REG - Argo Blockchain PLC - Argo 2023 Annual Financial Report
25/04/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240425:nRSY9335La&default-theme=true
RNS Number : 9335L Argo Blockchain PLC 25 April 2024
Press Release
25 April 2024
Argo Blockchain plc
("Argo" or "the Company")
2023 Full Year Results
Argo Blockchain plc, a global leader in cryptocurrency mining (LSE: ARB;
NASDAQ: ARBK), is pleased to announce its audited results for the year ended
31 December 2023.
Highlights
· Total number of Bitcoin mined during 2023 was 1,760, or 4.8
Bitcoin per day.
· Revenues of $50.6 million, a decrease of 14% from 2022, driven
primarily by a significant increase in the global hashrate and associated
network difficulty level.
· Increased hashrate by approximately 0.3 EH/s with the deployment
of ePIC BlockMiners at the Company's Quebec facilities.
· Reduced non-mining operating costs by 58% in 2023 compared to the
prior year.
· Generated $7.2 million of power credits through economic
curtailment at Helios.
· Mining margin of 43%, down from 54% in 2022. Similar to revenue,
this decrease was largely attributable to the increase in network difficulty.
· Adjusted EBITDA of $8.3 million, compared to negative Adjusted
EBITDA of $(46.7) million in 2022.
· Net loss of $35.0 million, compared to a net loss of $229.0
million in 2022.
· Reduced interest expense by 49%, driven by a strong focus on debt
reduction.
· Reduced debt owed to Galaxy Digital from $35.0 million at 31
December 2022 to $23.5 million at 31 December 2023; total debt outstanding at
the end of 2023 was $66.2 million.
· As at 31 December 2023, the Company had $7.4 million of cash; it
also held 9 Bitcoin on its balance sheet and other digital assets worth the
equivalent of 18 Bitcoin.
Post-period highlights
· In January 2024, the Company raised $9.9 million of gross
proceeds through a share placing with institutional investors.
· In March 2024, the Company sold its data center located in
Mirabel, Quebec for total consideration of $6.1 million. Net proceeds from the
sale were used to repay the Mirabel facility's existing mortgage and to repay
debt owed to Galaxy.
Q1 2024 Update (Preliminary and Unaudited)
· Total number of Bitcoin mined during Q1 2024 was 319, or 3.5
Bitcoin per day.
· Generated revenues of approximately $17 million.
· Average direct cost per Bitcoin mined was approximately $31,000.
· As at 31 March 2024, the Galaxy debt balance was $12.8 million
(down from original balance of $35.0 million), and the total debt balance was
$54.0 million.
· As at 31 March 2024, the Company's cash balance was $12.4
million.
Commenting on the results, Thomas Chippas, Argo Blockchain CEO, said,
"Despite a turbulent market, we have worked hard to strengthen our balance
sheet and reduce Argo's debt burden. We have reduced the debt owed to Galaxy
by $22 million, or 63%, and we have also improved our cash position over the
last several quarters. Operationally, Argo's hashrate increased by 0.3 EH/s
during the year with the deployment of ePIC BlockMiners at our Quebec
facilities, and we reduced our non-mining operating costs by 58%. We exited
the Bitcoin halving with a stronger balance sheet and leaner operations, and
we are optimistic about the ongoing growth and development of Argo with a
clear objective of delivering shareholder value."
*The tables below reconcile Bitcoin and Bitcoin Equivalent Mining Margin to
gross margin, the most directly comparable IFRS measure, and Adjusted EBITDA
to net income/(loss), the most directly comparable IFRS measure:
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Gross profit/(loss) 3,839 (42,623)
Depreciation of mining equipment 18,656 20,469
Change in fair value of digital currencies (738) 53,978
Other revenue - (119)
Mining profit 21,757 31,705
Bitcoin and Bitcoin Equivalent Mining Margin 43% 54%
The following table shows a reconciliation of Adjusted EBITDA to net
income/(loss), the most directly comparable IFRS measure, for the years ended
December 31, 2023 and December 31, 2022.
Year ended Year ended
31 December 31 December
2023 2022
$'000 $'000
Net income/(loss) (35,033) (228,961)
Interest expense 11,556 22,661
Depreciation / amortisation 20,129 29,003
Income tax (credit) / expense - (11,731)
EBITDA (3,348) (189,028)
Impairment of assets 855 55,838
Impairment of intangible assets 1,082 5,155
Loss/(gain) on disposal of intangible fixed assets (428) -
Loss/(gain) on sale of subsidiary and investments (36) 55,418
Loss on sale of fixed assets - 23,228
Foreign exchange (1,597) (21,337)
Restructuring and transaction-related fees 4,969 11,862
Share based payment charge 3,892 6,096
Equity accounted loss from associate 716 6,027
Write off of investment 2,236 -
Adjusted EBITDA 8,341 (46,741)
Inside Information and Forward-Looking Statements
This announcement contains inside information and includes forward-looking
statements which reflect the Company's current views, interpretations, beliefs
or expectations with respect to the Company's financial performance, business
strategy and plans and objectives of management for future operations. These
statements include forward-looking statements both with respect to the Company
and the sector and industry in which the Company operates. Statements which
include the words "remains confident", "expects", "intends", "plans",
"believes", "projects", "anticipates", "will", "targets", "aims", "may",
"would", "could", "continue", "estimate", "future", "opportunity", "potential"
or, in each case, their negatives, and similar statements of a future or
forward-looking nature identify forward-looking statements. All
forward-looking statements address matters that involve risks and
uncertainties because they relate to events that may or may not occur in the
future, including the risk that the Company may receive the benefits
contemplated by its transactions with Galaxy, the Company may be unable to
secure sufficient additional financing to meet its operating needs, and the
Company may not generate sufficient working capital to fund its operations for
the next twelve months as contemplated. Forward-looking statements are not
guarantees of future performance. Accordingly, there are or will be important
factors that could cause the Company's actual results, prospects and
performance to differ materially from those indicated in these statements. In
addition, even if the Company's actual results, prospects and performance are
consistent with the forward-looking statements contained in this document,
those results may not be indicative of results in subsequent periods. These
forward-looking statements speak only as of the date of this announcement.
Subject to any obligations under the Prospectus Regulation Rules, the Market
Abuse Regulation, the Listing Rules and the Disclosure and Transparency Rules
and except as required by the FCA, the London Stock Exchange, the City Code
or applicable law and regulations, the Company undertakes no obligation
publicly to update or review any forward-looking statement, whether as a
result of new information, future developments or otherwise. For a more
complete discussion of factors that could cause our actual results to differ
from those described in this announcement, please refer to the filings that
Company makes from time to time with the United States Securities and
Exchange Commission and the United Kingdom Financial Conduct Authority,
including the section entitled "Risk Factors" in the Company's Annual Report
on Form 20-F.
For further information please contact:
Argo Blockchain
Investor Relations ir@argoblockchain.com
Tennyson Securities
Corporate Broker +44 207 186 9030
Peter Krens
Fortified Securities
Joint Broker +44 7493 989014
Guy Wheatley, CFA guy.wheatley@fortifiedsecurities.com
Tancredi Intelligent Communication argoblock@tancredigroup.com
UK & Europe Media Relations
About Argo:
Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK) blockchain
technology company focused on large-scale cryptocurrency mining. With mining
operations in Quebec and Texas, and offices in the US, Canada, and the UK,
Argo's global, sustainable operations are predominantly powered by renewable
energy. In 2021, Argo became the first climate positive cryptocurrency mining
company, and a signatory to the Crypto Climate Accord. For more information,
visit (http://www.argoblockchain.com/) www.argoblockchain.com
(http://www.argoblockchain.com/) .
Chairman's Statement
We began 2023 on the heels of a transformational and strategic pivot in our
operations. In December 2022 we sold the Helios facility, which we designed,
constructed, and energized over the course of 2021 and 2022. The transaction
strengthened our balance sheet through $41 million of debt reduction and
through a refinance of our remaining machine-backed loans with a new
asset-backed loan from Galaxy Digital Holdings Ltd. ("Galaxy").
Argo maintained ownership of its entire fleet of mining machines, including
roughly 23,600 Bitmain S19J Pro machines that were operating at Helios prior
to the sale. Those miners remained in situ and continued to operate pursuant
to a hosting agreement with Galaxy. Currently, approximately 2.4 EH/s of total
hashrate capacity is deployed at Helios, and the machines continue to perform
very well in the custom-designed immersion-cooled facility.
The hosting agreement with Galaxy allows Argo to share in the proceeds from
economic curtailment, which occurs when Helios monetizes its fixed-price PPA
during periods of high power prices. During the year, Argo generated
approximately $7.2 million in power credits, with $3.8 million generated in
the month of August during a state-wide heat wave. Not only does the ability
to curtail operations benefit Argo economically, but it greatly enhances the
stability of the Texas grid.
Throughout the year, the Company focused on three key pillars: financial
discipline, operational excellence, and strategic partnerships for growth.
Financial discipline
After the sale of the Helios facility, the Company was able to significantly
reduce its operating expenses. During the first quarter alone, Argo reduced
its non-mining operating expenses by 68% compared to the run rate in the
second half of 2022. The Company has been able to sustain these cost
reductions, achieving a 58% reduction in non-mining operating expenses for the
full year 2023 compared to the prior year.
The Company has also made progress in strengthening its balance sheet by
reducing debt. For the full year 2023, the company reduced its debt by $13
million to $66 million. Most of the debt reduction was focused on the
asset-backed loans with Galaxy through monthly amortization, supplemented by
additional prepayments throughout the year. The prepayments were funded with
proceeds of non-core asset sales and a portion of the proceeds from an equity
raise completed in July 2023.
In addition, subsequent to year end, the Company paid down an additional $12
million using a portion of proceeds raised through an equity raise in January
2024, the proceeds of the sale of non-core assets, including the Mirabel
facility, and $3 million through monthly amortization payments. As of March
31, 2024, the debt balance owed to Galaxy was $13 million, and total debt was
$54 million.
Operational excellence
After selling the Mirabel facility in March 2024, Argo continues to own and
operate its data center in Baie Comeau, Quebec. The Baie Comeau site is over
40,000 square feet and has 15 MW of 99% renewable power capacity sourced from
the nearby Baie Comeau hydroelectric dam.
During the third quarter of 2023, the Company deployed approximately 2,750
BlockMiner machines from ePIC Blockchain Technologies, representing
approximately 300 PH/s, at its Quebec facilities. This deployment increased
the Company's total hashrate capacity by approximately 300 PH/s. As of 31
March 2024, taking into account the sale of certain prior generation machines
that occurred in conjunction with the sale of the Mirabel facility, the
Company's total hashrate capacity is 2.7 EH/s.
Additionally, the Company has the ability to expand its capacity at Baie
Comeau from 15 MW to 23 MW. The local municipality has approved the expansion,
and the Company is in the evaluation phase of this project.
Growth and strategic partnerships
The Company continues to explore opportunities where mining can be paired with
stranded or wasted energy. There is tremendous potential for energy generators
to utilize mining as a balancing and optimization tool, particularly in the
energy transition where limitations currently exist in the ability to store
renewable energy. Argo is evaluating several projects with companies across
the energy value chain.
Financial results
Revenue in 2023 was $50.6 million, compared to $58.6 million in 2022.
Non-mining operating expenses were $18.8 million, a significant decrease from
$34.1 million in 2022. Adjusted EBITDA was $8.3 million, compared to $(46.7)
million in 2022. Loss attributable to shareholders totaled $35.0 million. In
2023, total capital expenditures were $5.2 million. Our cash balance at
December 31, 2023 was $7.4 million.
Operating results
With the deployment of the BlockMiners at its Quebec facilities, the Group's
total hashrate capacity increased by 12% from 2.5 EH/s in June 2023 to 2.8
EH/s by September 2023. Argo's mining margin averaged 44% for the full year
2023, which is lower than the 54% mining margin achieved in 2022. The decrease
in mining margin from 2022 was driven primarily by the 71% increase in average
network difficulty in 2023.
Bitcoin macro environment
While 2022 was a challenging year for Bitcoin with several macroeconomic
headwinds, 2023 provided a bit of a reprieve for miners. After starting the
year at $16,616, the Bitcoin price experienced a rapid increase in March 2023
amidst a period of distress in the regional banking sector, climbing 21%
during the month. Additionally, the price saw a steady increase during the
second half of the year as speculation intensified about the impending January
2024 deadline for the approval of Bitcoin Spot ETFs by the US Securities and
Exchange Commission (post the period end, the ETFs were approved by the SEC on
10 January 2024). By the end of 2023, the price of Bitcoin had increased to
$42,208, a 154% increase for the year.
