REG - Argo Blockchain PLC - Strategic Actions to Strengthen the Balance Sheet

Argo BlockchainAnnouncement

07/10/2022 07:00

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RNS Number : 1464C  Argo Blockchain PLC  07 October 2022

Press Release

7 October 2022

Argo Blockchain plc

("Argo" or "the Company")

Announcement of Strategic Actions to Strengthen the Company's Balance Sheet

●     Argo signs LOI to amend existing equipment financing agreement

●     Argo plans to sell 3,400 mining machines for cash proceeds of
£6.0 million ($6.8m)

●     Argo intends to raise approximately £24 million ($27m) via
Proposed Subscription with a strategic investor

Argo Blockchain plc, a global leader in cryptocurrency mining (LSE: ARB;
NASDAQ: ARBK), is pleased to announce several strategic actions that are
intended to bring in additional capital to the business and ensure that the
Company has the working capital necessary to execute its current strategy and
meet its obligations over the next twelve months.

As previously reported on 9 September 2022, the Company has seen headwinds
from the price of both natural gas and electricity caused by the geopolitical
situation in Europe and low levels of natural gas storage in the United
States. These factors, coupled with the decline in the price of Bitcoin since
March 2022 and the increased mining difficulty, have reduced the Company's
profitability and free cash flow generation.

The Company has been proactive in curtailing operations at its flagship Helios
facility in Dickens County, Texas, during periods of high power prices and
securing a more favourable short term power purchase agreement ("PPA") with a
new electricity provider. The Company remains optimistic about securing a long
term, low-collateral, fixed price PPA and is continually reviewing its other
expenditures to identify and take additional steps to manage the Company's
costs.

In addition to the Company's measures to reduce costs and preserve capital,
Argo's Board of Directors ("Board")  has made the decision to pursue a
combination of financing opportunities to strengthen the Company's balance
sheet. Based on its cost reductions and the assumed completions of the
transactions described below on the terms set forth in the letters of intent
and presently anticipated timing, the Company believes its working capital
will be sufficient for its present requirements, that is for at least the next
twelve months from the date of this announcement. The Company and the Board
remain of the view that following these strategic steps, Argo will be both
well positioned and capitalised to endure the current period of market
dislocation. The Board and the Company will continue to closely monitor the
Company's cash needs and available sources of capital.

A.    Amendment to Existing Equipment Financing Agreement

The Company has executed a non-binding letter of intent ("NYDIG LOI") to amend
its existing equipment financing agreement with an affiliate of New York
Digital Investment Group LLC ("NYDIG"). This amendment releases approximately
£5.0 million ($5.7 million) of restricted cash and modifies the amortisation
schedule for the Company's existing loans. The transaction significantly
reduces the Company's debt service payments and links future payments for
NYDIG loans used to finance purchases of digital asset mining equipment to
network mining profitability. In exchange, the Company will provide NYDIG with
an expanded collateral package. The amended equipment financing agreement is
expected to contain customary covenants for an agreement of its type. The
Company and NYDIG expect to close the amendment within the next few weeks, and
a further announcement will be made in due course.

B.    Sale of Mining Machines

In addition, the Company has signed an agreement to sell to a third party
3,400 new in box Bitmain S19J Pro machines, representing ~340 PH/s of total
hashrate capacity, for cash proceeds of £6.0 million ($6.8 million). Argo
will host these machines for the third party at Helios pursuant to a hosting
services agreement that includes a profit sharing arrangement.

After accounting for this sale, the Company expects to achieve a total
hashrate capacity of 2.9 EH/s by the end of October 2022.

C.    Conditional Subscription for Ordinary Shares

The Company has entered into a non-binding letter of intent with a strategic
investor ("Investor") under which, subject to contract, due diligence and
other customary conditions, the Investor has agreed to subscribe for
approximately 87 million Ordinary Shares at GBP £0.276 per Ordinary Share for
gross proceeds of approximately GBP £24 million ($27 million) (the
"Subscription").

Assuming completion of the Subscription, the net proceeds of the Subscription
will be used by the Company for working capital and general corporate
purposes, including capital expenditures in connection with the continued
build out of its flagship Helios facility in Dickens County, Texas.

Assuming completion of the Subscription, the Investor will hold 15.46% of the
Company's enlarged issued share capital.

The Investor will have the right to nominate two new non-executive directors
to the Board, subject to the Company's approval. One of these new
non-executive directors will replace an existing non-executive director.
Following these appointments, the Board will consist of seven directors.

The Subscription is limited to the Investor, and this announcement should not
be considered an offer or solicitation to purchase or subscribe for securities
in the United States.

The Company and Investor expect to complete the Subscription within the next
30 days, and a further announcement will be made in due course.

Management Commentary

Peter Wall, Chief Executive at Argo Blockchain, said, "We have worked
relentlessly to create and execute on a strategy that will support our
objective of sustainable growth for the Company," Wall continued. "We also
understand the importance of maintaining flexibility in our approach in order
to respond swiftly to external factors. We are glad to have a strong
relationship with our lender NYDIG, who has been working with us to provide
flexibility and to help ensure the long term success of the Company."

"Additionally, the sale of the 3,400 Bitmain machines generates cash in the
near term, and the Subscription with a major strategic investor strengthens
the balance sheet while adding significant expertise in Bitcoin mining and
digital asset management to the Board. After careful consideration, we are
convinced that taking these steps will better position the Company to navigate
the current market conditions and preserve shareholder value."

Operational Update

The Company's next regular monthly operational update will be released on
Tuesday 11 October 2022.

Consummation of Transactions Under Letters of Intent Subject to Entry into
Definitive Agreements

Argo and the respective parties to the letters of intent described above
intend to negotiate and execute definitive agreements in the near term. There
can, however, be no assurance that any definitive agreements will be signed or
that any transaction will be consummated.  In that circumstance, the Board
would review other financing options, of which there are a number currently
available. Should Argo be unsuccessful in completing any further financing,
Argo would become cash flow negative in the near term and would need to
curtail or cease operations. The Board of Directors remains confident that the
Company will be able to complete the transactions described in this
announcement or failing that, other financing transactions to provide the
Company with working capital sufficient for its present requirements, that is
for at least the next twelve months from the date of this announcement.

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 "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 be unable to secure sufficient additional financing to meet its operating
needs. 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

 Seamus Fricker

 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
 Salamander Davoudi                  +44 7957 549 906

 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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