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

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Argo Blockchain plc (ARBK 2.81%)
This fall 2021 Earnings Name
Apr 28, 2022, 8:00 a.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Members

Ready Remarks:

Operator

Good afternoon, and welcome to the Argo Blockchain full 12 months outcomes investor presentation. All through this recorded presentation, traders might be in hear solely mode. [Operator instructions] The corporate might not be ready to reply each query it receives within the assembly itself. Nonetheless, the corporate will assessment 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 positive in the event you might give that your variety consideration, the corporate can 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 12 months outcomes name. As Mark mentioned, 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 slightly 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 up to now with the outcomes popping out. Performed slightly little bit of media. Hopefully a few of you which have adopted the corporate carefully have had an opportunity to see a few of these interviews we have performed.

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 numerous 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 current. We’re including the 2 2.6 Exahash from bitmain from the bitmain order that we’ve.

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 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 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 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 12 months. 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 situated 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 ability 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 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 a lot of , we launched Argo Labs earlier this 12 months. 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 — concerning 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 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 subsequent slide which is the slide that I feel everybody’s been ready for right now, which is our monetary highlights from from final 12 months. In order you may see, it was an important 12 months for us, a transformational 12 months for Argo.

Our income was $100 million, or 74 million pound, a rise of 291% from the 12 months earlier than. Our EBITA was $71 million,  or 53 million pound, up 594% from the earlier 12 months. Our web earnings was $42 million, or 31 million kilos up much less — up from 2 million in 2020. Our bitcoin mine for your complete 12 months was — 2,045.

So simply simply north of 2000. And as I mentioned earlier than, that cash margin was about 84%. On the finish of the 12 months, we held 2585 sorry, 2595 bitcoin and bitcoin equivalents on the steadiness sheet, and that was on the finish of the 12 months, finish of December 2021. On the chart on the best, you may see our mining margin was very sturdy and constant within the eighties for your complete 12 months.

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’ve in Quebec. The momentary drop in international hash charge that passed off with the Chinese language ban on bitcoin mining in mid final 12 months 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 12 months, 2021 was a good time to be a miner with entry to low price energy, and we’re very a lot feeling the identical manner 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 12 months.

So much occurred. However I will level out a few the main highlights that passed off for the 12 months. In all probability, a very powerful one for the 12 months was our acquisition of the Helios challenge within the Texas Panhandle. That occurred within the first quarter.

The Helios challenge was a shovel prepared challenge. It gave us an unimaginable basis for the expansion that we’ve 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 information 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 12 months. It was one thing that numerous shareholders and stakeholders have been asking for. It is one thing that is clearly quite common on this house for — miners to be listed now on Nasdaq. And that is as a result of it is a very powerful entry or offers probably the most the very best entry to the U.S.

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 12 months. 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 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 sort of — on this web page, you may see how dramatic our progress was. Quite a lot of up into the speed from 2020 to 2021.

On the hash charge aspect, 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.

Internet earnings from about $2 million to $42 million. And our money and — money and digital property at 12 months finish went from $9 million to $125 million on the finish of December 2021. So actually some vital metrics and clearly, we have been more than happy with the expansion for the 12 months. All proper.

Nonetheless, it is not 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 crew and convey the required experience in home. Our headcount grew from round seven folks.

We have been a really small firm at first of 2020 once I took over as CEO. Really 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 information 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 normal counsel, runs our authorized division. Justin Nolan was the co-founder of the Helios challenge and actually the drive behind getting arrange in Dickens County. He discovered the land and arrange the challenge 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 carefully 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, an extended profession in that house, and he is constructed a world class information middle operations crew to handle our three information facilities. Clearly, with an enormous focus in Texas proper now.

After which lastly, Tom Divine, who’s on the decision right now, 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 house. 2021 already looks as if a very long time in the past. So for the remainder of the presentation, I will speak about 2022 and past. Clearly, there’s so much occurring with us as an organization, so much occurring within the house.

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 most recent shot from our Helios facility. You’ll be able to see the speedy improvement that is taken place there during the last six, seven, eight months.

