Argo Blockchain PLC Announces Sale of Mirabel Quebec Data Center & Feb Op Update

Rhea-AI Summary

Argo Blockchain plc announces the sale of its Mirabel, Quebec data center for $6.1 million, reducing debt and strengthening its balance sheet. The company also provides an operational update for February, highlighting a decrease in Bitcoin production due to maintenance-related outage.

Positive

• The sale of the Mirabel Facility for $6.1 million will help Argo Blockchain plc reduce its debt and strengthen its balance sheet.
• The Transaction will repay the Mirabel Facility's outstanding mortgage and part of the debt owed to Galaxy Digital Holdings, Ltd., reducing the Galaxy debt balance by 60%.
• The Company's pro forma debt balances show a significant reduction after the Transaction, with a total debt of $55.2 million as of 29 February 2024.
• The Transaction enables Argo to maintain ownership of mining machines and streamline operations by relocating them to the Baie Comeau facility, with a total expected hashrate capacity of 2.7 EH/s.
• The Transaction is expected to close by the end of March 2024, subject to customary closing conditions.
• February operational update reveals a 21% reduction in daily Bitcoin production due to a maintenance-related outage at the Cottonwood substation, resulting in a 15% decrease in mining revenue compared to January 2024.
• Despite the decrease in Bitcoin production, Argo CEO Thomas Chippas anticipates lower power prices at Helios, leading to improved mining profit, margin, and operating cash flow for February.

Negative

• None.

Financial Analyst

The sale of Argo Blockchain's Mirabel Facility for $6.1 million represents a strategic financial move, aimed at improving the company's liquidity and reducing its debt burden. By analyzing the transaction price per megawatt, which stands at $1.2 million, it is evident that the sale price is a significant factor for the company's financial restructuring. This is particularly relevant when considering the aggressive deleveraging strategy that Argo is pursuing.

The repayment of the Mirabel Facility's mortgage and the reduction of the Galaxy debt by $5.4 million, resulting in a 60% decrease from the original balance, are crucial steps in strengthening the company's balance sheet. The pro forma debt balances and interest rates provided offer a clear view of the company's debt profile post-transaction, which is an essential consideration for investors assessing the company's financial health and risk profile.

From an operational standpoint, the retention of mining machines and the anticipated sale of older generation equipment could potentially streamline operations and maintain hashrate capacity. However, the impact on revenue from these changes needs to be monitored closely, as it will influence the company's future financial performance.

Market Research Analyst

The cryptocurrency mining industry is characterized by high volatility and operational challenges, such as fluctuating Bitcoin prices and network difficulty levels. Argo Blockchain's operational update for February, which includes a 21% reduction in daily Bitcoin production primarily due to maintenance issues, reflects the inherent risks associated with the sector. The subsequent decrease in mining revenue by 15% from the previous month underscores the sensitivity of the company's operations to external factors.

Despite the operational setback, the company's ability to take advantage of favorable power market conditions to potentially reduce operating costs is a positive indicator. It suggests adaptability and resilience in managing operational expenses, which is a key factor for maintaining profitability in the dynamic cryptocurrency mining landscape.

Analysts and investors will be interested in the long-term implications of these operational efficiencies and cost reductions on the company's competitive position within the industry. The expected hashrate capacity of 2.7 EH/s post-Transaction is an important metric that will be used to gauge the company's mining potential and forecast future earnings.

Cryptocurrency Expert

The strategic sale of the Mirabel Facility and the corresponding operational updates provide insights into Argo Blockchain's approach to navigating the complex cryptocurrency mining industry. The company's focus on deleveraging and optimizing non-mining operating expenses is a response to the need for financial stability in a market where asset prices and mining difficulties can fluctuate dramatically.

Understanding the significance of hashrate capacity, which measures the computational power of mining equipment, is crucial in evaluating a mining company's potential revenue. Argo's emphasis on maintaining a strong hashrate capacity of 2.7 EH/s, despite selling the Mirabel Facility, suggests a calculated approach to balancing asset liquidation with mining capabilities. Additionally, the company's decision to sell certain prior generation machines could be seen as an effort to modernize its mining fleet, potentially leading to increased efficiency and reduced maintenance costs.

It is also worth noting the impact of network difficulty on mining operations. The 5% increase in average network difficulty that Argo experienced in February is a reminder of the competitive nature of the industry and the importance of technical efficiency and scale in maintaining profitability.

Sale of Mirabel, Quebec Data Center for $6.1 Million

February Operational Update

LONDON, UK / ACCESSWIRE / March 5, 2024 / Argo Blockchain plc (LSE:ARB);(NASDAQ:ARBK), a global leader in cryptocurrency mining, is pleased to announce that it has entered into an agreement for the sale of its data center located in Mirabel, Quebec (the "Mirabel Facility") for total consideration of $6.1 million (the "Transaction"). All references to $ are to USD, being derived from the Canadian dollar amounts at an exchange rate of 0.74.

The Mirabel Facility has five megawatts of electrical capacity, implying a $1.2 million per megawatt sales price for the Transaction. The net proceeds from the Transaction are expected to first repay the Mirabel Facility's outstanding mortgage in full, with the remainder expected to be used to repay debt owed to Galaxy Digital Holdings, Ltd. ("Galaxy") (TSX:GLXY).