Another tailwind for Bitcoin miners was the growth of transaction fees from
the introduction of ordinals and inscriptions. Transaction fees on the Bitcoin
network more than quadrupled in 2023 compared to the prior year. There was a
large but temporary spike in transaction fees in May, along with longer
periods of elevated fees in November and December from increased ordinal and
inscription activity.
The increase in Bitcoin price, combined with growth in transaction fees,
enabled hashprice to climb from $60 per petahash per day at the end of 2022 to
$98 per petahash per day at the end of 2023, which is a 64% increase during
the year. The growth in hashprice was not as dramatic as the increase in
Bitcoin price or transaction fees because it takes into account the network
difficulty, which increased by 104% during the year to account for significant
growth in the global hashrate.
Commitment to sustainability
Since inception, Argo has always maintained a strong focus on environmental
sustainability. This is why we located our mining operations in Quebec, where
they are powered by hydroelectricity, and the Texas Panhandle, where more than
85% of the installed generation capacity comes from renewable sources.
To our knowledge, we are the first publicly traded cryptocurrency mining
company to publish a report in accordance with the Task Force on
Climate-related Financial Disclosures ("TCFD") Recommendations and Recommended
Disclosures (see page 32).
Leadership changes
On 30 January 2023, Chief Financial Officer and Executive Director Alex
Appleton resigned from his positions at Argo to pursue other opportunities.
After a formal recruitment process led by an executive search firm, the Board
appointed Jim MacCallum as Chief Financial Officer effective 5 April 2023.
On 9 February 2023, Chief Executive Officer and Interim Chairman Peter Wall
resigned from his positions at Argo to pursue other opportunities. Matthew
Shaw became Chairman of the Board, and the Board appointed Chief Operating
Officer Seif El-Bakly to serve as Interim CEO.
On 27 November 2023, after a formal recruitment process led by an executive
search firm, the Board of Directors appointed Thomas Chippas as Chief
Executive Officer and Executive Director. Seif El-Bakly returned to his role
as Chief Operating Officer.
On 5 January 2024, Seif El-Bakly resigned from his position to pursue other
opportunities.
Strategic focus in 2024
With the Bitcoin halving occurring in April 2024, the Company's priorities in
the first quarter of 2024 continued to involve a strong focus on financial
discipline, operational excellence, and modest growth in operations. We
believe that our efficient fleet, stable and competitive power prices, and
strengthened balance sheet make us well-positioned for a post-halving
environment.
On behalf of the Board, I would like to thank all of our shareholders and
stakeholders. I am excited for Argo to continue in its mission of powering the
world's most innovative and sustainable blockchain infrastructure.
Matthew Shaw
Chairman of the Board
Independent Auditor's Report
We have audited the financial statements of Argo Blockchain plc (the 'parent
company') and its subsidiaries (the "group") for the year ended 31 December
2023 which comprise the Group Statement of Comprehensive Income, the Group
and Parent Company Statements of Financial Position, the Group and Parent
Company Statements of Changes in Equity, the Group and Parent Company
Statements of Cash Flows and notes to the financial statements, including
significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK-adopted
international accounting standards and as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act
2006.
In our opinion:
· the financial statements give a true and fair view of the state
of the group's and of the parent company's affairs as at 31 December 2023 and
of the group's loss for the year then ended;
· the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
· the parent company financial statements have been properly
prepared in accordance with UK-adopted international accounting standards and
as applied in accordance with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the Group and
parent company financial statements in accordance with UK-adopted
international accounting standards. Under company law the directors must not
approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and Company and of the
profit and loss of the Group and Company for that period.
In preparing these financial statements, the directors are required to:
● Select suitable accounting policies and then apply them
consistently;
● Make judgements and accounting estimates that are reasonable and
prudent;
● State whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
● Prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and Company will continue in
business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements and
the Directors' Remuneration Report comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Group and Company and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are also responsible for ensuring that the Annual Report and
financial statements taken as a whole, is fair, balanced and understandable
and provides the information necessary for the shareholders to assess the
Group's and Company's position and performance, business model and strategy.
Website publication
The directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Group and Company's website is the responsibility of the directors. The
directors' responsibility also extends to the on-going integrity of the
financial statements contained therein.
Directors' responsibilities pursuant to DTR4 (Disclosure and Transparency
Rules)
The directors confirm to the best of their knowledge:
● The Group and Company financial statements have been prepared in
accordance with UK-adopted international financial reporting standards and
give a true and fair view of the assets, liabilities, financial position and
profit or and give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Group and Company; and
● The Annual Report includes a fair review of the development and
performance of the business and financial position of the Group and Company
together with a description of the principal risks and uncertainties that it
faces.
GROUP STATEMENT OF COMPREHENSIVE INCOME
Year ended December 2023 Year ended December 2022
(Restated, Note 2)
Continuing operations Note $'000 $'000
Revenues 7 50,558 58,583
Power and hosting costs (35,964) (26,759)
Power Credits 7 7,163 -
Crypto asset fair value movement 17, 20 738 (53,978)
Depreciation - mining hardware 18 (18,656) (20,469)
Gross profit (loss) 3,839 (42,623)
Operating expenses 8 (19,345) (34,057)
Gain on hedging - 2,097
Share based payment charge 21 (3,892) (6,096)
Operating loss (19,398) (80,679)
Gain on sale of investments 36 -
Loss on sale of subsidiary 14 - (55,418)
Write off of investment 16 (2,236) -
Loss on disposal of fixed assets - (23,228)
Investment fair value movement 15 - (406)
Finance costs 8 (11,556) (22,661)
Other income 346 3,726
Impairment of tangible fixed assets 18 (855) (55,838)
Gan on disposal of intangible assets 17 428 -
Impairment of intangible assets 17 (1,082) (5,155)
Equity accounted loss from associate 16 (716) (6,027)
Revaluation of contingent consideration - 4,994
Loss before taxation (35,033) (240,692)
Tax Credit 13 - 11,731
Loss after taxation (35,033) (228,961)
Other comprehensive income
Currency translation reserve (779) (20,639)
Equity accounted OCI from associate 16 - (8,744)
Fair value reserve - (551)
Total other comprehensive loss (779) (29,934)
Total comprehensive loss attributable (35,812) (258,895)
to the equity holders of the Company
Loss per share attributable to equity owners (cents)
Basic and diluted loss per share 12 (0.07) (0.48)
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 December As at 31 December As at 1
2023 2022 January
(Restated, 2022
Note 2)
Note $'000 $'000 $'000
ASSETS
Non-current assets
Investments at fair value through profit or loss 15 400 414 543
Investments accounted for using the equity method 16 - 2,863 18,642
Intangible fixed assets 17 888 2,103 7,560
Property, plant and equipment 18 59,728 76,991 150,571
Right of use assets 18 - 525 472
Total non-current assets 61,016 82,896 177,788
Current assets
Trade and other receivables 19 2,480 823 10,072
Prepaids 19 1,355 5,979 75,409
Digital assets 20 385 443 108,956
Cash and cash equivalents 26 7,443 20,092 15,923
11,663 27,337 210,360
Assets held for sale 14 3,261 - -
Total current assets 14,924 27,337 210,360
Total assets 75,940 110,233 388,148
EQUITY AND LIABILITIES
Equity
Share Capital 22 712 634 622
Share Premium 22 209,779 202,103 196,911
Share based payment reserve 23 12,166 8,528 2,531
Currency translation reserve 23 (30,129) (29,350) (8,711)
Fair value reserve - - 551
Other comprehensive income of equity accounted associates - - 8,744
Accumulated income (deficit) 23 (192,370) (157,337) 71,624
Total equity 158 24,578 272,272
Current liabilities
Trade and other payables 24 11,175 9,780 20,566
Corporation Tax - - 10,360
Deferred Tax 13 - - 386
Contingent consideration - - 10,889
Loan and Borrowings 25 14,320 11,605 31,558
Lease liability 25 - 5 10
25,495 21,390 73,769
Liabilities held for sale 14 2,090 - -
Total current liabilities 27,585 21,390 73,769
Non-current liabilities
Deferred tax 13 - - 730
Issued debt - bond 4 38,170 37,809 36,303
Loans 25 10,027 25,916 4,575
Lease liability 25 - 540 499
Total liabilities 75,782 85,655 115,876
Total equity and liabilities 75,940 110,233 388,148
The Group financial statements were approved by the Board of Directors on 24
April 2024 and authorised for issue and they are signed on its behalf by:
Thomas Chippas
Chief Executive Officer
The accounting policies and notes on pages 58 to 85 form part of the financial
statements. Registered number: 11097258
GROUP STATEMENT OF CHANGES IN EQUITY
Share Capital Share Premium Currency translation reserve Share based Accumulated Total
payment reserve surplus/ (deficit)
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2023 634 202,103 (29,350) 8,528 (157,337) 24,578
Total comprehensive loss for
the period:
Loss for the period - - - - (35,033) (35,033)
Other comprehensive loss - - (779) - - (779)
Total comprehensive loss for the - - (779) - (35,033) (35,812)
period
Transactions with equity owners:
Share capital issued 78 7,676 - - - 7,754
Share based payment charge - - - 3,892 - 3,892
Share RSUs vested - - - (254) - (254)
Total transactions with equity 78 7,676 - 3,638 - 11,392
owners
Balance at 31 December 2023 712 209,779 (30,129) 12,166 (192,370) 158
Share Capital Share Premium Currency translation Share based Fair Revaluation Reserve Other comprehensive Accumulated Total
reserve payment reserve income of surplus/ (deficit)
associates
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2022 622 196,911 (8,711) 2,531 551 71,624 272,272
8,744
Total comprehensive loss for
the period:
Loss for the period - - - - - (228,961) (228,961)
Other comprehensive loss - - (20,639) - (551) (8,744) - (29,934)
Total comprehensive loss for the - - (20,639) (551) (8,744) (228,961) (258,895)
period -
Transactions with equity owners:
Share capital issued 12 5,192 - - - - - 5,204
Share based payment charge - - - 6,096 - - - 6,096
Share options/warrants exercised - - - (99) - - - (99)
Total transactions with equity owners 12 5,192 - 5,997 - - 11,201
-
Balance at 31 December 2022 634 202,103 (29,350) 8,528 - - (157,337) 24,578
GROUP STATEMENT OF CASHFLOWS
Year ended December Year ended December
2023 2022 (Restated, Note 2)
Note
$'000 $'000
Cash flows from operating activities
Loss before tax (35,033) (240,692)
Adjustments for:
Depreciation and amortisation 17, 18 20,129 29,003
Foreign exchange movements (1,597) (21,337)
Loss on disposal of tangible assets - 23,228
Finance cost 8 11,556 22,662
Loss on sale of subsidiary and investment - 55,418
Fair value change in digital assets through profit or loss 20 (738) 55,555
Revenue from digital assets 20 (50,558) (60,172)
Impairment of intangible digital assets 17 654 5,548
Impairment of property, plant and equipment 18 855 55,838
Investment fair value movement 16 - 406
Write off of investment 16 2,236 -
Share of loss from associate 716 6,027
Gain on sale of investment (36) -
Revaluation of contingent consideration - (4,994)
Hedging gain - (2,097)
Proceeds from sale of digital assets 20 51,866 114,646
Share based payment expense 10 3,892 6,096
Working capital changes:
(Increase)/decrease in trade and other receivables 19 (1,152) (26,150)
Increase/(decrease) in trade and other payables 24 1,041 (5,576)
Net cash generated from operating activities 3,831 13,409
Investing activities
Cash transferred on disposal of subsidiary - (1,678)
Proceeds from sale of investment 15 50 -
Purchase of tangible fixed assets 18 (1,112) (108,047)
Proceeds from disposal of tangible fixed assets - 12,404
Net cash used in investing activities (1,062) (97,321)
Financing activities
Increase in loans 25 1,429 96,995
Lease payments 26 (93)
Loan repayments 25 (14,064) -
Interest paid (10,661) (22,661)
Proceeds from issue of loan in conjunction with the disposal of subsidiary
- 9,936
Proceeds from shares issued - net of issue costs 23 7,518 -
Net cash (used in) generated from financing activities (15,778) 84,177
Net (decrease) increase in cash and cash equivalents (13,009) 265
Effect of foreign exchange on cash and cash equivalents 360 3,904
Cash and cash equivalents at beginning of period 20,092 15,923
Cash and cash equivalents at end of period 7,443 20,092
Material non-cash movements:
● The Group sold its Helios facility in December 2022, in exchange
for paying down existing debt and obtaining new debt. See Note 19 for
additional details.
● In March 2022, the Group entered into an agreement to exchange
mining machines and terminate a hosting agreement. See Note 19 for additional
details.
● During the period, the Group utilised "Prepayments for mining
machines" amounting to $4,118,000, included within receivables, in order to
acquire mining machines within property plant and equipment additions.