The dry cooler is arising on the aspect are virtually to the top of the road. So, so nice, nice improvement. And actually, that’s our main focus for the remainder of this 12 months. So let’s soar forward to the important thing initiatives for the 12 months.

So completion of part certainly one of Helios remains to be slated to completely be baked out and completed by the top of this 12 months. That features filling it up fully with machines, and clearly having all of the infrastructure in place forward of time for these machines. Our development crew’s performed simply a fully unimaginable job with the substation is full. And that faucets into the cottonwood substation, which is throughout the fence line.

All of that being mentioned, we count on our hash charge to develop to five.5 exahash by the top of this 12 months. And that is a quantity that we’re very happy with. Our complete philosophy. I feel folks that observe the corporate carefully know has been to essentially concentrate on progress and to guarantee that we’re gradual and regular and specializing in quarters and years.

And so right now, we’re joyful to say that our expectation is might be 5.5 exahash by the top of this 12 months. 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 top of this 12 months. 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 wonderful. 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 performed. Moreover, we’re additionally not simply engaged on infrastructure, however we’re additionally creating a customized mining rig which is able to make the most of the Intel block scale AC chips.

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

Shout out to the double decker busses in London. On the best hand aspect, 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 one other 20 momentary labor.

So we have an unimaginable crew there charging forward, doing unimaginable work. We’ll have some extra content material, some extra video popping out quickly, very quickly concerning the work that is occurring there, and are actually excited to announce to the market — when that facility is energized. That is the subsequent large 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 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 is not an important setting for mining until you are utilizing immersion, which lets you shield the machines. It is extra environment friendly at protecting the machines cool.

It retains particulate matter mud, sand out, and all of that extends the lifespan of the machines. Along with that, we predict that we are able to get a major hash charge enhance out of the machines, i.e., overclock them when operating them in an immersion setting in comparison with air cooled. So all that being mentioned, the system that we’re constructing in Texas, as soon as it is totally deployed, might be one of many largest immersion cooling methods on this planet. All proper.

By way of machine improvement, we introduced earlier this 12 months a relationship with Intel, and certainly one of our key focuses is constructing a customized mining rig to make the most of the intel chips which can be popping out of that relationship. We’re very proud. We’re excited to be one of many 4 corporations that Intel has chosen to work with us as they entered the bitcoin mining house. And having them enter the house is extremely vital.

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

By way of creating that machine. We now have an important, nice relationship with the third get together producer. We’re working very carefully 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 top of the 12 months. So alongside these strains.

That is what the look forward for the 12 months 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 can be 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 vital half to find a way — to make the most of the — ancillary providers which can be which can be court docket affords.

In Texas, the set up of the immersion tools goes very nicely. That features the dry coolers that I simply talked about that you would be able to 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. 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 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 situated of their services, and that’ll happen on 4, 4 totally different explicit dates. It will 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 large 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 vital 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 vital occasion to get mining operations began at Helios. After which lastly on the Intel piece, we’re at present within the design testing part for the intel machines and we count on to deploy these machines towards the top of this 12 months 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 cannot cease with simply the fourth quarter. So what does all this imply when it comes to our hash charge? Bringing Helios on-line, finishing part one will clearly have a major affect on our hash charge. So proper now we’ve 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 mentioned, many occasions earlier than on this presentation and others in Might — beginning in Might after which by to the top of October. After which the Core machines are a part of that 1.6 exahash.

So we are going to get a rise in exahash from them clearly. On the finish of the 12 months, we’ll see an extra 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 12 months round 5.5 exahash with most of that hash charge at Helios with the with the complete 200 megawatts on-line.

This doesn’t embrace any uplift from the service provider. So we’re attempting 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 present wouldn’t have any mining apart from bitcoin mining slated for the Helios facility.

All proper. Leaping forward to the long run, we predict that one of many main advantages of our Helios facility is clearly the potential for this progress, this runway for progress. We have got an interconnection settlement for 800 megawatts of energy, which suggests we’ve 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 can present us with a gradual provide of machines.

