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Argo Blockchain plc (ARBK) CEO Peter Wall on This autumn 2021 Outcomes – Earnings Name Transcript

Argo Blockchain plc (NASDAQ:ARBK) This autumn 2021 Earnings Convention Name April 28, 2022 8:00 AM ET

Firm Contributors

Peter Wall – Chief Government Officer

Alex Appleton – Chief Monetary Officer

Tom Divine – Vice President, Investor Relations

Convention Name Contributors

Operator

Good afternoon and welcome to the Argo Blockchain Full 12 months Outcomes Investor Presentation. All through this recorded presentation, traders will likely be in listen-only mode. [Operator instructions] The corporate will not be able to reply each query it receives within the assembly itself. Nevertheless, the corporate will evaluate all questions submitted in the present day and publish responses the place it is acceptable to take action.

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

Peter Wall

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 in the present day is Alex Appleton, our CFO; and Tom Divine, our head of Investor Relations — our VP of investor relations. Tom goes to pop up slightly bit later, and is curating a few of 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 thus far with the outcomes popping out. Carried out slightly 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 achieved. And if not, we’ll share them on our social media quickly. All proper. So, let’s bounce into the presentation. Regular authorized disclaimer off the highest.

The subsequent slide for these of you which have seen loads of our shows earlier than, will look aware of slightly, little little bit of modifications 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 now have.

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 Might, which is just some days away. And the plan remains to be in progress, and nonetheless trying good to have these put in by the tip of October. So, we’re assured that that to 2 Exahash goes to be reached by the tip of October, given all the all of the items that we now have in place at present.

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 a giant a part of our firm values, a giant a part of our story. We had been the primary bitcoin miner to be 100% carbon impartial final yr. We put out a local weather technique alongside these traces.

We’ll be releasing an replace to that report within the very close to future and a giant cause we had been capable of obtain that carbon neutrality is being situated in sure areas. Initially, in Quebec, utilizing hydroelectric energy, we’re following the identical technique by establishing in West Texas, the place there’s an infinite 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. So, 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 aspect 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 realize, we launched Argo Labs earlier this yr. It is our in-house innovation arm, targeted on non-mining actions inside the broader blockchain and Internet 3.0 eco — Internet 3.0 ecosystem. And I will give slightly 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 best hand aspect of the slide, you see our map of our two places the place 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’ll bounce forward to the following slide, which is the slide that I feel everybody’s been ready for in the present day, which is our monetary highlights from – from final yr. In order you possibly can see, it was an important yr for us, a transformational yr for Argo.

Our income was $100 million, or £74 million, a rise of 291% from the yr earlier than. Our EBITA was $71 million, or £53 million, up 594% from the earlier yr. Our internet revenue was $42 million, or £31 million up much less – up from 2 million in 2020. Our bitcoin mine for the complete yr was — 2,045 so simply – simply north of two,000.

And as I stated earlier than, that cash margin was about 84%. On the finish of the yr, we held 2,585 sorry –2,595 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 best, you possibly can see our mining margin was very robust and constant within the eighties for the complete yr. This was pushed largely by the excessive value of bitcoin in addition to us actually with the ability to management our working prices, excellent internet hosting price with our Core scientific offers that we’re mining – we’re mining with, or at present nonetheless our cash with, however quickly won’t be in addition to the low price of energy that we now have in Quebec.

The non permanent drop in international hash fee that befell 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 robust all through the – all year long. So to summarize the yr, 2021 was a good time to be a miner with entry to low price 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. So much occurred. However I’ll level out a few the most important highlights that befell 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 now have in the present day. 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 befell 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 had been initially internet hosting our machines at these services going again so far as 2018 within the case of Mirabel. And – that was a giant a part of our shifting into proudly owning and working our personal infrastructure.