Group - net debt reconciliation Year ended 31 December Year ended 31 December
2023 2022
$'000 $'000
Current loans and borrowings 26 (14,320) (11,605)
Non-current issued debt - bonds 26 (38,170) (37,809)
Non-current loans and borrowings 26 (10,027) (25,916)
Lease liability - (545)
Cash and cash equivalents 7,443 20,092
Total net debt (55,074) (55,783)
NOTES TO THE FINANCIAL STATEMENTS
1. COMPANY INFORMATION
Argo Blockchain PLC ("the company") is a public company, limited by shares,
and incorporated in England and Wales. The registered office is Eastcastle
House, 27-28 Eastcastle Street, London, W1W 8DH. The company was incorporated
on 5 December 2017 as GoSun Blockchain Limited and changed its name to Argo
Blockchain Limited on 21 December 2017. Also on 21 December 2017, the company
re-registered as a public company, Argo Blockchain plc. Argo Blockchain plc
acquired a 100% subsidiary, Argo Innovation Labs Inc. (together "the Group"),
incorporated in Canada, on 12 January 2018.
On 4 March 2022 the Group acquired 100% of the share capital of DPN LLC and
was merged into new US entity Argo Innovation Facilities (US) Inc (also 100%
owned by Argo Blockchain plc).
On 11 May 2022 the Group acquired 100% of the share capital of 9377-2556
Quebec Inc and 9366-5230 Quebec Inc. These are held by Argo Innovation Labs
Inc. (Canada).
On 22 November 2022, the Group formed Argo Operating US LLC and Argo Holdings
US Inc.
On 21 December 2022, Argo Innovation Facilities (US) Inc became Galaxy Power
LLC. On 28 December 2022, the Group sold Galaxy Power LLC.
The principal activity of the group is that of Bitcoin mining.
The common shares of the Group are listed under the trading symbol ARB on the
London Stock Exchange. The American Depositary Receipt of the Group are listed
under the trading symbol ARBK on Nasdaq. The Group bond is listed on the
Nasdaq Global Select Market under the trading symbol ARBKL.
The financial statements cover the year ended 31 December 2023.
2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with UK-adopted
international accounting standards and with the requirements of the Companies
Act 2006. The financial statements have been prepared under the historical
cost convention, except for the measurement to fair value certain financial
and digital assets and financial instruments as described in the accounting
policies below.
During 2023, the Group changed its reporting currency to US dollars as further
described in Note 3. Monetary amounts in these financial statements are
rounded to the nearest thousand US dollars. Argo Blockchain PLC's functional
currency is GBP. Argo Innovations Labs Inc., 9377-2556 Quebec Inc, and
9366-5230 Quebec Inc.'s functional currency is Canadian Dollars; Argo
Operating US LLC and Argo Holdings US Inc.'s functional currency is United
States Dollars; all entries from these entities are presented in the Group's
presentational currency of US dollars. This change in accounting policy, added
retrospectively requires a third balance sheet as at the beginning of the
preceding comparative period to be reported. Where the subsidiary's functional
currency is different from the parent, the assets and liabilities presented
are translated at the closing rate as at the Statement of Financial Position
date. Income and expenses are translated at average exchange rates (unless
this average is not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and expenses
are translated at the rate on the dates of the transactions).
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates. The significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty are
disclosed in Note 6.
Prior year restatement
The 2022 income tax accounting was completed based on preliminary information
at the time of the financial statement completion. When updating the income
taxes for 2023 it was determined that the 2022 estimates were inaccurate and
have been restated.
The impact on the 2022 financial statements are as follows:
Income tax recovery increased by $11,285,000 from $446,000 to $11,731,000.
Cumulative translation adjustment increased by $455,000 from $20,184,000 to
$20,639,000
Net loss decreased by $11,285,000 from a loss of $240,246,000 to a loss of
$228,961,000.
Deferred tax liability decreased by $10,589,000 from $10,589,000 to $nil.
Statement of Cashflows reclassification
Proceeds from the sale of digital assets were reclassified from investing
cashflows to operating cashflows in the 2022 Statements of Cashflows, amongst
other presentational changes in 2022 in order to ensure comparability with the
presentation and classification in the current year.
3. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
consolidated financial statements are below.
Change in Presentation Currency
The Group changed its presentational currency to US Dollars during 2023 due to
the fact its revenues, direct costs, capital expenditures and debt obligations
are predominantly denominated in US Dollars. In order to satisfy the
requirements of IAS 21 with respect to a change in the presentation currency,
the financial information as previously reported in the Group's Annual Reports
have been restated from GBP into US Dollars using the procedures outlined
below:
· Assets and liabilities were translated to US Dollars at the
closing rates of exchange at each respective balance sheet date
· Share capital, share premium and other reserves were translated
at the historic rates prevailing at the dates of transactions
· Income and expenses were translated to US Dollars at an average
rate at each of the respective reporting years
· Differences resulting from the retranslation were taken to
reserves
· All exchange rates used were extracted from the Group's
underlying financial records
Going Concern
The preparation of consolidated financial statements requires an assessment
on the validity of the going concern assumption.
On 28 December 2022, the Group announced a series of transactions with Galaxy
Digital Holdings, Ltd. ("Galaxy") that improved the Group's liquidity position
and enabled the Group to continue its mining operations. As part of the
transactions, Argo sold the Helios facility and real property in Dickens
County, Texas to Galaxy for $65 million and refinanced existing asset-backed
loans via a new $35 million, three-year asset-backed loan with Galaxy. The
transactions reduced total indebtedness by $41 million and allowed Argo to
simplify its operating structure. During 2023 and through March 31, 2024, the
Group has repaid a significant portion of the Galaxy debt by making its
scheduled amortization payments, sweeps on equity raises, and through the sale
of non-core assets. In addition, an equity raise completed in January 2024
provided the Group with additional cash resources. This has strengthened the
Group's balance sheet and liquidity position. However, material uncertainties
exist that may cast significant doubt regarding the Group's ability to
continue as a going concern and meet its liabilities as they come due. The
significant uncertainties are:
1. The Group's debt service obligations as of reporting date are
approximately $18 million (Galaxy principal and interest on Galaxy and the
bonds) from 31 March 2024 to 30 June 2025.
2. The Group's exposure to Bitcoin prices, power prices, and hashprice,
each of which have shown volatility over recent years and have a significant
impact on the Group's future profitability. The Group may have difficulty
meeting its liabilities if there are significant declines to the hashprice
assumption or significant increases to the power price, particularly where
there is a combination of both factors. The recent April 2024 Bitcoin halving
has created pressure on the hashprice. The Directors' assessment of going
concern includes forecasted scenarios drawn up to 30 June 2025 using the
Group's estimate of potential hashprices and power costs.
Offsetting these potential risks to the Group's cash flow are the Group's
current cash balance, cash generated from operations and the Group's ability
to generate additional funds by issuing equity for cash proceeds.
Based on information from Management, as well as independent advisors, the
Directors have considered the period to 30 June 2025, as a reasonable time
period given the variable outlook of cryptocurrencies and the Bitcoin halving
in April 2024. Based on the above considerations, the Board believes it is
appropriate to adopt the going concern basis in the preparation of the
Financial Statements. However, the Board notes that the significant debt
service requirements and the volatile economic environment, indicate the
existence of material uncertainties that may cast significant doubt regarding
the applicability of the going concern assumption and the auditors have made
reference to this in their audit report.
Revenue and Other Income Recognition
Mining Revenue
The provision of hash calculation services is an output of our ordinary
activities from the Company's mining equipment. The Company has entered into
arrangements with a Mining pool and has undertaken the performance obligation
of providing computing power used for hashing calculations to the Mining pool
in exchange for noncash consideration in the form of cryptocurrency, which is
variable consideration. Providing our computing power is at the Company's
discretion and our enforceable right to compensation begins when, and
continues for as long as, services are provided. The cryptocurrency earnings
are calculated based on a formula which, in turn, is based on the hashrate
contributed by the Company's provided computing power used for hashing
calculations allocated to the Mining pool, assessed over a 24-hour period, and
distributed daily based on the Full Pay Per Share ("FPPS") methodology. The
Company assesses the estimated amount of the variable non-cash consideration
to which it expects to be entitled for providing computational power used for
hashing calculations at contract inception and subsequently measures if it is
highly probable that a significant reversal in the amount of cumulative
revenue recognized will not occur. The uncertainties regarding the daily
variable consideration to which the Company is entitled for providing its
computational power used for hashing calculations are no longer constrained at
23:59:59 UTC regardless of the timing of the BTC received. The amount earned
is calculated based on the Company's computing power used for hashing
calculations provided to the Mining pool and the estimated (i) block subsidies
and (ii) daily average transaction fees which the Mining Pool expects to earn,
less (iii) a Mining pool discount.
1. Block subsidies refers to the block reward that are expected to be
generated on the BTC network as a whole. The fee earned by the Company is
first calculated by dividing (a) the total amount of hashrate the Company
provides to the Mining pool operator, by (b) the total BTC network's implied
hashrate (as determined by the BTC network difficulty), multiplied by (c) the
total amount of block subsidies that are expected to be generated on the BTC
network as a whole.
2. Transaction fees refer to the total fees paid by users of the network
to execute transactions. The fee paid out by the Mining pool operator to the
Company is further calculated by dividing (a) the total amount of transaction
fees that are actually generated on the BTC network as a whole less the 3
largest and 3 smallest transactions per block, by (b) the total amount of
block subsidies that are actually generated on the BTC network as a whole,
multiplied by (c) the Company's fee earned as calculated in (i) above. The
Company is entitled to its relative share of consideration even if a block is
not successfully added to the blockchain by the mining pool.
3. Mining pool discount refers to the discount applied to the total FPPS
payout otherwise attributed to computing power service providers for their
sale of computing power used for hashing calculations as defined in the rate
schedule of the agreement with the Mining pool operator.
The Company is entitled to the fee from the Mining Pool as calculated above
regardless of the actual performance of the Mining Pool operator. Therefore,
even if the Mining Pool does not successfully add any block to the blockchain
in a given contract period, the fee remains payable by the Mining Pool to the
Company. Accordingly, the Company is not sharing in the earnings of the Mining
pool operator.
The Company's agreements with the Mining pool operator provide the Mining pool
operator and the Company with the enforceable right to terminate the contract
at any time without substantively compensating the other party for the
termination. Upon termination, the Mining pool operator is required to pay the
Company the amount due related to previously satisfied performance
obligations. As a result, the Company has determined that the duration of the
contract is less than 24 hours and the contract is continuously renewed
throughout the day. The Company has also determined that the Mining pool
operator's renewal right is not a material right as the terms, conditions, and
compensation amounts are at then-current market rates.
The cryptocurrency earned is received in full and can be paid in fractions of
cryptocurrency. Revenues from providing cryptocurrency computational power
used for hashing calculations are recognized upon delivery of the service over
a 24-hour period, which generally coincides with the receipt of crypto assets
in exchange for the provision of computational power used for hashing
calculations and the contract inception date. The Company updates the
estimated transaction price of the non-cash consideration received at its fair
market value. Management estimates fair value daily based on the quantity of
cryptocurrency received multiplied by the price quoted from Coingecko on the
day it was received. Management considers the prices quoted on Coingecko to be
a level 1 input under IFRS 13, Fair Value Measurement.
Power Credits - Power credits are credits we receive in Texas when we curtail
our mining production and sell the power back to the grid. The hosting
agreement with Galaxy allows Argo to share in the proceeds from these
curtailments, which occurs when the Helios facility monetizes its fixed-price
PPA during periods of high power prices. The Company records power credits in
the period they are earned provided they are estimable and recoverable.
Management fees: In 2022, the Group recognised management fees on the services
provided to third parties for management of mining machines on their behalf,
ensuring the machines are optimised and mining as efficiently as possible. The
performance obligation is identified as the services are performed, and thus
revenue is recorded over time.
Other Income: The Group receives credits and or coupons for the purchase and
use of "Application-Specific Integrated Circuits ("ASICs") on a periodic basis
for Bitcoin Mining. These credits are provided to the Group after it purchases
ASICs based on the variance between the price paid by the Group versus the
reduction in ASIC prices. The credits are transferable. The Group elects to
sell the credits at the market rate to willing buyers upon receipt of the
credits. Other income is recognised at the date the sale is completed.
Derivative Contracts - Hedging: In 2022, the Group used derivatives contracts
in connection with some of its lending activities and its treasury management.
Derivative contracts are susceptible to additional risks that can result in a
loss of all or part of the investment. The Group's derivative activities and
exposure to derivative contracts are subject to interest rate risk, credit
risk, foreign exchange risk, and macroeconomic risks. In addition, Argo is
also subject to additional counterparty risks due to the potential inability
of its counterparties to meet the terms of their contracts. There were no
hedging contracts in 2023.
Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
The Group assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.
The group consists of Argo Blockchain plc and its wholly owned subsidiaries
Argo Innovation Labs Inc, Argo Operating US LLC and Argo Holdings US Inc.,
9366-5230 and 9377-2556 and Argo Innovation Labs Ltd. Argo Innovation Labs Ltd
has been dormant since incorporation.
In the parent company financial statements, investments in subsidiaries, joint
ventures and associates are accounted for at cost less impairment.
The consolidated financial statements incorporate those of Argo Blockchain plc
and all of its subsidiaries (i.e., entities that the group controls through
its power to govern the financial and operating policies so as to obtain
economic benefits). Subsidiaries acquired during the year are consolidated
using the purchase method. Their results are incorporated from the date that
control passes.
All intra-group transactions, balances and unrealised gains on transactions
between group companies are eliminated on consolidation.
Business Combinations
The group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
values of the assets transferred, the liabilities incurred to the former
owners of the acquisition and the equity interests issued by the group. The
consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. The group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised amounts of
acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
Associates
Associates are all entities over which the Group has significant influence but
not control, generally accompanying a shareholding of between 20% and 50% of
the voting rights. Investments in associates are accounted for using the
equity method of accounting. Under the equity method, the investment is
initially recognised at cost, and the carrying amount is increased or
decreased to recognise the investor's share of the profit or loss of the
investee after the date of acquisition. The Group's investment in associates
includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence
is retained, only a proportionate share of the amounts previously recognised
in other comprehensive income is reclassified to profit or loss where
appropriate.
The Group's share of post-acquisition profit or loss is recognised in the
income statement, and its share of post- acquisition movements in other
comprehensive income is recognised in other comprehensive income with a
corresponding adjustment to the carrying amount of the investment. When the
Group's share of losses in an associate equal or exceeds its interest in the
associate, including any other unsecured receivables, the Group does not
recognise further losses, unless it has incurred legal or constructive
obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective
evidence that the investment in the associate is impaired. If this is the
case, the Group calculates the amount of impairment as the difference between
the recoverable amount of the associate and its carrying value and recognises
the amount adjacent to 'share of profit/(loss) of associates in the income
statement.
Segmented reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing the
performance of the operating segments, has been identified as the CEO or
equivalent. The directors consider that the Group has only one significant
reporting segment being crypto mining which is fully earned by a Canadian and
USA subsidiary for the financial year ended 31 December 2023.
Loans and issued debt
Loans and issued debt are recognised initially at fair value, net of
transaction costs incurred. Loans and issued debt are subsequently carried at
amortised cost; any difference between the proceeds and the redemption value
is recognised in the income statement over the period of the borrowings, using
the effective interest method. Loans and issued debt are removed from the
statement of financial position when the obligation specified in the contract
is discharged, cancelled or expired. Loans and borrowings and issued debt are
classified as current liabilities unless the Group has an unconditional right
to defer settlement of a liability for at least 12 months after the end of the
reporting period.
Intangible assets
Intangible fixed assets comprise of the Group's website and digital assets
that were not mined by the Group and are held by Argo Labs (our internal team)
as investments. The Group's website is recognised at cost and is amortised
over its useful life. Amortisation is recorded within administration expenses.
Digital assets recorded under IAS 38 have an indefinite useful life initially
measured at cost, and subsequently measured at fair value.
Argo's primary business is focused on cryptocurrency mining. Argo Labs is an
in-house innovation arm focused on identifying opportunities within the
disruptive and innovative sectors of the broader cryptocurrency ecosystem.
Argo Labs uses a portion of Argo's crypto assets to deploy into various
blockchain projects.
Increases in the carrying amount arising on revaluation of digital assets are
credited to other comprehensive income and shown as other reserves in
shareholders' equity. Decreases that offset previous increases of the same
asset are charged in other comprehensive income and debited against the fair
value reserve directly in equity; all other decreases are charged to the
income statement.
The fair value of intangible cryptocurrencies on hand at the end of the
reporting period is calculated as the quantity of cryptocurrencies on hand
multiplied by price quoted on www.coingecko.com (http://www.coingecko.com/) ,
(http://www.coingecko.com/) one of the leading crypto websites, as at the
reporting date.
Goodwill is initially measured at cost (being the excess of the consideration
transferred and the amount recognised for non-controlling interests and any
previous interest held of the net identifiable assets acquired and liabilities
assumed). If the fair value of the net assets acquired is in excess of the
aggregate consideration transferred, the difference is recognised in profit or
loss.
Tangible fixed assets
Tangible fixed assets are comprised of right of use assets, office equipment,
mining and computer equipment, data centres, leasehold improvements, and
electrical equipment.
Right of use assets are measured at cost, less any accumulated depreciation
and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of the right of use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and lease payments made
at or before the commencement date less any lease incentives received. Right
of use assets are depreciated on a straight-line basis over the shorter of the
lease term and the estimated useful lives of the assets.
Office equipment assets are measured at cost, less any accumulated
depreciation and impairment losses. Office equipment is depreciated over 3
years on a straight-line basis.
Mining and computer equipment and leasehold improvements: Depreciation is
recognised so as to write off the cost or valuation of assets less their
residual values over their estimated useful lives. It is 3 to 4 years in the
case of mining and computer equipment and 5 years in the case of the leasehold
improvements, on a straight-line basis.
Data centres: Depreciation on the data centres is recognised so as to write
off the cost or valuation of assets less their residual values over their
estimated useful lives of 25 years on a straight-line basis from when they are
brought into use. Depreciation is recorded in the Income Statement within
general administrative expenses once the asset is brought into use. Any land
component is not depreciated.
Electrical equipment: Depreciation is recognised on a straight-line basis to
write off the cost less their residual values over their estimated useful
lives of 7 years.
Management assesses the useful lives based on historical experience with
similar assets as well as anticipation of future events which may impact their
useful life.
Assets Held for Resale
An asset is classified as held for sale if its carrying amount will be
recovered principally through sale rather than through continuing use, which
is when the sale is highly probable, and it is available for immediate sale in
its present condition subject only to terms that are usual and customary for
sales of such assets. Assets classified as held for sale are measured at the
lower of the carrying amount upon classification and the fair value less costs
to sell. Assets classified as held for sale and the associated liabilities are
presented separately from other assets and liabilities in the Consolidated
Balance Sheet. Once assets are classified as held for sale, property, plant
and equipment and intangible assets are no longer subject to depreciation or
amortisation.
Impairment of non-financial assets
At each reporting period end date, the Group reviews the carrying amounts of
its non-financial assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where it is not possible to estimate
the recoverable amount of an individual asset, the Group and Company estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
Digital assets
Digital assets consist of mined bitcoin, and do not qualify for recognition as
cash and cash equivalents or financial assets and have an active market which
provides pricing information on an ongoing basis.
The Group has assessed that the most appropriate accounting for its digital
assets is IAS 2, Inventories, in characterising its holding of Digital assets
as inventory. If assets held by the Group are principally acquired for the
purpose of selling in the near future and generating a profit from
fluctuations in price, such assets are accounted for as inventory, and changes
in fair value (less costs to sell) are recognised in profit or loss. Digital
assets are initially measured at fair value. Subsequently, digital assets are
measured at fair value with gains and losses recognised directly in profit or
loss.
Digital assets are included in current assets as management intends to dispose
of them within 12 months of the end of the reporting period. Digital assets
are cryptocurrencies mined by the Group. Cryptocurrencies not mined by the
Group are recorded as Intangible Assets (see note 17).
Cash and cash equivalents
Cash and cash equivalents are comprised of cash held at banks with high credit
ratings. The Group considers the credit risk on cash and cash equivalents to
be limited because the counterparties are banks with high credit ratings
assigned by international credit rating agencies.
Financial instruments
Financial assets: Financial assets are recognised in the Statement of
Financial Position when the Group becomes party to the contractual provisions
of the instrument. Financial assets are classified into specified categories.
The classification depends on the nature and purpose of the financial assets
and is determined at the time of recognition. Financial assets are
subsequently measured at amortised cost, fair value through OCI, or fair value
through profit and loss.
The classification of financial assets at initial recognition that are debt
instruments depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them. The Group
initially
measures a financial asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised
cost, it needs to give rise to cash flows that are 'solely payments of
principal and interest (SPPI)' on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both.
Subsequent measurement: For purposes of subsequent measurement, financial
assets are classified in four categories:
· Financial assets at amortised cost
· Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
· Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments)
· Financial assets at fair value through profit or loss
Equity Instruments: The Group subsequently measures all equity investments at
fair value. Dividends from such investments continue to be recognised in
profit or loss as other income when the Group's right to receive payments is
established. Changes in the fair value of financial assets at FVPL are
recognised in other gains/(losses) in the statement of profit or loss as
applicable.
Financial assets at amortised cost (debt instruments): This category is the
most relevant to the Group. The Group measures financial assets at amortised
cost if both of the following conditions are met:
· The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual cash flows;
and
· The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the
effective interest rate (EIR) method and are subject to impairment. Interest
received is recognised as part of finance income in the statement of profit or
loss and other comprehensive income. Gains and losses are recognised in profit
or loss when the asset is derecognised, modified or impaired. The Group's
financial assets at amortised cost include other receivables and cash and cash
equivalents.
Derecognition: A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group's consolidated Balance sheet) when:
· The rights to receive cash flows from the asset have expired; or
· The Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a 'pass-through' arrangement;
and either (a) the Group has transferred substantially all the risks and
rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset
When the Group has transferred its rights to receive cash flows from an asset
or has entered into a pass-through arrangement, it evaluates if, and to what
extent, it has retained the risks and rewards of ownership. When it has
neither transferred nor retained substantially all of the risks and rewards of
the asset, nor transferred control of the asset, the Group continues to
recognise the transferred asset to the extent of its continuing involvement.
In that case, the Group also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that
reflects the rights and obligations that the Group has retained.
Impairment of financial assets: The Group recognises an allowance for expected
credit losses (ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the
Group expects to receive, discounted at an approximation of the original EIR.
The expected cash flows will include cash flows from the sale of collateral
held or other credit enhancements that are integral to the contractual terms.
The Group considers a financial asset in default when contractual payments are
90 days past due. However, in certain cases, the Group may also consider a
financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual
amounts in full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows and usually occurs when
past due for more than one year and not subject to enforcement activity.
At each reporting date, the Group assesses whether financial assets carried at
amortised cost are credit impaired. A financial asset is credit-impaired when
one or more events that have a detrimental impact on the estimated future cash
flows of the financial asset have occurred. The Company has an Intercompany
loan due from its 100% Canadian subsidiary for which there is no formal
agreement including payment date and therefore it cannot be considered to be
in breach of an agreement and accordingly the loan is not subject to
adjustments and is maintained at its book value in the financial statements.
Financial liabilities: Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value through profit or loss,
loans and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial liabilities
are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs. The
Group's financial liabilities include trade and other payables and loans.
Subsequent measurement: The measurement of financial liabilities depends on
their classification, as described below:
Loans and trade and other payables: After initial recognition,
interest-bearing loans and borrowings and trade and other payables are
subsequently measured at amortised cost using the EIR method. Gains and losses
are recognised in the statement of profit or loss and other comprehensive
income when the liabilities are derecognised, as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss
and other comprehensive income. This category generally applies to trade and
other payables.
Derecognition: A financial liability is derecognised when the associated
obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognised in
profit or loss or other comprehensive income.
Equity instruments: Equity instruments issued by the group are recorded at the
proceeds received, net of transaction costs. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Leases
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased. The lease
liability is measured at amortised cost using the effective interest method.
It is remeasured when there is a change in future lease payments.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset or is recorded in
profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
Taxation
The tax expense or recovery represents the sum of tax currently payable or
receivable and deferred tax.
Current tax: The tax currently payable or receivable is based on taxable
profit or loss for the year. Taxable profit or loss differs from net profit or
loss as reported in the income statement because it excludes items of income
or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting end date.
Deferred tax: Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation
of taxable profit and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Deferred income tax assets
are recognised on deductible temporary differences arising from investments in
subsidiaries, associates and joint arrangements only to the extent that it is
probable the temporary difference will reverse in the future and there is
sufficient taxable profit available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting end
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset is realised.
Deferred tax is charged or credited to the income statement, except when it
relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity. Deferred tax assets and liabilities
are offset when the company has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and liabilities relate
to taxes levied by the same tax authority.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an
expense.
Termination benefits are recognised immediately as an expense when the company
is demonstrably committed to terminate the employment of an employee or to
provide termination benefits.
The group does not have any pension schemes.
