Argo Blockchain PLC Announces Interim Half Year Results 2023

LONDON, UK / ACCESSWIRE / August 29, 2023 / Argo Blockchain plc, a global leader in cryptocurrency mining (LSE:ARB)(NASDAQ:ARBK), is pleased to announce its results for the six months to 30 June 2023.

Highlights

• Reduced non-mining operating costs and expenses by 21% in Q2 2023 compared to the prior quarter, resulting in a positive Adjusted EBITDA of $1.0 million for the quarter (Adjusted EBITDA of $2.3 million for H1 2023)
• Reduced debt by $4 million during the quarter to $75 million as of 30 June 2023, a $68 million reduction from $143 million at 30 June 2022
• Total number of Bitcoin and Bitcoin Equivalent ("BTC") mined during H1 2023 was 947, a 1% increase over the BTC mined in H1 2022, despite a 78% increase in the global hashrate from 30 June 2022 to 30 June 2023
• Revenues of $24.0 million for H1 2023, a decrease of 31% from H1 2022, driven primarily by a decrease in Bitcoin price and the increase in the global hashrate and associated network difficulty
• Net loss was $18.8 million for H1 2023, compared to a net loss of $39.6 million in H1 2022
• The Company ended June 2023 with $9.1 million of cash and 46 Bitcoin or Bitcoin Equivalent (together, "BTC") on its balance sheet; post the period end, the Company raised $7.5 million in gross proceeds via a share placement in July 2023

Post-period highlights

• Increased total hashrate capacity to 2.6 EH/s with the deployment of 1,242 BlockMiner machines at its Quebec facilities
• Expect to deploy an additional 1,628 BlockMiners in the coming months, increasing the Company's total hashrate capacity to 2.8 EH/s
• In July 2023, the Company raised $7.5 million of gross proceeds via a share placement with institutional and retail investors in the UK; the Company used a portion of these proceeds to repay approximately $1.8 million in debt, and the Company's debt balance at the end of July 2023 was $72 million
• The Company is involved in advanced discussions to sell certain non-core assets, and it continues to evaluate options for further reducing debt

Fixed Price Power Purchase Agreement at Helios

During H1 2023, the Company achieved a mining margin of 42%, which is an increase from the mining margin in H2 2022 of 33%. One of the primary drivers of the improved mining margin was the establishment of a fixed price power purchase agreement ("PPA") at Helios in H1 2023, which covers a substantial portion of the facility's electricity load. In addition to providing greater certainty of power costs at Helios going forward, the fixed price PPA also allows the Company to generate power credits via economic curtailment. In Q2 2023, the Company generated approximately $1.1 million in power credits, and it expects to generate more significant power credits during Q3 2023 as a result of the continued heat wave in Texas.

Non-IFRS Measures

The following table shows a reconciliation of mining margin percentage to gross margin, the most directly comparable IFRS measure, for the six month periods ended 30 June 2023 and 30 June 2022.

The following table shows a reconciliation of Adjusted EBITDA to net (loss) / income, the most directly comparable IFRS measure, for the six month periods ended 30 June 2023 and 30 June 2022.

Inside Information and Forward-Looking Statements

This announcement contains inside information and includes forward-looking statements which reflect the Company's current views, interpretations, beliefs or expectations with respect to the Company's financial performance, business strategy and plans and objectives of management for future operations. These statements include forward-looking statements both with respect to the Company and the sector and industry in which the Company operates. Statements which include the words "remains confident", "expects", "intends", "plans", "believes", "projects", "anticipates", "will", "targets", "aims", "may", "would", "could", "continue", "estimate", "future", "opportunity", "potential" or, in each case, their negatives, and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties because they relate to events that may or may not occur in the future, including the risk that the Company may receive the benefits contemplated by its transactions with Galaxy, the Company may be unable to secure sufficient additional financing to meet its operating needs, and the Company may not generate sufficient working capital to fund its operations for the next twelve months as contemplated. Forward-looking statements are not guarantees of future performance. Accordingly, there are or will be important factors that could cause the Company's actual results, prospects and performance to differ materially from those indicated in these statements. In addition, even if the Company's actual results, prospects and performance are consistent with the forward-looking statements contained in this document, those results may not be indicative of results in subsequent periods. These forward-looking statements speak only as of the date of this announcement. Subject to any obligations under the Prospectus Regulation Rules, the Market Abuse Regulation, the Listing Rules and the Disclosure and Transparency Rules and except as required by the FCA, the London Stock Exchange, the City Code or applicable law and regulations, the Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. For a more complete discussion of factors that could cause our actual results to differ from those described in this announcement, please refer to the filings that Company makes from time to time with the United States Securities and Exchange Commission and the United Kingdom Financial Conduct Authority, including the section entitled "Risk Factors" in the Company's Annual Report on Form 20-F.

For further information please contact:

About Argo:

Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK) blockchain technology company focused on large-scale cryptocurrency mining. With mining facilities in Quebec, mining operations in Texas, and offices in the US, Canada, and the UK, Argo's global, sustainable operations are predominantly powered by renewable energy. In 2021, Argo became the first climate positive cryptocurrency mining company, and a signatory to the Crypto Climate Accord. For more information, visit www.argoblockchain.com.