The third quarter noticed the itemizing – or noticed hotlist on the Nasdaq within the US, 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 loads of shareholders and stakeholders had 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 most effective entry to the US capital markets, which is clearly a really massive 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 are actually 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 tip of the fourth quarter, we had accomplished the principle construction and the skin facade of the constructing. And I will speak slightly bit extra about Helios slightly 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 possibly can see how dramatic our development was. A variety of up into the speed from 2020 to 2021. On the hash fee aspect, we grew from about 0.6 exahash to 1.6 exahash. Our income went from 26 million, these are all figures in US$26 million to US$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 revenue from about $2 million to $42 million. And our money and — money and digital property at yr finish went from $9 million to $125 million on the finish of December 2021. So actually some necessary metrics and clearly, we had been more than happy with the expansion for the yr. All proper.

Nevertheless, it is not solely about machines and solely about energy and solely about capital. It is also about individuals. And as we began to personal and function our personal services, we actually wanted to develop our crew and produce the mandatory experience in home. Our headcount grew from round seven individuals. We had been a really small firm at the beginning of 2020 after I took over as CEO. Truly on the finish of 2020, we had been nonetheless at seven individuals to round 39 individuals on the finish of 2021. As of proper now, we’re approaching about 100 individuals. We accrued all of our knowledge middle ops crew members.

On the senior administration crew, we additionally added a number of key people 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 basic counsel, runs our authorized division. Justin Nolan was the co-founder of the Helios mission and actually the pressure 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 improvement crew and is main our efforts there. Jean Esquier works very intently with Perry Hothi, he is our VP of know-how and improvement, and has been primarily targeted on the design and the construct out of the immersion system at Helios. Theo Papadakis is our VP of knowledge middle operations, comes from the world of knowledge facilities, a protracted profession in that area, and he is constructed a world class knowledge middle operations crew 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 in the present day, you may see him pop up slightly 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’ll discuss 2022 and past. Clearly, there’s so much occurring with us as an organization, so much occurring within the area.

I 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 possibly can see the speedy improvement that is taken place there during the last six, seven, eight months. The dry cooler is developing on the aspect are nearly to the tip of the road. So nice — nice improvement. And actually, that’s our main focus for the remainder of this yr. So let’s bounce forward to the important thing initiatives for the yr.

So completion of Section 1 of Helios remains to be slated to completely be baked out and completed by the tip 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 crew’s achieved 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 fee to develop to five.5 Exahash by the tip of this yr. And that is a quantity that we’re very happy with. Our complete, type of, philosophy. I feel people who observe the corporate intently know has been to essentially deal with development and to make it possible for we’re gradual and regular and specializing in quarters and years.

And so in the present day, we’re comfortable to say that our expectation is will likely be 5.5 Exahash by the tip of this yr. And we’ll get into these particulars slightly bit extra. I do know there’s people 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 imagine is completely achievable by the tip of this yr.

You realize, the philosophy is de facto to under-promise and overdeliver as a lot as we are able to. And definitely, 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 crew has achieved.

Moreover, we’re additionally not simply engaged on infrastructure, however we’re additionally growing a customized mining rig which can make the most of the Intel block scale AC chips. And I will speak slightly bit extra about what that is going to seem like on a slide developing.

All proper. A pair extra pictures of Helios. So on the left-hand aspect, you possibly can see the immersion tanks, that are on double decker racks. Shout out to the double decker busses in London. On the right-hand aspect, you possibly can see a photograph of our of our Helios facility employees throughout the latest onboarding actions, received about 40 employees there now, we now have one other 20 non permanent labor.

So we have an unbelievable crew. They’re 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 occurring 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 aspect 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 US primarily based international manufacturing firm.

As a result of everybody is aware of in Texas it will get scorching, it is dusty, it is windy, it is not an important surroundings for mining until you are utilizing immersion, which lets you shield the machines. It is extra environment friendly at holding 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 fee increase 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, will likely be one of many largest immersion cooling programs on the earth. All proper.

By way of machine improvement, we introduced earlier this yr a relationship with Intel, and considered one 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 into the area is extremely necessary. It provides the bitcoin mining area extra credibility to have a blue chip firm like Intel coming in, however it additionally will profit the business to have a extra various provide chain, and extra choices for ASICs and in addition to have chips accessible 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 present accessible off the shelf available in the market. And this can permit us to additional enhance our hash fee at aggressive margins.