Share-based payments
Equity-settled share-based payments are measured at fair value at the date of
grant by reference to the fair value of the equity instruments granted using
the Black-Scholes model. The fair value determined at the grant date is
expensed on a straight-line basis over the vesting period, based on the
estimate of shares that will eventually vest. A corresponding adjustment is
made to equity.
Cancellations or settlements are treated as an acceleration of vesting and the
amount that would have been recognised over the remaining vesting period is
recognised immediately.
RSUs (Restricted Stock Units)
Where RSUs are granted to employees, the fair value of the RSUs at grant date
is based upon the market price of the shares underlying the awards and is
charged to the Statement of Comprehensive Income over the vesting period. The
expense charged is adjusted based on actual forfeitures.
Foreign exchange
Transactions in currencies other than US dollars are recorded at the rates of
exchange prevailing at the dates of the transactions. At each reporting end
date, monetary assets and liabilities that are determined in foreign
currencies are retranslated at the rates prevailing on the reporting end date
- Gains and losses arising on translation are included in the income statement
for the period. At each reporting end date, non-monetary assets and
liabilities that are determined in foreign currencies are retranslated at the
rates prevailing on the opening balance sheet date. Gains and losses arising
on translation of subsidiary undertakings are included in other comprehensive
income and contained within the foreign currency translation reserve.
Earnings per share
Basic earnings per share is calculated by dividing:
· the profit attributable to owners of the company, excluding any
costs of servicing equity other than ordinary shares;
· by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares
issued during the year and excluding treasury shares.
· Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account:
· the after-income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares; and
· the weighted average number of additional ordinary shares that
would have been outstanding, assuming the conversion of all dilutive potential
ordinary shares.
4. FINANCIAL RISK FACTORS
The Group's activities expose it to a variety of financial risks: market risk,
credit risk and liquidity risk. The Group's overall risk management programme
seeks to minimise potential adverse effects on the Group's financial
performance. Risk management is undertaken by the Board of Directors.
Market Risk
The Group is dependent on the state of the cryptocurrency market, sentiments
of crypto assets as a whole, as well as general economic conditions and their
effect on exchange rates, interest rates and inflation rates. During the year
the Group sold its digital assets held at 31 December 2022 at a loss. The
Group now sells its Bitcoin production as it is mined to reduce the impact of
Bitcoin prices.
The Group is also subject to market fluctuations in foreign exchange rates.
The subsidiary (Argo Innovation Labs Inc.) is based in Canada, and transacts
in CAD$, USD$ and GBP. 9377-2556 Quebec Inc. and 9366-5230 Quebec Inc. are
based in Canada and transact in CAD. Argo Innovations Facilities (US) Inc.,
Argo Holdings US Inc. and Argo Operating US LLC are located in the United
States of America and transacts in USD. The Group bond is denominated in USD.
Cryptocurrency is primarily convertible into fiat through USD currency pairs
and through USD denominated stable coins and is the primary method for the
Group for conversion into cash. The Group maintains bank accounts in all
applicable currency denominations.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonable possible
change in GBP and CAD exchange rates, with all other variables held constant.
The impact on the Group's profit before tax is due to changes in the fair
value of monetary assets and liabilities.
Change in GBP Effect on profit
rate before tax
$'000
2023 +/-10% +/- 74
2022 +/-10% +/-77
Change in CAD Effect on profit Effect on pre-
rate before tax tax equity
$'000 $'000
2023 +/-10% +/- 274 -
2022 +/-10% +/-1,384 +/-3,208
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonable possible
change in interest rates on the portion of the loans and borrowings affected.
With other variables held constant, the impact on the Group's profit before
tax is affected through the impact on floating rate borrowings, as follows.
Increase/decrease in basis points Effect on profit before
tax
$'000
2023 +/-180 +/-464
2022 +/-180 +/-665
Credit risk
Credit risk arises from cash and cash equivalents as well as any outstanding
receivables. Management does not expect any losses from non-performance of
these receivables. The amount of exposure to any individual counter party is
subject to a limit, which is assessed by the Board.
The Group considers the credit risk on cash and cash equivalents to be limited
because the counterparties are banks with high credit ratings assigned by
international credit rating agencies.
The carrying amount of financial assets recorded in the financial statements
represents the Group's and Company's maximum exposure to credit risk. The
Group and Company do not hold any collateral or other credit enhancements to
cover this credit risk.
Liquidity risk
Liquidity risk arises from the Group's management of working capital. It is
the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
Management updates cashflow projections on a regular basis and closely
monitors the cryptocurrency market on a daily basis. Accordingly, the Group's
controls over expenditure are carefully managed, in order to maintain its cash
reserves. The Treasury committee meets on a weekly basis to make decisions
around future cashflows and working capital requirements. Decisions may
include considering debt/equity options alongside selling Bitcoin.
The table below analyses the Group's non-derivative financial liabilities and
net-settled derivative financial liabilities into relevant maturity groupings,
based on the remaining period at the Statement of Financial Position to the
contractual maturity date. Derivative financial liabilities are included in
the analysis if their contractual maturities are essential for an
understanding of the timing of the cash flows. The amounts disclosed in the
table are the contractual undiscounted cash flows.
The Group complied with all covenants during the year and through to the
reporting date.
Less than 1 Between 1 Between 2 Over 5 years
year and 2 years and 5 years
At 31 December 2023
Loans 14,320 9,830 197 -
Issued debt - bonds - - 38,170 -
At December 2022
Loans 11,605 13,643 12,273 -
Lease liabilities 5 5 15 511
Issued debt - bonds - - 37,810 -
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, in order to provide returns for
shareholders and benefits for other stakeholders, and to maintain an optimal
capital structure.
5. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
The Group has adopted all recognition, measurement and disclosure requirements
of IFRS, including any new and revised standards and Interpretations of IFRS,
in effect for annual periods commencing on or after 1 January 2023. The
adoption of these standards and amendments did not have any material impact on
the financial result or position of the Group.
At the date of authorisation of these financial statements, the following
Standards and Interpretation, which have not yet been applied in these
financial statements, were in issue but not yet effective:
Standard or Interpretation Description Effective date for annual accounting period beginning on or after
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial 1 January 2024
Information
IFRS S2 Climate-related Disclosures 1 January 2024
IAS 1 (amendments) Classification of Liabilities as Current and Non-Current 1 January 2024
IAS 1 (amendments) Presentation of Non-current Liabilities with Covenants 1 January 2024
IAS 7 and IFRS 7 (amendments) Disclosures on Supplier Finance Arrangements 1 January 2024
The Group has not early adopted any of the above standards and intends to
adopt them when they become effective.
6. KEY JUDGEMENTS AND ESTIMATES
In the application of the Group's accounting policies, the directors are
required to make judgements, estimates and assumptions about the carrying
amount of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised where the revision affects only that period, or in the
period of the revision and future periods where the revision affects both
current and future periods. The estimates and assumptions which have a
significant risk of causing a material adjustment to the carrying amount of
assets and liabilities are outlined below.
Valuation of tangible fixed assets - Note 18
The directors considered whether any impairments were required on the value of
the property, plant and equipment. In doing so they made use of forecasts of
revenues and expenditure prepared by the Group and came to the conclusion that
impairment of those assets was required based on current forecasts. Key
assumptions include Bitcoin production, hashprice, power prices and discount
rate.
Share-based payments - Note 21
The company has issued options and warrants to Directors, consultants and
employees which have been valued in accordance with the Black Scholes model.
Significant estimation and judgement is required in determining the
assumptions under the Black Scholes method. Further details of these estimates
are available in note 21.
The company has issued restricted stock units (RSUs) and performance stock
units (PSUs) to employees which have been valued based on the share price on
the date of the award. The RSUs vest over three years, beginning six months
after the award and then every three months thereafter. It is assumed that
employees will meet each vesting period and a related expense is recorded each
month. If an employee's employment is terminated prior to a vesting date,
the prior expense for that vesting period is reversed. PSUs are amortised
over the vesting period based on the mostly outcome of the performance
metrics.
Taxation and Contingent liabilities - Notes 13 and 27
The Group is subject to tax liabilities (both income and excise taxes)as
assessed by the tax authorities in the jurisdictions in which it operates. The
Group has recorded its tax liabilities based on the information which it has
available, as described in Note 13.
However, a tax authority could challenge our allocation of income, transfer
pricing and eligibility for input tax credits or assert that we are subject to
a tax in a jurisdiction where we believe we have not established a taxable
connection. If successful, these challenges could increase our expected tax
liability in one or more jurisdictions. The Group is also subject to a class
action lawsuit as described in Note 28 and no accrual has been made as there
is no basis to estimate any liability.
7. REVENUES
Cryptocurrency mining revenues are recognised at a point in time.
Cryptocurrency management fees are services recognised over time.
Other Income
Argo held 2,441 Bitcoin (fair valued at $80 million as at 31 December 2022) on
its Balance Sheet at the beginning of 2022. The Group used up to 1,504
Bitcoins as collateral with Galaxy Digital LP for a short-term payable on
demand loan of USD $30 million taken out on December 23, 2022. To protect its
Bitcoin holdings used as collateral for the loan and reduce overall exposure,
Argo took positions in the markets which resulted in a net hedge gain of $2.1
million for 2022. There were no hedging contracts in 2023.
During the year, Argo generated $7,163,000 in power credits (2022: $nil), with
$3.8 million generated in the month of August during a state-wide heat wave.
8. EXPENSES BY NATURE
2023 2022
Operating expenses $'000 $'000
Salary and other employee related costs 6,430 11,887
Restructuring and transaction related costs 4,969 11,862
Insurance 2,128 7,455
Depreciation and amortisation 1,473 8,535
Legal, professional and regulatory fees 1,431 3,925
Indirect taxes 994 4,208
Property tax 919 349
Consulting fees 533 1,024
Repairs and maintenance 455 1,067
Audit fees 341 383
Office general expenses 285 1,039
Public relations and associated activities 255 642
Travel 226 839
Carbon credits 129 -
Bank charges 34 297
Freight, postage and delivery 30 1,625
Capital loss - 143
Research costs - 11
Foreign exchange loss (1,287) (21,234)
Total operating expenses 19,345 34,057
Finance costs - interest on borrowings and bond 11,556 22,661
Total finance costs 11,556 22,661
9. AUDITOR'S REMUNERATION
2023 2022
$'000 $'000
In relation to statutory audit services 341 383
Total auditor's remuneration 341 383
10. EMPLOYEES
The average monthly number of persons (including directors) employed by the
group during the period was:
2023 2022
Number Number
Directors and employees 30 82
The aggregate remuneration (including directors) comprised of:
2023 2022
$'000 $'000
Wages and salaries 6,017 11,051
Social security costs 250 799
Pension costs 163 37
Share based payments 3,892 6,096
10,322 17,983
11. DIRECTOR'S REMUNERATION
2023 2022
$'000 $'000
Director's remuneration for qualifying services 591 1,588
Severance 765 -
Share based payments 916 1,883
Total remuneration for directors and key management 2,272 3,471
Further details of Directors' remuneration are available in the Remuneration
report and note 28.
12. EARNINGS PER SHARE
The basic earnings per share are calculated by dividing the loss attributable
to equity shareholders by the weighted average number of shares in
issue.
2023 2022
Net loss for the period attributable to ordinary equity holders from (35,033) (228,961)
continuing operations ($'000)
Finance Weighted average number of ordinary shares in issue ('000) 503,917 473,930
Basic and diluted loss per share for continuing operations (pence) (0.07) (0.48)
The diluted loss per Ordinary Share is calculated by adjusting the weighted
average number of Ordinary Shares outstanding to consider the impact of
options, warrants and other dilutive securities. As the effect of potential
dilutive Ordinary Shares in the current year would be anti-dilutive, they are
not included in the above calculation of dilutive earnings per Ordinary Share
for 2023.
13. TAXATION
Current tax: 2023 2022
(Restated)
$'000 $'000
- (11,731)
Current tax recovery on loss for the year
Total current tax - (11,731)
Deferred tax: 2023 2022
$'000 $'000
Origination and reversal of temporary differences - 9,840
Total deferred tax liability -
Total tax credit - (446)
No deferred tax has been recognised on the losses brought forward and carried
forward on the UK, Canada and US losses given the uncertainty on the
generation of future profits.
Income tax expense
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated entities as follows:
2023 2022
$'000 $'000
Profit (loss) before taxation (35,033) (240,693)
Expected tax charge (recovery) based on a weighted average of 25% (2022 - 25%) (8,758) (60,172)
(UK, US and Canada)
Effect of expenses not deductible in determining taxable profit 32,662
851
Temporary differences 5,930 8,470
Other tax adjustments 18 254
Origination and reversal of temporary differences - (1,023)
Unutilised tax losses carried forward 1,959 8,078
Taxation charge in the financial statements - (11,731)
The group has tax losses available to be carried forward and used against
trading profits arising in future periods of approximately $136,000,000 (2022
- $87,000,000).
