Argo Blockchain plc — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; this is an annual report, not a standalone Q4 filing. Filed April 30, 2024. Financial statements are IFRS, presented in U.S. dollars.
Business context and operating footprint
Argo is primarily a Bitcoin miner. At year-end it reported approximately 33,750 mining machines and 2.8 EH/s of capacity: about 2.4 EH/s hosted at the Helios, Texas facility and 0.4 EH/s at owned Quebec facilities. The company sold the Helios facility to Galaxy in December 2022 but retained its machines there under a two-year hosting agreement. It sold the Mirabel facility in March 2024; Baie-Comeau remained its owned operating data center.
Argo sold mined Bitcoin regularly to fund operating costs and working capital. It mined 1,760 Bitcoin in 2023, versus 2,156 in 2022. The filing reports that transaction fees were about 6% of Bitcoin mining revenue.
Financial and operating metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $50.6 million | $58.6 million |
| Gross profit (loss); gross margin | $3.8 million; 8% | $(42.6) million; (73)% |
| Operating loss | $(19.4) million | $(80.7) million |
| Net loss | $(35.0) million | $(229.0) million |
| Adjusted EBITDA (non-IFRS) | $8.3 million | $(46.7) million |
| Operating cash flow | $3.8 million | $13.4 million |
| Investing cash flow | $(1.1) million | $(97.3) million |
| Financing cash flow | $(15.8) million | $84.2 million |
| Cash and cash equivalents at year-end | $7.4 million | $20.1 million |
Revenue fell 14%, primarily as a 71% increase in average Bitcoin network difficulty contributed to a 40% decrease in hashprice and lower Bitcoin production. Mining revenue per Bitcoin rose to $28,723 from $27,117. Power and hosting costs increased to $36.0 million from $26.8 million, partly because Texas operated for a full year. Argo recorded $7.2 million in power credits from curtailment arrangements, including $3.8 million in August.
Mining profit margin, a company-defined non-IFRS measure, was 43% versus 54%. Average direct cost per Bitcoin mined was $16,362 versus $12,411; average total cost was $26,962 versus $21,905. The filing says power costs represented 52% of direct costs and 56% of mining revenue; a 10% change in power cost would have changed gross profit by $2.8 million.
Operating expenses were $19.3 million, down from $34.1 million, with the filing attributing the reduction mainly to the Helios sale and lower staffing and other non-mining costs. Finance costs were $11.6 million, down from $22.7 million. Capital expenditure, net of disposals, was reported as $5.2 million in the business overview and $1.1 million in the liquidity discussion; the filing text does not clearly reconcile these different figures.
At December 31, 2023, the balance sheet reported $75.9 million in total assets, $75.8 million in liabilities and $0.2 million in equity. Cash was $7.4 million and the audited notes reported $0.385 million of mined digital assets. Debt carrying values included $38.2 million of 8.75% senior notes due 2026 and $22.7 million of Galaxy loans; net debt was reported as $55.1 million. The Galaxy loan bears interest at SOFR plus 11% and is secured by mining equipment and other assets.
Changes, outlook, risks and unusual items
- Improved results, but continuing losses: Net loss narrowed substantially from 2022. The comparison is affected by the prior-year $54.0 million digital-currency fair-value loss, $55.8 million tangible-asset impairment and significant Helios-sale-related losses and charges. In 2023, power credits and sharply lower operating expenses supported results.
- Balance-sheet actions: Management said debt fell by $13 million in 2023 to $66 million. This headline debt figure differs from the year-end carrying amounts and net-debt disclosure above. The company raised $7.5 million gross through a July 2023 share placement. After year-end, it raised $9.9 million gross in January 2024, sold Mirabel for $6.1 million in March and reported further debt repayments; as of March 31, 2024, it reported $54.0 million of total debt and $12.8 million owed to Galaxy.
- Going concern: Management and the auditor identified substantial doubt about Argo’s ability to continue as a going concern, citing debt service, recurring operating losses and Bitcoin, power-price and hashprice volatility. Management’s forecast period ran through June 30, 2025 and assumed access to additional funding; the auditor’s report includes a going-concern uncertainty paragraph. The financial statements do not include adjustments that might result from the uncertainty.
- Bitcoin halving: The April 2024 halving reduced the block reward to 3.125 Bitcoin. Management notes this may pressure hashprice and mining economics. The company’s ability to offset lower rewards depends on Bitcoin prices, network difficulty, transaction fees and power costs.
- Legal matter: A securities class action, Murphy v. Argo Blockchain plc et al., was filed in January 2023. Argo disputes the allegations and was awaiting a ruling on its motion to dismiss. No accrual was recorded because management said it could not estimate a liability. Separately, a $0.5 million breach-of-contract claim settled after year-end was accrued at December 31, 2023.
- Other risks: Material exposures include Bitcoin price and mining difficulty, energy availability and cost, equipment obsolescence and impairment, hosting and mining-pool counterparties, regulation, cybersecurity and custody, and the ability to obtain financing. No specific 2024 financial guidance is provided. Management describes evaluating expansion at Baie-Comeau and projects pairing mining with stranded or wasted energy.
- Accounting and disclosure points: The filing restated 2022 tax accounting, increasing the tax recovery by $11.3 million and reducing the reported net loss by the same amount. It also states that management assessed disclosure controls and internal control over financial reporting as effective at year-end; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Reconcile the filing’s inconsistent year-end Bitcoin holdings: the business overview says 27 Bitcoin valued at about $1.1 million, while the audited notes report 9 Bitcoin valued at $0.385 million.
- Reconcile debt disclosures, including management’s $66 million year-end debt figure, the balance-sheet debt carrying amounts, and the $55.1 million net-debt figure; verify current maturities, bond terms and covenant headroom.
- Review liquidity forecasts and funding assumptions through June 2025, including the impact of the 2024 halving, hashprice, electricity prices and debt service.
- Assess the $51.2 million carrying value of mining machines and the impairment assumptions: the auditor identified this as a critical audit matter. The reported impairment sensitivity was $1.5 million for a 5% hashprice change and $0.4 million for a 1% discount-rate change.
- Confirm the consequences of the Mirabel sale and Helios hosting agreement, including operating capacity, hosting costs and curtailment credits; clarify the differing capital-expenditure figures in the filing.
- Track the class action and other contingencies, including the basis for not accruing an estimated class-action liability.