It’s been one year since Argo Blockchain had its Initial Public Offering (IPO) on the Nasdaq Global Select Market, raising $112.5 million with its listing to the most stringent exchange in the world.
Since then, the market has turned entirely. The price of Bitcoin has fallen 72% from its November 2021 highs while the global energy crisis has rocked every Bitcoin miner, including Argo Blockchain. Since we last covered Argo Blockchain’s debt position in August 2022, Argo has effectively been forced to carry out four strategic steps to strengthen its cash flow. We look into them here.
Short-Term Power Purchase Agreement (PPA)
Argo has been forced to curtail power usage at Helios over the summer months, given the lack of a fixed power purchase agreement (PPA). While a typical arrangement for a large power purchaser like Helios, the lack of a fixed PPA necessarily decreased hashing time.
Argo Blockchain has now managed to put in place a short-term PPA with a new electricity provider to help alleviate the situation and to maximize its use of the hashrate available. Argo remains focused on achieving a long-term PPA, similar to Riot Blockchain’s 10-year agreement at Whinstone.
A long-term PPA would enable Argo Blockchain to not only keep rates low, but sell energy back into the market. “Economic Curtailment,” as Riot Blockchain CEO Jason Les puts it.
Amendment to existing finance agreement with NYDIG
Argo Blockchain entered into an equipment-financing agreement with NYDIG in May 2022, whereby NYDIG would make loans available to the company up to a total of $70.6 million over a series of tranches.
Argo Blockchain is currently seeking to amend this agreement, which could immediately release $5.7 million in cash. The amendment would alter the current terms and payment schedule, thereby reducing the monthly debt repayments and providing the ability to link future payments to mining profitability. NYDIG will receive an additional collateral package to prevent any further downside risk.
Sale of 3,400 S19j Pro miners
Argo is also opening up its facility for hosting and selling miners. On Sep. 9, Argo announced a 32 MW hosting agreement with an undisclosed third party to power 10,000 miners. The agreement would see a 25% net revenue share for Argo.
Argo Blockchain also agreed to sell 3,400 new S19j Pro miners (340 PH/s) for a total consideration of $6.7 million. The company will now host these machines with a profit-share arrangement.
Strategic Investment - 87 million shares
The company has entered into a non-binding agreement with an investor who has agreed, subject to the normal due diligence, to purchase 87 million shares in the company for the total sum of $27 million. If the sale goes ahead, the investor will hold 15.46% of the new total shares outstanding in the company and will be given the opportunity to nominate two non-executive directors, subject to approval, bringing the total number of board members to seven.
These actions, although deemed necessary, have seen Argo's share price decline by 50% over the previous three trading days.
These are trying times for all miners, and Argo Blockchain is no exception. Cash flow is key to operational survival in this bear market, and the London-based firm has taken the unfortunate but necessary steps to keep business running over the next 12 months.
With a more favorable PPA in place and a cooling temperature in Texas, Argo Blockchain may be able to deliver enough hashrate to attract new retail and institutional investment.