The weighted average applicable tax rate was 25% (2022: 25%).
A tax authority may disagree with tax positions that we have taken, which
could result in increased tax liabilities. For example, His Majesty's Revenue
& Customs ("HMRC"), the IRS or another tax authority could challenge our
allocation of income by tax jurisdiction and the amounts paid between our
affiliated companies pursuant to our intercompany arrangements and transfer
pricing policies, including amounts paid with respect to our intellectual
property development. Similarly, a tax authority could assert that we are
subject to tax in a jurisdiction where we believe we have not established a
taxable connection and such an assertion, if successful, could increase our
expected tax liability in one or more jurisdictions.
14. ASSETS AND LIABLITIES HELD FOR SALE
In December 2023, the group signed an offer to purchase 9366-5230 Quebec Inc.
In March 2024, a purchase and sale agreement was signed for the sale of
9366-5230 Quebec Inc. ("Mirabel") for proceeds of $6.1 million. As a result of
the sale, the material assets and liabilities of Mirabel were reclassified to
be held for sale as at December 31, 2023, as follows:
Non-current Assets 2023
$'000
Tangible Fixed Assets 2,725
Right of use assets 536
Assets held for sale 3,261
Non-current liabilities 2023
$'000
Mortgage Payable 1,532
Lease Liability 558
Liabilities held for sale 2,090
15. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Non-current 2023 2022
Group $'000 $'000
At 1 January 414 543
Foreign exchange movement - 1
Additions - 300
Fair value through profit or loss - (430)
Disposals (14) -
At 31 December 400 414
16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
2023 2022
$'000 $'000
Opening balance 2,863 18,642
Share of loss (716) (6,027)
Share of fair value (losses)/gains on intangible assets through other - (8,744)
comprehensive income
Foreign exchange movement 89 (1,008)
Write off of investment (2,236) -
Closing balance - 2,863
Nature of investment in associates:
Name of entity Address of the registered office % of Nature of relationship Measurement method
ownership interest
Emergent Entertainment PLC Previously Pluto Digital plc) Hill Dickinson LLP, 8th Floor The Broadgate Tower, 20 Primrose Street, London, 19.5% Refer below Equity
United
Kingdom, EC2A 2EW
In December 2023, Emergent Entertainment Ltd ("EEL") announced they have
engaged an insolvency advisor to place it in liquidation. On January 10,
2024, EEL appointed liquidators to voluntarily wind up the company. The
Group has written off the balance of the investment in 2023.
17. INTANGIBLE FIXED ASSETS
Group Goodwill Digital Website 2023
assets Total
$'000 $'000 $'000 $'000
Cost
At 1 January 2023 96 5,722 873 6,691
Foreign Exchange Movements 16 334 19 369
Disposals - (727) - (727)
At 31 December 2023 112 5,329 892 6,333
Amortisation and impairment
At 1 January 2023 - 3,811 780 4,591
Foreign exchange movement - 88 - 88
Fair value movement - 654 - 654
Amortisation charged during the period - - 112 112
At 31 December 2023 - 4,553 892 5,445
Balance At 31 December 2023 112 776 - 888
Group Goodwill Digital Website 2022
assets Total
$'000 $'000 $'000 $'000
Cost
At 1 January 2022 96 6,394 873 7,364
Foreign Exchange movement - (274) - (274)
Additions - 2,084 - 2,084
Disposals - (2,482) - (2,482)
At 31 December 2022 96 5,722 873 6,691
Amortisation and impairment
At 1 January 2022 - 146 543 689
Foreign exchange movement - (1,490) (31) (1,521)
Fair value movement - 5,155 - 5,155
Amortisation charged during the period - - 267 267
At 31 December 2022 - 3,811 780 4,588
Balance At 31 December 2022 96 1,913 94 2,103
Digital assets are cryptocurrencies not mined by the Group. The Group held
crypto assets during the year, which are recorded at cost on the day of
acquisition. Movements in fair value between acquisition (date mined) and
disposal (date sold), and the movement in fair value in crypto assets held at
the year end, impairment of the intangible assets and any increase in fair
value are recorded in the fair value reserve.
The digital assets held below are held in Argo Labs (a division of the Group)
as discussed above. The assets are all held in secure custodian wallets
controlled by the Group team and not by individuals within the Argo Labs team.
The assets detailed below are all accessible and liquid in nature.
Crypto asset name Coins / tokens Fair value
$'000
Polkadot - DOT 16,554 135
Ethereum - ETH 4 10
USDC (stable coin - fixed to USD) 31,713 55
Other tokens, NFTs and other digital assets N/A 576
As at 31 December 2023 776
Crypto asset name Coins / tokens Fair value
$'000
Token Deals N/A 931
Ethereum - ETH 518 626
Polkadot - DOT 32,964 142
Other tokens, NFTs and other digital assets N/A 214
As at 31 December 2022 1,913
18. TANGIBLE FIXED ASSETS
Mining Machinery Data Centres Equipment Total
Group
$'000 $'000 $'000 $'000
Cost
At 1 January 2023 162,839 8,700 5,414 176,953
Foreign Exchange Movement 108 517 569 1,195
Additions 5,203 - 27 5,230
Transfer to Assets held for sale - (2,937) (1,976) (4,913)
At 31 December 2023 168,150 6,280 4,034 178,464
Depreciation and impairment
At 1 January 2023 (97,481) (1,924) (31) (99,437)
Foreign exchange movement - (38) (43) (81)
Depreciation charged during the period (18,656) (359) (1,000) (20,015)
Impairment in asset (855) - - (855)
Transfer to Assets held for sale - 784 868 1,652
At 31 December 2023 (116,992) (1,537) (206) (118,736)
Carrying amount
At 1 January 2023 65,358 6,775 5,383 77,516
At 31 December 2023 51,158 4,743 3,828 59,728
Mining Machines Assets under construction Data Centres Equipment Total
Group
$'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2022 70,539 73,924 7,900 5,313 157,676
Foreign exchange movement 3,310 8,787 701 - 12,797
Additions 162,315 - 99 103 162,518
Transfers to another class - cost - (82,711) 82,711 - -
Disposals (73,325) - (82,711) (2) (156,038)
At 31 December 2022 162,839 - 8,700 5,414 176,953
Depreciation and impairment
At 1 January 2022 (22,316) - (364) - (22,680)
Foreign exchange movement (1,047) - (17) - (1,064)
Depreciation charged (19,955) - (8,286) (31) (28,273)
Impairment in asset (54,163) - (271) - (54,434)
Transfer to another class - - 7,014 - 7,014
At 30 December 2022 (97,481) - (1,924) (31) (99,437)
Carrying amount
At 1 January 2022 48,223 73,924 7,536 5,313 134,966
At 31 December 2022 65,358 - 6,775 5,383 77,516
Acquisition of DPN LLC
On 8 March 2022 the Group completed the acquisition of DPN LLC to acquire 160
acres (with option to purchase a further 157 acres) of land in West Texas for
the construction of a 200MW mining facility for completion mid-2023.
The acquisition of DPN LLC, effectively comprising the land acquisition in
West Texas, has been treated as an asset acquisition in the financial
statements. The consideration for the acquisition was an initial price of GBP
3.6m, satisfied by the issue and allotment to the shareholders of DPN LLC of
3,497,817 new ordinary shares in Argo, with up to a further 8.6m of shares
payable if certain contractual milestones related to the facility are
fulfilled.
The initial issue and allotment of GBP 3.6m has been recognised based on the
estimated fair value of assets received at acquisition in line with IFRS 2
Share-based payments. Contingent consideration balance of this business
combination has been subsequently measured at fair value with changes
recognised in profit and loss in line with IFRS 9. The fair value of assets
acquired was assessed in line with independent valuations of the site by CBRE
as well as external financial due diligence and financial modelling. Financial
models used historical power purchase assumptions for the area and the
Company's internal hash rate and Bitcoin pricing assumptions to help the
Company evaluate the financial benefits of developing a Bitcoin mining
operation on the land. Work performed by DPN LLC from August 2019, when it
purchased the land, to March 2022, when it sold the land to the Company, to
prepare for a Bitcoin mining operation added to the value of the land for that
purpose.
Consideration at 8 March 2022
$'000
Share based payment 4,355
Contingent consideration to be settled in shares 10,710
Total 15,065
Allocated as follows
$'000
Tangible fixed assets (Asset under construction) 15,065
Total 15,065
Property, Plant and Equipment Impairments and Loss on Sale
The Group has a single line of business, crypto mining. As such, the Group has
one cash generating unit (CGU). At each reporting date, the Group assesses
whether there is an indication that an asset may be impaired. If an indication
exists, the Group estimates an asset's recoverable amount. An asset's
recoverable amount is the higher of an asset or CGU's fair value, less costs
of disposal and its value in use. When the carrying value of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
In assessing the fair value of Mining and Computer Equipment, the Group used
readily available tera hash pricing ("hashprice") less a 15% discount for used
equipment. In assessing value in use, the discounted estimated future cash
flows over the useful life of the mining machines using a pre-tax discount
rate of 14.09%. As a result of the analysis, an impairment charge of $0.9
million (2022 - $55.8 million) was recorded. A 5% change in the hashprice has
a $1.5 million impact on the impairment. A 1% change in the discount rate has
a $0.4 million impact on the impairment.
Impairment of
Chips
In assessing the fair value of machine components, the Group used readily
available chip set prices and management's estimate of other components in the
chip sets to determine the value of chips on hand. As a result of this
analysis, an impairment of $(0.1 million) was recorded (2022 - $18 million).
Loss on Sale
During 2022, the Group sold chips for proceeds of $12,404 and recorded a loss
on disposal of $23,228.
Mining Machine Swap
In March 2022, the Group entered into an agreement to exchange mining machines
and terminate a hosting agreement. With the completion of Helios, the Group no
longer required third party hosting services. The agreement provided the
hosting provider with ownership of the Group's machines at their facilities in
exchange for new mining machines for our Helios facility. The hash rate
between the two groups of mining machines was similar. This transaction lacks
commercial substance, therefore, IFRS 16 requires the mining machines acquired
to be recorded at the book value of the mining machines transferred to the
hosting service provider.
19. TRADE AND OTHER RECEIVABLES
Group Group
2023 2022
$'000 $'000
Trade and other receivables 1,131 -
Prepaids 1,355 -
Mining equipment prepayments - 5,978
Other taxation and social security 1,349 824
Total trade and other receivables 3,835 6,802
Within other taxation and social security is a provision against GST/QST/VAT
receivable of $2,325,000 in relation to ongoing matters in connection with GST
Notice 324 released by the Canadian Revenue Authority, and ongoing discussions
with HMRC. The Group have included the provision for prudence and upon
conclusion of the matter, the Group will adjust this provision accordingly.
20. DIGITAL ASSETS
The Group mined crypto assets during the period, which are recorded at fair
value on the day of acquisition. Movements in fair value between acquisition
(date mined) and disposal (date sold), and the movement in fair value in
crypto assets held at the year end, are recorded in profit or loss.
All of the Group's holding in crypto currencies other than Bitcoin are now
classified as intangible assets.
At the period end, the Group held Bitcoin representing a fair value of $385k.
The breakdown of which can be seen below:
Group
2023 2022
$'000 $'000
At 1 January 443 108,956
Foreign Exchange Movement 833
24
Crypto assets purchased and received - 264
Crypto assets mined 50,558 60,172
Total additions 50,582 61,269
Disposals
Transferred to/from intangible assets 420
Crypto assets sold (51,378) (114,646)
Total disposals (51,378) (114,226)
Fair value movements
Gain/(loss) on crypto asset sales 738 (55,410)
Movements on crypto assets held at the year end - (145)
Total fair value movements 738 (55,555)
At 31 December 385 443
As at 31 December 2023, digital assets comprised of 9 Bitcoin (2022: 25
Bitcoin).
21. SHARE OPTIONS, RESTRICED STOCK UNITS AND WARRANTS
In 2022, the Remuneration Committee of the Board ("Committee") approved the
2022 Equity Incentive Plan ("the Plan"). Under the Plan, the Committee, at
its discretion, may issue awards, including share awards, stock options, stock
appreciation rights ("SARs"), restricted stock units, performance awards and
American Depository Shares to any employee of the Group. The exercise price
of stock options and the base price of SARs may not be less than the market
price of the underlying shares on the date of grant. Stock options and SARs
may have an exercise period up to ten years after the grant date.
