Argo Blockchain plc (ARBK) This autumn 2021 Earnings Name Transcript


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Argo Blockchain plc (ARBK -5.55%)
This autumn 2021 Earnings Name
Apr 28, 2022, 8:00 a.m. ET


  • Ready Remarks
  • Questions and Solutions
  • Name Members

Ready Remarks:


Good afternoon, and welcome to the Argo Blockchain full yr outcomes investor presentation. All through this recorded presentation, buyers shall be in hear solely mode. [Operator instructions] The corporate is probably not able to reply each query it receives within the assembly itself. Nonetheless, the corporate will evaluate all questions submitted right now and publish responses the place it is applicable to take action.

Earlier than we start, we wish to submit the next ballot, and I am certain should you may give that your variety consideration, the corporate could be most grateful. With none additional do, wish to hand over to Peter Wall, CEO. Good afternoon.

Peter WallChief Government Officer

Thanks, Mark. Thanks, everybody, for becoming a member of us. Welcome to our 2021 full yr outcomes name. As Mark stated, I am Peter.

I am the CEO of Argo Blockchain. With me right now is Alex Appleton, our CFO; and Tom Divine, our head of investor relations —  our VP of investor relations. Tom goes to pop up a little bit bit later, and is curating among the questions as they arrive in. So nice, nice to have you ever with us.

Thanks for becoming a member of. It has been a busy morning for us to date with the outcomes popping out. Performed a little bit little bit of media. Hopefully a few of you which have adopted the corporate intently have had an opportunity to see a few of these interviews we have carried out.

And if not, we’ll share them on our social media quickly. All proper. So let’s soar into the presentation. Regular authorized disclaimer off the highest.

The following slide for these of you which have seen a number of our shows earlier than, will look acquainted with a little bit, little little bit of adjustments to it. Most significantly, the two.6 Exahash. So that’s our mining capability that’s contracted and present. We’re including the 2 2.6 Exahash from bitmain from the bitmain order that we’ve got.

The 20,000 machines that we ordered following the IPO again in September, these are beginning to be put in at Helios subsequent month, month of Could, which is only a few days away. And the plan continues to be in progress, and nonetheless wanting good to have these put in by the top of October. So we’re assured that that to 2 Exahash goes to be reached by the top of October, given all the all of the items that we’ve got in place at the moment. That Exahash of three.6 interprets to about 44,000 mining machines.

That is 24,000 machines already in our present fleet, after which the additional 20,000 that’s coming from the bitmain order that I used to be simply speaking about. I feel everybody is aware of we’re very targeted on Argo, on sustainability, being an ESG pleasant miner is an enormous a part of our our firm values, an enormous a part of our story. We have been the primary bitcoin miner to be 100% carbon impartial final yr. We put out a local weather technique alongside these strains.

We’ll be releasing an replace to that report within the very close to future, and an enormous motive we have been in a position to obtain that carbon neutrality is being positioned in sure areas. To start with, in Quebec, utilizing hydroelectric energy, we’re following the identical technique by organising in West Texas, the place there’s an unlimited quantity of renewable energy. 85% of the facility within the West load zone the place we’re in West Texas is coming from renewables, primarily wind. In order that, that story continues for us and is and is a key a part of who we’re and what we do.

On the bitcoin HODL facet of issues. On the finish of March, our bitcoin HODL was 2,700 bitcoin in bitcoin equal, 10% of that’s allotted to Argo Labs. As lots of you understand, we launched Argo Labs earlier this yr. It is our in-house innovation arm, targeted on non-mining actions throughout the broader blockchain and Net 3.0 eco — Net 3.0 ecosystem.

And I will give a little bit replace later within the presentation with — in regards to the actions of Argo Labs. Lastly, our mining margin for 2021 was 84%, which is among the many highest of all our friends, and is a quantity we’re actually happy with. All proper. So then on the precise hand facet of the slide, you see our map of our two locations-where we’re mining our two areas the place we’re mining Texas and Quebec.

The services in Bay Como and Mirabel, after which the brand new flagship facility we’re opening very quickly in Texas, the Helios facility. All proper. I will soar forward to the following slide which is the slide that I feel everybody’s been ready for right now, which is our monetary highlights from from final yr. In order you may see, it was an important yr for us, a transformational yr for Argo.

Our income was $100 million, or 74 million pound, a rise of 291% from the yr earlier than. Our EBITA was $71 million,  or 53 million pound, up 594% from the earlier yr. Our internet earnings was $42 million, or 31 million kilos up much less — up from 2 million in 2020. Our bitcoin mine for all the yr was — 2,045.

So simply simply north of 2000. And as I stated earlier than, that cash margin was about 84%. On the finish of the yr, we held 2585 sorry, 2595 bitcoin and bitcoin equivalents on the steadiness sheet, and that was on the finish of the yr, finish of December 2021. On the chart on the precise, you may see our mining margin was very sturdy and constant within the eighties for all the yr.

This was pushed largely by the excessive value of bitcoin in addition to us actually having the ability to management our working prices, superb internet hosting value with our Core scientific offers that we’re mining — we’re mining with or at the moment nonetheless our cash with, however quickly is not going to be in addition to the low value of energy that we’ve got in Quebec. The non permanent drop in international hash charge that passed off with the Chinese language ban on bitcoin mining in mid final yr additionally helped our efficiency. That was throughout the board for all miners, and that stored margins sturdy all through the — all year long. So to summarize the yr, 2021 was a good time to be a miner with entry to low value energy, and we’re very a lot feeling the identical method about 2022.

All proper. To leap forward to our key operational highlights and milestones from 2021. So I am not going to undergo all of them. It was it was a busy yr.

Rather a lot occurred. However I will level out a few the key highlights that passed off for the yr. In all probability, an important one for the yr was our acquisition of the Helios mission within the Texas Panhandle. That occurred within the first quarter.

The Helios mission was a shovel prepared mission. It gave us an unbelievable basis for the expansion that we’ve got right now. It was part of our shift in technique from being hosted at third events like Core and GPUOne to proudly owning and working our personal infrastructure. In order that passed off within the first quarter.