By way of manufacturing these machines, we’re working with a 3rd get together to customized manufacture these, and that, once more, we’re assured it would outcome on a less expensive price per terahash foundation than what’s at present out there out there. So add all of those elements collectively, the ability 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 regardless that we’re nonetheless solely in part one, the 200 megawatts we have taken steps to — for the long run phases already.

We introduced earlier this 12 months that we ordered 4 extra transformers that can take us as much as the complete 800 megawatts of energy. There is a lengthy lead time on people who they are going to be coming within the first quarter of subsequent 12 months. So it is vital we get these orders in. However we’ve 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 aspect of issues? So taking a fast look again. As everybody is aware of, this enterprise is a capital intensive enterprise.

For the reason that starting of 2021, we have raised almost 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 performed with NYDIG. What we’re seeing within the house is, is a continued maturation of debt markets, and that’s the place we’re specializing in our capital elevating efforts transferring ahead.

In order that takes us to the subsequent slide, which is how we’ll finance our progress in 2022. So with the intention to full part certainly one 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 mentioned many occasions, we’ve three levers which we are able to pull on once we’re elevating capital debt, fairness, and promoting bitcoin. Proper now, we plan to boost the extra capital by 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 house during the last three or 4 years, notably during the last 12 months. Sturdy relationships with Galaxy, with NYDIG, with different new people who’re transferring into the house.

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 progress with fairness, and with slightly little bit of debt.

Nonetheless, going ahead, we’re taking a barely totally different strategy, and promoting a portion of our month-to-month bitcoin manufacturing to cowl our working bills and to assist fund our progress 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 progress. 2021, we did not promote any. This 12 months, we’re taking a little bit of a blended strategy and doing a mixture of debt, and bitcoin.

All proper. Transferring on to ESG, clearly, as I mentioned 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 are mining services the place we’ve. First off, in Quebec, the place the machines are operating up hydroelectric energy, and now within the Texas panhandle, the place a lot of the era capability is coming from wind energy. Final 12 months, we put out a local weather technique, turned carbon impartial.

The primary firm within the house to try 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.

We now have a really strong relationship with the neighborhood there. Throughout the development part at Helios, we created about 130 development jobs. We now have 40 full time jobs that we have created for part 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 momentary workers which can be serving to within the final push to get the power up, up and operating. We even have made a contribution again to the neighborhood to refurbish the neighborhood pool, and that is — been closed since 2009. That challenge 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 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 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 12 months, though we have informally all the time these of you that know the corporate nicely, 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 known 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 identical 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 usually, the objective 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, up to now we have allotted them 10% of our whole digital property.

That is going nicely. They’re doing an important job up to now, 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 12 months. I do know Peter’s touched on numerous these figures already, however I feel it is price going by them in slightly 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 12 months really got here on towards the top of the 12 months.

In order that extra 500 petahash, [Inaudible] that we’ll see the complete affect of that as we go into 2022. After which additionally after all with the enlargement of Helios. Mining margin remained very sturdy, once more, Peter’s already mentioned 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 entry on to that low price of energy. And so, yep, margins you have seen from our operational updates, margins have tightened slightly bit, however nonetheless nicely into the 70s, which is enviable throughout most industries. And we’ll keep on the very in that [Inaudible] of miners by getting access to low price energy, and likewise the machines that we’re constructing out and the immersion component of that as nicely. In order that’s meant for gross revenue, very sturdy, very sturdy for the 12 months.

That is by $70 million to 50 million kilos at 70%. By way of working prices and bills, sure, they’ve elevated. With Peter’s gone by 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 workers when it comes to worker prices, and so on..

So you have got seen a rise within the normal administrative bills there. Moreover, with the twin itemizing, we do incur extra charges, extra skilled charges, extra consulting charges, and so on.. So you may additionally see these prices going by the working price of bills there as nicely. I will draw your consideration is concerning the share based mostly cost 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 isn’t really a money move by the enterprise. And that takes us right down to our whole working bills there of 10 million kilos. Nonetheless a really wholesome revenue.

