barrick-Randgold deal.

Last summer, Barrick’s executive chairman John Thornton took pains to explain how his company had finally turned the page. He disavowed the company’s US$7.8-billion purchase of Equinox Minerals Ltd. from 2011, the majority of which was eventually written off as impaired, calling it “one of the five worst acquisitions in (mining) history.”

Thornton noted Barrick had reduced its outstanding debt to nearly $5 billion, and was contemplating more productive uses of its capital. After spending billions of dollars into developing a mine on the Chile-Argentina border and finding no way forward, the company announced it asked a Chinese mining company to study the matter.

About two months later, Barrick purchased Randgold in a no-premium deal that installed the target company’s chief executive Mark Bristow, who has a track record of building and operating mines, as Barrick’s new CEO. Both companies stocks shot up afterwards.

“That a no-premium deal was that well received was a big surprise to many people,” said Rogers. “But it has emboldened many boards and CEOs” to search for a similar path forward.

Still, the Newmont-Goldcorp deal may give some executives pause. It included a 17-per cent premium for Goldcorp shareholders, but came when the company’s stock was trading at a historic low-price, having dropped 30 per cent in 2018 alone.

Within days after the deal was announced, Newmont’s stock had declined 10 per cent.

A Newmont gold mine in Peru.

Rick McCreary, deputy chair of investment banking at TD Securities, said that at the end of the day momentum matters most to the M&A sector. It’s easier to make deals in an environment where commodity prices and company shares are rising.

“You can see people are delicately stepping back into the sector,” said McCreary.

But in the absence of such momentum during a challenging period, risk management has become more important than ever, and drove some of the biggest deals in 2018.

In early, December, Teck Resources Ltd. sold a 30 per cent stake in a copper project it is developing in Chile, known as Quebrada Blanca 2, to Japan-based Sumitomo Corp. and Sumitomo Metal Mining Co. for US$1.2 billion.

Afterwards, Teck CEO Don Lindsay referred to it as risk mitigation, noting the sale took pressure off his company’s capital expenditures to develop the project, and provided cash that could be used to pay debt or to return to shareholders.

Michael Faralla, head of global mining at TD, said the deal also revealed the complicated picture when it comes to copper: Even though it isn’t trading at a historic high, deposits take time to develop into mines and there aren’t that many coming online in the next few years.

“The value of (Quebrada) … is much more driven by the long term fundamentals, which is that copper is a critical part of modern life,” said Faralla.

In 2018, only two others acquisitions of Canadian base metal companies were comparable: Nevsun Resources Ltd., which has been developing a larger copper deposit in Serbia, was purchased by China’s Zijin Mining Group Co. Ltd. for $1.85 billion; and Australia’s South32 purchased Arizona Mining Inc., which is developing a zinc mine in the U.S., for $1.7 billion.

In both cases, foreign buyers purchased assets developed by Canadian mining companies, a long term trend that accelerated during 2018, several bankers said. They noted Chinese companies have long been investing in Canadian-developed mining properties as the country feeds its demand for metals.

Meanwhile, Australia’s mining sector, particularly the gold companies, have outperformed their Canadian peers, which has allowed them to hunt North America for valuable mining assets, according to several bankers.

“The Australian mining companies have performed very well, and are trading at much better valuations relative to what we’re seeing in North America,” said Chris Gratias, head of CIBC’s global mining investment banking team.

dump truck loaded with ore drives along a haul road in the open pit mine at Norton Gold Fields Ltd. in Australia.

Peter Collibee, head of global mining and metals at Scotiabank, said part of the reason Australian companies have done better relates to currency fluctuations, but there are other managerial reasons: they delivered on projects in Australia during a period when many Canadian companies ran into challenges on projects abroad.

“They have outperformed” their Canadian peers, said Collibee. “Now, they’re looking to exploit that valuation and they’re able to compete with the Canadian-listed companies wherever they are and that is new.”