Within the second quarter, we closed the acquisition of two knowledge facilities in Quebec, one in Mirabel and one in Bay Como. We have been initially internet hosting our machines at these services going again so far as 2018 within the case of Mirabel. And — that was an enormous a part of our transferring into proudly owning and working our personal infrastructure. The third quarter noticed the itemizing — or noticed us checklist on the Nasdaq within the U.S., it was an enormous second for the corporate.

It was one thing that we labored on towards for a lot of the yr. It was one thing that a number of shareholders and stakeholders have been asking for. It is one thing that is clearly quite common on this area for — miners to be listed now on Nasdaq. And that is as a result of it is an important entry or provides essentially the most the very best entry to the U.S.

capital markets, which is clearly a really giant pool of capital. As a part of that itemizing, we raised $130 million, and a few of that capital instantly went towards the 20,000 machine that made order that we at the moment are beginning to set up in Helios. All proper. Within the fourth quarter — we did not cease.

We additionally had the set up of about 530 extra petahash of machines, which got here from orders that we positioned earlier within the first half of the yr. We additionally made nice progress on Helios. We broke floor there within the third quarter, however by the top of the fourth quarter, we had accomplished the primary construction and the skin facade of the constructing. And I will speak a little bit bit extra about Helios a little bit bit later within the presentation to get some extra updates.

All proper. Leaping forward to some key metrics. So on this type of — on this web page, you may see how dramatic our development was. Numerous up into the speed from 2020 to 2021.

On the hash charge facet, we grew from about 0.6 exahash to 1.6 exahash. Our income went from 26 million, these are all figures in U.S., $26 million to $100 million. Our cash margin additionally doubled as much as 84%. Our EBITA went from $11 million in 2020 to $71 million in 2021.

Web earnings from about $2 million to $42 million. And our money and — money and digital belongings at yr finish went from $9 million to $125 million on the finish of December 2021. So actually some necessary metrics and clearly, we have been very happy with the expansion for the yr. All proper.

Nonetheless, it isn’t solely about machines and solely about energy and solely about capital. It is also about folks. And as we began to personal and function our personal services, we actually wanted to develop our group and convey the required experience in home. Our headcount grew from round seven folks.

We have been a really small firm firstly of 2020 once I took over as CEO. Truly on the finish of 2020, we have been nonetheless at seven folks to round 39 folks on the finish of 2021. As of proper now, we’re approaching about 100 folks. We accrued all of our knowledge heart ops group members.

On the senior administration group, we additionally added a number of key of us to spherical out the unique crew that, that consisted of myself, Perry, and Seb, after which Alex, who joined in 2020. And Davis Zapffe is our common counsel, runs our authorized division. Justin Nolan was the co-founder of the Helios mission and actually the drive behind getting arrange in Dickens County. He discovered the land and arrange the mission after the acquisition of DPN, which was his firm.

Justin got here on board and it has been a very key a part of our enterprise growth group and is main our efforts there. Jean Esquier works very intently with Perry Hothi, he is our VP of know-how and growth, and has been primarily targeted on the design and the construct out of the immersion system at Helios. Theo Papadakis is our VP of information heart operations, comes from the world of information facilities, a protracted profession in that area, and he is constructed a world class knowledge heart operations group to handle our three knowledge facilities. Clearly, with an enormous focus in Texas proper now.

After which lastly, Tom Divine, who’s on the decision right now, you will see him pop up a little bit bit later. He leads our investor relations, and in addition to our authorities relations efforts. All proper. So that’s 2021 in a nutshell.

Clearly, it is a fast-paced area. 2021 already looks like a very long time in the past. So for the remainder of the presentation, I will speak about 2022 and past. Clearly, there’s quite a bit happening with us as an organization, quite a bit happening within the area.

I really like this image. This image was taken simply a few days in the past, I feel two days in the past. That is the newest shot from our Helios facility. You may see the fast growth that is taken place there during the last six, seven, eight months.

The dry cooler is arising on the facet are nearly to the top of the road. So, so nice, nice growth. And actually, that’s our major focus for the remainder of this yr. So let’s soar forward to the important thing initiatives for the yr.

So completion of section one in every of Helios continues to be slated to completely be baked out and completed by the top of this yr. That features filling it up utterly with machines, and clearly having all of the infrastructure in place forward of time for these machines. Our building group’s carried out simply a completely unbelievable job with the substation is full. And that faucets into the cottonwood substation, which is throughout the fence line.

All of that being stated, we count on our hash charge to develop to five.5 exahash by the top of this yr. And that is a quantity that we’re very happy with. Our entire philosophy. I feel folks that observe the corporate intently know has been to actually concentrate on development and to be sure that we’re sluggish and regular and specializing in quarters and years.

And so right now, we’re glad to say that our expectation is shall be 5.5 exahash by the top of this yr. And we’ll get into these particulars a little bit bit extra. I do know there’s of us asking, “What does that entail?”, “What does that not entail?”, however that is a very a key quantity for us and one thing that we consider is totally achievable by the top of this yr. The philosophy is actually to under-promise and overdeliver as a lot as we are able to.

And positively, I feel the velocity with this — the velocity with which we have constructed this facility has been superb. And simply even on the bottom in Dickens County, persons are saying they’ve by no means seen something prefer it. So it is fairly superior what our group has carried out. Moreover, we’re additionally not simply engaged on infrastructure, however we’re additionally creating a customized mining rig which can make the most of the Intel block scale AC chips.

And I will speak a little bit bit extra about what that is going to seem like on a slide arising. All proper. A pair extra pictures of Helios. So on the left hand facet, you may see the immersion tanks that are on double decker racks.

Shout out to the double decker busses in London. On the precise hand facet, you may see a photograph of our of our Helios facility workers through the current onboarding actions. Obtained about 40 workers there. Now we’ve got one other 20 non permanent labor.

So we have an unbelievable group there charging forward, doing unbelievable work. We’ll have some extra content material, some extra video popping out quickly, very quickly in regards to the work that is happening there, and are actually excited to announce to the market — when that facility is energized. That is the following massive step for us there. On immersion cooling facet of issues.

