TIDMARB

RNS Number : 8357L

Argo Blockchain PLC

18 May 2022

Press Release

18 May 2022

Argo Blockchain PLC

("Argo" or "the Company")

Q1 2022 Results (Unaudited)

Argo Blockchain plc (LSE: ARB; NASDAQ: ARBK), a global leader in cryptocurrency mining, is pleased to announce its unaudited financial results for the quarter ended 31 March 2022. All $ amounts are in United States Dollars ("USD") and all GBP amounts are in British Pounds ("GBP"), unless otherwise stated.

   --    Revenue of $19.5 million (GBP14.9 million) (+9% Y/Y) 

-- Produced net income of $2.1 million (GBP1.6 million) and $19.1 million of Adj. EBITDA (GBP14.5 million of Adj. EBITDA) (+24% Y/Y)

   --    Mined 470 Bitcoin and Bitcoin Equivalents in Q1 2022 (+21% Y/Y) 
   --    "HODL" of 2,700 Bitcoin and Bitcoin Equivalents as of 31 March 2022 

Peter Wall, Chief Executive of Argo, said: "During the first quarter, our team has focused on working towards the completion of Helios Phase 1, while continuing to deliver strong performance from our existing fleet. To be a successful miner you need three components - power, miners, and capital. We already have a strong foundation for growth at Helios with our access to 800 MW of power capacity. This quarter, we improved our access to capital by establishing a financing relationship with NYDIG and strengthened our access to miners through our supply agreement with Intel for their new Blockscale ASIC chips. This will allow us to build custom-designed mining machines specifically to Argo's specifications and built for use in immersion-cooling technology.

"As mining operations begin this month at Helios, we are excited to be delivering on our commitment to shareholders to build a best-in-class Bitcoin mining facility."

Q1 2022 Financial Performance

-- The Company generated $19.5 million (GBP14.9 million) of revenue in the quarter, a 9% increase over the same period in 2021. This increase was primarily driven by Argo's growth in hash rate throughout 2021 and partially offset by lower Bitcoin prices in Q1 2022.

   --    The Company produced net income of $2.1 million (GBP1.6 million). 

-- Argo achieved Adj. EBITDA of $19.1 million (GBP14.5 million), an increase of 24% over the same period in 2021.

-- Total Bitcoin mined in the quarter increased by 21% to 470 Bitcoin and Bitcoin Equivalents (together, "BTC"), compared to 387 BTC mined in the same period in 2021.

-- The Company's mining margin for the first quarter was 76%, with an average direct cost per BTC mined of $9,779 (GBP7,448).

-- The Company ended the quarter with 2,700 BTC in its HODL; this, combined with a cash balance of $11.9 million (GBP9.1 million), provides the Company with ample liquidity.

Q1 2022 and Recent Operational Highlights

-- The Helios facility was energized and commenced Bitcoin mining activities on 5 May 2022. The Company held a grand opening ceremony to commemorate the event with elected officials, partners, suppliers, and members of the local community in attendance.

-- The Company still expects to increase its hashrate to 5.5 EH/s by the end of 2022, subject to machine deliveries.

-- In March 2022, the Company signed an agreement to swap approximately 10,000 S19 mining machines currently hosted at Core Scientific facilities for new S19J Pro mining machines to be delivered to the Helios facility. To mitigate any temporary loss of hashrate for Argo, the swap of miners will occur in stages as the machines are delivered, which has already commenced and will continue through July 2022. Upon completion of this mining machine swap, Argo will no longer have any hosted machines and will have completed its strategic pivot away from hosting to a fully vertically-integrated model.

-- In January 2022, the Company formally launched Argo Labs, its in-house innovation arm established to identify opportunities within the disruptive and innovative sectors of the cryptocurrency ecosystem while supporting the decentralization of various blockchain protocols. Argo Labs is primarily focused on two key areas: network participation and strategic diversification through the efficient deployment of a portion of the Company's crypto treasury assets. Argo has allocated approximately 10% of the Company's crypto assets in its "HODL" to Argo Labs, which gives the Company the opportunity to integrate cryptocurrencies into existing financial infrastructure and gain exposure to the wider digital asset ecosystem.

