TIDMARB
RNS Number : 8362Y
Argo Blockchain PLC
09 September 2022
Press Release
9 September 2022
Argo Blockchain plc
("Argo" or "the Company")
August 2022 Operational Update
Helios Hosting Agreement
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 said 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 whereby Argo receives 25% of the net profits generated
from the Bitcoin mined by the hosted mining machines. This
arrangement ensures the alignment of both parties.
Operational Update
During the month of August, Argo mined 235 Bitcoin or Bitcoin
Equivalents (together, 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 is continuing to install the new Bitmain S19J
Pro machines at Helios, having achieved a total hashrate 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 its total hashrate capacity to 3.2 EH/s.
As of 31 August 2022, the Company held 1,098 Bitcoin, of which
244 were BTC Equivalents. The Company closely monitors market
conditions and is actively using a variety of derivatives to manage
BTC holdings and mitigate risk exposure.
Based on daily foreign exchange rates and cryptocurrency prices
during the month, mining revenue in August amounted to GBP4.39
million [$5.23 million*] (July 2022: GBP3.89 million [$4.73
million*]).
Argo generated this income at 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%
decrease in the price of Bitcoin and high power costs at Helios. As
discussed on the Company's recent earnings call, Argo's power
purchase agreement (PPA) at Helios provides for 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
during the month of August in prior years.
While many factors determine the spot power price in Texas, one
of the primary 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
US.
Peter Wall, Chief Executive at 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 enables 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 align with historical trends in the near future.
Further, electricity prices are seasonal, and we expect prices to
decrease as temperatures come down through the cooler months. We
will continue to monitor the market and evaluate our options for
securing a long-term fixed price PPA."
Non-IFRS Measures
Bitcoin and Bitcoin Equivalent Mining Margin is a financial
measure not defined by IFRS. We believe Bitcoin and Bitcoin
Equivalent Mining Margin has limitations as an analytical tool. 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. 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
similarly titled measures used by other companies. As a result, you
should not consider this measure in isolation from, or as a
substitute analysis for, our gross margin as determined in
accordance with IFRS.
The following table shows a reconciliation of gross margin to
Bitcoin and Bitcoin Equivalent Mining Margin, the most directly
comparable IFRS measure, for the months of July 2022 and August
2022.
Month Ended 3 1 July Month Ended 3 1 August
2022 2022
---------------------------------------------- -----------------------------------
GBP (000s) $ (000s) GBP(000s) $ (000s)
Gross prof it/(loss) 3,643 4, 433 (4,471) (5,334)
Gross Margin 94% 94% (110%) (110%)
Depreciation of mining
equipment 1,201 1, 461 1,644 1,961
Cha nge in fair value (1,886
of digital currencies ) (2,295) 2,944 3,512
Realised (profit)/loss
on sale of digital
currencies (1, 500) (1,826) 765 913
Mining Profit 1, 458 1,773 882 1,052
Bitcoin and Bitcoin
Equivalent
Mining Margin 37% 37% 20% 20%
------------------------- ----------------------- --------------------- ----------------------- ----------
( 1) Due to unfavourable changes in the 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 favourable change in fair
value of BTC and a gain on the change in fair value of digital
currencies.
* Dollar values translated from pound sterling into U.S. dollars
using the noon buying rate of the Federal Reserve Bank of New York
as at the applicable dates
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 Registration Statement on Form F-1.
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 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 predominantly powered by renewable energy. In 2021, Argo became
the first climate positive cryptocurrency mining company, and a
signatory to 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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