By way of growing that machine, we now have an important relationship with the third-party producer. We’re working very intently with them on the design of the mining machine from prime to backside, and we count on to have the ability to deploy these machines towards the tip of the yr.

So alongside these traces that is what the look forward for the yr appears to be like prefer to get us to the 200 megawatts at Helios. So you possibly can see a few of 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 have the ability to benefit from the ancillary providers that ERCOT gives in Texas.

The set up of the immersion tools goes very effectively. That features the dry coolers that I simply talked about which you can see on the within 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.

By way of the set up of machines, we count on to begin putting in machines very quickly, each the Core Scientific machines in addition to the Bitmain machines. So you possibly can see these two traces right here. The Core machine swap has been structured in a approach to mitigate any downtime. In order we obtain the brand new machines and set up them in batches, Core will take over the hash fee from our machines situated of their services, and that’ll happen on 4 completely different specific gates. This may get rid of downtime and in addition 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.

By way of energization, you see slightly dot there, slightly diamond does really feel like a diamond as a result of it is so necessary for us, it’s slated to occur very quickly. Very, very quickly we’ll make an announcement to the market when it occurs. It is, clearly, a vital occasion to get mining operations began at Helios.

After which lastly on the Intel piece, we’re at present within the design testing section for the Intel machines and we count on to deploy these machines towards the tip of this yr after which into 2023. So you possibly can see the dotted line on the chart. That’s after we count on to deploy the Intel machines, after which there will be extra into 2023 as effectively. We can’t cease with simply the fourth quarter.

So what does all this imply by way of our hash fee? Bringing Helios on-line, finishing section one will, clearly, have a big impression on our hash fee. So proper now we now have 1.6 Exahash in capability. We began Q2 there. We’ll see enhance in hash fee as we begin to set up the 20,000 S19J Execs that we ordered from Bitmain. These rigs are going to be delivered, as I’ve stated, many occasions earlier than on this presentation and others in Might — beginning in Might after which by way of to the tip 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 an extra uplift in hash fee as we deploy the Intel ASIC 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 fee at Helios with the complete 200 megawatts on-line. This doesn’t embrace any uplift from the service provider. So we’re making an attempt to be conservative about our hash fee projections. Once more, under-promise, overdeliver. So that is nameplate — nameplate hash fee, not together with immersion.

After which keep in mind, we nonetheless have one other 20 megawatts of capability. Our Quebec services, the place we mine each Bitcoin and Zcash. All of our Zcash mining is going down in Quebec. We at present wouldn’t have any mining aside from Bitcoin mining slated for the Helios facility.

All proper. Leaping forward to the longer term, we expect that one of many main advantages of our Helios facility is clearly the potential for this development, this runway for development. We have got an interconnection settlement for 800 megawatts of energy, which suggests we now have an extra 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 gentle provide of machines.

By way of manufacturing these machines, we’re working with a 3rd occasion to customized manufacture these, and that, once more, we’re assured it’ll outcome on a less expensive price per terahash foundation than what’s at present accessible available in the market. So add all of those elements 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 improvement clearly of the extra 600 megawatts of capability at Helios. So though we’re nonetheless solely in Section 1, the 200 megawatts we have taken steps to — for the longer term phases already.

We introduced earlier this yr that we ordered 4 extra 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 and second quarter of subsequent yr. So it is necessary we get these orders in. However we now have a transparent path to getting there to the complete 800 megawatts built-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 aspect 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 almost 300 million of exterior capital. A few of that has been fairness, just like the personal placement loans that befell in early 2021 and the NASDAQ itemizing, however we have additionally issued debt just like the Bitcoin backed mortgage, the 40 million in child bonds, and the infrastructure mortgage that we have achieved 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 shifting ahead.

In order that takes us to the following slide, which is how we will finance our development in 2022. So so as to full Section 1 of Helios, which incorporates each slightly bit extra capital into infrastructure, after which machines to completely construct out the 200 megawatts, we’d like roughly $125 million of extra capital. And as I’ve stated many occasions, we now have three levers which we are able to pull on after we’re elevating capital debt, fairness, and promoting bitcoin. Proper now, we plan to boost the extra capital by way of a mix of debt and bitcoin. We do not anticipate issuing fairness in 2022.