We have mentioned earlier than how Helios has been constructed to make use of our proprietary immersion cooling system that we have co-designed with a big U.S. based mostly international manufacturing firm. As a result of everybody is aware of in Texas it will get scorching, it is dusty, it is windy, it isn’t an important surroundings for mining until you are utilizing immersion, which lets you defend the machines. It is extra environment friendly at retaining the machines cool.

It retains particulate matter mud, sand out, and all of that extends the lifespan of the machines. Along with that, we expect that we are able to get a big hash charge enhance out of the machines, i.e., overclock them when working them in an immersion surroundings in comparison with air cooled. So all that being stated, the system that we’re constructing in Texas, as soon as it is absolutely deployed, shall be one of many largest immersion cooling programs on this planet. All proper.

When it comes to machine growth, we introduced earlier this yr a relationship with Intel, and one in every of our key focuses is constructing a customized mining rig to make the most of the intel chips which are popping out of that relationship. We’re very proud. We’re excited to be one of many 4 firms that Intel has chosen to work with us as they entered the bitcoin mining area. And having them enter the area is extremely necessary.

It provides the bitcoin mining area extra credibility to have a blue chip firm like Intel coming in, but it surely additionally will profit the business to have a extra numerous provide chain. And extra choices for ASICs and likewise to have chips out there versus absolutely baked machines. We predict our customized mining rig, which goes to make use of these intel mining chips, goes to be considerably cheaper on a value per terahash foundation than what’s at the moment out there off the shelf out there. And this can enable us to additional improve our hash charge at aggressive margins.

When it comes to creating that machine. We’ve got an important, nice relationship with the third occasion producer. We’re working very intently with them on the design of the mining machine from high to backside, and we count on to have the ability to deploy these machines towards the top of the yr. So alongside these strains.

That is what the look forward for the yr appears wish to get us to the 200 megawatts at Helios. So you may see among the main workstreams right here which have been accomplished or which are in progress. We have been on time with the development of the Helios facility, and the substation we’re working to finalize the demand response items with ERCOT. That is clearly a very necessary half to give you the chance — to benefit from the — ancillary providers which are which are courtroom presents.

In Texas, the set up of the immersion gear goes very nicely. That features the dry coolers that I simply talked about you can see on the skin of the constructing, in addition to the tanks, and the pumps, and the piping inside the power. Clearly, all that must be in place earlier than we are able to begin placing machines to work and mining. When it comes to the set up of machines, we count on to start out putting in machines very quickly, each the Core scientific machines in addition to the bitmain machines.

So you may see these two strains right here. The Core machine swap has been structured in a method to mitigate any downtime. In order we obtain the brand new machines and set up them in batches, Core will take over the hash charge from our machines positioned of their services, and that’ll happen on 4, 4 completely different explicit dates. This can restrict downtime and likewise having to unplug, plug the machines and ship them to Helios.

So we’re actually happy with that association with Core. As soon as we full the Core swap on the finish of July, we’ll be 100% self owned and operated with no extra internet hosting preparations, which is one other massive milestone for us. When it comes to energization, you see a little bit dot there, a little bit diamond does really feel like a diamond as a result of it is so necessary for us is slated to occur very quickly. Very, very quickly.

We’ll make an announcement to the market when it occurs. It is clearly a important occasion to get mining operations began at Helios. After which lastly on the Intel piece, we’re at the moment within the design testing section for the intel machines and we count on to deploy these machines towards the top of this yr after which into 2023. So you may see the dotted line on the chart.

That’s once we count on to deploy the intel machines, after which, yeah, there will be extra into 2023 as nicely. We can’t cease with simply the fourth quarter. So what does all this imply when it comes to our hash charge? Bringing Helios on-line, finishing section one will clearly have a big influence on our hash charge. So proper now we’ve got 1.6 exahash in capability.

We began Q2 there. We’re seeing improve in hash charge as we begin to set up the 20,000 S19J Professionals that we ordered from bitmain. These rigs are going to be delivered, as I’ve stated, many instances earlier than on this presentation and others in Could — beginning in Could after which by means of to the top of October. After which the Core machines are a part of that 1.6 exahash.

So we’ll get a rise in exahash from them clearly. On the finish of the yr, we’ll see a further uplift in hash charge as we deploy the [Inaudible] machines. That is one other bump of about 1.8 exahash. So we count on to finish the yr round 5.5 exahash with most of that hash charge at Helios with the with the complete 200 megawatts on-line.

This doesn’t embody any uplift from the service provider. So we’re making an attempt to be conservative about our hash charge projections. Once more, under-promise, overdeliver. So that is nameplate — nameplate hash charge, not together with immersion.

After which keep in mind, we nonetheless have one other 20 megawatts of capability. Our Quebec services will  remining each bitcoin and Zcash. All of our Zcash mining is happening in Quebec. We at the moment do not need any mining aside from bitcoin mining slated for the Helios facility.

All proper. Leaping forward to the long run, we expect that one of many major advantages of our Helios facility is clearly the potential for this development, this runway for development. We have an interconnection settlement for 800 megawatts of energy, which suggests we’ve got a further 600 megawatts of capability remaining as soon as this 200 megawatts is up and going. We even have the ASIC provide settlement, which we have simply been speaking about, and that may present us with a gradual provide of machines.

When it comes to manufacturing these machines, we’re working with a 3rd occasion to customized manufacture these, and that, once more, we’re assured it should outcome on a less expensive value per terahash foundation than what’s at the moment out there out there. So add all of those components collectively, the facility and the entry to chips, and we see us attending to north of 20 exahash by 2024. This would come with the complete growth clearly of the extra 600 megawatts of capability at Helios. So regardless that we’re nonetheless solely in section one, the 200 megawatts we have taken steps to — for the long run phases already.

We introduced earlier this yr that we ordered 4 further transformers that may take us as much as the complete 800 megawatts of energy. There is a lengthy lead time on those who they are going to be coming within the first quarter of subsequent yr. So it is necessary we get these orders in. However we’ve got a transparent path to getting there to the to the complete 800 megawatts constructed out.

All proper. So that is the plan for — machines and clearly, that is plan for energy. However how are we going to pay for it? What are we doing within the capital facet of issues? So taking a fast look again. As everybody is aware of, this enterprise is a capital intensive enterprise.