Working revenue, which actually happy with, which we obtain this 12 months, 43 million kilos there. By way of different earnings and bills, we have taken on some debt. So we’ve some elevated curiosity bills there. After which there’s some totally different reevaluations, and so on., which leads right down to our web earnings of 30 million kilos.

So a very pleasing 12 months, and one we’re actually happy with. And as I say, we’re well-positioned to proceed on the expansion part and proceed a really worthwhile stage. The steadiness sheet. So this 12 months, as Peter mentioned, we’ve — we have had numerous non-public placements which has actually strengthened the steadiness sheet.

So you could possibly see the top of the 12 months, we have a really sturdy steadiness sheet, considerably stronger than final 12 months when it comes to our web. Our web property are nicely into the $200 million — $220 million or so. And we’re — what have we performed 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 numerous money that we have used to really 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 closely in Helios and that asset in addition to over 70 million kilos, has additionally gone into to that. Alongside that, as Peter mentioned, we have been in a position to proceed to HODL, and develop our digital property 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 numerous choices round debt that are very, and there is a query really in there concerning 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 12 months. On the 12 months finish, rate of interest was 8%.

And we’re seeing continued downward strain 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 12 months 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 aspect or the Q&A bit on the aspect.

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

Tom DivineVice President of Investor Relations

Yeah. Thanks, Peter. We have been getting numerous questions from people who’re listening in, in addition to among the promote aspect 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 isn’t any. Once more, we’re attempting to guarantee that we’re conservative with our projections, under-promise, overdeliver.

So the 5.5 exahash doesn’t embrace 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 assume the availability settlement with Intel may give you versus different miners?

Peter WallChief Government Officer

Thanks for the query, Darren. By way of the availability settlement with Intel, the benefit for us is that, we can have a greater entry to a secure supply of chips, which in flip will imply cheaper hash charge progress, potential to customise our mining rigs. That is a very vital issue once you’re utilizing immersion cooling. And I feel, as , 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 achieve this cheaper and we are able to put these into an rising setting. And that permits us to essentially get probably the most out of our mining operations.

Tom DivineVice President of Investor Relations

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 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 on the bottom for the time being.

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

And it is one thing that can present a possibility going ahead for. As we construct out Helios that can 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. 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 methods collectively. Do you have got a design associate at this level

Peter WallChief Government Officer

Certain. Thanks, Joe. So these — I will offer you slightly little bit of a background on how he got here to work with Intel, after which slightly bit concerning the customized mining rigs. So Intel reached out to numerous people within the house again in round This fall of final 12 months and mentioned, “Hey, we’ll be creating a mining chip.

Are you all fascinated by working with us?”, and naturally, we mentioned, “Completely, we might be very .” And so they mentioned, “Pay attention, we’re solely going to work with miners that match that form of a line with our values on the ESG aspect of issues particularly.” So we walked by what we’re doing — what we have been doing, and what we’re doing on the ESG aspect of issues. And so they mentioned, “That sounds nice. You guys sound like a very good match.” After which, by that relationship, by the best way, they discovered that we’ve a really sturdy know-how crew 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 schooling backwards and forwards on either side. So — it has been a very good relationship up to now, and we’re excited to be working with them when it comes to what that remaining system goes to appear to be. Yeah, you are proper, Joe. They don’t seem to be placing a full system collectively.

They’re creating chips. That is what they do. That is what they’re actually good at. After which, identical to they promote chips to competing pc producers like Dell, they are going to 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 selection, the third get together of our selection. So we’ve not introduced that but what we’re doing, however we might be working with the third get together to develop these customized mining rigs. And as quickly as that relationship is able to announce to the market, we are going to. But it surely’s one thing that we’re actually enthusiastic about and one thing that we predict 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 corporations restrict the ability out there at Helios?

Peter WallChief Government Officer

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

We even have a very strong 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 vitality providers.

They handle interconnection agreements, they handle PPA, 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 apprehensive about any modifications to ERCOT, and we encourage ERCOT to guarantee that, that people in Texas are getting the ability that they want, and miners are getting the ability 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 selected area that has a really excessive era 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 vital for that area, and actually vital for grid grid stability. So I feel ERCOT, the primary time I mentioned 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 mentioned, “We’d like load in that space. That is wonderful.