As this debt market is maturing, we see numerous alternatives, together with machine financing. We have constructed some actually robust relationships with the main capital suppliers within the area during the last three, 4 years, notably during the last 12 months, robust relationships with Galaxy, with NYDIG, with different new people who’re shifting into the area. They’re all seeking to deploy capital, and to look — and seeking to respected miners to deploy that with. So we’re in a very good place on the financing aspect and that is our focus.

By way of 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 slightly little bit of debt. Nevertheless, going ahead, we’re taking a barely completely different strategy, 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 consider 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 strategy and doing a mixture of debt, and bitcoin.

All proper. Shifting 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 situated our mining services the place we now have. 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, turned 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 aspect of issues, the social aspect of issues, our focus is de facto to be a very good company citizen within the communities that we’re working in. So our efforts in Dickens County, we really feel, are bringing financial advantages.

Now we have a really strong relationship with the neighborhood there. In the course of the building section at Helios, we created about 130 building jobs. Now we have 40 full time jobs that we have created for Section 1 of the power. Many of the hiring has been taken — has taken place in Dickens County.

A few of it’s from the neighboring area, from the Lubbock space. And we have one other 20 half time employees or non permanent employees 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 aspect of issues, we strengthened 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 more than 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 all the time — these of you that know the corporate effectively, we have informally all the time felt like there’s alternatives within the blockchain ecosystem system at massive. 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 particular person crew led by Seb, and they’re actually in search of methods for us to take part within the disruptive sectors of the blockchain, and Internet 3.0 ecosystem. So similar to it was a small crew of us that began the mining aspect of issues, it is a small crew that is engaged on the innovation aspect, the non-mining aspect of issues.

And customarily, the aim for this crew is to take a portion of our bitcoin holdings, and generate extra uplift that merely outperforms holding bitcoin or that outperforms merely holding bitcoin. So, thus far we have allotted them 10% of our complete digital property. That is going effectively. They’re doing an important job thus far, and we’ll reassess that the quantity of allocation that they’ve on a quarter-by-quarter foundation.

All proper. That’s my slides. I’ll hand it over to Alex for a pair for him.

Alex Appleton

Thanks, Peter. So, it is actually been an important yr. I do know Peter’s touched on loads of these figures already, however I feel it is price going by way of them in slightly bit extra element. Income is as much as $100 million, £74 million.

That is been pushed by each the rise within the bitcoin value, which Peter’s talked about, and in addition our elevated capability, most of which, on this yr truly got here on towards the tip of the yr. In order that extra 500 Petahash the FDA, so we’ll see the complete impression of that as we go into 2022, after which additionally, after all, with the growth of Helios.

Mining margin remained very robust. 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 shifting into what’s Helios the place we now have entry on to that low price of energy.

And so, margins you have seen from our operational updates, margins have tightened slightly bit, however nonetheless effectively into the 70s, which is enviable throughout most industries. And we will keep on the very in that TAA of miners by getting access to low price energy, and in addition the machines that we’re constructing out and the immersion aspect of that as effectively.

In order that’s meant for gross revenue, very robust, very robust for the yr. That is by way of $70 million to £50 million at 70%. By way of working prices and bills, sure, they’ve elevated. With Peter’s gone by way of how we have strengthened the chief crew, we strengthened the administration crew inside 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 employees by way of worker prices, et cetera. So, you could have seen a rise within the basic administrative bills there.

Moreover, with the twin itemizing, we do incur extra charges, extra skilled charges, extra consulting charges, et cetera. So you may additionally see these prices going by way of the working price of bills there as effectively.

I will draw your consideration is in regards to the share primarily based cost cost that’s on there, that is £2 million, or $2.6 million. That’s truly, that is the cost that’s taken on to the accounting changes. It isn’t truly a money circulate by way 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 there. By way of different revenue and bills, we have taken on some debt. So we now have some elevated curiosity bills there. After which, there’s some completely different re-evaluations, et cetera, which leads right down to our internet revenue of £30 million. 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 now have – we have had quite a lot of personal placements, which has actually strengthened the steadiness sheet. So you possibly can see the tip of the yr, we have a really robust steadiness sheet, considerably stronger than final yr by way of our internet. Our internet property are effectively into the $200 million – $220 million or so.

