REG - Argo Blockchain PLC - August 2022 Operational Update

Argo BlockchainAnnouncement

09/09/2022 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:20220909:nRSI8362Ya&default-theme=true

RNS Number : 8362Y  Argo Blockchain PLC  09 September 2022

Press Release

9 September 2022

Argo Blockchain plc

("Argo" or "the Company")

 

August 2022 Operational Update

Helios Hosting Agreement

 

Strategic Hosting Agreement

Argo Blockchain plc, a global leader in cryptocurrency mining (LSE: ARB;
NASDAQ: ARBK), is pleased to announce that it has entered into a strategic
hosting services agreement (the "Hosting Agreement") with an undisclosed third
party.

As part of the Hosting Agreement, Argo will host and operate mining machines
owned by the said third party at its Helios facility in Dickens County, Texas.
Argo has committed to providing the undisclosed third party with up to 32 MW
of power capacity, which is enough electricity to power more than 10,000
mining machines. The Hosting Agreement includes a profit-sharing arrangement
whereby Argo receives 25% of the net profits generated from the Bitcoin mined
by the hosted mining machines. This arrangement ensures the alignment of both
parties.

Operational Update

During the month of August, Argo mined 235 Bitcoin or Bitcoin Equivalents
(together, BTC) compared to 219 BTC in July 2022. The increase in BTC mined is
primarily due to an increase in total hashrate capacity at the Helios facility
compared to the previous month. The Company is continuing to install the new
Bitmain S19J Pro machines at Helios, having achieved a total hashrate capacity
of 2.5 EH/s by the end of August. Argo remains on track to complete the
installation of the Bitmain machines by October 2022, which will increase its
total hashrate capacity to 3.2 EH/s.

As of 31 August 2022, the Company held 1,098 Bitcoin, of which 244 were BTC
Equivalents. The Company closely monitors market conditions and is actively
using a variety of derivatives to manage BTC holdings and mitigate risk
exposure.

Based on daily foreign exchange rates and cryptocurrency prices during the
month, mining revenue in August amounted to £4.39 million [$5.23 million*]
(July 2022: £3.89 million [$4.73 million*]).

Argo generated this income at a Bitcoin and Bitcoin Equivalent Mining Margin
of 20% for the month of August (July 2022: 37%). This reduction in mining
margin was driven by two factors: an 11% decrease in the price of Bitcoin and
high power costs at Helios. As discussed on the Company's recent earnings
call, Argo's power purchase agreement (PPA) at Helios provides for electricity
at spot power prices, which are significantly higher than in previous years.
In August 2022, spot power prices in West Texas averaged nearly $0.09 per kWh,
which is nearly three times the average price during the month of August in
prior years.

While many factors determine the spot power price in Texas, one of the primary
factors is the price of natural gas. During the month of August 2022, natural
gas prices were 204% higher than the average price during the month of August
in 2018 - 2021. The higher natural gas prices can be attributed to several
factors, including the war in Ukraine and low natural gas storage levels in
the US.

Peter Wall, Chief Executive at Argo Blockchain, said, "The increase in BTC
mined this month reflects the hard work put in by our operations team. The new
Bitmain SJ19 Pros are already showing great promise, and we look forward to
unlocking their full potential in the coming months as we complete their
installation. Additionally, we are excited about our strategic hosting
agreement, which enables us to utilize excess capacity at Helios and further
increase our hashrate."

"While our mining margin is lower than expected, the recent high natural gas
and electricity prices are a temporary reflection of broader market
dislocations, and we are confident that electricity prices will align with
historical trends in the near future. Further, electricity prices are
seasonal, and we expect prices to decrease as temperatures come down through
the cooler months. We will continue to monitor the market and evaluate our
options for securing a long-term fixed price PPA."

Non-IFRS Measures

Bitcoin and Bitcoin Equivalent Mining Margin is a financial measure not
defined by IFRS. We believe Bitcoin and Bitcoin Equivalent Mining Margin has
limitations as an analytical tool. In particular, Bitcoin and Bitcoin
Equivalent Mining Margin excludes the depreciation of mining equipment and so
does not reflect the full cost of our mining operations, and it also excludes
the effects of fluctuations in the value of digital currencies and realized
losses on the sale of digital assets, which affect our IFRS gross profit. This
measure should not be considered as an alternative to gross margin determined
in accordance with IFRS, or other IFRS measures. This measure is not
necessarily comparable to similarly titled measures used by other companies.
As a result, you should not consider this measure in isolation from, or as a
substitute analysis for, our gross margin as determined in accordance with
IFRS.

The following table shows a reconciliation of gross margin to Bitcoin and
Bitcoin Equivalent Mining Margin, the most directly comparable IFRS measure,
for the months of July 2022 and August 2022.

                                                                                                                       Month Ended 31 July 2022                                    Mont
                                                                                                                                                                                   h
                                                                                                                                                                                   Ende
                                                                                                                                                                                   d 31
                                                                                                                                                                                   Augu
                                                                                                                                                                                   st
                                                                                                                                                                                   2022
                                                                 £ (000s)                                 $ (000s)                                   £(000s)                  $ (000s)
 Gross profit/(loss)                                              3,643                                     4,433                          (4,471)                     (5,334)
 Gross Margin                                                      94%                                       94%                           (110%)                      (110%)
 Depreciation of mining equipment                                  1,201                                          1,461                    1,644                       1,961
 Change in fair value of digital currencies                         (1,886)                                    (2,295)                     2,944                       3,512
 Realised (profit)/loss on sale of digital currencies                (1,500)                                   (1,826)                     765                         913

 Mining Profit                                                          1,458                                     1,773                    882                         1,052
 Bitcoin and Bitcoin Equivalent Mining Margin                          37%                                         37%                     20%                         20%

(1) Due to unfavourable changes in the fair value of BTC there was a loss on
the change in fair value of digital currencies in August 2022. In July 2022,
there was a favourable change in fair value of BTC and a gain on the change in
fair value of digital currencies.

* Dollar values translated from pound sterling into U.S. dollars using the
noon buying rate of the Federal Reserve Bank of New York as at the applicable
dates

Inside Information and Forward-Looking Statements

This announcement contains inside information and includes forward-looking
statements which reflect the Company's or, as appropriate, the Directors'
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 "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. 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 Registration Statement on Form F-1.

 

For further information please contact:

 

 Argo Blockchain
 Peter Wall                          via Tancredi +44 203 434 2334

 Chief Executive
 finnCap Ltd
 Corporate Finance                   +44 207 220 0500

 Jonny Franklin-Adams

 Tim Harper

 Joint Corporate Broker

 Sunila de Silva
 Tennyson Securities
 Joint Corporate Broker              +44 207 186 9030

 Peter Krens
 OTC Markets
 Jonathan Dickson                    +44 204 526 4581

 jonathan@otcmarkets.com             +44 7731 815 896
 Tancredi Intelligent Communication

 UK & Europe Media Relations
 Emma Valgimigli                     +44 7727 180 873

 Fabio Galloni-Roversi Monaco        +44 7888 672 701

 Nasser Al-Sayed                     +44 7915 033 739

 argoblock@tancredigroup.com

 

About Argo:

Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK) blockchain
technology company focused on large-scale cryptocurrency mining. With its
flagship mining facility in 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. Argo also participates
in several Web 3.0, DeFi and GameFi projects through its Argo Labs division,
further contributing to its business operations, as well as the development of
the cryptocurrency markets. For more information, visit www.argoblockchain.com
(http://www.argoblockchain.com/) .

 

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  UPDEASNPELPAEFA