TIDMARB
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
Peter Krens +44 207 186 9030
------------------------------
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 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 31 December 1 January
2023 2022 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 Share based Accumulated Total
translation payment reserve deficit
reserve
$'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 Share Currency Share Fair Other Accumulated Total
capital premium translation based value comprehensive surplus/
reserve payment reserve income of (deficit)
reserve associates
$'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 Description Effective date for
or Interpretation 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 30 June 2022
(unaudited) (unaudited)
$'000 $'000
Loss before taxation (18,563) (47,866)
----------------------------------------------- -------------- --------------
Expected tax recovery based on a
weighted average of 25% (2022 - 25%)
(UK, US and Canada) (4,640) (21,325)
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 Website 2023 Total
assets
$'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 Mining Machine Leasehold Data Equipment Total
Equipment and Components Improvements centres
Computer
Equipment
$'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
30 June 2023 2022 (audited)
(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 GBP0.1288.
11. TRADE AND OTHER PAYABLES
As at As at
30 June 2023 31 December 2022
(unaudited) (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 31 December
(unaudited) 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 (GBP29m). 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 31 December 2022
(unaudited) (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
20,544 25,916
* Long term loans
* 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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END
IR PLMFTMTMTMLJ
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August 29, 2023 02:20 ET (06:20 GMT)
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