And we’re – what have we achieved with the money that we have truly raised? So the nice majority of that has gone into machines, both machines that we have put in and placed on the bottom, there’s about £40 million price of machines that we have put in and placed on the bottom and bought. There’s loads of money that we have used to truly put up the prepayments for the machines, largely for the Bitmain order. In order that’s almost 50 million with the majority of that being for the Bitmain order. We have additionally invested clearly closely in Helios, and that asset in addition to over £70 million, has additionally gone into to that.

Alongside that, as Peter stated, we have been capable of proceed to HODL, and develop our digital property that are fairly vital 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 now have quite a lot of choices round debt that are very, and there is a query truly in there in regards to the rates of interest and the way that is impacted as we’re truly seeing rates of interest come down.

I keep in mind – the primary bitcoin backed mortgage that we had again in June of 2021, the rate of interest was over 12%. We have seen that fall considerably throughout 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 more than 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 Wall

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 throughout the presentation within the chat group on the aspect, or the Q&A piece on the aspect. And he’ll learn out some questions after which Alex and I’ll reply.

Query-and-Reply Session

A – Tom Divine

Yeah. Thanks, Peter. We have been getting loads of questions from people who’re listening in, in addition to a few of the promote aspect analysis analysts. So I’ll 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 tip of 2022?

Peter Wall

All proper. Thanks, Jason. So the reply isn’t any. Once more, we’re making an attempt to make it possible for we’re conservative with our projections, under-promise, over ship. So the 5.5 Exahash doesn’t embrace an uplift from rising.

Tom Divine

Okay. Nice. Thanks, Peter. Our subsequent query comes from Darren Aftahi at Roth Capital Companions. What kind of benefit do you assume the availability settlement with Intel may give you versus different miners?

Peter Wall

Thanks for the query, Darren. By way of the availability settlement with Intel, the benefit for us is that, we may have a greater entry to a secure supply of chips, which in flip will imply cheaper hash fee development, potential to customise our mining rigs. That is a very necessary issue if you’re utilizing immersion cooling. And I feel, as you realize, Darren, we prefer to be very granular, very a lot in management, very a lot optimize our machines and our mining. We run a really type of customized mining store. This isn’t a plug-and-play or a plug-and-pray type of an organization. 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 immersion surroundings. And that permits us to essentially get essentially the most out of our mining operations.

Tom Divine

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

Peter Wall

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

Alex Appleton

Sure. Completely. I will take it. It is for electrical infrastructure that we now have on the bottom in the meanwhile. We’re actually happy with that NYDIG. NYDIG is a good accomplice to have on this area. And once more, again to the rate of interest, 8.25% may be very aggressive in comparison with the normal sector. So it’s a very a very good deal for us. And it is one thing that may present a chance going ahead for as we construct out Helios that may give us additional collateral to have the ability to use for additional debt initiatives.

Tom Divine

Nice. Our subsequent query comes from Joe Vafi at Canaccord. Might you go right into a bit extra element on the ASICs you are buying from Intel? I imagine they don’t seem to be placing full programs collectively. Do you could have a design accomplice at this level?

Peter Wall

Positive. Thanks, Joe. So these — I will provide you with slightly little bit of a background on how he got here to work with Intel, after which slightly bit in regards to the customized mining rigs. So Intel reached out to quite a lot of people within the area again in round This autumn of final yr and stated, “Hey, we will be growing a mining chip. Are you all all for working with us?”, and naturally, we stated, “Completely, we might be very .” They usually stated, “Pay attention, we’re solely going to work with miners that match that type of a line with our values on the ESG aspect of issues specifically.”

So we walked by way of what we’re doing — what we have been doing, and what we’re doing on the ESG aspect of issues. They usually stated, “That sounds nice. You guys sound like a very good match.”