Because the starting of 2021, we have raised practically 300 million of exterior capital. A few of that has been fairness, just like the non-public placement loans that passed off in early 2021 and the Nasdaq itemizing. However we have additionally issued debt just like the bitcoin again mortgage, the 40 million in child bonds, and the infrastructure mortgage that we have carried out with NYDIG. What we’re seeing within the area is, is a continued maturation of debt markets, and that’s the place we’re taking a look at specializing in our capital elevating efforts transferring ahead.

In order that takes us to the following slide, which is how we will finance our development in 2022. So with a purpose to full section one in every of Helios, which incorporates each a little bit bit extra capital into infrastructure, after which machines to completely construct out the 200 megawatts, we want roughly $125 million of further capital. And as I’ve stated many instances, we’ve got three levers which we are able to pull on once we’re elevating capital debt, fairness, and promoting bitcoin. Proper now, we plan to lift the extra capital by means of a mixture of debt and bitcoin.

We do not anticipate issuing fairness in 2022. As this debt market is maturing, we see a lot of alternatives, together with machine financing. We have constructed some actually sturdy relationships with the main capital suppliers within the area during the last three or 4 years, significantly during the last 12 months. Robust relationships with Galaxy, with NYDIG, with different new of us who’re transferring into the area.

They’re all trying to deploy capital, and to look — and trying to respected miners to deploy that with. So we’re in a very good place on the financing facet and that is our focus. When it comes to promoting bitcoin, I feel as most individuals know, in 2021, we did not promote a lot bitcoin. We financed our development with fairness, and with a little bit little bit of debt.

Nonetheless, going ahead, we’re taking a barely completely different method, and promoting a portion of our month-to-month bitcoin manufacturing to cowl our working bills and to assist fund our development plans. So if you concentrate on the historical past of the corporate going again to 2019, 2020, we needed to promote bitcoin to cowl working prices to assist fund our development. 2021, we did not promote any. This yr, we’re taking a little bit of a blended method and doing a mixture of debt, and bitcoin.

All proper. Transferring on to ESG, clearly, as I stated from the beginning, a key a part of our story, a key a part of who we’re, and that is a key a part of why we positioned are mining services the place we’ve got. First off, in Quebec, the place the machines are working up hydroelectric energy, and now within the Texas panhandle, the place a lot of the technology capability is coming from wind energy. Final yr, we put out a local weather technique, grew to become carbon impartial.

The primary firm within the area to do this. 2021 replace is forthcoming to report on that, and the 2022 local weather technique popping out alongside that. On the S facet of issues, the social facet of issues, our focus is actually to be a great company citizen within the communities that we’re working in. So our efforts in Dickens County, we really feel, are bringing financial advantages.

We’ve got a really stable relationship with the neighborhood there. In the course of the building section at Helios, we created about 130 building jobs. We’ve got 40 full time jobs that we have created for section one of many facility. A lot of the hiring has been taken — has taken place in Dickens County.

A few of it’s from from the neighboring area, from the Lubbock space. And we have one other 20 half time workers or non permanent workers which are serving to within the final push to get the power up, up and working. We even have made a contribution again to the neighborhood to refurbish the neighborhood pool, and that is — been closed since 2009. That mission is underway, and we’re working with the neighborhood to get that accomplished as shortly as we are able to.

On the federal government facet of issues, we strengthen our board of administrators with the addition of three new members. Within the final 12 months, we have added Raghav Chopra, who’s has an important expertise background in banking and investing. Sarah Gow, who has a finance and asset administration background; and Maria Perrella, who brings a wealth of expertise, is a former public firm CFO. So we’re very grateful to have them on the board.

We’re a stronger firm due to that. They’re very energetic, and the Board is in a very great spot. So I am very happy with that. All proper.

Lastly, let me say a fast phrase about Argo Labs earlier than I flip it over to Alex. We began Argo Labs final yr, though we have informally at all times these of you that know the corporate nicely, we have informally at all times felt like there’s alternatives — within the blockchain ecosystem system at giant. And actually, Sebastien Chalus, who’s our chief technique officer, has been main that for a few years now. We have now have this codified group referred to as Argo Labs.

It is a six individual group led by Seb, and they’re actually searching for methods for us to take part within the disruptive sectors of the blockchain, and — Net 3.0 ecosystem. So similar to it was a small group of us that began the mining facet of issues, it is a small group that is engaged on the innovation facet, the non-mining facet of issues. And customarily, the aim for this group is to take a portion of our bitcoin holdings, and generate further uplift that merely outperforms holding bitcoin — or that outperforms merely holding bitcoin. So, to date we have allotted them 10% of our complete digital belongings.

That is going nicely. They’re doing an important job to date, and can reassess that the quantity of allocation that they’ve on a quarter-by-quarter foundation. All proper. That’s my slides.

I will hand it over to Alex for a pair for him.

Alex AppletonChief Monetary Officer

Thanks, Peter. So it is actually been an important yr. I do know Peter’s touched on a number of these figures already, however I feel it is price going by means of them in a little bit bit extra element.  Income is as much as $100 million, 74 million kilos. That is been pushed by each the rise within the bitcoin value, which Peter’s talked about, and likewise our elevated capability, most of which, on this yr really got here on towards the top of the yr.

In order that further 500 petahash, [Inaudible] that we’ll see the complete influence of that as we go into 2022. After which additionally in fact with the growth of Helios. Mining margin remained very sturdy, once more, Peter’s already stated this, among the many market main of bitcoin miners. And we intend to remain there.

And that is why we’re transferring into what’s Helios the place we’ve got entry on to that low value of energy. And so, yep, margins you have seen from our operational updates, margins have tightened a little bit bit, however nonetheless nicely into the 70s, which is enviable throughout most industries. And we will keep on the very in that [Inaudible] of miners by gaining access to low value energy, and likewise the machines that we’re constructing out and the immersion ingredient of that as nicely. In order that’s meant for gross revenue, very sturdy, very sturdy for the yr.

That is by means of $70 million to 50 million kilos at 70%. When it comes to working prices and bills, sure, they’ve elevated. With Peter’s gone by means of how we have strengthened the chief group, we strengthened the administration group throughout the enterprise. And likewise as we have grown and we moved to the owned and working mannequin, we’ll additionally — we take it on extra workers when it comes to worker prices, and many others..