He predicted more Australian gold companies would be active in the M&A space this year, perhaps looking at some Canadian companies.

Another new dimension bankers point to is the evolution of private equity companies operating in the mining space. As mining companies have encountered trouble raising money on the public markets, private equity companies have stepped up their game.

One of the largest transactions in 2018 was the U.S.-based Orion Resource Partners LP, a private equity company taking Dalradian Resources Inc. private in a $427 million transaction.

“There’s certainly been growth in mining private equity,” said Faralla, who noted it comes as raising money through public markets has grown more difficult.

His colleague McCreary said that private equity firms have grown more sophisticated in their approach to mining investments, and now have in-house teams with great expertise on how to manage mining assets.

Ryan Latinovich, head of RBC’s metals and mining group.

Ryan Latinovich, head of RBC’s metals and mining group, notes that while it has been more difficult for Canadian mining companies to raise equity, the challenges appear to be easing.

The commodity outlook seems positive across most metals and many companies have paid down debt and are set to reap higher cash flows, according to Latinovich.

“Even if the commodity prices don’t run high harder, the mining sector has gotten itself into a healthy state,” he said. “The space has gotten itself healthy again, and as we look forward we’re pretty optimistic about the space.”

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Crypto mining giant Bitmain is reportedly getting a new CEO as its IPO plan stalls

Bitmain, the Chinese crypto miner maker, looks like it has reached an interesting point in its pathway to going public. There’s been little heard since the company filed to go public in Hong Kong in September, but now it appears that a new CEO has been hired and its two founders are leaving.

That’s according to a report from SCMP which — citing two sources — said Wang Haichao, Bitmain’s director of product engineering, has assumed CEO duties following a transition that began in December. Founders Wu Jihan (pictured above) and Zhan Ketuan will be co-chairs with Wang described as the “potential successor.”

The publication said that it isn’t clear when a new CEO will be named, or indeed whether an outside appointment will be made.

Bitmain declined to comment on the report when asked by TechCrunch.

The company, which is said to have been valued as high as $15 billion, certainly appears to have stalled with its IPO following the filing of an application on September 26. That document opened up a treasure trove of financial information regarding the company, which is estimated to supply around three-quarters of the world’s crypto mining machines.

Indeed, Bitmain’s IPO filing showed heady growth in revenue. The company grossed more than $2.5 billion in revenue in 2017, a near-10X leap on the $278 million it claimed for 2016, while sales in the first six months of last year surpassed $2.8 billion.

However, there were no figures for Q3 2018 and, since September, the price of Bitcoin and other cryptocurrency has plummeted further still, therein reducing the appeal of buying a mining machine and likely impacting Bitmain’s sales.

Bitmain saw impressive revenue growth as the crypto market grew, but it isn’t clear how the business weathered the price slump that affected the market in 2017

We reported that the company likely made a loss of around $400 million in that Q3 quarter. Things are likely to have been trickier still in Q4, as crypto prices dropped so low that mining companies in China were reported to be selling off machines because the cost of power to mine was lower than the reward for doing so.

Bitmain has diversified into non-mining services, to its credit, but its efforts to grow Bitcoin Cash — a controversial fork of Bitcoin — have been controversial and likely loss-making, to boot.

The price of Bitcoin Cash is currently $162 at the timing of writing, that’s down significantly from around $2,500 one year ago. That doesn’t bode well for Bitmain’s investment into the cryptocurrency, and it likely explains why the company has made layoffs, like others in the crypto space.

What a difference four months can make. The challenge for the company’s (apparent) new CEO is certainly a daunting one.

But Bitmain’s struggle isn’t unprecedented. Just this week, its closest rival — Canaan — was linked with a U.S. IPO. The company had planned to go public in Hong Kong last year but it allowed its application to expire as crypto market prices went south.

There’s plenty to watch out for in the mining space in 2019!

Editorial note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.