After which, by way of that relationship, by the way in which, they discovered that we now have a really robust know-how crew led by our CTO, Perry. And so there’s been numerous collaboration and many dialog with Intel about what they’re doing. And there is been numerous schooling backwards and forwards on either side.

So it has been a very good relationship thus far, and we’re excited to be working with them, by way of what that remaining system goes to seem like. Sure, you are proper, Joe. They don’t seem to be placing a full system collectively. They’re growing chips. That is what they do. That is what they’re actually good at. After which, similar to they promote chips to competing laptop 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 along with a provider from Intel or to go along 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 will likely be working with the third-party to develop these customized mining rigs. And as quickly as that relationship is able to announce to the market, we’ll. But it surely’s one thing that we’re actually enthusiastic about and one thing that we expect is a key differentiator for us at this level.

Tom Divine

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 accessible at Helios?

Peter Wall

Sure. It is one other good query. So this isn’t one thing that we expect goes to have an effect on us. Now we have our interconnection settlement in place for the complete 800 megawatts of capability. We even have a very strong relationship with ERCOT. We had been truly 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 vitality providers. They handle interconnection agreements, they handle PPAs, they handle energy load flexibility, they’re actually the important thing people in Texas that you simply 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 nervous about any modifications to ERCOT, and we encourage ERCOT to make it possible for, 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 in all probability 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 numerous energy being made. And this makes our versatile load actually necessary for that area, and actually necessary for grid stability.

So I feel ERCOT, the primary time I stated to Brad Jones, who’s the top of ERCOT, “Hey, we’re establishing 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 more than happy with the place we have chosen to arrange. And I do not see any points in Texas with the grid for us.

Tom Divine

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 Wall

Sure. So I coated this slightly 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 already at Core. Our machines are already at Core. So we’re not anticipating any downtime.

We have type of taken that into consideration. That is a part of why — we have structured the deal as we now have. Now we have a very good relationship with Core. We have labored with them for a few years. We’re pals with these guys. However finally, we wish to be the captains of our personal ship and be capable to run our personal facility.

So the connection is coming to an finish in an amicable method. By the tip of July this yr, we’ll have all of these machines which are — all of that capability at that Core will likely be at our facility. And what I can let you know 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 similtaneously the — in parallel with the set up of the Bitmain machines which are additionally beginning to arrive at Helios proper now.

Tom Divine

Nice. Our subsequent query is 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 Wall

Sure. It is a good query. Thanks, Suthan. So if you consider type of our three foremost buckets of CapEx for the remainder of this yr, there’s infrastructure, there’s Bitmain machines, after which there’s Intel machines.

The infrastructure, the overwhelming majority that’s already paid for, clearly, we have constructed it. If you happen to work with building people, it is advisable to pay them as you are constructing. In order that’s just about already achieved and paid for. Tiny little bit of infrastructure price left, however not a complete lot.

The second, on the Bitmain machines, we have paid the 20,000 machines, Bitmain order. Now we have 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. Now we have a deposit with Intel. We have — we have began that relationship, however the majority of that capital will likely be for machines, and the vast majority of the machine capital will likely be for the Intel aspect. Alex, do you wish to add something to that?

Alex Appleton

No. I feel you have just about coated it, Peter. As you say, the bulk left is machines, a big majority of machines. As Peter stated, with two thirds of the way in which by way of as we stand in the present day, we’re over two thirds of the way in which by way of the Bitmain funds and looking out ahead, its Intel that’s the price, foremost price for them, not 1 million to five million.

Tom Divine

Nice. Our subsequent query, we have gotten a number of occasions from Kevin [indiscernible] and a few others within the chat. Do you propose on trying on the choice of constructing our personal photo voltaic fields and wind farms at Helios?

Peter Wall

Thanks for the query, Kevin. So the quick reply is, sure. Within the long-term, it is one thing that we’re taking a look at as an choice. Clearly, Texas is a good spot for each photo voltaic and for wind. That is why there’s a lot renewable improvement there.

By way of 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 now have the interconnection settlement with. However clearly, as we develop as miners on this area, because the business develops, you are seeing two key, effectively, 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 could 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 aspect.