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 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 manner of filling Helios?

Peter WallChief Government Officer

Yeah. So I lined 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 can be which can be 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.

We now have a very good relationship with Core. We have labored with them for a few years. We’re buddies 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 manner. By the top of July this 12 months, we’ll have all of these machines which can be — all of that capability that that Core might be at our facility. And what I can let you know is that, these machines from Core have already began arriving to a major 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 can be 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 part one, what’s 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 consider our three foremost buckets of cap — capex for the remainder of this 12 months, 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 development people, it is advisable pay them as you are constructing. In order that’s just about already performed and paid for. Tiny little bit of infrastructure price left, however not an entire lot.

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

We now have a deposit with Intel. We have — we have began that relationship, however the majority of that capital might be for machines, and nearly all of the machine capital might be for the Intel aspect. 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 major majority of machines. As Peter mentioned, with two thirds of the best way by as we stand right now, we’re over two thirds of the best way by the bitmain funds.

And searching ahead, it is Intel that’s the price, foremost price for them, not 1 million to five million.

Tom DivineVice President of Investor Relations

Nice. Our subsequent query we have gotten a number of occasions 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 as an possibility. Clearly, Texas is a superb 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 subsequent part is that, the remaining 600 megawatts which we’ve the interconnection settlement with. However clearly, as we develop as miners on this house, 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 could be a key, key piece of mining. After which — the final one getting nearer to capital, and also you see increasingly more capital suppliers coming into the house.

And as we have talked about on this presentation on the debt aspect. So all of these issues are taking place 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 it is advisable be eager about sooner or later.

Tom DivineVice President of Investor Relations

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

Peter WallChief Government Officer

Thanks, Jon. Jon from Jefferies, JJ. So briefly, sure, the rise within the fourth quarter of this 12 months might 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. By way of price per terahash, we do not have a price per terahash that we’re in a position to share but. We’re very optimistic that the price per terahash might 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 on., and so on., to have the ability to optimize in an rising setting.

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 manner in your 10% HODL at Argo Labs resembling Ethereum, Solana, Atom, and so on.?

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 manner that guides us a capability to earn a very good APY.

Tom DivineVice President of Investor Relations

Subsequent query is from Ramsey El-Assal at Barclays. The way you — how are you eager about the affect 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 assume it will have the identical affect on international hash charge the best way that the mining ban in China occurred or did. I feel it might need — it would gradual issues down slightly bit when it comes to progress, however I do not assume it will be that important. I feel the place to observe hash charge progress proper now could be in america. And many miners, a lot of publicly traded miners have put numbers out.

And so, we’ll be at x exahash by this explicit date, and we’ll must see in the event that they hit — these numbers that they’ve put out. For us, that is the 12 months of execution. 2021 was the 12 months of progress. 2022 is the 12 months of execution.

So we have been actually specializing in, as I mentioned a few occasions 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 affect have provide chain points had on the enterprise?

Peter WallChief Government Officer

Yeah. Thanks, Abby. 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 in a position to keep on schedule with Helios. And we’ve somebody who works full time with us now at Argo that we have employed 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 professional in that world. And in order that’s that is been very useful and it is one thing we take critically and put numerous effort into.

We noticed a rise for positive 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 have to be cognizant of once we’re constructing out our budgets, and so on.. However whereas they’ve had an affect for positive, we really feel like we have been in a position to climate them due to our — the efforts — of our crew.

Tom DivineVice President of Investor Relations

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

Peter WallChief Government Officer

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

We’re going to focus our capex price there. First, on the infrastructure and the constructing, after which second on the rigs. By way of the infrastructure aspect of issues. Our expectation is, sure, it will likely be inexpensive.

We all know, we have discovered as we have grown. We have additionally performed numerous the groundwork in Texas to guarantee that we’re getting, have the best relationships — the best relationships in place with the best suppliers. We have already put among the lengthy lead objects in, as I discussed, for the massive transformer items. And people — a few of these items are already pre-paid.

So, sure, — when it comes to the infrastructure aspect, our expectation is that it will likely be — it will likely be inexpensive than part one. By way of the rig aspect, once more, because of this relationship with Intel, our price per terahash is anticipated to be decrease than it’s, than it would 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 assume you have got a aggressive benefit together with your infrastructure?

Peter WallChief Government Officer

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

Typically, we see this as a constructive factor. We imagine in decentralization. That is the entire level of the bitcoin community. We now have a transparent aggressive benefit with our mining expertise, with our present infrastructure, with our future infrastructure.

So, hear, we’re excited concerning the house generally rising and all the unimaginable momentum that the house has. Although the fairness markets have slowed down so much, it feels to me just like the crypto markets, whereas they’re below slightly little bit of strain, are actually charging forward. And I am enthusiastic about this 12 months 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 concerning the increasing debt financing choices and the bettering phrases that you simply talked about? We have additionally heard that conventional banks have turn out 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 can be — which can be on the market now than there was — 12 months in the past — I imply 18 months in the past, there was principally no debt financing choices.

Now you have obtained numerous very established corporations. You’ve got obtained new people seeking to get into the house. And as Alex mentioned earlier, phrases are getting higher. So, our market circumstances 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 mentioned, “Hey, I am opening a 50 megawatt facility in, identify your house”, and also you went to a lender. I feel with no observe document, you’d have a tough time getting financing. I feel miners which have observe information, which have current groups in place, which have relationships in place, I feel these are the miners which can be going to have the ability to develop. So I feel scale issues and status 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 large shift. They take a very long time to show, they usually want numerous effort to show.

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

Alex AppletonChief Monetary Officer

Yeah. I simply echo what Peter mentioned that, when it comes to, there are numerous 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 observe document is de facto vital to point out that we’ve used that.

We have used that properly. We have been very prudent with out that. We expect we’ve extra extra room to tackle extra debt, and nonetheless keep inside our prudent inside and EBITDAs, debt ratios, and so on., and so on., 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 major quantity of bitcoin as nicely.

So we aren’t wholly reliant on debt. In actual fact, we might virtually self mine — and use the — and have a look at utilizing simply components of debt, and so on.. As we mentioned, 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 number of extra questions from King F, given the volatility of bitcoin value and the unpredictability of the crypto house generally, do you have got any plans or alternatives to diversify your mining capability into totally different blockchain property?

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 crew there’s all the time exploring different avenues to have a look at. Cannot share something for the time being precisely what they’re . However, sure, it is one thing that we’re all the time eager about. By way of mining different crypto property, as we have performed previously with Zcash, and you then return into 2018, we mined a bunch of altcoins.

We’re all the time opportunistic about different crypto property. It is onerous to get them, King, at scale. Get machines at scale the best way you may for bitcoin mining. Occasionally there’s alternatives, once more, like we had with the Z11s mining Zcash.

However for probably 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. By way of internet hosting different miners, for now, we plan on utilizing the out there — energy for ourselves. We’re all the time alternatives. We have had a lot of conversations.

Once you’ve obtained 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, with the crew that we’ve, 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 doubtlessly host some people at Helios within the subsequent part? Doubtlessly, and we’re having a few of these conversations. However nothing important to report on in any manner proper now.

Questions & Solutions:

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, on 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 questioned if I could ask you for a number 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 know the way many individuals we had right now on this name, but it surely’s — there’s all the time 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 at the very least among the questions that got here out. And we have some large 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 12 months, quarters and years, and this factor takes time to construct. And people of you which can be sticking with us and which can be imagine 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.

Operator

That is nice. Peter, Alex, Tom, thanks very a lot certainly on your time this afternoon and for updating traders. Might I please ask traders to not shut this session, as will now robotically 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 might be most grateful on behalf of the crew 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]

Length: 61 minutes

Name contributors:

Peter WallChief Government Officer

Alex AppletonChief Monetary Officer

Tom DivineVice President of Investor Relations

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