REG - Argo Blockchain PLC - Interim Half Year Results 2023
29/08/2023 07:30
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RNS Number : 6391K Argo Blockchain PLC 29 August 2023
Press Release
29 August 2023
Argo Blockchain plc
("Argo" or "the Company")
Interim Half Year Results 2023
Argo Blockchain plc, a global leader in cryptocurrency mining (LSE: ARB;
NASDAQ: ARBK), is pleased to announce its results for the six months to 30
June 2023.
Highlights
● Reduced non-mining operating costs and expenses by 21% in Q2 2023
compared to the prior quarter, resulting in a positive Adjusted EBITDA of $1.0
million for the quarter (Adjusted EBITDA of $2.3 million for H1 2023)
● Reduced debt by $4 million during the quarter to $75 million as of
30 June 2023, a $68 million reduction from $143 million at 30 June 2022
● Total number of Bitcoin and Bitcoin Equivalent ("BTC") mined during
H1 2023 was 947, a 1% increase over the BTC mined in H1 2022, despite a 78%
increase in the global hashrate from 30 June 2022 to 30 June 2023
● Revenues of $24.0 million for H1 2023, a decrease of 31% from H1
2022, driven primarily by a decrease in Bitcoin price and the increase in the
global hashrate and associated network difficulty
● Net loss was $18.8 million for H1 2023, compared to a net loss of
$39.6 million in H1 2022
● The Company ended June 2023 with $9.1 million of cash and 46 Bitcoin
or Bitcoin Equivalent (together, "BTC") on its balance sheet; post the period
end, the Company raised $7.5 million in gross proceeds via a share placement
in July 2023
Post-period highlights
● Increased total hashrate capacity to 2.6 EH/s with the deployment of
1,242 BlockMiner machines at its Quebec facilities
● Expect to deploy an additional 1,628 BlockMiners in the coming
months, increasing the Company's total hashrate capacity to 2.8 EH/s
● In July 2023, the Company raised $7.5 million of gross proceeds via
a share placement with institutional and retail investors in the UK; the
Company used a portion of these proceeds to repay approximately $1.8 million
in debt, and the Company's debt balance at the end of July 2023 was $72
million
● The Company is involved in advanced discussions to sell certain
non-core assets, and it continues to evaluate options for further reducing
debt
Fixed Price Power Purchase Agreement at Helios
During H1 2023, the Company achieved a mining margin of 42%, which is an
increase from the mining margin in H2 2022 of 33%. One of the primary drivers
of the improved mining margin was the establishment of a fixed price power
purchase agreement ("PPA") at Helios in H1 2023, which covers a substantial
portion of the facility's electricity load. In addition to providing greater
certainty of power costs at Helios going forward, the fixed price PPA also
allows the Company to generate power credits via economic curtailment. In Q2
2023, the Company generated approximately $1.1 million in power credits, and
it expects to generate more significant power credits during Q3 2023 as a
result of the continued heat wave in Texas.
Non-IFRS Measures
The following table shows a reconciliation of mining margin percentage to gross margin, the most directly comparable IFRS measure, for the six month periods ended 30 June 2023 and 30 June 2022.
Period ended Period ended
30 June 2023 30 June 2022
(unaudited) (unaudited)
$'000 $'000
Gross margin (1,371) (44,651)
Gross margin percentage (6%) (129%)
Depreciation of mining equipment 12,047 14,081
Change in fair value of digital currencies (489) 55,011
Mining margin 10,187 24,441
Mining margin percentage 42% 71%
The following table shows a reconciliation of Adjusted EBITDA to net (loss) /
income, the most directly comparable IFRS measure, for the six month periods
ended 30 June 2023 and 30 June 2022.
Period ended Period ended
30 June 2023 30 June 2022
(unaudited) (unaudited)
$'000 $'000
Net Loss (16,242) (39,580)
Interest expense 6,335 4,511
Income tax credit (2,321) (8,286)
Severance and restructuring 1,399 -
Foreign Exchange (1,403) (13,319)
Depreciation/Amortisation 12,698 15,204
Share based payment 1,889 3,654
Change in fair value of digital currencies (489) 55,011
Equity accounting loss from associate 458 636
Adjusted EBITDA 2,324 17,832
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
Tancredi Intelligent Communication
UK & Europe Media Relations
Salamander Davoudi argoblock@tancredigroup.com
Emma Valgimigli
Fabio Galloni-Roversi Monaco
Nasser Al-Sayed
About Argo:
Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK) blockchain
technology company focused on large-scale cryptocurrency mining. With mining
facilities in Quebec, mining operations 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.
For more information, visit (http://www.argoblockchain.com/)
www.argoblockchain.com (http://www.argoblockchain.com/) .
Interim Management Report
Argo entered 2023 on the heels of a transformational series of transactions
with Galaxy Digital Holdings Ltd. ("Galaxy") that strengthened our balance
sheet, improved our liquidity position, and positioned Argo for profitable
mining. As part of the transactions, the Helios facility and real property in
Dickens County, Texas were sold to Galaxy for $65 million and existing
asset-backed loans were refinanced with 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.
Importantly, the Company maintained ownership of its entire fleet of more than
27,000 mining machines. Its roughly 23,600 Bitmain S19J Pro mining machines at
Helios are continuing to operate in that facility pursuant to a hosting
agreement with Galaxy. During the first quarter of 2023, the Company completed
the transition of operations at Helios to the Galaxy team, and Argo has been
working closely with them to optimize mining operations and performance.
Currently, approximately 2.4 EH/s of total hashrate capacity is deployed at
Helios.
The hosting agreement with Galaxy provides Argo with pass-through access to
the power that Galaxy obtains through its power purchase agreement ("PPA") for
Helios, and the Company pays an incremental hosting fee based on actual
electricity usage. Argo also has the ability to share in the proceeds when
Helios undergoes economic curtailment in order to monetize its fixed price PPA
during periods of high power prices. One of the primary benefits of bitcoin
mining is its flexible load consumption, which can be curtailed during times
of peak demand. This helps to stabilize the Texas power grid and reduce price
volatility for consumers. During Q2 2023, the Company generated proceeds of
approximately $1.1 million from economic curtailment at Helios; this helps to
offset the reduced BTC production from heat-related curtailment during the
summer months and improves mining margin.
During the first quarter of 2023, following the resignation of Peter Wall from
his roles as Interim Executive Chairman and Chief Executive officer, the Board
appointed Chief Operating Officer Seif El-Bakly to serve as Interim CEO, and
Matthew Shaw became Chairman of the Board. Additionally, after a formal
recruitment process led by an executive search firm, the Board appointed Jim
MacCallum as Chief Financial Officer in April 2023.
With the new management team in place, the Company has focused on three key
pillars: financial discipline, operational excellence, and strategic
partnerships for growth.
Financial discipline
The sale of the Helios facility significantly changed the Company's operating
profile and presented an opportunity to dramatically decrease both operating
expenses and G&A. During the first quarter, Argo reduced its non-mining
operating expenses by 68% compared to its run rate during the second half of
2022. These cost reductions are particularly important in the current
inflationary environment. In the second quarter, non-mining operating expenses
were further reduced by an additional 21%, and these cost savings are expected
to be sustained. Cash generation and preservation are high priorities for the
Company.
In addition to reducing operating expenses, the Company continues to explore
opportunities to strengthen its balance sheet and reduce indebtedness while
maintaining profitable mining operations. To do this, the Company is
evaluating the sale of certain non-core assets, including investments held on
the balance sheet, excess inventory and real estate. In the second quarter,
the Company sold approximately $1.0 million in ether tokens and used the
proceeds to pay down debt owed to Galaxy. Additionally, post the period end,
the Company issued 57.5 million shares in exchange for $7.5 million of gross
proceeds, a portion of which will be used to repay debt owed to Galaxy.
Operational excellence
Argo continues to operate both of its owned data centers in Quebec, Canada.
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. The
Company's Mirabel facility, located adjacent to the Mirabel airport near
Montreal, has approximately 30,000 square feet of mining space with 5 MW of
99% renewable power capacity sourced from Hydro-Quebec.
Optimization of both capacity and existing operations at both Quebec
facilities continues. In June 2023, the Company began to receive and deploy
its BlockMiner mining machines ordered from ePIC Blockchain Technologies. As
of 31 July 2023, the Company has deployed 1,242 BlockMiners at its Quebec
facilities (representing approximately 130 PH/s) and expects to deploy the
remaining 1,628 machines (an additional 170 PH/s) by the end of Q4 2023.
Growth & strategic partnerships
While the Company's primary focus in H1 2023 was on financial discipline and
operational excellence at its existing facilities, management 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.
For the remainder of 2023, the Company will continue to focus on strengthening
the balance sheet and growing the business with a strong emphasis on financial
discipline and operational excellence. 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 in this next stage of the Company's
development.
Sincerely,
Matthew Shaw
Chairman of the Board
Responsibility Statement
We confirm that to the best of our knowledge:
● the Interim Report has been prepared in accordance with
International Accounting Standards 34, Interim Financial Reporting; and
● gives a true and fair view of the assets, liabilities, financial
position and profit/loss of the Group; and
● the Interim Report includes a fair review of the information
required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the set of interim financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year.
● the Interim Report includes a fair review of the information
required by DTR 4.2.8R of the Disclosure and Transparency Rules, being the
information required on related party transactions.
The Interim Report was approved by the Board of Directors and the above
responsibility statement was signed on its behalf by:
Matthew Shaw
Chairman of the Board
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
Period ended Period ended
30 June 2023 30 June 2022
(unaudited) (unaudited)
Note $'000 $'000
Revenues 23,996 34,644
Direct costs (15,093) (10,203)
Power credits 1,284 -
Mining margin 10,187 24,441
Depreciation of mining equipment (12,047) (14,081)
Change in fair value of digital currencies 6 489 (55,011)
Gross margin (1,371) (44,651)
Operating costs and expenses (7,863) (11,653)
Restructuring (1,399) -
Foreign exchange 1,403 13,319
Depreciation/amortisation (651) (1,123)
Share based payment (1,889) (3,654)
Operating loss (11,770) (47,762)
Fair value change of investments - (368)
Gain on settlement of contingent consideration - 5,239
Gain on sale of investment - 172
Finance cost (6,335) (4,511)
Equity accounted loss from associate (458) (636)
Loss before taxation (18,563) (47,866)
Tax credit 5 2,321 8,286
Net Loss (16,242) (39,580)
Other comprehensive loss
Items which may be subsequently reclassified to profit or loss:
- Currency translation reserve (1,562) (5,726)
- Equity accounted OCI from associate - (10,793)
- Fair value loss on intangible digital assets - (537)
Total other comprehensive loss, net of tax (1,562) (17,056)
Total comprehensive loss (17,804) (56,636)
Weighted average shares outstanding 477,825,166 469,182,463
Basic earnings per share* $(0.03) $(0.08)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 June 2023 31 December 2022 1 January 2022
(unaudited) (audited) (audited)
Note $'000 $'000 $'000
ASSETS
Non-current assets
Investments at fair value through income and loss 419 414 543
Investments accounted for using the equity method 2,529 2,863 18,642
Intangible assets 6 1,464 2,103 7,560
Property, plant and equipment 7 70,333 76,992 150,571
Right of use assets 536 525 472
Total non-current assets 75,281 82,897 177,788
Current assets
Trade and other receivables 8 4,395 6,802 85,481
Digital assets 9 - 443 108,956
Cash and cash equivalents 9,148 20,092 15,923
Total current assets 13,543 27,337 210,360
Total assets 88,824 110,234 388,148
EQUITY AND LIABILITIES
Equity
Share capital 10 634 634 622
Share premium 10 202,103 202,103 196,911
Share based payment reserve 10,389 8,528 2,531
Foreign currency translation reserve (30,457) (28,895) 1,623
Fair value reserve - - 551
Other comprehensive income of equity accounted associates - - 8,744
Accumulated surplus (deficit) (184,865) (168,623) 71,623
Total equity (2,196) 13,747 282,605
Current liabilities
Trade and other payables 11 9,913 10,023 10,233
Loans and borrowings 12 14,407 11,605 31,558
Deferred tax 3,390 2,648 386
Income tax - - 10,360
Contingent consideration - - 10,889
Lease liability 5 5 10
Total current liabilities 27,715 24,281 63,436
Non - current liabilities
Deferred tax 4,265 7,941 730
Issued debt - bond 12 37,943 37,809 36,303
Loans and borrowings 12 20,544 25,916 4,575
Lease liability 553 540 499
Total liabilities 91,020 96,487 105,543
Total equity and liabilities 88,824 110,234 388,148
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Currency translation reserve Share based payment reserve Accumulated deficit Total
$'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2023 634 202,103 (28,895) 8,528 (168,623) 13,747
Loss for the period - - - - (16,242) (16,242)
Other comprehensive income - - (1,562) - - (1,562)
Foreign exchange movement - - - (28) - (28)
Stock based compensation charge - - - 1,889 - 1,889
Balance at 30 June 2023 634 202,103 (30,457) 10,389 (184,865) (2,196)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Currency translation reserve Share based payment reserve Fair value reserve Other comprehensive income of associates Accumulated surplus/ (deficit) Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2022 622 196,911 1,623 2,531 551 8,744 71,623 282,605
Loss for the period - - - - - - (39,580) (39,580)
Other comprehensive income - - (5,726) - (537) (10,793) - (17,056)
Foreign exchange movement - - - 1,301 (14) - - 1,287
Stock based compensation charge - - - 3,654 - - - 3,654
Common stock issuance 2 138 - - - - - 140
Common stock options/warrants exercised 10 5,054 - - - - - 5,064
Balance at 30 June 2022 634 202,103 (4,103) 7,486 - (2,049) 32,043 236,114
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Period ended Period ended
30 June 2023 30 June 2022
(unaudited) (unaudited)
Note $'000 $'000
Cash flows from operating activities
Loss before tax (18,563) (47,866)
Adjustments for:
Depreciation/Amortisation 12,698 15,204
Foreign exchange movements (1,403) (13,319)
Finance cost 6,335 4,511
Fair value change in digital assets - 40,371
Realised (gain)/loss in digital assets (489) 6,372
Investment fair value movement - 368
Gain on investment - (173)
Impairment of intangible digital assets - 3,904
Share of loss from associate 458 636
Gain on settlement of contingent consideration - (5,239)
Share based payment expense 1,889 3,654
Working capital changes:
Increase in trade and other receivables 8 (892) (1,204)
(Decrease)/Increase in trade and other payables 11 (973) 3,098
Decrease in digital assets 443 21,593
Net cash flow (used in)/from operating activities (497) 31,910
Investing activities
Proceeds from sale of intangibles/investments 989 173
Purchase of tangible fixed assets 7 (1,301) (63,893)
Mining equipment prepayments - (45,972)
Net cash used in investing activities (312) (109,692)
Financing activities
Proceeds from borrowings 16 811 86,065
Lease payments - (17)
Loan repayments (3,381) (10,890)
Interest paid (5,247) (4,511)
Proceeds from shares issued - 151
Net cash from (used in)/from financing activities (7,817) 70,798
Net decrease in cash and cash equivalents (8,626) (6,984)
Effect of foreign exchange changes in cash (2,318) 2,261
Cash and cash equivalents, beginning of period 20,092 15,923
Cash and cash equivalents, end of period 9,148 11,200
NOTES TO THE CONDENSED INTERIM CONSOLIDATED 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 Eatcastle Street, London, England, W1W 8DH. The company was
incorporated on 5 December 2017 as GoSun Blockchain Limited.
On 21 December 2017, the company changed its name to Argo Blockchain Limited
and re-registered as a public company, Argo Blockchain plc.
