Argo Blockchain plc — Form 6-K Summary
Reporting period: June 2022 operational results, filed July 7, 2022. Argo is a dual-listed cryptocurrency mining company operating primarily through its Texas Helios facility.
Key Financial and Operating Metrics
- Bitcoin production: 179 BTC and Bitcoin Equivalents in June, compared with 124 BTC in May.
- Mining revenue: £3.38 million ($4.35 million) in June, versus £3.07 million ($3.89 million) in May.
- Bitcoin and Bitcoin Equivalent Mining Margin: 50% in June, down from 55% in May. This non-IFRS measure excludes depreciation, digital-asset fair-value movements and realized losses on digital-asset sales.
- IFRS gross loss: £14.925 million in June, compared with £11.934 million in May. Gross margin was negative 429% in June versus negative 384% in May.
- Mining profit under the company’s non-IFRS reconciliation: £1.728 million in June, versus £1.711 million in May.
- Bitcoin holdings: 1,953 BTC as of June 30, including 210 Bitcoin Equivalents.
- Bitcoin sales: 637 BTC sold during June at an average price of approximately $24,500. Proceeds funded operating expenses, growth capital and repayment of the Galaxy Digital BTC-backed loan.
- BTC-backed loan: Outstanding balance of $22 million at June 30.
- Hashrate: Total hashrate capacity increased to 2.2 EH/s by June 30.
- Liquidity and cash flow: The filing does not provide a clear cash balance, operating cash flow, free cash flow or current ratio. Management stated that it believed liquidity was sufficient to avoid potential liquidation of the BTC-backed loan if Bitcoin prices continued to decline.
Material Changes Versus May 2022
- Bitcoin production increased approximately 44%, primarily because of higher total hashrate and improved uptime at Helios.
- Mining revenue increased approximately 10%, while the mining margin declined from 55% to 50% because of lower Bitcoin prices and higher Helios electricity costs.
- IFRS gross loss widened to £14.925 million from £11.934 million. June included £2.350 million of mining-equipment depreciation, a £9.216 million fair-value charge on digital currencies and a £5.087 million realized loss on digital-currency sales.
- The company corrected its previously reported May mining margin from 62% to 55% after recording previously omitted Helios fee invoices. Previously reported May gross loss, gross margin and mining profit were also revised.
- Argo continued selling a significant portion of monthly Bitcoin production to reduce exposure to its BTC-backed borrowing and strengthen its balance sheet.
Outlook, Commentary, Risks and Unusual Items
- Argo remained on track to install all 20,000 Bitmain S19J Pro machines by October 2022. More than 95% of the total purchase price had been paid by June 30, including discounts associated with the decline in Bitcoin’s price.
- Under the machine-swap agreement with Core Scientific, 5,000 S19J Pro machines had been delivered and installed by June 30.
- Since the fourth quarter of 2021, Argo has used derivatives to limit downside risk and hired a full-time derivatives trader in June to expand its risk and treasury capabilities.
- Key risks include Bitcoin-price volatility, cryptocurrency fair-value losses, electricity costs, mining-equipment deployment, facility uptime, debt collateral requirements and potential liquidation of the BTC-backed loan.
- The company’s stated outlook depends on forward-looking assumptions and is not a guarantee of future performance. The filing directs investors to Argo’s SEC and FCA filings, including its risk factors.
Important Facts for Investors to Verify
- Verify the company’s actual unrestricted cash and liquidity position, including available borrowing capacity and obligations related to the BTC-backed loan.
- Assess the collateral and liquidation terms of the $22 million Galaxy Digital loan under further Bitcoin-price declines.
- Confirm the timing, remaining costs and financing of the 20,000-machine Bitmain deployment and Core Scientific machine swap.
- Reconcile non-IFRS mining margin with IFRS results, particularly depreciation, digital-currency fair-value changes and realized losses.
- Review subsequent filings for changes in Bitcoin holdings, production, electricity costs, hashrate, debt and liquidity.