So you could have seen a rise within the common administrative bills there. Moreover, with the twin itemizing, we do incur extra charges, extra skilled charges, extra consulting charges, and many others.. So you will additionally see these prices going by means of the working value of bills there as nicely. I will draw your consideration is in regards to the share based mostly fee cost that’s on there, that is 2 million kilos, or $2.6 million.

That’s really, that is the cost that’s taken on to the accounting changes. It is not really a money move by means of the enterprise. And that takes us right down to our complete working bills there of 10 million kilos. Nonetheless a really wholesome revenue.

Working revenue, which actually happy with, which we obtain this yr, 43 million kilos there. When it comes to different earnings and bills, we have taken on some debt. So we’ve got some elevated curiosity bills there. After which there’s some completely different reevaluations, and many others., which leads right down to our internet earnings of 30 million kilos.

So a very pleasing yr, and one we’re actually happy with. And as I say, we’re well-positioned to proceed on the expansion section and proceed a really worthwhile stage. The steadiness sheet. So this yr, as Peter stated, we’ve got — we have had various non-public placements which has actually strengthened the steadiness sheet.

So you possibly can see the top of the yr, we have a really sturdy steadiness sheet, considerably stronger than final yr when it comes to our internet. Our internet belongings are nicely into the $200 million — $220 million or so. And we’re — what have we carried out with the money that we have really raised? So the good majority of that has gone into machines, both machines that we have put in and placed on the bottom, there’s about 40 million kilos price of machines that we have put in and placed on the bottom and bought. There’s a number of money that we have used to really put up the prepayments for the machines, principally for the bitmain order.

In order that’s practically 50 million with the majority of that being for the bitmain order. We have additionally invested closely in Helios and that asset in addition to over 70 million kilos, has additionally gone into to that. Alongside that, as Peter stated, we have been in a position to proceed to HODL, and develop our digital belongings which — are fairly important now. And we’re well-placed to maneuver ahead with our technique of now promoting some a part of what we mine.

And likewise we’re — we’ve got various choices round debt that are very, and there is a query really in there in regards to the rates of interest and the way that is impacted as we’re really seeing rates of interest come down. I keep in mind — the primary bitcoin backed mortgage that we had again in June of ’21, the rate of interest was over 12%. We have seen that fall considerably through the yr. On the yr finish, rate of interest was 8%.

And we’re seeing continued downward stress on the price of capital. So we’re very happy with the place we sat. And as we glance ahead, we glance ahead with optimism into the approaching yr and I am very excited to see Helios opening within the very close to future. Peter, again to you, sir.

Peter WallChief Government Officer

All proper. Thanks, Alex. I am now going to ask Tom Divine, our VP of Investor Relations, to return on. Tom has been gathering questions each from earlier than the presentation, and from through the presentation within the chat group on the facet or the Q&A piece on the facet.

And he will learn out some questions after which Alex and I’ll reply.

Tom DivineVice President of Investor Relations

Yeah. Thanks, Peter. We have been getting a number of questions from of us who’re listening in, in addition to among the promote facet analysis analysts. So I will undergo a few of these.

So our first query comes from Jason B. His query is, is immersion uplift included within the 5.5 exahash goal that we have introduced for the top of 2022?

Peter WallChief Government Officer

All proper. Thanks, Jason. So the reply is not any. Once more, we’re making an attempt to be sure that we’re conservative with our projections, under-promise, overdeliver.

So the 5.5 exahash doesn’t embody an uplift from rising.

Tom DivineVice President of Investor Relations

OK. Nice. Thanks, Peter. Our subsequent query comes from Darren Aftahi at Roth Capital Companions.

What kind of benefit do you suppose the availability settlement with Intel may give you versus different miners?

Peter WallChief Government Officer

Thanks for the query, Darren. When it comes to the availability settlement with Intel, the benefit for us is that, we can have a greater entry to a steady supply of chips, which in flip will imply cheaper hash charge development, capability to customise our mining rigs. That is a very necessary issue if you’re utilizing immersion cooling. And I feel, as you understand, Darren, we wish to be very granular, very a lot in management, very a lot optimize our machines and our mining.

We run a really customized mining store. This isn’t a plug and play or a plug and play form of — firm. So the extra we are able to get granular with our machines and the extra we are able to have entry to chips that we are able to construct our personal customized rigs, and we are able to accomplish that cheaper and we are able to put these into an rising surroundings. And that permits us to actually get essentially the most out of our mining operations.

Tom DivineVice President of Investor Relations

Nice. Our subsequent query comes from Thanassis S. May you clarify what the gear financing settlement with NYDIG entailed? Is it for electrical gear preorders wanted for the 600 megawatts?

Peter WallChief Government Officer

Certain. Alex, you wish to take that one? You need me to take —

Alex AppletonChief Monetary Officer

Yeah. Completely. I will take it. It is for electrical infrastructure that we’ve got on the bottom in the meanwhile.

We’re actually happy with that. NYDIG is a superb associate to have on this area. And once more, again to the rate of interest, 8.5% may be very aggressive in comparison with the normal sector. So it was actually a great deal for us.

And it is one thing that may present a possibility going ahead for. As we construct out Helios that may give us additional collateral to have the ability to use for additional, additional debt initiatives.

Tom DivineVice President of Investor Relations

Nice. Our subsequent query comes from Joe Vafi at Canaccord. May you go right into a bit extra element on the ASICs you are buying from Intel? I consider they aren’t placing full programs collectively. Do you could have a design associate at this level

Peter WallChief Government Officer

Certain. Thanks, Joe. So these — I will provide you with a little bit little bit of a background on how he got here to work with Intel, after which a little bit bit in regards to the customized mining rigs. So Intel reached out to various of us within the area again in round This autumn of final yr and stated, “Hey, we will be creating a mining chip.

Are you all fascinated with working with us?”, and naturally, we stated, “Completely, we might be very .” And so they stated, “Pay attention, we’re solely going to work with miners that match that form of a line with our values on the ESG facet of issues specifically.” So we walked by means of what we’re doing — what we have been doing, and what we’re doing on the ESG facet of issues. And so they stated, “That sounds nice. You guys sound like a great match.” After which, by means of that relationship, by the way in which, they discovered that we’ve got a really sturdy know-how group led by our CTO, Perry. And so there’s been a lot of collaboration and plenty of dialog with Intel about what they’re doing.

