Argo Blockchain PLC announces operational update from August 2022

Helios hosting agreement

LONDON, UK / ACCESSWIRE / September 9, 2022 / Argo Blockchain PLC (“Argo” or the “Company”)

Strategic hosting agreement
Argo Blockchain plc, a global leader in cryptocurrency mining (LSE:ARB); (NASDAQ:ARBK), is pleased to announce that it has entered into a strategic hosting services agreement (the “Hosting Agreement”) with an undisclosed third party.

As part of the hosting agreement, Argo will host and operate mining machines owned by the aforementioned third party at its Helios facility in Dickens County, Texas. Argo has committed to providing the undisclosed third party with up to 32 MW of power capacity, which is enough electricity to power more than 10,000 mining machines. The hosting agreement includes a profit sharing arrangement where Argo receives 25% of the net profit generated from the Bitcoin mined by the hosted mining machines. This arrangement ensures coordination by both parties.

Operational update
During the month of August, Argo mined 235 Bitcoin or Bitcoin Equivalents (collectively, BTC) compared to 219 BTC in July 2022. The increase in BTC mined is primarily due to an increase in total hashrate capacity at the Helios facility compared to the previous month. . The company continues to install the new Bitmain S19J Pro machines on Helios, having achieved a total hash rate capacity of 2.5 EH/s by the end of August. Argo remains on track to complete the installation of the Bitmain machines by October 2022, which will increase the total hash rate capacity to 3.2 EH/s.

As of August 31, 2022, the company held 1,098 Bitcoins, of which 244 were BTC equivalents. The company closely monitors market conditions and actively uses a variety of derivatives to manage BTC holdings and reduce risk exposure.

Based on daily exchange rates and cryptocurrency prices during the month, mining revenue in August amounted to £4.39 million [$5.23 million*] (July 2022: £3.89m [$4.73 million*]).

The story continues

Argo generated this income with a Bitcoin and Bitcoin equivalent mining margin of 20% for the month of August (July 2022: 37%). This reduction in mining margin was driven by two factors: an 11% drop in the price of Bitcoin and high power costs at Helios. As discussed on the company’s last earnings call, Argos power purchase agreement (PPA) with Helios provides electricity at spot power prices, which are significantly higher than in previous years. In August 2022, spot power prices in West Texas averaged nearly $0.09 per kWh, which is nearly three times the average price in the month of August last year.

While many factors determine the spot power price in Texas, one of the main factors is the price of natural gas. During the month of August 2022, natural gas prices were 204% higher than the average price during the month of August in 2018 – 2021. The higher natural gas prices can be attributed to several factors, including the war in Ukraine and low natural gas storage levels in the United States.

Peter Wall, CEO of Argo Blockchain, said: “The increase in BTC mined this month reflects the hard work put in by our operations team. The new Bitmain SJ19 Pros are already showing great promise and we look forward to unlocking their full potential . in the coming months as we complete their installation. Additionally, we are excited about our strategic hosting agreement, which will enable us to utilize excess capacity at Helios and further increase our hashrate.”

“While our mining margin is lower than expected, the recent high natural gas and electricity prices are a temporary reflection of broader market dislocations, and we are confident that electricity prices will match historical trends in the near future. Additionally, electricity prices are seasonal, and we expect that prices will decrease as temperatures fall through the cooler months. We will continue to monitor the market and evaluate our options to secure a long-term fixed price PPA.”

Non-IFRS measures
Bitcoin and Bitcoin Equivalent Mining Margin is a financial measure that is not defined by IFRS. We believe Bitcoin and Bitcoin Equivalent Mining Margin have limitations as an analytical tool. In particular, Bitcoin and Bitcoin Equivalent Mining Margin excludes impairment of mining equipment and therefore does not reflect the full cost of our mining operations, and it also excludes the effect of fluctuations in the value of digital currencies and realized losses on the sale of digital assets, which affect our IFRS gross profit. This measure should not be considered as an alternative to gross margin determined in accordance with IFRS, or other IFRS measures. This measure is not necessarily comparable to similar titles used by other companies. As a result, you should not consider this measure in isolation from, or as a replacement analysis for, our gross margin as determined under IFRS.

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

(1) Due to unfavorable changes in fair value of BTC, there was a loss on the change in fair value of digital currencies in August 2022. In July 2022, there was a favorable change in fair value of BTC and a gain on the change in fair value of digital currencies.

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

Inside information and forward-looking statements
This announcement contains inside information and includes forward-looking statements that reflect the current views, interpretations, beliefs or expectations of the Company or, as applicable, the Board of Directors with respect to the Company’s financial results, business strategy and management’s plans and objectives for future operations. These statements include forward-looking statements both with respect to the company and the sector and industry in which the company operates. Statements that include the words “expects”, “intends”, “plans”, “believes”, “projects”, “anticipates”, “will”, “goals”, “goals”, “may”, “would”, “could”, “continue”, “estimate”, “future”, “possibility”, “potential” or, in each case, their negative and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements deal with matters that involve risk and uncertainty because they relate to events that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. Consequently, there are or will be important factors that may lead to the company’s actual results, prospects and results deviating significantly from those stated in these statements. In addition, even if the Company’s actual results, prospects and performance are consistent with the forward-looking statements contained in this document, these results may not be indicative of results in subsequent periods. These forward-looking statements speak only as of the date of this announcement. Subject to any obligations under the Prospectus Regulation, the Market Abuse Regulation, the Listing Rules and the Disclosure and Transparency Rules, and except as required by the FCA, the London Stock Exchange, the City Code or applicable laws and regulations, the Company undertakes no public obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. For a more complete discussion of factors that could cause our actual results to differ from those described in this announcement, please refer to the filings that the Company files from time to time with the United States Securities and Exchange Commission and the United Kingdom Financial Conduct Authority, including the section entitled “Risk Factors” in the Company’s Registration Statement on Form F-1.

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About Argo:
Argo Blockchain plc is a dual-listed (LSE: ARB); (NASDAQ:ARBK) blockchain technology company focused on large-scale cryptocurrency mining. With its flagship mining facility in Texas, and offices in the US, Canada and the UK, Argo’s global, sustainable operations are powered primarily by renewable energy. In 2021, Argo became the first climate-positive cryptocurrency mining company, signing the Crypto Climate Accord. Argo also participates in several Web 3.0, DeFi and GameFi projects through its Argo Labs division, further contributing to its business operations as well as the development of the cryptocurrency markets. For more information, visit www.argoblockchain.com.

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SOURCE: Argo Blockchain PLC

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