On 12 January 2018, Argo Blockchain plc acquired a 100% subsidiary, Argo
Innovation Labs Inc. (together "the Group"), incorporated in 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 Bitcoin mining.
The ordinary 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.
2. BASIS OF PREPARATION
The condensed consolidated interim financial statements for the six months
ended 30 June 2023 have been prepared in accordance with IAS 34 'Interim
Financial Reporting' and presented in US dollars which is further described in
Note 3. They do not include all the information required in annual financial
statements in accordance with IFRS and should be read in conjunction with the
consolidated financial statements for the year ended 31 December 2022, which
have been prepared in accordance with International Financial Reporting
Standards as issued by the IASB. The report of the auditors on those financial
statements was unqualified.
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.
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. In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the financial statements for the year ended
31 December 2022.
3. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
condensed consolidated interim financial statements are consistent with those
of the previous financial year, except the change in presentational currency
from British Pounds to US Dollars and recognition of power credits within
Mining Margin in the Statement of Comprehensive Income. The Group changed
its presentational currency to US Dollars due to the fact its revenues, direct
costs, capital expenditures and debt obligations are now predominantly
denominated in US Dollars.
In order to satisfy the requirements of IAS 8 and IAS 21 with respect to a
change in the presentation currency, the statutory 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 on a monthly basis. This has been
deemed to be a reasonable approximation to exchange rates at the date of the
transactions.
· Differences resulting from the retranslation were taken to currency
translation reserve within equity
· All exchange rates used were extracted from the Group's underlying
financial records
Power credits: The Group recognized power credits in relation to selling power
back to the power grid. The hosting facility sells some of the Group's power
back to the power grid when economically feasible.
Going Concern
The preparation of consolidated financial statements requires an assessment on
the validity of the going concern assumption. 2022 was a challenging year for
Bitcoin miners: the depressed price of Bitcoin and the elevated global
hashrate caused hashprice, the primary measure of mining profitability, to
reach all-time lows in Q4 2022. In addition, global events resulted in
disruption to fossil fuel energy markets which resulted in a significant
increase in electricity prices. The low hashprice and elevated power prices
significantly reduced Argo's profitability and its ability to generate free
cash flow. During Q4 2022, the Group evaluated several strategic alternatives
to restructure our balance sheet and improve our cash flow.
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.
While the Galaxy transactions strengthened the Group's balance sheet, 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 of approximately $17.8 million to 31
August 2024. Please see the net debt tables under the Group and Company cash
flow statements for further information of the Group's exposure to liabilities
and net position at the year end.
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 Directors' assessment of going concern
includes a forecast drawn up to 31 August 2024 using the Group's estimate of
the forecasted hashprice. Power costs are now also partially fixed per
kilowatt hour as Galaxy has hedged the majority of the power obligations at
Helios and, as per the hosting agreement in place, the Group has access to
this power. Anticipated power costs based on this arrangement are reflected in
the forecast prepared.
Offsetting these potential risks to the Group's cash flow are the Group's
current cash balance, the Group's ability to generate additional funds by
issuing equity for cash proceeds and selling certain non-core Group assets.
Based on information from Management, the Directors have considered the period
to 31 August 2024, as a reasonable time period given the variable outlook of
cryptocurrencies and the Bitcoin halving due in May 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 made reference to this in their audit report on
the financial statements for the year ended 31 December 2022.
4. 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.
Standards which are in issue but not yet effective:
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
IAS 1 Non-current Liabilities with Covenants 1 January 2024
The Group has not early adopted any of the above standards and intends to
adopt them when they become effective.
No deferred tax asset has been recognised in respect of tax losses carried
forward on the basis that there is insufficient certainty over the level of
future profits to utilise against this amount.
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:
5. TAXATION
Period ended Period ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
$'000 $'000
Income tax credit - foreign tax - (7,785)
Deferred tax credit (2,321) (501)
Taxation credit in the financial statements (2,321) (8,286)
Period ended Period ended
30 June 2023 (unaudited) 30 June 2022 (unaudited)
$'000 $'000
Loss before taxation (18,563) (47,866)
(4,640) (21,325)
Expected tax recovery based on a weighted average of 25% (2022 - 25%) (UK, US
and Canada)
Expenses not deductible in determining taxable profit 512 52
Capital allowances in excess of depreciation - (7,250)
Other tax adjustments (2,543) 15,064
Losses utilised re prior years - (9,106)
Origination and reversal of temporary differences 3,117 5,116
Unutilised tax losses carried forward 1,233 9,162
Taxation credit in the financial statements (2,321) (8,286)
6. INTANGIBLE ASSETS NOTE
Group Goodwill Digital assets Website 2023 Total
$'000 $'000 $'000 $'000
Cost
At 1 January 2023 96 5,942 873 6,911
Foreign exchange movements 16 69 19 104
Disposals - (1,868) - (1,868)
At 30 June 2023 102 4,143 892 5,147
Amortisation and impairment
At 1 January - 4,045 762 4,807
Foreign exchange movement - 47 17 64
Disposal - (1,243) - (1,243)
Fair value gain - (34) - (34)
Amortisation charged during the period - - 88 88
At 30 June 2023 - 2,524 803 3,327
Balance at 1 January 2023 97 1,917 42 2,111
Balance At 30 June 2023 112 1,327 25 1,464
Intangible digital assets are cryptocurrencies owned but not mined by the
Group. The Intangible digital assets are recorded at cost on the day of
acquisition. Changes in fair value are recorded in the fair value reserve in
other comprehensive income.
The Intangible digital assets held are detailed in the table below:
As at 30 June 2023 Coins/tokens Fair value
Crypto asset name $'000
Polkadot - DOT 32,955 170
Ethereum - ETH 213 70
Solana - SOL 17 6
LAYR 12,048 125
ASTRA 1 200
Alternative coins 392,971 756
At 30 June 2023 438,205 1,327
7. TANGIBLE FIXED ASSETS
Group Office Equipment Mining and Computer Equipment Machine Components Leasehold Improvements Data centres Equipment Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At 1 January 2023 57 142,901 20,938 116 13,295 104 176,410
Foreign exchange movement 3 4,489 985 5 625 5 6,112
Additions - - 3,300 - - 1,301 4,601
Transfer to another class 513 - - 530 (3,803) 2,760 -
Disposals - - - - - - -
At 30 June 2023 572 145,390 25,222 652 10,117 4,710 187,124
Depreciation and impairment
At 1 January 2023 17 79,248 18,233 105 1,801 14 99,419
Foreign exchange movement 1 3,726 857 - 5 85 4,674
Depreciation charged during the period 145 12,047 - 74 103 328 12,698
Disposals - - - - - - -
At 30 June 2023 163 95,021 19,091 179 1,910 427 116,791
Carrying amount
At 1 January 2023 40 62,653 2,705 11 11,494 89 76,992
At 30 June 2023 409 51,369 6,132 472 8,208 3,743 70,333
8. TRADE AND OTHER RECEIVABLES
As at As at 31 December 2022 (audited)
30 June 2023 (unaudited)
$'000 $'000
Trade and other receivables 706 -
Prepayments 2,214 5,978
Other taxation and social security 1,473 824
Total trade and other receivables 4,393 6,802
The directors consider that the carrying amount of trade and other receivables
is equal to their fair value.
9. DIGITAL ASSETS
Group Period ended Year ended
30 June 2023 31 December 2022
(unaudited) (audited)
$'000 $'000
Opening Balance 443 102,632
Additions
Crypto assets mined - 263
Crypto asset purchased and received 23,982 60,069
Total additions 23,982 60,332
Disposals
Crypto assets purchased & received - 419
Crypto assets sold (24,448) (107,456)
Total disposals (24,448) (107,037)
Fair value movements
Gain/(loss) on crypto asset sales 23 (55,315)
Movements on crypto assets held - (169)
Total fair value movements 23 (55,484)
Closing Balance - 443
The Group mined crypto assets during the period, which are recorded at fair
value on the day of acquisition. Movements in fair value are recorded in
change in fair value of digital currencies on the statement of comprehensive
loss.
10. ORDINARY SHARES
The Group had 477,825,166 Ordinary shares outstanding at 30 June 2023 and 31
December 2022.
Subsequent to June 30, 2023, the Group issued 57,500,000 ordinary shares for
net proceeds of $7M.
The Group has in issue 10,544,406 warrants and options at 30 June 2023 (2022:
18,396,397).
The Group granted 6,616,487 restricted stock units (RSUs) and 1,973,892
performance stock units (PSUs) in 2023. The RSUs/PSUs vest over 3 years from
grant date. PSUs have performance conditions that must be met as a condition
of vesting. The grant price of the RSUs/PSUs was £0.1288.
11. TRADE AND OTHER PAYABLES
As at As at
30 June 2023 (unaudited) 31 December 2022 (audited)
$'000 $'000
Trade payables 2,040 3,253
Accruals and other payables 7,365 6,099
Other taxation and social security 507 690
Total trade and other creditors 9,912 10,043
The directors consider that the carrying value of trade and other payables is
equal to their fair value.
12. LOANS AND BORROWINGS
Non-current liabilities As at As at
30 June 2023 (unaudited) 31 December 2022 (audited)
$'000 $'000
Issued debt - bond 37,943 37,809
Long term loan 18,200 23,131
Mortgages 2,344 2,785
Lease Liability 553 540
Total 59,040 64,265
Current liabilities
Loans 13,415 10,475
Mortgages 992 1,130
Lease Liability 5 5
Total 14,412 11,610
The mortgages are secured against the two buildings at Mirabel and Baie Comeau
and are repayable over periods from 39 months to 42 months at an interest rate
of lender prime + 0.5%.
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.
In December 2022, the Group entered into a loan agreement with Galaxy Digital
LLC for USD$35 million (£29m). 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.
In May 2023, the Group entered into a loan agreement with First Insurance
Funding for USD $811k. The loan is payable over 10 months with an interest
rate of 9.2%.
13. FINANCIAL INSTRUMENTS
As at As at
30 June 2023 (unaudited) 31 December 2022 (audited)
$'000 $'000
Carrying amount of financial assets
Measured at amortised cost
- Mining equipment prepayments - 5,978
- Trade and other receivables 2,178 824
- Cash and cash equivalents 9,148 20,092
Measured at fair value - Digital Assets - 443
Total carrying amount of financial assets 11,328 27,337
Carrying amount of financial liabilities
Measured at amortised cost
- Trade and other payables 9,913 10,022
- Short term loans 11,407 11,605
- Long term loans 20,544 25,916
- Issued Debt - bonds
37,943 37,809
- Lease liabilities 553 540
Total carrying amount of financial liabilities 83,365 85,892
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 and liabilities that are
measured at fair value at 30 June 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 26 - 393 419
Intangible assets - crypto assets - 1,327 - 1,327
Digital assets - - - -
Total at 30 June 2023 26 1,327 393 1,746
Level 1 Level 2 Level 3 Total
Assets $'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
Equity holdings 73 - 89 162
Intangible assets - crypto assets - 2,129 - 2,129
Digital assets - 443 - 443
Total at 31 December 2022 73 2,572 89 2,734
All financial assets are in listed/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.
14. COMMITMENTS
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 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.
15. RELATED PARTY TRANSACTIONS
Key management compensation - all amounts in $000's
Key management includes Directors (executive and non-executive) and senior
management. The compensation paid to related parties in respect of key
management for employee services during the period was made only from Argo
Blockchain PLC, amounting to: $60k (2022 - $26) paid to Webslinger Advisors
Inc. in respect of fees of Matthew Shaw (Non-executive director); and Alex
Appleton through Appleton Business Advisors Limited was paid $22 (2022 - $126)
during the period.
Total director fees and remuneration, paid directly and indirectly, totalled
$280 (2022: $406).
16. SUBSEQUENT EVENTS
In July 2023, the Company issued 57,500,000 ordinary shares for net proceeds
of $7M.
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