And there is been a lot of training backwards and forwards on each side. So — it has been a very good relationship to date, and we’re excited to be working with them when it comes to what that remaining system goes to seem like. Yeah, you are proper, Joe. They aren’t placing a full system collectively.

They’re creating chips. That is what they do. That is what they’re actually good at. After which, similar to they promote chips to competing pc producers like Dell, they will promote chips to sure miners that may then put them to work in their very own machines.

So there is a chance to both go together with a provider from Intel or to go together with a provider of our alternative, the third occasion of our alternative. So we have not introduced that but what we’re doing, however we shall be working with the third occasion to develop these customized mining rigs. And as quickly as that relationship is able to announce to the market, we’ll. However it’s one thing that we’re actually enthusiastic about and one thing that we expect is is a key differentiator for us at this level.

Tom DivineVice President of Investor Relations

Nice. Thanks, Peter. Our subsequent query was pre submitted and it has to do with ERCOT. To what extent do the brand new Texas ERCOT guidelines for mining firms restrict the facility out there at Helios?

Peter WallChief Government Officer

Yeah. It is one other good query. So this isn’t one thing that we expect goes to have an effect on us. We’ve got our interconnection settlement in place — for the complete 800 megawatts of capability.

We even have a very stable relationship with ERCOT. We have been really simply at a gathering with them this week in Texas. We even have a relationship as a consumer of precedence energy. Precedence energy is an business chief in mining power providers.

They handle interconnection agreements, they handle PPA, they handle energy load flexibility. They’re actually the important thing of us in Texas that you just wish to be working with. So due to these relationships, as a result of we have already got our items in place, we’re not apprehensive about any adjustments to ERCOT, and we encourage ERCOT to be sure that, that folk in Texas are getting the facility that they want, and miners are getting the facility that they want. And I feel that, that is precisely what is going on on.

I feel most likely most significantly for us, we have additionally chosen to be in a specific area that has a really excessive technology capability, however a really low native load, which suggests there’s little or no demand for energy, however a lot of energy being made. And this makes our versatile load actually necessary for that area, and actually necessary for grid grid stability. So I feel ERCOT, the primary time I stated to Brad Jones, who’s the top of ERCOT, “Hey, we’re organising a 200 megawatt facility in Dickens County, Texas, within the West load zone.” He checked out me and stated, “We want load in that space. That is superb.

That is nice.” So I am very happy with the place we have chosen to arrange. And I do not see any points in Texas with the grid for us.

Tom DivineVice President of Investor Relations

Our subsequent query comes from Darren Aftahi at Roth Capital Companions. On the core machine swap, how do you mitigate downtime throughout that? And is that your preliminary method of filling Helios?

Peter WallChief Government Officer

Yeah. So I lined this a little bit bit within the presentation, Darren. The swap is structured in order that we keep away from downtime. In order the machines from Core are arriving, we’re putting in them after which we’ll be swapping out for the machines which are which are already at Core.

Our machines are already at Core. So we’re not anticipating any downtime. We have taken that into consideration. That is a part of why — we have structured the deal as we’ve got.

We’ve got a great relationship with Core. We have labored with them for a few years. We’re associates with these guys. However finally, we wish to be the captains of our personal ship and be capable of run our personal facility.

So the connection is coming to an finish in an amicable method. By the top of July this yr, we’ll have all of these machines which are — all of that capability that that Core shall be at our facility. And what I can inform you is that, these machines from Core have already began arriving to a big diploma in Texas. In order that course of is already underway and that course of will happen concurrently the in parallel with the set up of the bitmain machines which are additionally beginning to arrive at Helios proper now.

Tom DivineVice President of Investor Relations

Nice. Our subsequent query from Suthan Sukumar at Stifel. On the incremental capital wants for section one, what is going to this cash be spent on? Is that this infrastructure or rig procurement?

Peter WallChief Government Officer

Yeah. It is a good query. Thanks, Suthan. So if you concentrate on our three major buckets of cap — capex for the remainder of this yr, there’s infrastructure, there’s bitmain machines, after which there’s Intel machines.

And the infrastructure, the overwhelming majority that’s already paid for, clearly, we have constructed it. In case you work with building of us, you must pay them as you are constructing. In order that’s just about already carried out and paid for. Tiny little bit of infrastructure value left, however not an entire lot.

The second, on the bitmain machines, we have paid the 20,000 machines [Inaudible] order. We’ve got paid for north of two thirds of these. So the vast majority of these machines are already paid for. After which the final piece is the Intel machines.

We’ve got a deposit with Intel. We have — we have began that relationship, however the majority of that capital shall be for machines, and the vast majority of the machine capital shall be for the Intel facet. Alex, do you wish to add something to that?

Alex AppletonChief Monetary Officer

No. I feel, you have just about, just about lined it, Peter. As you say, the bulk left is is machines, a big majority of machines. As Peter stated, with two thirds of the way in which by means of as we stand right now, we’re over two thirds of the way in which by means of the bitmain funds.

And looking out ahead, it is Intel that’s the value, major value for them, not 1 million to five million.

Tom DivineVice President of Investor Relations

Nice. Our subsequent query we have gotten a couple of instances from Kevin [Inaudible] and a few others within the chat. Do you propose on wanting on the possibility of constructing our personal photo voltaic fields and wind farms at Helios?

Peter WallChief Government Officer

Thanks for the query, Kevin. So the brief reply is sure. Within the long-term, it is one thing that we’re taking a look at as an possibility. Clearly, Texas is a superb spot for each photo voltaic and for wind.

That is why there’s a lot renewable growth there. When it comes to the short-term, we’re actually targeted on this 200 megawatts utilizing grid energy. After which the following section is that, the remaining 600 megawatts which we’ve got the interconnection settlement with. However clearly, as we develop as miners on this area, because the business develops, you are seeing two key, nicely, actually three key developments.