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 personal energy from renewables is one thing that, as a miner it is advisable to be excited about sooner or later.

Tom Divine

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

Peter Wall

Thanks, Jon. Jon from Jefferies, JJ. So briefly, sure, the rise within the fourth quarter of this yr will likely be coming from Intel, as you noticed in our chart. That is actually the place the expansion in hash fee goes to be coming from — at Helios. By way of price per terahash, we do not have a value per terahash that we’re capable of share but.

We’re very optimistic that the associated fee per terahash will likely 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 so forth., and so forth., to have the ability to optimize in an rising surroundings.

Tom Divine

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 comparable to Ethereum, Solana, Atom, et cetera?

Peter Wall

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 very good APY.

Tom Divine

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

Peter Wall

Sure, it is a good query, Ramsey. I feel the final type of quantity I noticed Russia was roughly 10% of world hash fee. Clearly, the latest occasions with BitRiver having to close down and so they’re, if not the largest, one of many largest gamers in Russia will have an effect. I do not assume it may have the identical type of impression on international hash fee the way in which that the mining ban in China occurred or did. I feel it might need a – would possibly gradual issues down slightly bit by way of development, however I do not assume it is going to be that vital.

I feel the place to look at hash fee development proper now’s the US. And many miners, numerous publicly traded miners have put numbers out and stated we will be at X-ex of hash by this specific date, and we’ll need to 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 occasions on this name, underneath promising and over delivering and ensuring that if we put a quantity out, we’re 100% assured that we are able to meet it.

Tom Divine

Our subsequent query comes from Abey R [ph]. What impression have provide chain points had on the enterprise?

Peter Wall

Sure. Thanks, Abey. Pay attention, international provide chains are robust around the globe. Positively, it has been slightly bit tougher to satisfy our deadlines, however we’re nonetheless capable of keep on schedule with Healios. Now we have somebody who works full time with us proper now at Argo that we’ve employed just lately as a part of that crew of 100 that we’re constructing out, who’s engaged on logistics and provide chain items. She’s an skilled in that world. In order that’s been very useful. And it is one thing we take significantly and put loads of effort into.

We noticed a rise for positive in delivery prices for miners. It is roughly 50% to 100% dearer now — than it was two years in the past to shift miners. In order that’s one thing that we have to be cognizant of after we’re constructing out our budgets, etcetera. However whereas they’ve had an impression for positive, we really feel like we have been capable of climate them due to our – the efforts of our crew.

Tom Divine

Nice. Our subsequent query comes from Alan Howard at Tennyson. How are you excited about the build-out at Helios for future phases? Will or not it’s cheaper than Section 1 and can or not it’s unfold out evenly over the following three years?

Peter Wall

Hey Alan, thanks for the query. So sure, pay attention, we now have a big runway at Helios. As I stated its 600 megawatt, it is a massive chunk to fill. We’re going to focus our CapEx prices there first on the infrastructure and the constructing after which second on the charges. By way of the infrastructure aspect of issues, our expectation is, sure, it is going to be cheaper. We have discovered, as we have grown. We have additionally achieved loads of the groundwork in Texas to make it possible for we’re getting – have the best relationships, the best relationships in place with the best suppliers. We have already put a few of the lengthy lead gadgets in as I discussed for the large transformer items.

I do know a few of these items are already pay as you go. So sure, by way of the infrastructure aspect, our expectation is that, it is going to be cheaper than Section 1. By way of the rig aspect, once more, due to this relationship with Intel, our price per terahash is predicted to be decrease than it’s — than it’ll have been for the primary 200 megawatts.

Tom Divine

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

Peter Wall

Thanks, Luke. Good query. I feel you are in all probability referring to what occurred just lately with the information, I feel, from Fort Value. And so general, we’re not involved about cities and nations getting concerned. Usually, we see this as a constructive factor. We imagine in decentralization. That is the entire level of the bitcoin community. Now we have a transparent aggressive benefit with our mining expertise, with our present infrastructure, with our future infrastructure. So, pay attention, we’re excited in regards to the area normally rising and all the unbelievable momentum that the area has. Though the fairness markets have slowed down so much, it feels to me just like the crypto markets, whereas they’re underneath slightly little bit of stress, are actually charging forward. And I am enthusiastic about this yr and the years to return.

Tom Divine

Our subsequent query comes from Chris Brendler at D.A. Davidson. Are you able to converse extra in regards to the increasing debt financing choices and the enhancing phrases that you simply 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 Wall

Positive. I will begin this one after which I will hand it over to Alex. Thanks for the query, Chris. Simply by way of 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 received quite a lot of very established firms. You have received new people seeking 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, identify your house and also you went to a lender. I feel and not using a observe report, you’d have a tough time getting financing. I feel miners which have observe information, 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, and so they want loads of effort to show. And they also’re not fairly able to get there but. However they’re on their method.

Alex Appleton

Yeah. I simply echo what Peter stated that, by way of, there are loads of new strikes into the market. And what comes with that’s much more due diligence round — who they’re planning to accomplice with, who they’re planning to lend to. So, the observe report is de facto necessary to indicate that we now have used that. We have used that properly. We have been very prudent with out that. We predict we now have extra room to tackle extra debt, and nonetheless keep inside our prudent inside and EBITDAs, debt ratios, et cetera, et cetera, and all of these good issues.

However the place we stand in the present day, we stand in a really robust place, as a result of we do not — we have on our steadiness sheet a big quantity of bitcoin as effectively. So we’re not wholly reliant on debt. In reality, we may nearly self mine — and use the — and have a look at utilizing simply elements of debt, et cetera. As we stated, that is going to be our course of going ahead. So we’re — we’re in actually robust place to maneuver ahead on the debt market stays robust. And it is one thing that we — we’re trying into.

Tom Divine

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

Peter Wall

Sure. Thanks. Thanks, King, for the query. So Argo Labs is the principle level of Argo Labs is diversification. And the crew there may be all the time 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 all the time excited about. By way of mining different crypto property, as we have achieved previously with ZCash, and you then return into 2018, we mined a number of altcoins. We’re all the time opportunistic about different crypto property. It is exhausting to get them, King, at scale. Get machines at scale the way in which you possibly can for bitcoin mining. Infrequently there may be 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 most effective immersion mining facility on the earth. And the machines that we’re targeted on proper now are our bitcoin machines.

Tom Divine

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

Peter Wall

So, thanks for the query, Gary. By way of internet hosting different miners, for now, we plan on utilizing the accessible — energy for ourselves. We’re all the time taking a look at alternatives. We have had numerous conversations. If you’ve received a giant facility coming on-line, individuals knock in your door and so they say, “Hey, — can you’re taking a few of our machines?”, and we really feel like with the with the margins that we now have, with the crew that we now have, 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. Shifting into the longer term, is there a chance to doubtlessly host some people at Helios within the subsequent section? Probably, and we’re having a few of these conversations. However nothing vital to report on in any method proper now.

Operator

That is nice. Thanks very a lot. And Tom, thanks very a lot certainly for internet hosting that Q&A. And Alex and Peter, to your engagement. I’ll shortly redirect traders 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 number of closing feedback to wrap up with.

Peter Wall

Positive. 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 in the present day on this name, however it’s — there’s all the time numerous individuals sending us notes, partaking with us on social media, turning as much as issues like this. We actually recognize it. Hopefully, we had been capable of reply at the very least a few of 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 tip 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 imagine in us, we actually recognize it. We actually do. So, so it is a good time to be an Argonaut, I might say. And onwards and upwards.

Operator

That is nice. Peter, Alex, Tom, thanks very a lot certainly to your time this afternoon and for updating traders. Might I please ask traders to not shut this session, as will now mechanically redirect you for the chance to offer your suggestions so as the corporate can actually higher perceive your ideas and expectations. This would possibly take a number of moments to finish, however I am positive the corporate will likely be most grateful on behalf of the crew from Argo Blockchain PLC, want to thanks very a lot certainly for attending in the present day’s presentation.

Good morning to you, Peter, over there within the US, and good afternoon to everybody within the UK. Thanks.

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