TIDMARB

RNS Number : 1200X

Argo Blockchain PLC

25 August 2022

Press Release

25 August 2022

Argo Blockchain plc

("Argo" or "the Group")

Interim Half Year Results 2022

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 2022.

Financial Highlights

-- Total number of Bitcoin and Bitcoin Equivalent ("BTC") mined during H1 2022 was 939, a 6% increase over the BTC mined in H1 2021

-- Revenues of GBP26.7 million ($32.5 million), a decrease of 14% from H1 2021, driven primarily by a decrease in Bitcoin price and an increase in the global hashrate and associated network difficulty level

   --    Adjusted EBITDA of GBP17.1 million ($20.9 million), a decrease of 28% from H1 2021 

-- Mining margin of 71%, down from 81% in H1 2021. Similar to revenue, this decrease is largely attributable to the decrease in Bitcoin price and an increase in network difficulty

-- Pre-tax loss of GBP36.9 million ($44.9 million), driven primarily by a non-cash reduction in the fair value of digital currencies held on the balance sheet

-- Total number of BTC held at 30 June 2022 was 1,953, a 54% increase from 1,268 BTC held at 30 June 2021

Operational Highlights

-- Energized Phase 1 of the Helios facility in Dickens County, Texas and commenced mining operations on 5 May 2022

-- Increased hashrate capacity by 38% from 1.6 EH/s at the end of 2021 to 2.2 EH/s at the end of July 2022

-- Obtained $26.7 million (GBP20.2 million) of financing from NYDIG secured by certain electrical infrastructure equipment at Helios

-- Obtained up to $70.6 million (GBP56.3 million) of additional financing from NYDIG secured by certain Bitmain S19J Pro machines at Helios

-- Executed an agreement with ePIC Blockchain Technologies to purchase custom mining machines for use with Intel's Blockscale ASIC chip

Post Period End

-- Strengthened balance sheet by reducing exposure on BTC-backed loan with Galaxy Digital to GBP5.5 million ($6.7 million)

-- Completed swap agreement with Core Scientific for approximately 10,000 S19J Pro machines, which completes the strategic pivot to a self-hosted business model in which Argo owns and operates its own machines and infrastructure

-- Released the Group's 2021 Sustainability Report and maintained climate positive status by producing no Scope 1 emissions and offsetting all Scope 2 and Scope 3 emissions through renewable energy credits and verifiable emissions reductions

Update to Mining Capacity Guidance

In response to current market conditions and to reduce near-term capital intensity, the Group is updating its year end guidance for hashrate capacity. The Group expects to achieve 3.2 EH/s of total hashrate capacity by the end of 2022 and to increase capacity in Q1 2023 to 4.1 EH/s.

Peter Wall, CEO of Argo, said: "The delivery and installation of the approximately 20,000 S19J Pro machines from Bitmain continues to progress on schedule, and we still expect to have all of these machines installed by October 2022. The revision to our hashrate guidance reflects our current expectations for delivery and deployment of the custom machines we are developing with ePIC Blockchain Technologies ("ePIC") that utilize the Intel(R) Blockscale(TM) ASIC chips. We have worked closely with ePIC and Intel to modify the machine design to increase total mining efficiency, which has delayed our expected deployment schedule. Further, we are preserving our optionality by reducing our overall capital spending on these machines as market conditions remain volatile. We remain confident in the performance of the custom machines and are excited to deploy them starting in Q1 2023."

Non-IFRS Measures

The following table shows a reconciliation of gross margin to Bitcoin and Bitcoin Equivalent Mining Margin, the most directly comparable IFRS measure, for the periods ended 30 June 2022 and 30 June 2021.

 
                                               Period ended   Period ended 
                                               30 June 2022   30 June 2021 
                                                (unaudited)    (unaudited) 
                                                    GBP'000        GBP'000 
--------------------------------------------  -------------  ------------- 
 
 Gross (loss)/profit                               (34,413)         14,533 
 Gross margin                                        (129%)            47% 
 Depreciation of mining equipment                    10,852          4,758 
 Change in fair value of digital currencies          36,025          6,407 
 Realised loss/(gain) on sale of digital 
  currencies                                          6,372          (219) 
 Non mining revenue                                       -        (1,148) 
 
 Mining Profit                                       18,836         24,331 
--------------------------------------------  -------------  ------------- 
 Bitcoin and Bitcoin Equivalent Mining 
  Margin                                                71%            81% 
--------------------------------------------  -------------  ------------- 
 

The following table shows a reconciliation of Adjusted EBITDA to net income, the most directly comparable IFRS measure, for the periods ended 30 June 2022 and 30 June 2021.

 
                                               Period ended   Period ended 
                                               30 June 2022   30 June 2021 
                                                (unaudited)    (unaudited) 
                                                    GBP'000        GBP'000 
--------------------------------------------  -------------  ------------- 
 
 (Loss) / Profit after taxation                    (30,504)          7,214 
 Interest expense                                     3,477            411 
 Income tax (credit)/expense                        (6,386)          3,484 
 Depreciation/Amortisation                           11,718          4,870 
 Share based payment                                  2,816          1,568 
 Change in fair value of digital currencies          36,025          6,407 
 
 Adjusted EBITDA                                     17,146         23,954 
--------------------------------------------  -------------  ------------- 
 

Inside Information and Forward-Looking Statements

This announcement contains inside information and includes forward-looking statements which reflect the Company's or, as appropriate, the Directors' 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 "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. 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 Registration Statement on Form F-1.

For further information, please contact:

 
  Argo Blockchain 
  Peter Wall                             via Tancredi +44 203 434 
   Chief Executive                        2334 
                                       -------------------------- 
  finnCap Ltd 
                                       -------------------------- 
  Corporate Finance 
   Jonny Franklin-Adams 
   Tim Harper 
   Joint Corporate Broker 
   Sunila de Silva                       +44 207 220 0500 
                                       -------------------------- 
  Tennyson Securities 
                                       -------------------------- 
  Joint Corporate Broker 
   Peter Krens                           +44 207 186 9030 
                                       -------------------------- 
  OTC Markets 
                                       -------------------------- 
  Jonathan Dickson                       +44 204 526 4581 
   jonathan@otcmarkets.com                +44 7731 815 896 
                                       -------------------------- 
  Tancredi Intelligent Communication 
   UK & Europe Media Relations 
                                       -------------------------- 
  Emma Valgimigli 
   Fabio Galloni-Roversi Monaco          +44 7727 180 873 
   Nasser Al-Sayed                        +44 7888 672 701 
   argoblock@tancredigroup.com            +44 7915 033 739 
                                       -------------------------- 
 

About Argo:

Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK) blockchain technology company focused on large-scale cryptocurrency mining. With its flagship mining facility 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. Argo also participates in several Web 3.0, DeFi and GameFi projects through its Argo Labs division, further contributing to its business operations, as well as the development of the cryptocurrency markets. For more information, visit www.argoblockchain.com.