And that’s getting nearer to — rigs you are seeing now with our Intel deal. You are getting nearer to energy. You are going to begin to see miners get nearer and nearer to energy as a result of that may be a key, key piece of mining. After which — the final one getting nearer to capital, and also you see increasingly capital suppliers coming into the area.

And as we have talked about on this presentation on the debt facet. So all of these issues are occurring as a result of these are the three key items to be a profitable miner. And so clearly, producing your individual energy from renewables is one thing that, as a miner you must be excited about sooner or later.

Tom DivineVice President of Investor Relations

Our subsequent query comes from Jon Petersen. Are you able to speak a little bit bit extra about your Intel mining rigs? Is all the growth in fourth quarter 2022 more likely to come from the Intel chips? And may you give us any indication of the fee per terahash on these intel mining machines?

Peter WallChief Government Officer

Thanks, Jon. Jon from Jefferies, JJ. So in brief, sure, the rise within the fourth quarter of this yr shall be coming from Intel. As you noticed in our chart.

That is actually the place the expansion in hash charge goes to be coming from — at Helios. When it comes to value per terahash, we do not have a value per terahash that we’re in a position to share but. We’re very optimistic that the fee per terahash shall be decrease then — then off the shelf — off the shelf choices proper now. And in order that’s a key piece of it, in addition to the flexibility to have management over the design of the machines and the software program, and many others., and many others., to have the ability to optimize in an rising surroundings.

Tom DivineVice President of Investor Relations

Nice. Our subsequent submitted query from the chat is from Thanassis. Are you actively staking or incomes APY in any method in your 10% HODL at Argo Labs similar to Ethereum, Solana, Atom, and many others.?

Peter WallChief Government Officer

Thanks, Thanassis, once more. So sure, a good portion of our HODL is in validators, and nodes is staked and is deployed in DeFi in a method that guides us a capability to earn a great APY.

Tom DivineVice President of Investor Relations

Subsequent query is from Ramsey El-Assal at Barclays. The way you — how are you excited about the influence of sanctions on mining in Russia, the place we see the worldwide hashrate drop if miners in Russia are crippled by sanctions?

Peter WallChief Government Officer

Yeah. It is a good query, Ramsey. I feel the final quantity I noticed of Russia was roughly 10% of world hash charge. Clearly, the current occasions with [Inaudible] river having to close down and there, if not the largest, one of many greatest gamers in Russia will have an effect.

I do not suppose it may have the identical influence on international hash charge the way in which that the mining ban in China occurred or did. I feel it might need — it’d sluggish issues down a little bit bit when it comes to development, however I do not suppose it’s going to be that important. I feel the place to look at hash charge development proper now could be in america. And many miners, a lot of publicly traded miners have put numbers out.

And so, we will be at x exahash by this explicit date, and we’ll should see in the event that they hit — these numbers that they’ve put out. For us, that is the yr of execution. 2021 was the yr of development. 2022 is the yr of execution.

So we have been actually specializing in, as I stated a few instances on this name, under-promise and in over delivering. And ensuring that, if we put a quantity out, we’re 100% assured that we are able to meet it.

Tom DivineVice President of Investor Relations

Our subsequent query comes from Abby R. What influence have provide chain points had on the enterprise?

Peter WallChief Government Officer

Yeah. Thanks, Abby. Pay attention, international provide chains are robust all over the world. Undoubtedly.

It has been a little bit bit more difficult to fulfill our deadlines, however we’re nonetheless in a position to keep on schedule with Helios. And we’ve got somebody who works full time with us now at Argo that we have employed just lately as a part of that group of 100 that we’re constructing out who’s engaged on logistics and provide chain items. She’s — an professional in that world. And in order that’s that is been very useful and it is one thing we take severely and put a number of effort into.

We noticed a rise for certain in delivery prices for miners. It is roughly 50% to 100%  costlier now than it’s — than it was two years in the past to ship miners. In order that’s one thing that we should be cognizant of once we’re constructing out our budgets, and many others.. However whereas they’ve had an influence for certain, we really feel like we have been in a position to climate them due to our — the efforts — of our group.

Tom DivineVice President of Investor Relations

Nice. Our subsequent query comes from Alan Howard at Tennyson. How are you excited about the construct out of Helios for future phases? Will it’s inexpensive than section one and can it’s unfold out evenly over the following three years?

Peter WallChief Government Officer

Hey, Alan, thanks. Thanks for the query. So, yeah, hear, we’ve got a big runway at Helios, as I’ve stated, this 600 megawatts. It is a massive, it is a massive chunk to fill.

We’re going to focus our capex value there. First, on the infrastructure and the constructing, after which second on the rigs. When it comes to the infrastructure facet of issues. Our expectation is, sure, will probably be inexpensive.

We all know, we have realized as we have grown. We have additionally carried out a number of the groundwork in Texas to be sure that we’re getting, have the precise relationships — the precise relationships in place with the precise suppliers. We have already put among the lengthy lead gadgets in, as I discussed, for the large transformer items. And people — a few of these items are already pre-paid.

So, sure, — when it comes to the infrastructure facet, our expectation is that will probably be — will probably be inexpensive than section one. When it comes to the rig facet, once more, because of this relationship with Intel, our value per terahash is anticipated to be decrease than it’s, than it should have been for the primary 200 megawatts.

Tom DivineVice President of Investor Relations

Our subsequent query comes from Luke P. Are you involved with international locations and cities getting concerned in mining? Or do you suppose you could have a aggressive benefit along with your infrastructure?

Peter WallChief Government Officer

Thanks, Luke. Good query. I feel you are most likely referring to what occurred just lately with the information, I feel, from Fort Value. And so general, we’re not involved about cities and international locations getting concerned.

Generally, we see this as a constructive factor. We consider in decentralization. That is the entire level of the bitcoin community. We’ve got a transparent aggressive benefit with our mining expertise, with our present infrastructure, with our future infrastructure.

So, hear, we’re excited in regards to the area on the whole rising and all the unbelievable momentum that the area has. Regardless that the fairness markets have slowed down quite a bit, it feels to me just like the crypto markets, whereas they’re below a little bit little bit of stress, are actually charging forward. And I am enthusiastic about this yr and the years to return.

