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Canadian mining company using bitcoins to pay the bills

A chain of block erupters used for Bitcoin mining is pictured at the Plug and Play Tech Center in Sunnyvale, California October 28, 2013. REUTERS/Stephen Lam

Forget the fickle financing market, a Canadian junior mining company is turning to the controversial digital currency bitcoin to pay some bills.

Vancouver-based Alix Resources Corp. says its decision to pay contractor Ridge Resources Ltd. in bitcoin is a first in the junior mining sector, which has been struggling to raise and conserve cash amid a steep drop in commodity prices.

It’s a risky move for Alix, but not a stretch in an industry with a long history of prospecting for potential profits.

“The growth of popularity in the bitcoin space as an alternate method of payment has led Alix to step into this very exciting market,” Alix CEO Michael England stated in a release.

Sounding like a true exploration company, Alix believes it’s getting into the bitcoin market at “an early stage.”

Others are more skeptical.

“I’m surprised someone’s willing to take payment through Bitcoins,” Brian Huen, managing partner with Red Sky Capital Management Ltd. told Bloomberg News. “I certainly personally wouldn’t take that currency for services I’m rendering.”

Bitcoin is called a crypto currency because it uses secure communication protocols to handle transactions. The virtual money is popular among computer-savvy financial folks since there’s no oversight by authorities such as a central bank. That also makes it a big gamble. There have been recent reports of bitcoin sites disappearing with millions in users’ investments.

Others warn about a bitcoin bubble, as the value of the currency currently trades above $400, double where it traded just a few weeks ago.

Famous bitcoin investors include the Winklevoss twins, known for their involvement in Facebook. The pair is also reportedly set to launch an exchange-traded fund that will allow investors to put their money in digital currencies.

Vancouver is also becoming a hotbed for bit coin in Canada. Last month, the world’s first Bitcoin-enabled bank machine ATM opened in the city, the first of five expected to pop up across the country.

Alix says bitcoin will be used to pay for exploration work the company’s northwestern B.C.-based Windy Tungsten Project, which it bought last week. Tungsten is a steel-grey metal used in light bulbs and to cement together other metals across a wide range of applications.

The junior miner says it will pay Ridge in bitcoins and may pitch the currency as a form of payment to other service providers in future. The company has signed on a private software vendor to license a bitcoin exchange set to launch in January.

Alix’s shares rose 33 per cent t0 4 cents on the TSX Venture Exchange on Tuesday, the same day it made the bit coin announcement, pushing its market capitalization to more than $2 million. The stock jumped 12.5 per cent to 5 cents on Wednesday afternoon, but is still below its 52-week high of 6.5 cents in January. The stock dropped to 52-week low of 1.5 cents in July.

England is the largest shareholder Alix Resources, with a 5-per-cent stake as of late September, according to data from S&P Capital IQ.