Interim Management Report

Argo entered 2023 on the heels of a transformational series of transactions with Galaxy Digital Holdings Ltd. ("Galaxy") that strengthened our balance sheet, improved our liquidity position, and positioned Argo for profitable mining. As part of the transactions, the Helios facility and real property in Dickens County, Texas were sold to Galaxy for $65 million and existing asset-backed loans were refinanced with a new $35 million three-year asset-backed loan with Galaxy. The transactions reduced total indebtedness by $41 million and allowed Argo to simplify its operating structure.

Importantly, the Company maintained ownership of its entire fleet of more than 27,000 mining machines. Its roughly 23,600 Bitmain S19J Pro mining machines at Helios are continuing to operate in that facility pursuant to a hosting agreement with Galaxy. During the first quarter of 2023, the Company completed the transition of operations at Helios to the Galaxy team, and Argo has been working closely with them to optimize mining operations and performance. Currently, approximately 2.4 EH/s of total hashrate capacity is deployed at Helios.

The hosting agreement with Galaxy provides Argo with pass-through access to the power that Galaxy obtains through its power purchase agreement ("PPA") for Helios, and the Company pays an incremental hosting fee based on actual electricity usage. Argo also has the ability to share in the proceeds when Helios undergoes economic curtailment in order to monetize its fixed price PPA during periods of high power prices. One of the primary benefits of bitcoin mining is its flexible load consumption, which can be curtailed during times of peak demand. This helps to stabilize the Texas power grid and reduce price volatility for consumers. During Q2 2023, the Company generated proceeds of approximately $1.1 million from economic curtailment at Helios; this helps to offset the reduced BTC production from heat-related curtailment during the summer months and improves mining margin.

During the first quarter of 2023, following the resignation of Peter Wall from his roles as Interim Executive Chairman and Chief Executive officer, the Board appointed Chief Operating Officer Seif El-Bakly to serve as Interim CEO, and Matthew Shaw became Chairman of the Board. Additionally, after a formal recruitment process led by an executive search firm, the Board appointed Jim MacCallum as Chief Financial Officer in April 2023.

With the new management team in place, the Company has focused on three key pillars: financial discipline, operational excellence, and strategic partnerships for growth.

Financial discipline

The sale of the Helios facility significantly changed the Company's operating profile and presented an opportunity to dramatically decrease both operating expenses and G&A. During the first quarter, Argo reduced its non-mining operating expenses by 68% compared to its run rate during the second half of 2022. These cost reductions are particularly important in the current inflationary environment. In the second quarter, non-mining operating expenses were further reduced by an additional 21%, and these cost savings are expected to be sustained. Cash generation and preservation are high priorities for the Company.

In addition to reducing operating expenses, the Company continues to explore opportunities to strengthen its balance sheet and reduce indebtedness while maintaining profitable mining operations. To do this, the Company is evaluating the sale of certain non-core assets, including investments held on the balance sheet, excess inventory and real estate. In the second quarter, the Company sold approximately $1.0 million in ether tokens and used the proceeds to pay down debt owed to Galaxy. Additionally, post the period end, the Company issued 57.5 million shares in exchange for $7.5 million of gross proceeds, a portion of which will be used to repay debt owed to Galaxy.

Operational excellence

Argo continues to operate both of its owned data centers in Quebec, Canada. The Baie Comeau site is over 40,000 square feet and has 15 MW of 99% renewable power capacity sourced from the nearby Baie Comeau hydroelectric dam. The Company's Mirabel facility, located adjacent to the Mirabel airport near Montreal, has approximately 30,000 square feet of mining space with 5 MW of 99% renewable power capacity sourced from Hydro-Quebec.

Optimization of both capacity and existing operations at both Quebec facilities continues. In June 2023, the Company began to receive and deploy its BlockMiner mining machines ordered from ePIC Blockchain Technologies. As of 31 July 2023, the Company has deployed 1,242 BlockMiners at its Quebec facilities (representing approximately 130 PH/s) and expects to deploy the remaining 1,628 machines (an additional 170 PH/s) by the end of Q4 2023.

Growth & strategic partnerships

While the Company's primary focus in H1 2023 was on financial discipline and operational excellence at its existing facilities, management continues to explore opportunities where mining can be paired with stranded or wasted energy. There is tremendous potential for energy generators to utilize mining as a balancing and optimization tool, particularly in the energy transition where limitations currently exist in the ability to store renewable energy. Argo is evaluating several projects with companies across the energy value chain.

For the remainder of 2023, the Company will continue to focus on strengthening the balance sheet and growing the business with a strong emphasis on financial discipline and operational excellence. On behalf of the Board, I would like to thank all of our shareholders and stakeholders. I am excited for Argo to continue in its mission of powering the world's most innovative and sustainable blockchain infrastructure in this next stage of the Company's development.

Sincerely,

Matthew Shaw

Chairman of the Board

Responsibility Statement

We confirm that to the best of our knowledge:

• the Interim Report has been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting; and
• gives a true and fair view of the assets, liabilities, financial position and profit/loss of the Group; and
• the Interim Report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year.
• the Interim Report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being the information required on related party transactions.

The Interim Report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by:

Matthew Shaw
Chairman of the Board

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS