REG - Argo Blockchain PLC - July 2022 Operational Update

Argo BlockchainAnnouncement

05/08/2022 07:00

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RNS Number : 0063V  Argo Blockchain PLC  05 August 2022

Press Release

05 August 2022

Argo Blockchain PLC

("Argo" or "the Company")

 

July 2022 Operational Update

Grant of Options

 

Operational Update

Argo Blockchain plc, a global leader in cryptocurrency mining (LSE: ARB;
NASDAQ: ARBK), is pleased to provide the following operational update for July
2022.

During the month of July, Argo mined 219 Bitcoin or Bitcoin Equivalents
(together, BTC) compared to 179 BTC in June 2022. Based on daily foreign
exchange rates and cryptocurrency prices during the month, mining revenue in
July amounted to £3.89 million [$4.73 million*] (June 2022 £3.38 million
[$4.35 million*]). Argo generated this income at a Bitcoin and Bitcoin
Equivalent Mining Margin of 37 % for the month of July (June 2022: 50%). As of
31 July 2022, the Company held 1295 Bitcoin, of which 227 were BTC
Equivalents.

Financing Update

During the month of July, the Company sold 887 Bitcoin at an average price of
approximately $22,670. Proceeds were used to reduce obligations under a
BTC-backed loan agreement with Galaxy Digital, as well as to fund operating
expenses and growth capital. As of 31 July 2022, the Company had an
outstanding balance of $6.72 million under the BTC-backed loan, a significant
reduction from the maximum outstanding balance of $50 million in Q2 2022.

Helios Power Update

During the month of July, Argo's electricity costs at its Helios facility in
Texas continued to be higher than previously anticipated. Electricity costs
have increased around the world, largely due to higher natural gas prices
stemming from the war in Ukraine, as well as increased demand for
electric-powered air conditioning during an unusually hot and dry summer. The
Company currently has a power purchase agreement (PPA) whereby it pays index
power prices, and is evaluating options for a long-term, fixed price PPA to
sign in the near future. Until then, the Company will continue to closely
monitor real-time and projected prices and adjust its operations to avoid
instances of high electricity prices.

In the middle of July, ERCOT issued a conservation alert urging all
residential, commercial and industrial electricity users to reduce electricity
consumption during specific afternoon hours when electricity demand would be
at its highest. Argo, along with most large-scale Bitcoin miners in Texas,
proactively shut down operations and reduced usage by over 1,000 MW, thereby
reducing strain on the grid during peak demand. In extraordinary circumstances
like that, Argo believes that electricity should be prioritised for uses that
ensure the health and safety of the public and is proud to be able to reduce
its operations in order to contribute to grid stability.

Hashrate Update

During the month of July, the Company completed its machine swap of the
approximately 10,000 S19s which were hosted with Core Scientific, finalising
its strategic pivot to a self-hosted business model. In owning and operating
its own infrastructure, the Company expects to generate better performance
from its mining machines and have greater control of operations, including
operational expenses.

As part of the process of transferring its mining operations out of third
party facilities and into its own data centres, Argo conducted a comprehensive
review of its entire mining fleet, with a focus on its S17 and T17 miners
(collectively, the "17 series machines"). There have been reports of high
failures among the 17 series machines within the crypto mining sector and the
Company has experienced similar results within its own fleet. After carrying
out a review and audit of this portion of its fleet, the Company has
determined that approximately 460 PH/s of its 17 series machines are not
operational and are not suitable for repair. Despite the operational
challenges of the 17 series machines, they have been profitable for the
Company, generating a total ROI in excess of 260% in aggregate to date.

After removal of the non-operational 17 series machines and those undergoing
maintenance, the Company's total hashrate at the end of July was approximately
2.23EH/s. This figure takes into account the continued installation of the
S19J Pros ordered from Bitmain and the conclusion of the Core machine swap.
Going forwards, the Company will remove from its calculations of total
hashrate non-functional 17 series machines and those 17 series machines
undergoing maintenance.

"We would like to thank Core Scientific for acting as an invaluable and
reliable business partner in this transition period which represents a crucial
step for Argo's future development. The completion of the S19 machines swap
marks a further consolidation of our infrastructure, allowing us to retain
further control of our operations and adjust them in accordance with our needs
at any given time." said Peter Wall, Argo's CEO. "While there have been some
challenges in operating the 17 series machines, we are pleased with the ROI we
have achieved on this portion of our mining infrastructure."

Grant of Options

On 27 June 2022, the Company granted an aggregate 250,000 options over
ordinary shares of the Company to recently hired employees.

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 realised
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 June 2022 and July 2022.

                                                                                                                  Month Ended 30 June 2022                                                 Mont
                                                                                                                                                                                           h
                                                                                                                                                                                           Ende
                                                                                                                                                                                           d 31
                                                                                                                                                                                           July
                                                                                                                                                                                           2022
                                                            £ (000s)                                 $ (000s)                                      £(000s)                          $(000s)
 Gross (loss)/profit(2)                                      (14,925)                                  (18,657)                       3,643                                          4,433
 Gross Margin(2)                                              (429%)                                    (429%)                        94%                                            94%
 Depreciation of mining equipment(1)                          2,350                                          2,937                    1,201                             1,461
 Charge in fair value of digital currencies                    9,216                          11,521                                  (1,886)                           (2,295)
 Realised loss on sale of digital currencies                   5,087                          6,359                                   (1,500)                                       (1,826)

 Mining Profit(2)                                                  1,728                                     2,160                    1,458                             1,773
 Bitcoin and Bitcoin Equivalent Mining Margin(2)                  50%                                         50%                     37%                                              37%

 

(1) Due to a change in estimation technique of the machine depreciation and as
a result of the Core swap the depreciation has fallen from June 2022 to July
2022.

 

(2) Due to favourable changes in fair value of Bitcoin and Bitcoin equivalents
there was a gain on the change in fair value of digital currencies in July
2022. In June 2022 due to unfavourable changes in fair value of Bitcoin and
Bitcoin Equivalents  there was a loss 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
(http://www.argoblockchain.com/) www.argoblockchain.com
(http://www.argoblockchain.com/) .

 

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