REG - Argo Blockchain PLC - Transformational Strategic Transaction with Galaxy

Argo BlockchainAnnouncement

28/12/2022 07:00

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RNS Number : 9746K  Argo Blockchain PLC  28 December 2022

Press Release

28 December 2022

Argo Blockchain plc

("Argo" or "the Company")

Announcement of Transformational Strategic Transactions with Galaxy Digital
Holdings, Ltd.

●   Argo's subsidiary to sell its Helios facility to Galaxy for $65
million (£54 million) and refinance asset-backed loans with a new $35 million
(£29 million) loan with Galaxy

●   Transactions will reduce total indebtedness by $41 million (£34
million) and simplify Argo's operating structure

●   Argo will maintain ownership of all mining machines, and Galaxy will
host Argo's fleet of Bitmain S19J Pros at Helios

●   Transactions will strengthen Argo's balance sheet, improve Argo's
liquidity position, and enable the Company to continue operations

Argo Blockchain plc (LSE: ARB; NASDAQ: ARBK), a global leader in
cryptocurrency mining, announces that it has entered into definitive
agreements with Galaxy Digital Holdings, Ltd. (TSX: GLXY) ("Galaxy") under
which an Argo subsidiary will sell its Helios facility in Dickens County,
Texas for $65 million (£54 million) and refinance its asset-backed loans.
Additionally, Galaxy has agreed to host Argo's mining machines located at
Helios. The transactions are expected to close on Wednesday, 28 December 2022.

 

Sale of Helios to Galaxy and New Asset-Backed Loan

 

Pursuant to an equity purchase agreement, an Argo subsidiary will sell its
Helios facility and real property in Dickens County, Texas and related assets
to Galaxy for $65 million (£54 million), subject to customary post-closing
adjustments. In addition, Galaxy will provide Argo with a new asset-backed
loan in an aggregate principal amount of $35 million (£29 million) with an
initial term of 36 months. This financing will be secured by a collateral
package that includes 23,619 Bitmain S19J Pro mining machines currently
operating at Helios and certain machines located at Argo's Canadian data
centers. Argo has agreed to guarantee, on an unsecured basis, its
subsidiaries' obligations under the definitive agreements, and along with its
other subsidiaries, has agreed to guarantee, on an unsecured basis, and
provide certain additional collateral for, the financing. The Company has also
committed to working with Galaxy to ensure a smooth transition at Helios and
minimize any disruption to operations.

 

The cash proceeds received from the sale of Helios, along with a portion of
the borrowings under the asset-backed loan, will be used to repay all existing
indebtedness, prepayment interest, and other fees of approximately $84 million
(£70 million) and $1 million (£1 million), owed to NYDIG ABL LLC and North
Mill Commercial Finance, LLC, respectively. Upon this repayment, approximately
$6 million (£5 million) will be returned to the Company from a collateral
account controlled by NYDIG ABL LLC.

 

Hosting Agreement

 

Under a two-year hosting agreement with Galaxy, Argo's 23,619 Bitmain S19J Pro
mining machines currently operating at Helios will remain in operation at
Helios. As the owner of Helios, Galaxy intends to enter into a fixed-price
power purchase agreement ("PPA") with a licensed retail electricity provider
to procure electricity for the facility. The hosting agreement provides that
Argo will have access to this electricity at the PPA rate. Argo will pay
Galaxy a hosting fee and will collaborate on designing a curtailment strategy
in order to participate in certain demand response programs offered by the
Electric Reliability Council of Texas, which manages the Texas power grid.

 

The hosting agreement allows Argo to keep its mining machines operating at
Helios and mitigate any mining machine downtime from the sale of the Helios
facility. Furthermore, the Company believes that the immersion-cooling system
it developed and implemented at Helios provides for a superior operating
environment for these machines, representing approximately 2.36 EH/s.

 

Renewed Focus on Canadian Operations

 

The Company's Canadian assets are not affected by the agreements with Galaxy
except for the use of certain mining machines and other assets located in
Quebec as collateral for the asset-backed loan. Initially, Argo plans to
refocus its efforts on growing and optimizing operations at its two data
centers in Quebec, which are powered fully by low-cost hydroelectricity. The
Company currently has approximately 140 PH/s of hashrate capacity at its
Baie-Comeau and Mirabel facilities, which have 15 MW and 5 MW of power
capacity, respectively.

Third Quarter Earnings Results and Suspension of Trading on Nasdaq

In light of the transaction with Galaxy, the Company will not report earnings
results for Q3 2022 at this time. The Company is designated by the SEC as a
foreign private issuer and is required to comply with regulatory filing
requirements in its home market. The UK Financial Conduct Authority requires
semi-annual reporting of financial results.

As previously disclosed, the Company requested a suspension of trading of its
ADSs and unsecured notes on Nasdaq on Tuesday, 27 December 2022. Trading on
Nasdaq is expected to resume on Wednesday, 28 December 2022 when both the
London Stock Exchange and the Nasdaq are open for trading.

Management Commentary

Peter Wall, Argo's Chief Executive, said, "This transaction with Galaxy is a
transformational one for Argo and benefits the Company in several ways. It
reduces our debt by $41 million (£34 million) and provides us with a stronger
balance sheet and enhanced liquidity to help ensure continued operations
through the ongoing bear market. It also allows us to focus on optimizing our
operations with significantly lower capex and opex requirements."

 

Wall continued, "Argo will maintain ownership of its fleet of Bitcoin mining
machines, which represents approximately 2.5 EH/s of total hashrate capacity.
Our miners currently operating at Helios will continue to be hosted there by
Galaxy, which is a high-quality, institutional participant in the Bitcoin
mining space."

 

Company Advisors

 

McDermott Will & Emery LLP and Fladgate LLP acted as legal advisers to
Argo. Stifel GMP acted as a financial adviser, and Berkeley Research Group,
LLC provided secondary independent financial advice to the Company. Houlihan
Lokey acted as the financial adviser to Argo's Board of Directors.

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 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 Registration Statement on Form F-1.

For further information please contact:

 

 Argo Blockchain
 Peter Wall                          ir@argoblockchain.com

 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
 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.
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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