The following table summarizes share-based compensation expense for the years
ended December 31, 2023 and 2022:
2023 2022
Stock options and warrants 3,332 6,096
Restricted stock units 287 -
Performance stock units 273 -
3,892 6,096
Number of options and Weighted average exercise
warrants '000 price £
At 1 January 2023 18,698 0.78
Granted 659 0.13
Exercised - -
Lapsed (8,329) 0.67
Outstanding at 31 December 2023 11,028 0.83
Exercisable at 31 December 2023 7,904 0.89
Number of options and Weighted average exercise
warrants '000 price £
At 1 January 2022 17,689 0.81
Granted 5,220 0.50
Exercised (1,593) 0.07
Lapsed (2,618) 0.89
Outstanding at 31 December 2022 18,698 0.78
Exercisable at 31 December 2022 11,345 0.61
The weighted average remaining contractual life of options and warrants as at
31 December 2023 is 83 months (2022
-93 months). If the exercisable shares had been exercised on 31 December 2023
this would have represented 1.5% (2022 - 2.3%) of the enlarged share capital.
At the grant date, the fair value of the options and warrants prior to the
listing date was the net asset value and post listing determined using the
Black-Scholes option pricing model. Volatility was calculated based on data
from comparable listed technology start-up companies, with an appropriate
discount applied due to being an unlisted entity at grant date. Risk free
interest has been based on UK Government Gilt rates for an equivalent term.
The inputs into the Black-Scholes model are as follows:
2023 2022
Grant date share price £ 0.14 0.94 - 1.57
Exercise price £ 0.13 0.94 - 1.57
Volatility 187% 91 - 169%
Life 10 years 5 - 10 years
Risk free rate 3.4% 1.6 - 3.6%
Dividend yield 0% 0%
Restricted Stock Units
In 2023, the Committee approved the grant of RSUs to employees. The RSUs
vest quarterly beginning the sixth month after the grant date over a
three-year period. The weighted average remaining vesting period is the
period to the last vesting date.
2023
Number of Awards Weighted Average Grant Date Price £ Weighted Average Remaining Vesting Period (months)
Outstanding at beginning of period - -
Granted during the period 12,041,192 0.13
Vested during the period (3,617,136) 0.13
Forfeited during the period (1,424,239) 0.13
Outstanding at the end of period 6,999,817 0.12 28
Performance Stock Units (American Depository Shares)
In 2023, the Committee approved the grant of PSUs for the American Depository
Shares to the CEO of the Group. The PSUs vest annually over a three-year
period. The annual vesting amount may vary from 25% - 100%. The weighted
average remaining vesting period assumes the last vesting date is the latest
vesting date possible.
2023
Number of Awards Weighted Average Grant Date Price $ Weighted Average Remaining Vesting Period (months)
Outstanding at beginning of the period - -
Granted during the period 2,850,000 1.15
Vested during the period - -
Forfeited during the period - -
Outstanding at the end of the period 2,850,000 1.15 35
22. ORDINARY SHARES
As at 31 December As at 31 December
2023 2022
$'000 $'000
Ordinary share capital
Issued and fully paid
477,825,166 Ordinary Shares of $0.001 each 634 622
Issued in the period
59,138,305 Ordinary Shares of $0.001 each 78 12
536,963,471 Ordinary Shares of $0.001 each 712 634
Share premium
At beginning of the period 202,103 196,911
Issued in the period 7,676 5,192
Issue costs - -
At the end of period 209,779 202,103
See the subsequent events note for additional shares issued after period end.
23. RESERVES
The following describes the nature and purpose of each reserve:
Reserve Description
Ordinary Shares Represents the nominal value of equity shares
Share Premium Amount subscribed for share capital in excess of nominal value
Share based payment reserve Represents the fair value of options and warrants granted less amounts
transferred on exercise, lapse or expiry
Currency translation reserve Cumulative effects of translation of opening balances on non-monetary assets
between subsidiaries functional currencies (Canadian dollars and Uk Sterling)
and Group presentational currency (US Dollars).
Fair value reserve Cumulative net gains on the fair value of intangible assets
Other comprehensive income of equity accounted associates The other comprehensive income of any associates is recognised in this reserve
Accumulated surplus Cumulative net gains and losses and other transactions with equity holders not
recognised elsewhere.
24. TRADE AND OTHER PAYABLES
Group 2023 Group 2022
$'000 $'000
Trade payables 2,336 3,079
Accruals and other payables 7,153 6,012
Other taxation and social security 1,686 689
Total trade and other creditors 11,175 9,780
The directors consider that the carrying value of trade and other payables is
equal to their fair value.
Contingent consideration
In June 2022, the Company issued 8,147,831 Ordinary Shares to settle $5.0
million in contingent consideration. The remaining contingent consideration of
$5.0 million was not earned and as a result was reversed into profit or loss.
25. LOANS AND BORROWINGS
Non-current liabilities As at 31 December As at 31 December
2023 2022
$'000 $'000
Issued debt - bond (a) 38,170 37,810
Galaxy loan (b) 9,230 18,475
Mortgage - Quebec facility (c) 797 2,785
Lease liability - 531
Total 48,197 59,601
Current liabilities
Galaxy loan (b) 13,444 10,169
Mortgage- Quebec facility (c) 600 1,130
Other Loans 276 306
Lease liability - 5
Total 14,320 11,610
(a) Unsecured Bonds:
In November 2021, the Group issued an unsecured 5-year bond with an interest
rate of 8.75%. The bonds mature on 30 November 2026. The bonds may be redeemed
for cash in whole or in part at any time at the Group's option (i) on or after
30 November 2023 and prior to 30 November 2024, at a price equal to 102% of
their principal amount, plus accrued and unpaid interest to, but excluding,
the date of redemption, (ii) on or after 30 November 30 and prior to 30
November 2025, at a price equal to 101% of their principal amount, plus
accrued and unpaid interest to, but excluding, the date of redemption, and
(iii) on or after November 30, 2025 and prior to maturity, at a price equal to
100% of their principal amount, plus accrued and unpaid interest to, but
excluding, the date of redemption. The Group may redeem the bonds, in whole,
but not in part, at any time at its option, at a redemption price equal to
100.5% of the principal amount plus accrued and unpaid interest to, but not
including, the date of redemption, upon the occurrence of certain change of
control events. The bonds are listed on the Nasdaq Global Select Market under
the symbol ARBKL.
(b) Galaxy and related loans
On 23 December 2021 the Group entered into a loan agreement with Galaxy
Digital LP for a loan of USD$30 million. The proceeds of the loan were used,
in conjunction with funds raised previously, to continue the build-out of the
Texas data centre, Helios. The short-term loan was a Bitcoin collateralised
loan with an interest rate of 8% per annum. This loan was repaid during 2022
as part of the Galaxy transaction.
In March 2022, the Group entered into loan agreements with NYDIG ABL LLC for
loans in the amounts of USD$97 million for the purchase of mining machines and
Helios infrastructure, respectively. The loan was repaid during the year as
part of the Galaxy transaction.
In May 2022, the Group entered into a loan agreement with Liberty Commercial
Finance for a loan of USD$1.2 million ($1.0m) to purchase equipment. The loan
is repayable over a period of 36 months with an interest rate of 11.9%. In
June 2022, the loan was assigned to North Mill Equipment Finance LLC ("New
Mill"). The loan was repaid during the year as part of the Galaxy transaction.
In December 2022, the Group sold Galaxy Power LLC (see note 14) and entered
into a loan agreement with Galaxy Digital LLC for USD$35 million. Proceeds
were used to pay off the Galaxy Digital LP, New Mill and NYDIG loans and
working capital. The Galaxy Digital LLC loan is payable monthly based on an
amortization schedule over 32 months with an interest rate of the secured
overnight financing rate by the Federal Reserve Bank of New York plus 11%. The
loan is secured by the Group's property, plant and equipment.
(c) Mortgage - Quebec Facility
The mortgage is secured against the property at Baie-Comeau and is repayable
over 36 months at an interest rate of Lender Prime + 0.5%. (7.7% as of 31
December 2023).
26. FINANCIAL INSTRUMENTS
Group Group
2023 2022
$'000 $'000
Carrying amount of financial assets
Measured at amortised cost
- Mining equipment prepayments - 5,978
- Trade and other receivables 1,131 -
- Cash and cash equivalents 7,443 20,091
Measured at fair value through profit or loss 400 414
Total carrying amount of financial assets 8,974 26,483
Carrying amount of financial liabilities
Measured at amortised cost
- Trade and other payables 7,501 10,020
- Short term loans 280 11,605
- Long term loans 25,599 25,915
- Issued debt - bonds 38,170 37,810
- Lease liabilities - 545
Total carrying amount of financial 71,550 85,895
liabilities
Fair Value Estimation
Fair value measurements are disclosed according to the following fair value
measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1)
- Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices),
or indirectly (that is, derived from prices) (Level 2)
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3). This is the
case for unlisted equity securities.
The following table presents the Group's assets that are measured at fair
value at 31 December 2023 and 31 December 2022.
Level 1 Level 2 Level 3 Total
Assets $'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
- Equity holdings - - 400 400
- Digital assets - 385 - 385
Total at 31 December 2023 - 385 400 785
Level 1 Level 2 Level 3 Total
Assets $'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
- Equity holdings 14 - 400 414
- Digital assets - 443 - 443
Total at 31 December 2022 329 443 400 857
All financial assets are in listed and unlisted securities and digital assets.
There were no transfers between levels during the period.
The Group recognises the fair value of financial assets at fair value through
profit or loss relating to unlisted investments at the cost of investment
unless:
- There has been a specific change in the circumstances which, in
the Group's opinion, has permanently impaired the value of the financial
asset. The asset will be written down to the impaired value;
- There has been a significant change in the performance of the
investee compared with budgets, plans or milestones;
- There has been a change in expectation that the investee's
technical product milestones will be achieved or a change in the economic
environment in which the investee operates;
- There has been an equity transaction, subsequent to the Group's
investment, which crystallises a valuation for the financial asset which is
different to the valuation at which the Group invested. The asset's value will
be adjusted to reflect this revised valuation; or
- An independently prepared valuation report exists for the
investee within close proximity to the reporting date.
- The deferred consideration has been fair valued to the year-end
date as the amount is to be paid in Argo shares.
-
27. COMMITMENTS AND CONTINGENCIES
The Group's material contractual commitments relate to the hosting services
agreement with Galaxy Digital Qualified Opportunity Zone Business LLC, which
provides hosting, power and support services at the Helios facility. Whilst
management do not envisage terminating agreements in the immediate future, it
is impracticable to determine monthly commitments due to large fluctuations in
power usage and variations on foreign exchange rates, and as such a commitment
over the contract life has not been determined. The agreement is for services
with no identifiable assets, therefore, there is no right of use asset
associated with the agreement.
As the company disclosed on February 8, 2023, it is currently subject to a
class action lawsuit. The case, Murphy vs Argo Blockchain plc et al, was filed
in the Eastern District of New York on 26 January 2023. The company refutes
all of the allegations and believes that this class action lawsuit is without
merit. The company is vigorously defending itself against the action. We are
not currently subject to any other material pending legal proceedings or
claims.
The Company is also subject to other litigation matters in the ordinary course
of business. Subsequent to period end, the Company settled a breach of
contract claim for $0.5 million. This was accrued in operating expenses at 31
December 2023.
28. RELATED PARTY TRANSACTIONS
The compensation paid to related parties in respect of services rendered in
2023 were:
· $170,554 (2022 - $133,867) to Webslinger Advisors in respect of
fees of Matthew Shaw (Non-executive director);
· $129,752 (2022 - $148,679) in respect of fees for Maria Perrella
(Non-executive director);
· $135,105 (2022 - $130,438) in respect of fees for Raghav Chopra
(Non-executive director);
· $27,659 (2022 - $nil) to Jim MacCallum (CFO) through JMM
Consulting Inc.;
· $166,738 (2022 - $803,112) to Alex Appleton (Previous CFO)
through Appleton Business Advisors Limited.
29. CONTROLLING PARTY
There is no controlling party of the Group.
30. POST BALANCE SHEET EVENTS
In January 2024, the Company issued 38,064,000 new ordinary shares at a price
per share of £0.205 to certain institutional investors for gross proceeds of
$9.9 million.
In March 2024, the Group sold its Mirabel Facility for proceeds of $6.1
million. See note 14 for additional details.