Interim Management Report

Argo entered 2022 with two clear goals: to complete Phase 1 of the Group's Helios facility in Dickens County, Texas while continuing to optimise the performance of its existing mining fleet.

Argo is making significant progress towards the completion of Phase 1 of Helios; on 5 May 2022, the Group energized the facility and commenced mining operations. Argo commemorated this important milestone with an inauguration ceremony attended by local, state, and federal elected officials, as well as members of the local community. Since then, the Group has continued to install new machines and is on track to complete the installation of its order of 20,000 S19 J Pro machines from Bitmain by October 2022. Additionally, in July 2022, Argo completed its machine swap agreement with Core Scientific, which included the installation of an additional approximately 10,000 machines at Helios.

Upon completion of the machine swap agreement, the Group now operates 100% of its owned machines and has no third-party hosting arrangements. This is the culmination of the strategic pivot away from hosting to a fully vertically-integrated business model that began with the acquisition of two data centres in Quebec in early 2021. Being vertically-integrated will allow Argo's management to have more operational control over its mining machines and drive increased performance. Additionally, controlling operational expenses will be critical as the next Bitcoin halving cycle takes place in May 2024 and the Bitcoin block reward is reduced by 50%.

On the second goal, Argo is operating with a mining margin of 70% over the period, which is among the highest of the Group's peers.

As the Group's fleet is upgraded to the newer and more efficient S19J Pro machines, it continues to review the profitability and performance of the older machines in its fleet. Post period end, the Group completed a comprehensive review of its mining fleet and removed 460 PH/s of non-operational mining capacity from its total hashrate. This primarily comprises S17 and T17 machines, which despite a higher rate of failure, have been profitable for the Group with a total aggregate ROI in excess of 260%.

Argo is also making progress on the custom mining machine it is developing in collaboration with ePIC Blockchain that is specifically designed to utilize the Intel Blockscale ASIC chip. Delivery and deployment of these machines is expected to take place in the fourth quarter of 2022.

In January, the Group formally launched Argo Labs, its in-house innovation arm established to identify opportunities within the broader Web3 and blockchain ecosystem while supporting the decentralization of various blockchain protocols. Argo allocated approximately 10% of the Group's crypto assets in its "HODL" to Argo Labs. Argo Labs is primarily focused on two key areas: network participation and strategic diversification through the efficient deployment of the Group's crypto treasury assets. Network participation consists of providing infrastructure support, running nodes and validators, and staking innovative projects. Efficient deployment of the Group's crypto treasury assets includes, among other things, supporting early-stage projects and participating in decentralized finance (DeFi), as well as the NFT & metaverse ecosystem, in each case in furtherance of the Group's general business operations. By gaining exposure to the broader digital asset ecosystem, Argo Labs will allow the Group to participate in disruptive technologies and provide long-term value to its shareholders.

Despite the overall market drawdown and the decrease in Bitcoin price, the Group has been able to raise significant capital via secured debt financing. In March 2022, Argo obtained GBP20.2 million ($26.7 million) of debt financing from NYDIG, the proceeds of which were used to continue the build out of Helios. These borrowings are secured by certain electrical infrastructure equipment at the Helios facility. Additionally, in May 2022, Argo announced another debt financing agreement with NYDIG for up to GBP56.3 million ($70.6 million); these borrowings are secured by certain S19J Pro mining machines located at Helios.

The Group is mindful of its carbon footprint and maintains a strong focus on environmental sustainability. The Group's mining facilities in Quebec are powered by hydroelectricity, and operations in Texas are located in the Texas Panhandle where 85% of the generation capacity comes from wind power. In 2021, the Group signed the Crypto Climate Accord, committing to achieve net-zero carbon emissions by 2030. In 2021, Argo reached this goal, releasing a full climate strategy and becoming the first Bitcoin mining company to announce climate positive status through its use of renewable energy to power mining operations, and by offsetting more scope 2 and 3 greenhouse gas emissions than it emitted in both 2020 and 2021. Additionally, Argo was a founding member of the Bitcoin Mining Council, which educates the public on the increasing amount of renewable energy used for Bitcoin mining. It also seeks to improve reporting and increase the amount of data available on the use of renewable energy within the sector.

Argo's operations in Quebec and Texas also promote sustainability by helping to stabilize the electrical grid. In Quebec, Argo participates in curtailment programs to lower electricity usage during periods of extreme weather. In Texas, the Helios facility will participate in demand response programs, whereby it can reduce its electricity usage and increase availability of power to the grid in times of peak demand. This flexibility in electricity load has profound benefits for grid stability and helps to ensure equilibrium between supply and demand. This was demonstrated in July 2022 when Argo, along with most large-scale Bitcoin miners in Texas, voluntarily shut down operations in response to a conservation alert from ERCOT. Bitcoin miners collectively curtailed over 1,000 MW of electricity demand, which was then available during a time of intense heat and peak electricity demand. This action enabled ERCOT to avoid implementing rolling blackouts, which would have negatively impacted residential and commercial electricity users across the state.

Having successfully energized the Helios facility and commenced mining operations, the Group's strategic focus for the remainder of 2022 is to complete the build out of Phase 1 and lay the groundwork for the development of future phases at Helios.

Outlook

While the first half of 2022 presented many challenges, I am delighted with the progress that we have made in developing Helios and positioning ourselves as a leader in the Bitcoin mining industry. We designed and built a world-class Bitcoin mining facility from the ground up, balancing prudent growth with a volatile market. Furthermore, we continue to lead the industry with our commitment to sustainability, and we were proud to publish the Group's 2021 sustainability report which explains our climate positive status.

As operations at Helios continue to ramp up, there are certain milestones which will enable us to optimise our operations and achieve greater efficiency. We are evaluating several opportunities to execute a long-term, fixed price power purchase agreement (PPA), which will lock in our electricity prices and reduce our exposure to short term price fluctuations. Once the fixed price PPA is in place, Helios will have more optionality to participate in the demand response programs offered by ERCOT, which will further reduce its overall electricity cost.

During the period, there has been a global macroeconomic pullback as investors and central bankers grapple with inflation, the war in Ukraine, and rising interest rates. These headwinds have impacted all financial assets, including Bitcoin and the equity of publicly traded Bitcoin miners.

