Argo Blockchain PLC announces operational update July 2022

Grant of options

Operational update

LONDON, UK / ACCESSWIRE / August 5, 2022 / 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 (BTC in total) compared to 179 BTC in June 2022. Based on daily exchange rates and cryptocurrency prices during the month, mining revenue in July amounted to £3.89 million. [$4.73 million*] (June 2022 £3.38m [$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 July 31, 2022, the company held 1,295 Bitcoins, of which 227 were BTC equivalents.

Funding Update

During the month of July, the company sold 887 Bitcoins at an average price of approximately $22,670. The proceeds were used to reduce obligations under a BTC-backed loan agreement with Galaxy Digital, as well as to fund operating costs and growth capital. As of July 31, 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 the Helios facility in Texas continued to be higher than previously expected. Electricity costs have risen around the world, largely due to higher natural gas prices stemming from the war in Ukraine, as well as increased demand for electrically powered air conditioners during an unusually hot and dry summer. The company currently has a power purchase agreement (PPA) under which it pays index power prices, and is considering 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 forecast prices and adjust operations to avoid instances of high electricity prices.

In mid-July, ERCOT issued a conservation notice urging all residential, commercial and industrial electricity users to reduce their electricity use during specific afternoon hours when electricity demand would be at its highest. Argo, along with most major Bitcoin miners in Texas, proactively shut down operations and reduced usage by over 1,000 MW, reducing the load on the grid during peak demand. In extraordinary circumstances such as this, Argo believes that electricity should be prioritized for use that ensures the health and safety of the public and is proud to be able to reduce operations to contribute to grid stability.

Hashrate update

During the month of July, the company completed the machine replacement of the approximately 10,000 S19s hosted with Core Scientific, completing its strategic pivot to a self-powered business model. By owning and operating its own infrastructure, the company expects to generate better performance from its mining machines and have greater control over operations, including operating expenses.

As part of the process of transferring mining operations from third-party facilities and into its own data centers, Argo conducted a comprehensive review of its entire mining fleet, focusing on the S17 and T17 miners (collectively, the “17 Series Machines”). There have been reports of high failures among the 17-series machines in the cryptomining sector, and the company has experienced similar results in its own fleet. After conducting a review and audit of this portion of the fleet, the Company has determined that approximately 460 PH/s of the 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 combined ROI of over 260% to date.

After removing the non-operational 17-series machines and those under 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 S19J Pros ordered from Bitmain and the conclusion of the Core machine swap. Going forward, the company will remove from its calculations of total hashrate non-functional 17-series machines and the 17-series machines undergoing maintenance.

“We would like to thank Core Scientific for acting as an invaluable and reliable business partner during this transition period, which represents a crucial step for Argo’s future development. The completion of the S19 machine replacement marks a further consolidation of our infrastructure, allowing us to retain further control over our operations and adjust them according to our needs at all times.” said Peter Wall, Argos’ chief executive. “While there have been some challenges operating the 17 Series machines, we are pleased with the returns we have achieved on this part of our mining infrastructure.”

Grant of options

On 27 June 2022, the company granted a total of 250,000 options over ordinary shares in the company to recently hired employees.

Non-IFRS measures

Bitcoin and Bitcoin Equivalent Mining Margin is a financial measure that is not defined by IFRS. We believe Bitcoin and Bitcoin Equivalent Mining Margin have limitations as an analytical tool. In particular, Bitcoin and Bitcoin Equivalent Mining Margin excludes impairment of mining equipment and therefore does not reflect the full cost of our mining operations, and it also excludes the effect 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 similar titles used by other companies. As a result, you should not consider this measure in isolation from, or as a replacement analysis for, our gross margin as determined under IFRS.

The table below shows a reconciliation of Bitcoin Gross Margin and Bitcoin Equivalent Mining Margin, the most directly comparable IFRS measure, for the months of June 2022 and July 2022.

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

(2) Due to favorable 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 unfavorable changes in fair value of Bitcoin and Bitcoin equivalents was a loss on change in fair value of digital currencies.

* Dollar values ​​translated from pounds sterling to US dollars using the noon buying rate of the Federal Reserve Bank of New York on current dates

Inside information and forward-looking statements

This announcement contains inside information and includes forward-looking statements that reflect the current views, interpretations, beliefs or expectations of the Company or, as applicable, the Board of Directors with respect to the Company’s financial results, business strategy and management’s plans and objectives 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 that include the words “expects”, “intends”, “plans”, “believes”, “projects”, “anticipates”, “will”, “goals”, “goals”, “may”, “would”, “could”, “continue”, “estimate”, “future”, “possibility”, “potential” or, in each case, their negative and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements deal with matters that involve risk and uncertainty because they relate to events that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. Consequently, there are or will be important factors that may lead to the company’s actual results, prospects and results deviating significantly from those stated 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, these 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, 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 laws 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 the Company files 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.

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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 powered primarily by renewable energy. In 2021, Argo became the first climate positive cryptocurrency mining company, signing 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.

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SOURCE: Argo Blockchain PLC