Q1 2022 and Recent Financing Highlights

-- Argo entered into two significant non-dilutive debt financing arrangements with New York Digital Investment Group LLC ("NYDIG").

-- In March 2022, Argo signed loan agreements to borrow $26.7 million (GBP20.2 million at the 3 March 2022 exchange rate), with the proceeds to be used for the continued build out of Helios Phase 1. Under these loan agreements, the borrowings are secured against certain electrical infrastructure at Helios.

-- In May 2022, Argo signed additional loan agreements to borrow up to $70.6 million (GBP56.3 million at the 3 May 2022 exchange rate), subject to customary drawdown conditions, with the proceeds to be used for the continued build out of Helios Phase 1. Under these loan agreements, the borrowings are secured against certain Bitcoin mining machines installed at Helios.

Q1 2022 and Recent Personnel Updates

-- The Company strengthened its executive team by appointing Seif El-Bakly as Chief Operating Officer and Alana Marks as Vice President of People and Culture.

-- Justin Nolan, who previously held the role of Vice President of Business Development, was promoted to the role of Chief Growth Officer.

-- The Company appointed Raghav Chopra, a seasoned finance and investing professional, as a non-executive director.

Earnings Conference Call

Argo will host a conference call to discuss its results at 08:00 ET/12:00 BST tomorrow, Wednesday 18 May 2022. The live webcast of the call can be accessed via the Investor Meet Company platform.

Investors can sign up to Investor Meet Company and add Argo Blockchain via the following link: https://www.investormeetcompany.com/argo-blockchain-plc/register-investor

Investors already following Argo Blockchain on the Investor Meet Company platform will be invited automatically.

Inside Information and Forward-Looking Statements

This announcement contains inside information and includes forward-looking statements which reflect the Company's or, as appropriate, the Directors' current views, interpretations, beliefs or expectations with respect to the Company's financial performance, business strategy and plans and objectives of management for future operations. These statements include forward-looking statements both with respect to the Company and the sector and industry in which the Company operates. Statements which include the words "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. 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.

Non-IFRS Measures

Bitcoin and Bitcoin Equivalent Mining Margin and Adjusted EBITDA are financial measures not defined by IFRS. We believe Bitcoin and Bitcoin Equivalent Mining Margin and Adjusted EBITDA have limitations as analytical tools. In particular, Bitcoin and Bitcoin Equivalent Mining Margin excludes the depreciation of mining equipment and so does not reflect the full cost of our mining operations, and it also excludes the effects of fluctuations in the value of digital currencies and realized losses on the sale of digital assets, which affect our IFRS gross profit. Further, Adjusted EBITDA excludes interest income (expense), taxes, depreciation and amortization, change in fair value of digital currencies, and share based payments, which are important components of our IFRS net income/(loss). These measures should not be considered as an alternative to gross margin or net income/(loss), as applicable, determined in accordance with IFRS, or other IFRS measures. These measures are not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider these measures in isolation from, or as a substitute analysis for, our gross margin or net income/(loss), as applicable, as determined in accordance with IFRS.

 
 Statement of Income                          Three Months Ended     Three Months Ended 31 
                                                31 March, 2022            March, 2021 
 Figures in '000 except per share                $         GBP          $           GBP 
  and BTC mined 
------------------------------------------  ----------  ---------  -----------  ----------- 
 Revenues                                       19,515     14,862       17,836       13,583 
 Direct costs                                  (4,596)    (3,500)      (2,562)      (1,951) 
 Depreciation of mining equipment              (6,961)    (5,301)      (2,869)      (2,185) 
 Change in fair value of digital 
  currencies                                   (6,080)    (4,630)       13,248       10,090 
 Realized gain on sale of digital 
  currencies                                        41         30        1,472        1,121 
------------------------------------------  ----------  ---------  -----------  ----------- 
 Gross profit                                    1,919      1,461       27,125       20,657 
------------------------------------------  ----------  ---------  -----------  ----------- 
 
 Consulting fees                                 (208)      (159)        (467)        (356) 
 Professional fees                             (1,262)      (961)        (259)        (197) 
 General and administrative                    (2,908)    (2,215)        (633)        (482) 
 Share based payment charge                    (1,423)    (1,084)        (123)         (94) 
 Foreign exchange                                5,705      4,346         (54)         (41) 
 Operating profit                                1,823      1,388       25,589       19,488 
------------------------------------------  ----------  ---------  -----------  ----------- 
 
 Fair value gain (loss) of investments           (174)      (132)            -            - 
 Fair value revaluation of contingent 
  consideration                                  2,742      2,088            -            - 
 Finance costs                                 (2,442)    (1,860)        (289)        (221) 
 Profit before taxation                          1,949      1,484       25,300       19,267 
------------------------------------------  ----------  ---------  -----------  ----------- 
 
 Tax credit                                        117         89            -            - 
 
 Profit after taxation                           2,066      1,573       25,300       19,268 
------------------------------------------  ----------  ---------  -----------  ----------- 
 
   Other comprehensive loss 
 Items which may be subsequently 
  reclassified to profit or loss: 
 
        *    Currency translation reserve     (17,170)   (13,076)            -            - 
 Total other comprehensive (loss), 
  net of tax                                  (17,170)   (13,076)            -            - 
------------------------------------------  ----------  ---------  -----------  ----------- 
 
 Total comprehensive (loss) income 
  attributable to the equity holders 
  of the Company                              (15,104)   (11,503)       25,300       19,268 
------------------------------------------  ----------  ---------  -----------  ----------- 
 
 Earnings per share attributable 
  to equity owners (pence) 
 Basic earnings (loss) per share               $0.004c     0.003p      $0.080c       0.060p 
 Diluted earnings per share                    $0.004c     0.003p      $0.070c       0.050p 
 
 
 
 Balance Sheet                                                     As at 31             As at 31 
                                                                   March 2022         December 2021 
 Figures in '000                                                 $         GBP         $        GBP 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 
 ASSETS 
 Non-current assets 
 Investments at fair value through profit or loss                  355        271       529       403 
 Investments accounted for using the equity method              18,143     13,817    18,143    13,817 
 Intangible fixed assets                                        11,655      8,876     7,359     5,604 
 Property, plant and equipment                                 156,765    119,386   146,546   111,604 
 Right of use assets                                               484        368       460       350 
 Total non-current assets                                      187,402    142,718   173,037   131,778 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 
 Current assets 
 Trade and other receivables                                   111,500     84,914    83,196    63,359 
 Digital assets                                                104,835     79,839   106,044    80,759 
 Cash and cash equivalents                                      11,904      9,066    15,498    11,803 
 Total current assets                                          228,239    173,819   204,738   155,921 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 
 Total assets                                                  415,641    316,537   377,775   287,699 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 
 EQUITY AND LIABILITIES 
 Equity 
 Share Capital                                                     614        468       614       468 
 Share Premium                                                 183,282    139,581   183,282   139,581 
 Share based payment reserve                                     3,925      2,989     2,501     1,905 
 Fair value reserve                                                545        414       545       414 
 Currency translation reserve                                 (16,588)   (12,633)        44        33 
 Other comprehensive income of equity accounted associates       8,628      6,571     8,628     6,571 
 Accumulated surplus                                            80,075     60,982    69,381    52,838 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 Total equity                                                  260,481    198,372   264,995   201,810 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 
 Current liabilities 
 Trade and other payables                                       18,122     13,803    20,018    15,245 
 Contingent consideration                                        7,856      5,983    10,598     8,071 
 Loans and borrowings                                           58,618     44,641    30,715    23,391 
 Income tax                                                     10,568      8,048    10,083     7,679 
 Deferred tax                                                      259        197       375       286 
 Lease liability                                                    10          7         9         7 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 Total current liabilities                                      95,433     72,679    71,798    54,679 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 
   Non-current liabilities 
 Deferred tax                                                      710        541       710       541 
 Issued debt - bond                                             35,322     26,900    35,333    26,908 
 Loans                                                          23,188     17,659     4,453     3,391 
 Lease liability                                                   507        386       486       370 
 Total liabilities                                             155,160    118,165   112,780    85,889 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 
 Total equity and liabilities                                  415,641    316,537   377,775   287,699 
-----------------------------------------------------------  ---------  ---------  --------  -------- 
 

The following table shows a reconciliation of Bitcoin and Bitcoin Equivalent Mining Margin to gross margin, the most directly comparable IFRS measure, for the three months ended 31 March 2022 and the three months ended 31 March 2021.

 
                                                    2022                2021 
                                              ----------------  -------------------- 
 Figures in '000                                 $       GBP        $         GBP 
--------------------------------------------  -------  -------  ---------  --------- 
 
 Gross profit                                   1,919    1,461     27,125     20,658 
--------------------------------------------  -------  -------  ---------  --------- 
 
 Depreciation of mining equipment               6,961    5,301      2,869      2,185 
 Change in fair value of digital currencies     6,080    4,630   (13,248)   (10,090) 
 Realized gain (loss) on sale of digital 
  currencies                                     (41)     (30)    (1,472)    (1,121) 
 Cryptocurrency management fees                     -        -      (434)      (330) 
 Mining profit                                 14,919   11,362     14,840     11,302 
--------------------------------------------  -------  -------  ---------  --------- 
 Bitcoin and Bitcoin Equivalent Mining 
  Margin                                          76%      76%        83%        83% 
 

The following table shows a reconciliation of Adjusted EBITDA to net income, the most directly comparable IFRS measure, for the three months ended 31 March 2022 and the three months ended 31 March 2021.

 
                                         2022                2021 
                                   ----------------  -------------------- 
 Figures in '000                      $       GBP        $         GBP 
---------------------------------  -------  -------  ---------  --------- 
 
 Net income                          2,066    1,573     25,300     19,267 
---------------------------------  -------  -------  ---------  --------- 
 
 Depreciation/amortization           7,166    5,457      2,914      2,219 
 Interest expense                    2,442    1,860        289        220 
 Income tax credit                   (117)     (89)          -          - 
 Share based payment                 1,423    1,084        123         94 
 Change in fair value of digital 
  currencies                         6,080    4,630   (13,248)   (10,090) 
 Adjusted EBITDA                    19,060   14,515     15,378     11,710 
---------------------------------  -------  -------  ---------  --------- 
 Adjusted EBITDA Margin                98%      98%        86%        86% 
 

*Dollar values translated from pound sterling into U.S. dollars at the rate of GBP1.00 to $1.31 unless otherwise specified.

For further information please contact:

 
  Argo Blockchain 
  Peter Wall                             via Tancredi +44 203 434 
   Chief Executive                        2334 
                                       -------------------------- 
  finnCap Ltd 
                                       -------------------------- 
  Corporate Finance 
   Jonny Franklin-Adams 
   Tim Harper 
   Joint Corporate Broker 
   Sunila de Silva                       +44 207 220 0500 
                                       -------------------------- 
  Tennyson Securities 
                                       -------------------------- 
  Joint Corporate Broker 
   Peter Krens                           +44 207 186 9030 
                                       -------------------------- 
  OTC Markets 
                                       -------------------------- 
  Jonathan Dickson                       +44 204 526 4581 
   jonathan@otcmarkets.com                +44 7731 815 896 
                                       -------------------------- 
  Tancredi Intelligent Communication 
   UK & Europe Media Relations 
                                       -------------------------- 
  Emma Valgimigli 
   Fabio Galloni-Roversi Monaco          +44 7727 180 873 
   Nasser Al-Sayed                        +44 7888 672 701 
   argoblock@tancredigroup.com            +44 7915 033 739 
                                       -------------------------- 
 

About Argo:

Argo Blockchain plc is a global leader in cryptocurrency mining with one of the largest and most efficient operations powered by clean energy. The Company is headquartered in London, UK and its shares are listed on the Main Market of the London Stock Exchange under the ticker: ARB and on the Nasdaq Global Select Market in the United States under the ticker: ARBK.

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