Argo is well positioned to weather the current downturn with its large and highly efficient mining infrastructure, runway for growth, and experienced management team, which has successfully navigated the Group through previous crypto winters. In response to the challenging market environment, we have adjusted our treasury management strategy. Throughout the period, we have been steadily selling Bitcoin, utilizing derivatives to obtain a higher realized price than simply selling into the market. In Q2 2022, we sold Bitcoin at an average realized price of approximately $28,500, realizing hedge gains in excess of $1,500 per Bitcoin. Proceeds from these sales have been used for operating expenses, capital expenditures, and to reduce exposure on our Bitcoin-backed loan.

Despite the challenging economic environment in 2022, we continue to focus on our strategic priority of completing Phase 1 of Helios and laying the groundwork to further scale operations.

On behalf of the Board, I would like to thank all shareholders and staff who share in Argo's mission of powering the world's most innovative and sustainable blockchain infrastructure.

Onwards and upwards!

Peter Wall

CEO & Interim Executive Chairman

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:

Peter Wall

CEO & Interim Executive Chairman

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
                                                                    Period ended   Period ended 
                                                                    30 June 2022   30 June 2021 
                                                                     (unaudited)    (unaudited) 
                                                             Note        GBP'000        GBP'000 
----------------------------------------------------------  -----  -------------  ------------- 
 
 Revenues                                                     5           26,700         31,086 
 Direct costs                                                           (18,716)       (10,365) 
 Change in fair value of digital currencies                   12        (42,397)        (6,188) 
 
 Gross (loss) / profit                                                  (34,413)         14,533 
----------------------------------------------------------  -----  -------------  ------------- 
 
 Operating costs and expenses                                            (9,846)        (2,293) 
 Share based payment                                                     (2,816)        (1,568) 
 Foreign exchange                                                         10,265            437 
 Operating (loss) / profit                                              (36,810)         11,109 
----------------------------------------------------------  -----  -------------  ------------- 
 
 Gain on settlement of contingent consideration                            4,038              - 
 Gain on sale of investment                                                  133              - 
 Fair value (loss) of investments                                          (284)              - 
 Finance cost                                                            (3,477)          (411) 
 Equity accounted loss from associate                                      (490)              - 
 
 (Loss) / profit before taxation                                        (36,890)         10,698 
----------------------------------------------------------  -----  -------------  ------------- 
 
 Income tax credit / (expense)                                7            6,386        (3,484) 
 
 (Loss) / Profit after taxation                                         (30,504)          7,214 
----------------------------------------------------------  -----  -------------  ------------- 
 
   Other comprehensive income 
 Items which may be subsequently reclassified 
  to profit or loss: 
 
        *    Currency translation reserve 
                                                                         (4,413)          (361) 
 
        *    Equity accounted OCI from associate                         (8,318)              - 
                                                                           (414)              - 
        *    Fair value loss on intangible digital assets 
 
 Total other comprehensive income, 
  net of tax                                                            (13,145)          (361) 
----------------------------------------------------------  -----  -------------  ------------- 
 
 Total comprehensive income attributable 
  to the equity holders of the Company                                  (43,649)          6,853 
----------------------------------------------------------  -----  -------------  ------------- 
 
 Earnings per share attributable to 
  equity owners (pence) 
 Basic earnings per share                                     6           (6.5p)           1.9p 
 Diluted earnings per share - restricted                      6           (6.5p)           1.8p 
 

The income statement has been prepared on the basis that all operations are continuing operations.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 
                                                      As at         As at 
                                               30 June 2022   31 December 
                                                                     2021 
                                                (unaudited)     (audited) 
                                        Note        GBP'000       GBP'000 
-------------------------------------  -----  -------------  ------------ 
 
 ASSETS 
 Non-current assets 
 Investments at fair value through 
  income and loss                                       135           403 
 Investments accounted for using the 
  equity method                          8            5,009        13,817 
 Intangible fixed assets                 9            3,602         5,604 
 Property, plant and equipment           10         157,795       111,604 
 Right of use assets                     10             374           350 
 Total non-current assets                           166,915       131,778 
-------------------------------------  -----  -------------  ------------ 
 
 Current assets 
 Trade and other receivables             11          99,448        63,359 
 Digital assets                          12          28,092        80,759 
 Cash and cash equivalents                            9,210        11,803 
 Total current assets                               136,750       155,921 
-------------------------------------  -----  -------------  ------------ 
 
 Total assets                                       303,665       287,699 
-------------------------------------  -----  -------------  ------------ 
 
 EQUITY AND LIABILITIES 
 Equity 
 Share capital                           13             478           468 
 Share premium                           13         143,752       139,581 
 Share based payment reserve             14           4,689         1,905 
 Currency translation reserve            14         (4,380)            33 
 Fair value reserve                                       -           414 
 Other comprehensive (loss)/income 
  of equity accounted associate                     (1,747)         6,571 
 Accumulated surplus                     14          22,366        52,838 
-------------------------------------  -----  -------------  ------------ 
 Total equity                                       165,158       201,810 
-------------------------------------  -----  -------------  ------------ 
 
 Current liabilities 
 Trade and other payables                15          17,633        15,245 
 Contingent consideration                                 -         8,071 
 Loans and borrowings                    16          44,716        23,391 
 Income tax                                           2,439         7,679 
 Deferred tax                                             -           286 
 Lease liability                                         11             7 
-------------------------------------  -----  -------------  ------------ 
 Total current liabilities                           64,799        54,679 
-------------------------------------  -----  -------------  ------------ 
 
 
  Non-current liabilities 
 Deferred tax                                           442           541 
 Issued debt - bond                      16          32,892        26,908 
 Loans and borrowings                    16          39,989         3,391 
 Lease liability                                        385           370 
 Total liabilities                                  138,507        85,889 
-------------------------------------  -----  -------------  ------------ 
 