COMPANY STATEMENT OF FINANCIAL POSITION
As at December As at December As at
2023 2022 January 1
Note 2022
$'000 $'000 $'000
ASSETS
Non-current assets
Investment at fair value through profit or loss 3 100 100 100
Investments in Associate - 2,863 18,642
Investments in Subsidiary 4 43,983 65,000 -
Tangible Fixed Assets 739 2,195 -
Total non-current assets 44,822 70,158 18,742
Current assets
Trade and Other Receivables 1 77 - 1,466
Prepaids 1 573 1,080 10,226
Cash and cash equivalents 3 705 139 170
Intercompany 1 28,199 10,336 253,935
Total Current Assets 29,554 11,555 265,797
Total assets 74,376 81,713 284,539
EQUITY AND LIABILITIES
Equity
Share Capital 22 (712) (634) (622)
Share Premium 22 (209,779) (202,103) (196,911)
Share based payment reserve (12,166) (8,528) (2,531)
Foreign Currency Translation Reserve 29,295 26,935 8,100
Other comprehensive income of equity accounted associates - - (8,744)
Accumulated (surplus)/deficit 161,448 146,547 (24,929)
Total equity (31,914) (37,783) (225,637)
Current liabilities
Trade and other payables 2 (4,042) (6,120) (11,710)
Contingent consideration - - (10,899)
Loan (250) - -
Total current liabilities (4,292) (6,120) (22,599)
Non-current liabilities
Issued Debt (38,170) (37,809) (36,303)
Total liabilities (42,462) (43,930) (58,902)
Total equity and liabilities (74,376) (81,713) (284,539)
As permitted by s408 Companies Act 2006, the company has not presented its own
profit and loss account and related notes. The company's total comprehensive
loss for the year was $17.3 million (2022: $191.1 million). The Group
financial statements were approved by the board of directors on 24 April 2024
and authorised for issue; they are signed on its behalf by:
Thomas Chippas
Chief Executive Officer
24 April 2024
The accounting policies and notes on pages 91 to 94 form part of the financial
statements.
Registered number: 11097258
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Capital Share Premium Currency Translation Reserve Share based payment reserve Accumulated Total
surplus/ (deficit)
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2023 634 202,103 (26,935) 8,528 (146,547) 37,783
Total comprehensive income for the
period:
Loss for the period - - - - (14,901) -
Other comprehensive income - - (2,360) - - (2,360)
Total comprehensive income for the period - - (2,360) - (14,901) (17,261)
Transactions with equity owners:
Share capital issued 78 7,676 - - - 7,754
Share based payments charge - - - 3,892 - 3,892
Share RSUs vested - - - (254) - (254)
Total transactions with equity owners 78 7,676 - 3,316 - 11,392
Balance at 31 December 2023 712 209,779 (29,295) 12,166 (161,448) 31,914
Share Capital Share Premium Share based payment reserve Currency Translation Reserve Other comprehensive income of associate Accumulated Total
surplus/ (deficit)
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2022 622 196,911 2,531 (8,100) 8,744 24,929 225,637
Total comprehensive income for the
period:
Loss for the period - - - - - (171,476) (171,476)
Other comprehensive income - - - (18,835) (8,744) - (27,579)
Total comprehensive income for the period - - - (18,835) (8,744) (171,476) (199,055)
Transactions with equity owners:
Share capital issued 12 5,192 - - - - 5.204
Share based payments charge - - 5,997 - - - 5,997
Share options/warrants exercised - - - - -
Total transactions with equity owners 12 5,192 5,997 - - - 11,201
Balance at 31 December 2022 634 202,103 8,528 (26,935) - (146,547) 37,783
COMPANY STATEMENT OF CASH FLOWS
Year ended December 2023 Year ended December 2022
$'000 $'000
Cash flows from operating activities
Loss before tax (14,901) (171,476)
Adjustments for:
Share of loss from associate 716 6,026
Fair value adjustment on contingent consideration - (4,995)
Foreign exchange movements (1,877) (7,617)
Finance cost 4,888 -
Write off of investments 22,764 -
Impairment of assets 83 -
Share based payment expense 3,874 6,095
Loss on disposal of investment in subsidiary - 128,949
Impairment of assets - 18,702
Working capital changes:
(Increase)/decrease in trade and other receivables 1,803 10,071
Increase/(decrease) in trade and other payables (2,079) (4,116)
Net cash generated/used in operating activities 15,271 (18,361)
Investing activities
(Increase)/decrease in loan to subsidiary (17,863) 18,346
Net cash used in/generated from investing activities (17,863) 18,346
Financing activities
-
Loan proceeds 811 -
Loan repayments (561) -
Interest paid (4,602) -
Proceeds from shares issued - net of issue costs 7,518 -
Net cash generated from financing activities 3,166 -
Net (decrease)/increase in cash and cash equivalents 574 (14)
Cash and cash equivalents at beginning of period 139 156
Effect of foreign exchange on cash and cash equivalents (8) (2)
Cash and cash equivalents at end of period
705 139
Year ended Year ended
Company - net debt reconciliation 31 December 31 December
2023 2022
$'000 $'000
Non-current loans and borrowings 2 (38,170) (37,809)
Cash and cash equivalents 705 139
Total net (debt) / asset (37,465) (37,670)
NOTES TO THE FINANCIAL STATEMENTS
Argo Blockchain PLC ("the company") is a public company, limited by shares,
and incorporated in England and Wales. The registered office is Eastcastle
House, 27-28 Eastcastle Street, London, W1W 8DH. The company was incorporated
on 5 December 2017 as GoSun Blockchain Limited and changed its name to Argo
Blockchain Limited on 21 December 2017. Also on 21 December 2017, the company
re-registered as a public company, Argo Blockchain plc. Argo Blockchain plc
acquired a 100% subsidiary, Argo Innovation Labs Inc. (together "the Group"),
incorporated in Canada, on 12 January 2018.
The Company financial statements are required by Companies House and do not
include any intercompany eliminations, The Company financial statements and
note disclosures should be read in conjunction with the Group statements and
notes above.
1. TRADE AND OTHER RECEIVABLES / INTERCOMPANY
Company Company
2023 2022
$'000 $'000
Trade and other receivables/prepayments 650 1,080
Total trade and other receivables 650 1,080
Within receivables is a provision against VAT receivable of $499,000 in
relation to ongoing matters in connection with ongoing discussions with HMRC.
The Group have included the provision for prudence and upon conclusion of the
matter, the Group will adjust this provision accordingly.
COMPANY - INTERCOMPANY
Company Company
2023 2022
$'000 $'000
Amounts due from group companies, net 28,199 10,336
Funds advanced to group companies were used for operating expenses, settling
debt and purchasing tangible and intangible assets. There are no terms of
repayment. The amounts due are non-interest bearing. The decrease in 2022 is
as a result of the debts from Argo Innovation Facilities (US) which were
converted to shares to be issued prior to the sale.
The Company considers the intercompany loan to its subsidiary (Argo US
Operating LLC.) to be fully recoverable based on review of projected cash
flows and acceptance of regular payments directly to the Company's creditors.
2. TRADE AND OTHER PAYABLES
Company Company 2022
2023
$'000 $'000
Trade payables 1,253 2,690
Accruals and other payables 2,781 3,430
Other taxation and social security 9 -
Total trade and other creditors 4,043 6,120
The directors consider that the carrying value of trade and other payables is
equal to their fair value.
Contingent consideration
In June 2022, the Company issued 8,147,831 Ordinary Shares to settle $5.0
million in contingent consideration. The remaining contingent consideration of
$5.0 million was not earned and as a result was reversed into profit or loss.
3. FINANCIAL INSTRUMENTS
Company Company
2023 2022
$'000 $'000
Carrying amount of financial assets
Measured at amortised cost
- Trade and other receivables 77 -
- Cash and cash equivalents 705 139
Measured at fair value through profit or loss 100 100
Total carrying amount of financial assets 882 239
Carrying amount of financial liabilities
Measured at amortised cost
- Trade and other payables 3,044 4,431
- Short term loans 250 -
- Long term loans - -
- Issued debt - bonds 38,170 37,810
- Lease liabilities - -
Total carrying amount of financial 41,464 42,241
liabilities
Fair Value Estimation
Fair value measurements are disclosed according to the following fair value
measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1)
- Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices),
or indirectly (that is, derived from prices) (Level 2)
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3). This is the
case for unlisted equity securities.
The following table presents the company's assets that are measured at fair
value at 31 December 2023 and 31 December 2022.
Level 1 Level 2 Level 3 Total
Assets $'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
- Equity holdings - - 100 100
Total at 31 December 2023 - - 100 100
Level 1 Level 2 Level 3 Total
Assets $'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
- Equity holdings - 100 100
Total at 31 December 2022 - - 100 100
All financial assets are in unlisted securities. There were no transfers
between levels during the period.
The Group recognises the fair value of financial assets at fair value through
profit or loss relating to unlisted investments at the cost of investment
unless:
- There has been a specific change in the circumstances which, in
the Group's opinion, has permanently impaired the value of the financial
asset. The asset will be written down to the impaired value;
- There has been a significant change in the performance of the
investee compared with budgets, plans or milestones;
- There has been a change in expectation that the investee's
technical product milestones will be achieved or a change in the economic
environment in which the investee operates;
- There has been an equity transaction, subsequent to the Group's
investment, which crystallises a valuation for the financial asset which is
different to the valuation at which the Group invested. The asset's value will
be adjusted to reflect this revised valuation; or
- An independently prepared valuation report exists for the
investee within close proximity to the reporting date.
- The deferred consideration has been fair valued to the year-end
date as the amount is to be paid in Argo shares.
4. INVESTMENT IN SUBSIDIARIES AND LOSS ON SALE OF SUBSIDIARY
Company
Details of the Company's subsidiaries at 31 December 2023 are as follows:
Name of Undertaking Country of Ownership Voting Power Nature of
Incorporation Interest (%) Held (%) Business
Argo Innovation Labs Inc. Canada 100% 100% ***
9377-2556 Quebec Inc. Canada 100% 100% **
9366-5230 Quebec Inc. Canada 100% 100% **
Argo Holdings US Inc. USA 100% 100% ****
Argo Operating US LLC USA 100% 100% *
* The provision of cryptocurrency mining services
** The provision of cryptocurrency mining sites
*** Converted from the provision of cryptocurrency mining services to cost
centre in 2023
**** Holding company
Investment in subsidiaries 2023 2022
$'000 $'000
At January 1 65,000 15,067
Impairment (21,017) -
Additions - 65,000
Disposals - (15,067)
At 31 December 43,983 65,000
Argo Holdings US Inc. was incorporated on November 22, 2023, with a registered
office of 1209 Orange Street, Wilmington, Delaware, USA, 19801. The company
contributed shares in Argo Innovation Facilities (US) valued at $65m.
Argo Operations US LLC was formed on November 22, 2022, with a registered
office of 1209 Orange Street, Wilmington, Delaware, USA, 19801.
Argo Innovation Facilities (US) Inc was incorporated on 25 February 2022 with
a registered address of 2028 East Ben White Blvd. Austin, TX 78740. This
entity held the Helios facility and real property in Dickens County, Texas. On
21 December 2023, Argo Innovation Facilities (US) Inc. was converted to Galaxy
Power LLC. Galaxy Power LLC was sold on 28 December 2023 pursuant to an equity
purchase agreement. The proceeds received for the sale were $65 million
against a book value of $120 million resulting in a loss on sale for the Group
of $120 million.
The effects of the disposal of Galaxy Power LLC on the cash flows of the Group
were:
Group At 28 December
2022
$000
Carrying amounts of assets and liabilities as at the date of disposal:
Cash and bank balances 1,678
Property, plant and equipment 129,736
Trade and other debtors 367
Total assets 131,782
Trade and other creditors 12,077
Total liabilities 12,077
Net assets disposed of 119,705
Cash flows arising from disposal:
Proceeds used to paydown existing debt 56,029
Proceeds used for new loans 8,258
Total Proceeds 64,287
Net assets disposed of (as above) 119,705
Loss on disposal (55,418)
5. KEY JUDGEMENTS AND ESTIMATES
Valuation of investments in subsidiaries and amounts due from group companies
- Note 19
The Board considered amounts due from group companies and whether any further
impairments were required on their carrying value. When considering these
amounts, they made use of forecasts of the profitability of the subsidiary and
of their revenues and expenditure and concluded that impairment of those
assets was necessary based on current forecasts and performance during the
first part of 2024.
The forecasts to support this were built using our existing internal models
showing positive cash contribution and profitability of the subsidiaries and
their future value to the Group as a whole. Both pre and post year end these
models continue to show that the contribution to the Group is at least the
carrying value of these investments and as such no impairment has been
recognised.
6. EMPLOYEES
The average monthly number of persons (including directors) employed by the
company during the period was:
2023 2022
Number Number
Directors and employees 6 10
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR QKQBQOBKDQQBRecent news on Argo Blockchain
See all newsREG - Argo Blockchain PLC - Argo April Operational Update
AnnouncementREG - Argo Blockchain PLC - Argo 2023 Annual Financial Report
AnnouncementREG - Argo Blockchain PLC - Notice of FY 2023 Results
AnnouncementREG - Argo Blockchain PLC - March Ops Update
AnnouncementREG - Argo Blockchain PLC - Closing on Sale of Mirabel / TVR
Announcement