Tom DivineVice President of Investor Relations

Our subsequent query comes from Chris Brendler at D.A. Davidson. Are you able to communicate extra in regards to the increasing debt financing choices and the enhancing phrases that you just talked about? We have additionally heard that conventional banks have grow to be extra within the sector. Are you able to give your perspective on that?

Peter WallChief Government Officer

Certain. I will begin this one after which I will hand it over to Alex. Thanks for the query, Chris. Simply when it comes to relationships with lenders, there’s simply extra of them which are — which are on the market now than there was — 12 months in the past — I imply 18 months in the past, there was mainly no debt financing choices.

Now you have acquired various very established firms. You’ve got acquired new of us trying to get into the area. And as Alex stated earlier, phrases are getting higher. So, our market situations impacting the financing choices, I would say that lenders are going to be extra selective about who they’re lending to.

I feel if you’re a brand new minor, you got here out and also you stated, “Hey, I am opening a 50 megawatt facility in, title your house”, and also you went to a lender. I feel and not using a monitor file, you’d have a tough time getting financing. I feel miners which have monitor data, which have present groups in place, which have relationships in place, I feel these are the miners which are going to have the ability to develop. So I feel scale issues and repute issues.

Relationships matter. And sure, we have heard from conventional banks, however they’re dipping their toes. I feel it is nonetheless — we’re not there but, I feel these relationships are nonetheless — these are there is a massive shift. They take a very long time to show, they usually want a number of effort to show.

And they also’re not fairly able to get there but. However they’re on their method.

Alex AppletonChief Monetary Officer

Yeah. I simply echo what Peter stated that, when it comes to, there are a number of new strikes into the market. And what comes with that’s, much more due diligence round — who they’re planning to associate with, who they’re planning to lend to. So, the monitor file is actually necessary to point out that we’ve got used that.

We have used that properly. We have been very prudent with out that. We predict we’ve got extra extra room to tackle extra debt, and nonetheless keep inside our prudent inner and EBITDAs, debt ratios, and many others., and many others., and all of these good issues. However the place we stand right now, we stand in a really sturdy place, as a result of we do not — we have on our steadiness sheet a big quantity of bitcoin as nicely.

So we aren’t wholly reliant on debt. In reality, we may nearly self mine — and use the — and have a look at utilizing simply components of debt, and many others.. As we stated, that is going to be our course of going ahead. So we’re  — we’re in actually sturdy place to maneuver ahead on the debt market stays sturdy.

And it is one thing that we — we’re wanting into.

Tom DivineVice President of Investor Relations

Nice. We’re getting near the highest of the hour, so we solely have a couple of extra questions from King F, given the volatility of bitcoin value and the unpredictability of the crypto area on the whole, do you could have any plans or alternatives to diversify your mining capability into completely different blockchain belongings?

Peter WallChief Government Officer

Sure. Thanks. Thanks, King, for the query. So Argo Labs is the primary level of Argo Labs is diversification.

And the group there’s at all times exploring different avenues to take a look at. Cannot share something in the meanwhile precisely what they’re taking a look at. However, sure, it is one thing that we’re at all times excited about. When it comes to mining different crypto belongings, as we have carried out prior to now with Zcash, and you then return into 2018, we mined a number of altcoins.

We’re at all times opportunistic about different crypto belongings. It is onerous to get them, King, at scale. Get machines at scale the way in which you may for bitcoin mining. On occasion there’s alternatives, once more, like we had with the Z11s mining Zcash.

However for essentially the most half, our focus is on, proper now, ensuring that Helios is the very best immersion mining facility on this planet. And the machines that we’re targeted on proper now are our bitcoin machines.

Tom DivineVice President of Investor Relations

Nice. Our final query from Gary C. Are there plans to diversify into internet hosting different miners at Helios?

Peter WallChief Government Officer

So, thanks for the query, Gary. When it comes to internet hosting different miners, for now, we plan on utilizing the out there — energy for ourselves. We’re at all times taking a look at alternatives. We have had a lot of conversations.

Whenever you’ve acquired an enormous facility coming on-line, folks knock in your door they usually say, “Hey, — can you are taking a few of our machines?”, and we really feel like with the with the margins that we’ve got, with the group that we’ve got, with our experience in mining, we’re actually good at mining. So, so we wish to use as a lot energy as we are able to for ourselves. Transferring into the long run, is there a possibility to probably host some of us at Helios within the subsequent section? Probably, and we’re having a few of these conversations. However nothing important to report on in any method proper now.

Questions & Solutions:


That is nice. Thanks very a lot. And Tom, thanks very a lot certainly for internet hosting that Q&A. And Alex and Peter, on your engagement.

I’ll shortly redirect buyers to give you their ideas and expectations and get their suggestions. However Peter, earlier than doing so, I puzzled if I may ask you for a couple of closing feedback to wrap up with.

Peter WallChief Government Officer

Certain. Thanks, everybody. Pay attention, — one of many nice issues about being the CEO of this firm is that there is a lot shareholder engagement. I imply, I do not understand how many individuals we had right now on this name, but it surely’s — there’s at all times a lot of folks sending us notes, partaking with us on social media, turning as much as issues like this.

We actually respect it. Hopefully, we have been in a position to reply not less than among the questions that got here out. And we have some massive issues coming within the subsequent few weeks and months. So we’re enthusiastic about the place we’re at.

And, I did say going again to the top of final yr, quarters and years, and this factor takes time to construct. And people of you which are sticking with us and which are consider in us, we actually respect it. We actually do. So, so it is a good time to be an Argonaut, I’d say.

And onwards and upwards.


That is nice. Peter, Alex, Tom, thanks very a lot certainly on your time this afternoon and for updating buyers. May I please ask buyers to not shut this session, as will now robotically redirect you for the chance to supply your suggestions so as the corporate can actually higher perceive your ideas and expectations. This would possibly take a couple of moments to finish, however I am certain the corporate shall be most grateful on behalf of the group from Argo Blockchain PLC, wish to thanks very a lot certainly for attending right now’s presentation.

Good morning to you, Peter, over there within the U.S., and good afternoon to everybody within the UK. Thanks. [Operator signoff]

Period: 61 minutes

Name contributors:

Peter WallChief Government Officer

Alex AppletonChief Monetary Officer

Tom DivineVice President of Investor Relations

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