 Total equity and liabilities                       303,665       287,699 
-------------------------------------  -----  -------------  ------------ 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 
                        Share      Share      Currency      Share        Fair           Other   Accumulated      Total 
                      capital    premium   translation      based       value   comprehensive      surplus/ 
                                               reserve    payment     reserve       income of     (deficit) 
                                                          reserve                  associates 
                      GBP'000    GBP'000       GBP'000    GBP'000     GBP'000         GBP'000       GBP'000    GBP'000 
------------------  ---------  ---------  ------------  ---------  ----------  --------------  ------------  --------- 
 Balance at 
  1 January 
  2022                    468    139,581            33      1,905         414           6,571        52,838    201,810 
 Total 
 comprehensive 
 profit for 
 the period: 
 Loss for the 
  period                    -          -             -          -           -               -      (30,504)   (30,504) 
 Other 
  comprehensive 
  income                    -          -       (4,413)          -       (414)         (8,318)             -   (13,145) 
------------------  ---------  ---------  ------------  ---------  ----------  --------------  ------------  --------- 
 Total 
  comprehensive 
  income for 
  the period                -          -       (4,413)          -       (414)         (8,318)      (30,504)   (43,649) 
------------------  ---------  ---------  ------------  ---------  ----------  --------------  ------------  --------- 
 Transactions 
  with equity 
  owners: 
 Stock based 
  compensation 
  charge                    -          -             -      2,816           -               -             -      2,816 
 Common stock 
  options/warrants 
  exercised                10      4,171             -       (32)           -               -            32      4,181 
 Balance at 
  30 June 2022            478    143,752       (4,380)      4,689           -         (1,747)        22,366    165,158 
------------------  ---------  ---------  ------------  ---------  ----------  --------------  ------------  --------- 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 
                           Share      Share       Currency            Share   Accumulated     Total 
                         capital    premium    translation    based payment      surplus/ 
                                                   reserve          reserve     (deficit) 
                         GBP'000    GBP'000        GBP'000          GBP'000       GBP'000   GBP'000 
---------------------  ---------  ---------  -------------  ---------------  ------------  -------- 
 Balance at 
  1 January 2021             304      1,540            443               75        21,965    24,327 
 Total comprehensive 
  income for the 
  period: 
 Profit for the 
  period                       -          -              -                -         7,214     7,214 
 Other comprehensive 
  income                       -          -          (361)                -             -     (361) 
---------------------  ---------  ---------  -------------  ---------------  ------------  -------- 
 Total comprehensive 
  income for the 
  period                       -          -          (361)                -         7,214     6,853 
---------------------  ---------  ---------  -------------  ---------------  ------------  -------- 
 Transactions 
  with equity 
  owners: 
 Common stock 
  to be issued*                -         11              -                -             -        11 
 Issue of common 
  stock net of 
  issue costs                 78     53,766              -                -             -    53,844 
 Stock based 
  compensation 
  charge                       -          -              -            1,568             -     1,568 
 Common stock 
  options/warrants 
  exercised                    -          -              -            (568)           568         - 
 Common stock 
  options/warrants 
  lapsed/expired               -          -              -             (83)            83         - 
---------------------  ---------  ---------  -------------  ---------------  ------------  -------- 
 Total transactions 
  with equity 
  owners                      78     53,777              -              917           651    55,423 
---------------------  ---------  ---------  -------------  ---------------  ------------  -------- 
 
 Balance at 
  30 June 2021               382     55,317             82              992        29,830    86,603 
---------------------  ---------  ---------  -------------  ---------------  ------------  -------- 
 

*Shares to be issued relate to share options exercised and paid up pre period end, however the shares were formally issued post period end.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 
                                                          Period ended   Period ended 
                                                          30 June 2022   30 June 2021 
                                                           (unaudited)    (unaudited) 
                                                   Note        GBP'000        GBP'000 
------------------------------------------------  -----  -------------  ------------- 
 Cash flows from operating activities 
 (Loss) / profit before taxation                              (36,890)         10,698 
 Adjustments for: 
 Depreciation/Amortisation                                      11,718          4,870 
 Foreign exchange movements                                   (10,266)             25 
 Finance cost                                                    3,477            411 
 Fair value change in digital assets                            36,025              - 
  through profit or loss 
 Investment fair value movement                                    284              - 
 Gain on investment                                              (133)              - 
 Impairment of intangible digital assets                         3,009              - 
 Share of loss from associate                                      490              - 
 Gain on settlement of contingent consideration                (4,038)              - 
 Share based payment expense                                     2,816          1,568 
 Working capital changes: 
 (Increase) in trade and other receivables          11           (928)        (2,095) 
 Increase in trade and other payables               15           2,388         15,246 
 Decrease/(increase) in digital assets              12          16,642       (28,351) 
 Net cash flow from operating activities                        24,594          2,372 
------------------------------------------------  -----  -------------  ------------- 
 
 Investing activities 
 Acquisition of subsidiaries, net of 
  cash acquired                                                      -          (272) 
 Proceeds from sale of investment                                  133              - 
 Investment in associate                            8                -        (7,353) 
 Other investments                                                   -          (219) 
 Purchase of tangible fixed assets*                 9         (49,243)        (6,883) 
 Mining equipment prepayments                                 (35,431)       (35,471) 
------------------------------------------------  -----  -------------  ------------- 
 Net cash used in investing activities                        (84,541)       (50,198) 
------------------------------------------------  -----  -------------  ------------- 
 
 Financing activities 
 Proceeds from borrowings                           16          66,331         14,375 
 Lease payments                                                   (13)        (1,734) 
 Loan repayments                                               (8,393)              - 
 Interest paid                                                 (3,477)          (411) 
 Proceeds from shares issued                                       116         49,593 
------------------------------------------------  -----  -------------  ------------- 
 Net cash generated from financing 
  activities                                                    54,564         61,823 
------------------------------------------------  -----  -------------  ------------- 
 Net (decrease)/increase in cash and 
  cash equivalents                                             (5,383)         13,997 
------------------------------------------------  -----  -------------  ------------- 
 Effect of foreign exchange changes                              2,790              - 
  in cash 
 Cash and cash equivalents at beginning 
  of period                                                     11,803          2,051 
 Cash and cash equivalents at end of 
  period                                                         9,210         16,048 
------------------------------------------------  -----  -------------  ------------- 
 
 
 

Material non-cash movements:

*GBP7,277k of the machine additions were funded by the sale of machines, as part of the Core Scientific swap deal arrangement

GBP1,648k purchase of intangible assets were acquired using Bitcoin

GBP4,362k payment to Bitmain in respect of machine prepayments paid in Bitcoin

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   1.         COMPANY INFORMATION 

Argo Blockchain PLC ("the company") is a public company, limited by shares, and incorporated in England and Wales. The registered office is 9th Floor, 16th Great Queen Street, London, England, WC2B 5DG. The company was incorporated on 5 December 2017 as GoSun Blockchain Limited and changed its name to Argo Blockchain Limited on 21 December 2017. Also on 21 December 2017, the company re-registered as a public company, Argo Blockchain plc. Argo Blockchain plc acquired a 100% subsidiary, Argo Innovation Labs Inc. (together "the Group"), incorporated in Canada, on 12 January 2018.

On 4 March 2021 the Group acquired 100% of the share capital of DPN LLC and was merged into new US entity Argo Innovation Facilities (US) Inc (also 100% owned by Argo Blockchain plc).

On 11 May 2021 the Group acquired 100% of the share capital of 9377-2556 Quebec Inc and 9366-5230 Quebec Inc. These are held by Argo Innovation Labs Inc. (Canada).

The principal activities of the group are that of crypto asset mining and investing in crypto assets and non-fungible tokens.

