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 Emma Valgimigli Fabio Galloni-Roversi Monaco Nasser Al-Sayed | 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 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 2023 | 31 December 2022 | 1 January 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 translation reserve | Share based payment reserve | Accumulated deficit | Total |
| | $'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 capital | Share premium | Currency translation reserve | Share based payment reserve | Fair value reserve | Other comprehensive income of associates | Accumulated surplus/ (deficit) | Total |
| | $'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 or Interpretation | Description | Effective date for 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 30 June 2023 (unaudited) | Period ended 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 30 June 2023 (unaudited) | Period ended 30 June 2022 (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 assets | Website | 2023 Total | ||||
|
|
| $'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 Equipment | Mining and Computer Equipment | Machine Components | Leasehold Improvements | Data centres | Equipment | Total | |
| | $'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 30 June 2023 (unaudited) | As at 31 December 2022 (audited) |
|
| $'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 30 June 2023 (unaudited) $'000 | Year ended 31 December 2022 (audited) $'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 £0.1288.
11. TRADE AND OTHER PAYABLES
|
| As at 30 June 2023 (unaudited) | As at 31 December 2022 (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 30 June 2023 (unaudited) $'000 | As at 31 December 2022 (audited) $'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 (£29m). 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 30 June 2023 (unaudited) $'000 | As at 31 December 2022 (audited) $'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 |
| - Long term loans - Issued Debt - bonds | 20,544 | 25,916 |
| 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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