The Transaction is expected to strengthen Argo's balance sheet, reducing outstanding debt by $5.4 million. The Galaxy debt balance as of 29 February 2024, with pro forma adjustments for the Transaction and subsequent debt repayment, is $14.0 million, a 60% reduction from the original Galaxy debt balance of $35.0 million.

Pro Forma Unaudited Debt Balances:

$ in millions		Interest Rate				9/30/2023				12/31/2023				2/29/2023				Transaction				Pro Forma 2/29/2024
Senior Notes			8.75	%		$	40.0			$	40.0			$	40.0				-			$	40.0
Galaxy Debt		SOFR + 11		%			27.2				23.5				18.0				(4.0	)			14.0
Mirabel Mortgage		Prime + 0.5		%			1.6				1.5				1.4				(1.4	)			-
Baie Comeau Mortgage		Prime + 0.5		%			1.5				1.4				1.2				-				1.2
Total						$	70.3			$	66.4			$	60.6			$	(5.4	)		$	55.2

Importantly, the Transaction enables the Company to delever the balance sheet with minimal impact to the Company's revenue. Following the Transaction, Argo will maintain ownership of all mining machines currently located at the Mirabel Facility. The Company is in the process of relocating the machines to its Baie Comeau facility and anticipates selling certain prior generation machines representing approximately 140 PH/s. Going forward, the Company's total hashrate capacity is expected to be 2.7 EH/s.

The Transaction has significant operational benefits for Argo. It allows the Company to streamline its operations by locating all self-mining machines at its Baie Comeau facility. Additionally, the Transaction reduces the Company's non-mining operating expenses by $0.7 million annually.

The Transaction is expected to close by the end of March 2024 upon the successful completion of customary closing conditions, including entry into a definitive share purchase agreement and certain regulatory approvals.

Management Commentary
Argo's Chief Executive Officer, Thomas Chippas, said, "This Transaction demonstrates the Company's continued commitment to strengthening the balance sheet through a focus on aggressive deleveraging and reducing non-mining operating expenses. We are able to exit the Mirabel Facility with a high multiple on its power capacity, and we also realize a premium on this real estate asset while maintaining a strong hashrate capacity of 2.7 EH/s."

February Operational Update
During the month of February, the Company mined 92 Bitcoin, or 3.2 Bitcoin per day. This 21% reduction in daily Bitcoin production compared to the prior month was primarily due to a maintenance-related outage at the Cottonwood substation which is owned and operated by an unaffiliated third party. Total downtime from the outage was approximately 77 hours, or 11% of the month. The maintenance was completed on 21 February 2024, and normal operations have resumed. Additionally, Bitcoin production in February was negatively impacted by a 5% higher average network difficulty compared to the prior month.

Mining revenue in February 2024 amounted to $4.5 million, a decrease of 15% compared to the prior month (January 2024: $5.3 million).

As of 29 February 2024, the Company held digital assets worth the equivalent of 14 Bitcoin.

Argo CEO Thomas Chippas said, "Despite the decrease in Bitcoin production due to maintenance on the Cottonwood substation, we expect that our realized power prices at Helios for February will be significantly lower than normal due to favorable power market conditions. Lower power prices will have a beneficial impact to our mining profit, mining margin, and operating cash flow for the month."

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:

Argo Blockchain
Investor Relations	ir@argoblockchain.com
Tennyson Securities
Corporate Broker Peter Krens	+44 207 186 9030
Fortified Securities
Joint Broker Guy Wheatley, CFA	+44 74930989014 guy.wheatley@fortifiedsecurities.com
Tancredi Intelligent Communication UK & Europe Media Relations
Salamander Davoudi Helen Humphrey	argoblock@tancredigroup.com

About Argo:
Argo Blockchain plc is a dual-listed (LSE:ARB);(NASDAQ:ARBK) blockchain technology company focused on large-scale cryptocurrency mining. With mining operations in Quebec and 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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

SOURCE: Argo Blockchain PLC

View the original press release on accesswire.com

What is the total consideration for the sale of Argo Blockchain plc's Mirabel Facility?

The total consideration for the sale of Argo Blockchain plc's Mirabel Facility is $6.1 million.

How much debt reduction is expected from the Transaction?

The Transaction is expected to reduce Argo's outstanding debt by $5.4 million, with a 60% reduction in the Galaxy debt balance.

What is the expected hashrate capacity of Argo Blockchain plc after the Transaction?

After the Transaction, Argo Blockchain plc's total expected hashrate capacity is 2.7 EH/s.

What caused the 21% reduction in daily Bitcoin production in February?

The reduction in daily Bitcoin production in February was primarily due to a maintenance-related outage at the Cottonwood substation.

How much was Argo Blockchain plc's mining revenue in February 2024?

Argo Blockchain plc's mining revenue in February 2024 amounted to $4.5 million, a 15% decrease from January 2024.

When is the Transaction expected to close?

The Transaction is expected to close by the end of March 2024, subject to customary closing conditions.