The ordinary shares of the Group are listed under the trading symbol ARB on the London Stock Exchange. The American Depositary Receipt of the Group are listed under the trading symbol ARBK on Nasdaq. The Group bond is listed on the Nasdaq Global Select Market under the trading symbol ARBKL.

   2.         BASIS OF PREPARATION 

The condensed consolidated interim financial statements for the six months ended 30 June 2022 have been prepared in accordance with IAS 34 'Interim Financial Reporting' and presented in sterling. They do not include all of the information required in annual financial statements in accordance with IFRS, and should be read in conjunction with the consolidated financial statements for the year ended 31 December 2021, which have been prepared in accordance with UK-adopted international accounting standards and International Financial Reporting Standards as issued by the IASB. The report of the auditors on those financial statements was unqualified.

The financial statements have been prepared under the historical cost convention, except for the measurement to fair value certain financial and digital assets and financial instruments.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December 2021.

   3.         ACCOUNTING POLICIES 

The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are consistent with those of the previous financial year except as set out below.

Segmental reporting

The directors consider that the Group has only one significant reporting segment being crypto mining which is fully earned by a Canadian subsidiary.

Derivative financial instruments

The Group uses derivative financial instruments to hedge its exposure to commodity risks (namely the price of Bitcoin) arising from operating, financing and investing activities. The Group does not hold or issue derivative financial instruments for trading purposes.

Derivative financial instruments are recognised and stated at fair value.

   4.         ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS 

The Group has adopted all recognition, measurement and disclosure requirements of IFRS, including any new and revised standards and Interpretations of IFRS, in effect for annual periods commencing on or after 1 January 2022. The adoption of these standards and amendments did not have any material impact on the financial result of position of the Group.

Standards which are in issue but not yet effective:

At the date of authorisation of these financial statements, the following Standards and Interpretation, which have not yet been applied in these financial statements, were in issue but not yet effective.

 
Standard            Description                                          Effective date for 
 or Interpretation                                                 annual accounting period 
                                                                      beginning on or after 
------------------  --------------------------------------------  ------------------------- 
IAS 1               Amendments - Presentation and Classification             1 January 2023 
                     of Liabilities as Current or Non-current 
IAS 8               Amendments - Definition of Accounting                    1 January 2023 
                     Estimates 
 

The Group has not early adopted any of the above standards and intends to adopt them when they become effective.

   5.         REVENUES 
 
                                        Period ended    Period ended 
                                        30 June 2022    30 June 2021 
                                         (unaudited)     (unaudited) 
                                             GBP'000         GBP'000 
------------------------------------  --------------  -------------- 
 Crypto currency mining - worldwide           26,700          29,937 
 Crypto currency management fees - 
  United States                                    -           1,148 
 Total revenue                                26,700          31,085 
------------------------------------  --------------  -------------- 
 
 
 

Due to the nature of Crypto currency mining, it is not possible to provide a geographical split of the revenue stream.

Crypto currency mining revenues are recognised at a point in time.

Crypto currency management fees are services recognised over time.

   6.         EARNINGS PER SHARE 

The basic earnings per share is calculated by dividing the profit attributable to equity shareholders by the weighted average number of shares in issue.

 
                                                                  Period              Period 
                                                                   ended               ended 
                                                                 30 June             30 June 
                                                        2022 (unaudited)    2021 (unaudited) 
 Net (loss)/profit for the period attributable 
  to ordinary equity holders from continuing 
  operations (GBP000)                                           (30,504)               7,214 
 Weighted average number of ordinary shares 
  in issue                                                   469,182,463         381,832,335 
 Basic earnings per share for continuing operations 
  (pence)                                                          (6.5)                 1.9 
----------------------------------------------------  ------------------  ------------------ 
 
 Net (loss)/profit for the period attributable 
  to ordinary equity holders for continuing 
  operations (GBP000)                                           (30,504)               7,214 
 Diluted number of ordinary shares in issue                  475,067,159         393,091,232 
----------------------------------------------------  ------------------  ------------------ 
 Diluted earnings per share for continuing 
  operations (pence) - restricted                                  (6.5)                 1.8 
----------------------------------------------------  ------------------  ------------------ 
 
   The Group has in issue 18,396,397 warrants and options at 30 June 
   2022 (2021: 11,258,897). 
 
 
   7. TAXATION 
                                              Period ended    Period ended 
                                              30 June 2022    30 June 2021 
                                               (unaudited)     (unaudited) 
                                                   GBP'000         GBP'000 
   ---------------------------------------  --------------  -------------- 
    Income tax (credit)/expense - foreign 
     tax                                           (6,000)           3,484 
    Deferred tax (credit)/expense                    (386)               - 
   ---------------------------------------  --------------  -------------- 
    Taxation charge in the financial 
     statements                                    (6,386)           3,484 
   ---------------------------------------  --------------  -------------- 
 

No deferred tax asset has been recognised in respect of UK tax losses carried forward on the basis that there is insufficient certainty over the level of future profits to utilise against this amount.

Income tax expense

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

 
                                            Period ended    Period ended 
                                            30 June 2022    30 June 2021 
                                             (unaudited)     (unaudited) 
                                                 GBP'000         GBP'000 
 (Loss)/Profit before taxation                  (36,890)          10,698 
----------------------------------------  --------------  -------------- 
 
   Expected tax (credit)/charge based 
   on a weighted average of 25% (2020 
   - 24%) (UK, US and Canada)                   (16,404)           2,568 
 
 Effect of expenses not deductible 
  in determining taxable profit                       40              32 
 Capital allowances in excess of 
  depreciation                                   (5,589)             323 
 Other tax adjustments                            11,588           1,838 
 Losses utilised re prior years*                 (7,005)         (1,790) 
 Origination and reversal of temporary 
  differences                                      3,936             256 
 Unutilised tax losses carried forward             7,048             257 
 Taxation (credit)/charge in the 
  financial statements                           (6,386)           3,484 
----------------------------------------  --------------  -------------- 
 

*During the period the tax charge in respect of the year ended 31 December 2021 in respect of the taxable charge for Argo Innovation Labs Inc was finalised and it was agreed losses previously not accepted as deductible were deductible and as a result the liability for that year was reduced.

   8.         INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD 
 
                                                    Period ended        Year ended 
                                                    30 June 2022       31 December 
                                                     (unaudited)    2021 (audited) 
                                                         GBP'000           GBP'000 
------------------------------------------------  --------------  ---------------- 
 Opening balance                                          13,817                 - 
 Acquired during the period                                    -             8,444 
 Share of loss                                             (490)           (1,198) 
 Share of fair value (loss) /gain on 
  intangible assets through other comprehensive 
  income                                                 (8,318)             6,571 
------------------------------------------------  --------------  ---------------- 
 Total Associates                                          5,009            13,817 
------------------------------------------------  --------------  ---------------- 
 

Set out below are the associates of the Group as at 30 June 2022, which, in the opinion of the Directors, significant influence is held. The associate as listed below has share capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business.

Nature of investment in associates 2022 and 2021:

 
 Name of entity   Address of the        % of ownership   Nature of       Measurement 
                   registered office     interest         relationship    method 
 Pluto Digital    Hill Dickinson        24.65%           Refer below     Equity 
  PLC              LLP, 8th Floor 
                   The Broadgate 
                   Tower, 20 Primrose 
                   Street, London, 
                   United Kingdom, 
                   EC2A 2EW 
 

On 3 February 2021 Argo invested in Pluto Digital PLC ("Pluto"), a crypto venture capital and technology company. The investment was satisfied with 75,000 Polkadot with a fair value at that date of GBP1,091,850. Further to this in a second round of funding the Group invested an additional GBP7,352,970 on 8 March 2021.

Argo owns 24.65% of the total share capital and voting rights of the business and is entitled to nominate one director to the Pluto Board of Directors.

Pluto is a crypto technology company that connects Web 3.0 decentralised technologies to the global economy. Pluto identifies key emerging areas and projects in the crypto sphere, then deploys its business, networks and technical expertise to create value for crypto partners, projects and Pluto shareholders.

Pluto incubates and advises digital asset projects based on decentralised technologies, decentralised finance and networks such as Ethereum and Polkadot. Additionally, Pluto supports the operation of proof-of-stake networks by staking and operating validator nodes. Pluto represents a strategic partnership for the Group as it diversifies its activities in the crypto space.

Pluto Digital PLC is an unlisted company and there is no quoted market price available for its shares.

There are no contingent liabilities relating to the Group's interest in the associates.

Summarised financial information for associates

Set out below is the summarised financial information for Pluto Digital plc which is accounted for using the equity method.

 
                   Pluto Digital plc 
                       As at 30 June 
                              2022 
                          GBP000's 
------------    ------------------ 
 Net assets                 18,033 
--------------  ------------------ 
 

Summarised Statement of Comprehensive Income, Pluto Digital plc

 
                                      Period ended June 2022 
                                                    GBP000's 
---------------------------------    ----------------------- 
 Loss from continuing operations                     (3,046) 
 Interest expense, net of 
  income                                               (179) 
 Income tax expense                                    1,240 
-----------------------------------  ----------------------- 
 Post-tax loss from continuing 
  operations                                         (1,985) 
 Other comprehensive loss                           (33,736) 
 Total comprehensive Income                         (35,721) 
-----------------------------------  ----------------------- 
 

The information above reflects the amounts presented in the management accounts of the associate (and not Argo Blockchain Plc's share of those amounts) adjusted for differences in accounting policies between the Group and the associate.

   9.         INTANGIBLE FIXED ASSETS NOTE 
 
 Group                                                     Goodwill        Digital      Website   2022 Total 
                                                                            assets 
                                                            GBP'000        GBP'000      GBP'000      GBP'000 
-----------------------------------------------   -----------------  -------------  -----------  ----------- 
 Cost 
 At 1 January 
  2022                                                           80          5,424          671        6,175 
 
 Additions                                                        -          5,841            -        5,841 
 Disposals                                                        -        (4,087)            -      (4,087) 
 At 30 June 2022                                                 80          7,178          671        7,929 
------------------------------------------------  -----------------  -------------  -----------  ----------- 
 
 Amortisation 
  and impairment 
 At 1 January                                                     -            121          450          571 
 Foreign exchange movement                                       35            204           23          262 
 Impairment                                                       -          3,009            -        3,009 
 Fair value loss/(gain)                                           -            413            -          413 
 Amortisation charged during 
  the period                                                      -              -           72           72 
 At 30 June 2022                                                 35          3,747          545        4,327 
------------------------------------------------  -----------------  -------------  -----------  ----------- 
 
 Balance At 30 June 2022                                         45          3,431          126        3,602 
 
   Digital assets are cryptocurrencies not mined by the Group. The 
   Group held crypto assets during the year, which are recorded 
   at cost on the day of acquisition. Movements in fair value between 
   acquisition (date mined) and disposal (date sold), and the movement 
   in fair value in crypto assets held at the year end, impairment 
   of the intangible assets and any increase in fair value are recorded 
   in the fair value reserve. 
 
   The digital assets held below are held in Argo Labs (a division 
   of the Group) as discussed above. The assets are all held in 
   secure custodian wallets controlled by the Group team and not 
   by individuals within the Argo Labs team. 
 
   The assets detailed below are all accessible and liquid in nature. 
   Those assets (immaterial in total) held longer term are inaccessible 
   for a period of time have been valued either at cost or GBPnil 
   depending upon the information available as at the year end. 
 As at 30 June 2022                                                   Coins/tokens   Fair value 
 Crypto asset name                                                                      GBP'000 
-------------------------------------------------------------------  -------------  ----------- 
 Polkadot - DOT                                                            120,886          693 
 Ethereum - ETH                                                                605          526 
 Solana - SOL                                                                9,365          256 
 Cosmos Hub - ATOM                                                          27,938          183 
 ASTRA                                                                           -          112 
 Alternative coins                                                               -        1,661 
 
 At 30 June 2022                                                                          3,431 
-------------------------------------------------------------------  -------------  ----------- 
 
 
   10.       TANGIBLE FIXED ASSETS 
 
 Group             Right      Office      Mining       Assets Under      Leasehold       Data       Motor      Total 
                  of use   Equipment         and       Construction   Improvements    centres    vehicles 
                  Assets                Computer 
                                       Equipment 
                 GBP'000     GBP'000     GBP'000            GBP'000        GBP'000    GBP'000     GBP'000    GBP'000 
--------------  --------  ----------  ----------  -----------------  -------------  ---------  ----------  --------- 
 Cost 
 At 1 January 
  2022               358          49      58,499             61,306             85     10,466           -    130,763 
 
 Foreign 
  exchange 
  movement            32           -       2,476              6,805              8        975           -     10,296 
 Additions             -          27      41,353              6,344              1      8,742          53     56,520 
 Disposals             -           -    (12,340)                  -              -          -           -   (12,340) 
 Transfer to 
  another 
  class                -           -           -           (74,455)              -     74,455           -          - 
 At 30 June 
  2022               390          76      89,988                  -             94     94,638          53    185,239 
--------------  --------  ----------  ----------  -----------------  -------------  ---------  ----------  --------- 
 
 Depreciation 
 and 
 impairment 
 At 1 January 
  2022                 8           -      18,507                  -             65        229                 18,809 
 Foreign 
  exchange 
  movement             -           -       1,612                  -              6         59           -      1,677 
 On disposals          -           -     (5,063)                  -              -          -           -    (5,063) 
 Depreciation 
  charged 
  during 
  the period           8           5      10,839                  -             10        782           2     11,646 
 At 30 June 
  2022                16           5      25,895                  -             81      1,070           2     27,069 
--------------  --------  ----------  ----------  -----------------  -------------  ---------  ----------  --------- 
 
 Carrying 
 amount 
--------------  --------  ----------  ----------  -----------------  -------------  ---------  ----------  --------- 
 At 1 January 
  2022               350          49      39,992             61,306             20     10,237                111,954 
--------------  --------  ----------  ----------  -----------------  -------------  ---------  ----------  --------- 
 At 30 June 
  2022               374          71      64,093                  -             13     93,568          51    158,170 
--------------  --------  ----------  ----------  -----------------  -------------  ---------  ----------  --------- 
 
 
 

Note: on the face of the balance sheet the Right of Use assets are disclosed as a separate line but have been aggregated with other fixed assets above.

   11.       TRADE AND OTHER RECEIVABLES 
 
                                               As at   As at 31 December 
                                        30 June 2022      2021 (audited) 
                                         (unaudited) 
                                             GBP'000             GBP'000 
------------------------------------  --------------  ------------------ 
 Mining equipment prepayments                 82,587              47,426 
 Hedging instrument                            1,608                   - 
 Prepayments and other receivables            12,233              13,194 
 Other taxation and social security            3,020               2,739 
 Total trade and other receivables            99,448              63,359 
------------------------------------  --------------  ------------------ 
 

Mining equipment prepayments consist of payments made and due on mining equipment due to arrive by the end of 2022. Payments to ePIC ASIC Asia Limited ("ePIC") comprise GBP4.1m, Intel of GBP15.1m and the balance of GBP63.4m was paid to Bitmain in advance of machine purchases to be received after the period end.

Other taxation and social security consist of purchase tax recoverable in the UK and Canada. GST and QST debtors are greater than 90 days as at 30 June 2022.

The directors consider that the carrying amount of trade and other receivables is equal to their fair value.

   12.       DIGITAL ASSETS 
 
  Group                                      Period ended       Year ended 
                                                               31 December 
                                                                      2021 
                                             30 June 2022        (audited) 
                                              (unaudited)          GBP'000 
                                                  GBP'000 
----------------------------------------  ---------------  --------------- 
 At 1 January 2022 and 2021                        80,759            4.637 
 
 Additions 
 Crypto assets mined                               26,700           70,325 
 Crypto asset purchased and received                    -           16,569 
----------------------------------------  ---------------  --------------- 
 Total additions                                   26,700           86.894 
 
 Disposals 
 Crypto assets sold                              (34,069)         (12,400) 
----------------------------------------  ---------------  --------------- 
 Total disposals                                 (34,069)         (12,400) 
 
 Fair value movements 
 Foreign exchange                                 (2,901)                - 
     Gain/(loss) on crypto asset sales            (6,372)              437 
 Movements on crypto assets held at 
  the period end                                 (36,025)            1,191 
----------------------------------------  ---------------  --------------- 
 Total fair value movements                      (45,298)            1,628 
 
 At 30 June 2022 & 31 December 2021                28,092           80,759 
----------------------------------------  ---------------  --------------- 
 
 
 

The Group mined crypto assets during the period, which are recorded at fair value on the day of acquisition. Movements in fair value between acquisition (date mined) and disposal (date sold), and the movement in fair value in crypto assets held at the year end, are recorded in profit or loss. The Group has used 1,178 as at 30 June 2022 and 1,504 Bitcoin as at 31 December 2021 as collateral for a loan.

As at 30 June 2022 and 31 December 2021 the above digital assets solely comprised 1,742 and 2,441 Bitcoin respectively.

   13.       ORDINARY SHARES 
 
                                                                         As at             As at 
                                                                  30 June 2022       31 December 
                                                                   (unaudited)    2021 (audited) 
                                                                       GBP'000           GBP'000 
--------------------------------------------------------   -------------------  ---------------- 
 Ordinary share capital 
 Issued and fully paid 
 468,082,335 Ordinary Shares of GBP0.001 
  each                                                                     468               303 
 Issued in the period 
 9,742,831 Ordinary Shares of GBP0.001 
  each                                                                      10               165 
 477,825,166 Ordinary Shares of GBP0.001 
  each                                                                     478               468 
---------------------------------------------------------  -------------------  ---------------- 
 
 Share premium 
--------------------------------------------------------   -------------------  ---------------- 
 At beginning of the period                                            139,581             1,540 
 Issued in the period                                                    4,171           150,977 
 Issue Costs                                                                 -          (12,936) 
 At the end of period                                                  143,752           139,581 
---------------------------------------------------------  -------------------  ---------------- 
 
   Acquisition of DPN LLC 
   The acquisition of DPN LLC, effectively comprising the land acquisition 
   in west Texas, has been treated as an asset acquisition in these 
   condensed consolidated financial statements. In June 2022, the 
   Company settled the contingent consideration by issuing 8,147,831 
   new Ordinary Shares credited as fully paid at a price per share 
   of GBP0.495. 
 
 
   14.       RESERVES 

The following describes the nature and purpose of each reserve:

 
 Reserve                 Description 
----------------------  ------------------------------------------------------- 
 Ordinary shares         Represents the nominal value of equity shares 
 Share premium           Amount subscribed for share capital in excess 
                          of nominal value 
 Share based payment     Represents the fair value of options and warrants 
                          granted less amounts transferred on exercise, 
                          lapse or expiry 
 Foreign currency        Cumulative effects of translation of opening 
  translation reserve     balances on non-monetary assets between subsidiary 
                          functional currency (Canadian dollars) and Group 
                          functional and presentational currency (Sterling). 
 Fair value reserve      Cumulative net gains on the fair value of intangible 
                          assets 
 
 Other comprehensive     The other comprehensive income of any associates 
  income of equity        is recognised in this reserve 
  accounted associates 
 Accumulated surplus     Cumulative net gains and losses and other transactions 
                          with equity holders not recognised elsewhere. 
 
 
 
   15.       TRADE AND OTHER PAYABLES 
 
                                            As at               As at 
                                     30 June 2022    31 December 2021 
                                      (unaudited)           (audited) 
                                          GBP'000             GBP'000 
---------------------------------  --------------  ------------------ 
 Trade payables                            12,531              10,259 
 Accruals and other payables                5,102               4,986 
 Total trade and other creditors           17,633              15,245 
---------------------------------  --------------  ------------------ 
 

Within trade payables is GBP2.2m (2021: GBP10.8m) for amounts due for mining machines not yet received.

The directors consider that the carrying value of trade and other payables is equal to their fair value.

   16.       LOANS AND BORROWINGS 
 
 
 Non-current liabilities                    As at             As at 
                                     30 June 2022       31 December 
                                      (unaudited)    2021 (audited) 
                                          GBP'000           GBP'000 
---------------------------------  --------------  ---------------- 
 Issued debt - bond                        32,892            26,908 
 Long term loans                           37,081                 - 
 Assumed mortgage on acquisition            2,908             3,391 
 Total                                     72,881            30,299 
---------------------------------  --------------  ---------------- 
 
   Current liabilities 
---------------------------------  --------------  ---------------- 
 Short term loans                          43,876            22,239 
 Assumed mortgage on acquisition              840             1,152 
---------------------------------  --------------  ---------------- 
 Total                                     44,716            23,391 
---------------------------------  --------------  ---------------- 
 
 

The mortgages are secured against the two buildings at Mirabel and Baie Comeau and are repayable over periods from 52 months to 58 months at an interest rate of lender prime + 0.6%.

The Company entered into several loans to acquire mining equipment for the Helios facility in Texas. The loans are secured by the financed mining equipment. The loans have terms from 2 years to 4 years and interest rates from 8.25% to 12%.

   17.       FINANCIAL INSTRUMENTS 
 
                                                     As at               As at 
                                              30 June 2022    31 December 2021 
                                               (unaudited)           (audited) 
                                                   GBP'000             GBP'000 
------------------------------------------  --------------  ------------------ 
 Carrying amount of financial assets 
 Measured at amortised cost 
                                                    82,587              47,426 
       *    Mining equipment prepayments             5,496              13,194 
 
 
        *    Trade and other receivables 
 
        *    Cash and cash equivalents               9,210              11,803 
 Measured at fair value through profit 
  or loss                                            1,608                 403 
 Total carrying amount of financial 
  assets                                            98,901              72,826 
------------------------------------------  --------------  ------------------ 
 
 Carrying amount of financial liabilities 
 Measured at amortised cost 
 
        *    Trade and other payables               17,633              10,259 
 
        *    Short term loans                       44,716              23,391 
                                                    39,989               3,391 
       *    Long term loans                         32,892              26,908 
 
 
        *    Issued Debt - bonds 
 
        *    Lease liabilities                         398                 377 
 Measured at fair value through profit 
  or loss                                                -               8,071 
 Total carrying amount of financial 
  liabilities                                      135,628              72,397 
------------------------------------------  --------------  ------------------ 
 

Fair Value Estimation

Fair value measurements are disclosed according to the following fair value measurement hierarchy:

   -     Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) 

- Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices), or indirectly (that is, derived from prices) (Level 2)

- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). This is the case for unlisted equity securities.

The following table presents the Group's assets and liabilities that are measured at fair value at 30 June 2022 and 31 December 2021.

 
                                       Level 1   Level 2   Level 3     Total 
 Assets                                GBP'000   GBP'000   GBP'000   GBP'000 
------------------------------------  --------  --------  --------  -------- 
 Financial assets at fair                    -         -         -         - 
  value through profit or 
  loss 
 Equity holdings                            60         -        74       134 
 Hedging instruments                     1,608         -         -     1,608 
 Intangible assets - crypto 
  assets                                     -     3,431         -     3,431 
 Digital assets                              -    28,092              26,092 
 Total at 30 June 2022                   1,668    31,523        74    33,265 
------------------------------------  --------  --------  --------  -------- 
 
                                       Level 1   Level 2   Level 3     Total 
 Assets                                GBP'000   GBP'000   GBP'000   GBP'000 
------------------------------------  --------  --------  --------  -------- 
 Financial assets at fair                    -         -         -         - 
  value through profit or 
  loss 
 Equity holdings                           329         -        73       402 
 Hedging instruments                         -         -         -         - 
 Intangible assets - crypto 
  assets                                     -     5,424         -     5,424 
 Digital assets                              -    80,759              80,759 
 Total at 31 December 2021                 329    86,183        73    86,585 
------------------------------------  --------  --------  --------  -------- 
 Liabilities 
------------------------------------  --------  --------  --------  -------- 
 Financial liabilities at 
  fair value through profit 
  or loss 
 -Deferred contingent consideration                          8,071     8,071 
 Total at 31 December 2021                                   8,071     8,071 
------------------------------------  --------  --------  --------  -------- 
 

All financial assets are in listed/unlisted securities and digital assets.

There were no transfers between levels during the period.

The Group recognises the fair value of financial assets at fair value through profit or loss relating to unlisted investments at the cost of investment unless:

- There has been a specific change in the circumstances which, in the Group's opinion, has permanently impaired the value of the financial asset. The asset will be written down to the impaired value;

- There has been a significant change in the performance of the investee compared with budgets, plans or milestones;

- There has been a change in expectation that the investee's technical product milestones will be achieved or a change in the economic environment in which the investee operates;

- There has been an equity transaction, subsequent to the Group's investment, which crystallises a valuation for the financial asset which is different to the valuation at which the Group invested. The asset's value will be adjusted to reflect this revised valuation; or

- An independently prepared valuation report exists for the investee within close proximity to the reporting date.

   18.       COMMITMENTS 

The Group's material contractual commitments relate to the master services agreement with Core Scientific, which provides hosting, power and support services. This terminates shortly after the period end once the machine swap deal is complete.

   19.       RELATED PARTY TRANSACTIONS 

Key management compensation - all amounts in GBP000's

Key management includes Directors (executive and non-executive) and senior management. The compensation paid to related parties in respect of key management for employee services during the period was made only from Argo Innovation Labs Inc, amounting to: GBP20k (2021 - GBP18k) paid to POMA Enterprises Limited in respect of fees of Matthew Shaw (Non-executive director); GBP142k (2021 - GBP106k) paid to Vernon Blockchain Inc in respect of fees of Peter Wall (CEO); GBPnil (2021 - GBP68k) paid to Tenuous Holdings Ltd in respect of fees of Ian MacLeod (ex Executive chairman). During the period, James Savage (ex NED) was remunerated a gross salary of GBPnil (2021 - GBP15k), Marco D'Attanasio was remunerated gross fees of GBPnil (2021 - GBP15k) and Alex Appleton (CFO) through Appleton Business Advisors Limited was paid GBP97k (2021 - GBP60k) during the period.

Total director fees and remuneration, paid directly and indirectly, totalled GBP313k (2021: GBP221k).

   20.       CONTROLLING PARTY 

There is no controlling party of the Group.

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IR EALPLAAEAEFA

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August 25, 2022 02:00 ET (06:00 GMT)

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