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Argo Blockchain cuts debt and expenses as revenue falls


Argo Blockchain [LON:ARB, NASDAQ:ARBK], the London-based Bitcoin miner published its interim half-year results to end of June today (29th August). The last six months was a story of cutting, trimming and reducing. The global data centre business managed to reduce its non-mining costs and expenses by 21% when comparing 2Q23 to 1Q23 resulting in an adjusted EBITDA of USD1m for the quarter and USD2.3m for 1H23.

The company also reduced its net debt by USD4m in the quarter and USD68m over the year – a wise move given the state of play for interest rates globally – reducing overall debt to USD75m by the end of June.

Net loss down

One of the things that was also down was Argo Blockchain’s net loss, which fell to USD18.8m, down 52.5% from USD39.6m from 1H232. Unfortunately, another thing that was down was Argo Blockchain’s revenue, USD24m, off 31% from 1H22. The company blamed this upon a fall in the price of Bitcoin [BTC], combined with network issues and an increase in global hashrate.

As previously reported, hashrate is the measure of the computational power in a proof-of-work cryptocurrency network. The hash rate is used to determine the health, security, and mining difficulty of a blockchain network. A hash is an alphanumeric code that is randomly generated, and hashing is the process of guessing that code, or as close to it as possible. Each guess submitted by computers on the network is measured, and the hash rate is how many guesses per second are taking place across the entire network.

Hash rate is a measure of the computational power on a blockchain network and determined by how many guesses are made per second. The overall hash rate helps determine the security and mining difficulty of a blockchain network, hashrates can change over time, with the most popular blockchains increasing year-over-year.

BTC mining increases

Argo Blockchain managed to increase the BTC it mined during 1H23 by 1% to 947BTC. This was despite a 78% increase in global hashrate between June 2022 and June 2023. Argo Blockchain finished the first half having 46BTC and USD9.1m cash in the bank.

It seems that the market retains its confidence in Argo Blockchain. Last month the company raised USD7.5m (gross) through a split retail/institutional placement in the UK, the company immediately deployed USD1.8m to pay back debt, with the London-based crypto firm owing USD72m to lenders at the end of July.

The company also invested in miners and machinery. Total hashrate capacity was 2.6EH/s (1EH/s = one quintillion hashes per second}, deploying nearly 1,250 block miners in Quebec, and following this up with plans to add another 1,600 miners to increase capacity to 2.8EH/s.

Debt remains a concern, and Argo Blockchain is doing a review of its operations with a view to identify and sell non-core assets.

Another concern – given the general price of electricity aggravated by the War in Ukraine – was energy supply. Back in July the company said it experienced a 11% fall in BTC mining per day month-on-month as Helios, Argo Blockchain’s energy supplier, experienced a fall in energy production due to climatic conditions. In June the company said it was due money-back from Helios.

It’s a bit of a swing and roundabout, in the fact that if Helios’ operations are curtailed Argo Blockchain’s BTC production is stymied, but outage leads to additional cash payments to the miner from Helios. The company agreed a fixed-price power purchase agreement with Helios, which provides most of Argo Blockchain’s energy. The agreement obviously fixes Argo Blockchain’s price for energy, but also lets Argo Blockchain generate power credits for economic curtailment and in 2Q23 the company received USD1.1m back from Helios and is expecting more incoming due to the heat wave in Texas and these credits should land in Argo Blockchain’s account in 3Q23.

COO to Interim CEO

There have been some boardroom changes at Argo Blockchain and chief operating officer, Seif el-Bakly was promoted to interim CEO and the company said in the coming year it was concentrated upon: “financial discipline, operational excellence, and strategic partnerships for growth”. The company said that the recent partnership it signed with Galaxy Digital Holdings: “strengthened our balance sheet, improved our liquidity position, and positioned Argo for profitable mining.”

The Galaxy deal closed at the end of last year, with Argo Blockchain selling its Helios facility in Dickens County, Texas for USD65m and refinancing its asset-backed loans. Galaxy also agreed to host Argo’s mining machines located at Helios.

The company’s shares opened trading in London today at 8.5p had a brief rally before settling at around 8.5p before lunch. Argo Blockchain’s shares have ranged between 2p and 44p over 52-weeks. The Bitcoin miner has offered a year-to-date return of 16.4% but over one-year fell -76.4% giving the company a market capitalisation of GBP47.5m.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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