James Cirrone

Argo Blockchain released its second quarter earnings numbers Tuesday. These show depressed revenues and a very slight increase in bitcoin mined in the first six months of the year, ending on June 30.



However, the mining company has two other things under consideration beyond its 31% decrease in revenue during the first half of 2023, compared with the same period last year.&nbsp;



Those are: the need to de-leverage from its debt — worth $72 million as of July — and the weeks-long Texas heatwave that has kept power prices high, according to Argo CEO Seif El-Bakly.



When it comes to the company’s debt, things have certainly improved. As of June 30, 2022, Argo was $143 million in the hole. Furthermore, in this quarter, it has paid down roughly $4 million in pre-existing financial obligations.&nbsp;



A significant portion of Argo’s debt is tied up with Galaxy Digital through a $35 million asset-backed loan secured by the some 23,619 Bitmain S19J rigs located at its Helios site. <a href="https://blockworks.co/news/bitcoin-miner-argo-to-sell-largest-facility-to-stay-afloat-stock-doubles">Galaxy purchased the Texas site for $65 million</a> in December 2022 and now hosts Argo’s miners.



To continue paying down debt, Argo sold roughly $1 million worth of <a href="https://blockworks.co/tag/ethereum">Ethereum</a> in May, and in July, the company completed a share placement in the UK that netted $7.5 million. About $1.8 million of the share proceeds went toward debt reduction. 



Shifting to its mining stats, Argo has increased its hashing power to 2.6 exahashes per second (EH/s) and the end of year goal is to nudge that up to 2.8 EH/s. To achieve this, the company aims to add 1,628 more BlockMiner rigs to its facilities in Quebec, on top of the existing 1,242 BlockMiners.&nbsp;



“We are confident that by the end of the year, all of the nearly 2900 machines will be deployed,” El-Bakly said on an earnings call. “Given the current deployment rate, I&#8217;m confident that we can likely deploy them before Q4 of 2023.”



In Texas at the flagship Helios facility, Argo is dealing with a dramatic heatwave that has persisted throughout the summer.&nbsp;



Helios is located in Dickens County, a part of north Texas. And according to a <a href="https://www.dallasnews.com/news/weather/2023/08/04/the-north-texas-heat-wave-when-will-this-end-how-many-100-degree-days-have-we-had/">report</a> from the Dallas Morning News, north Texas has seen 41 days that reached temperatures of at least 100 degrees.&nbsp;



El-Bakly explained that Helios’ fixed power purchase agreement (PPA), which was struck during the first half of 2023, has been “ultimately a good hedge, and it&#8217;s proving itself to be very valuable so far for the third quarter.”



The PPA covers a “significant portion” of the Helios facility’s power load, but not all of it.



He went on to say that this is the best possible time for bitcoin’s price to be slightly down, as strange as that sounds.&nbsp;



“The reason is…when you essentially have a fixed PPA…you can pretty much use those power blocks and sell it back to the grid,” he explained.&nbsp;



He continued, “The higher the Bitcoin prices are, the more of an opportunity cost it is for us not to mine. And at times, it&#8217;s actually more beneficial for us not to mine and sell that power back to the grid, rather than keep mining.”



To that end, Helios generated $1.1 million worth in power credits in the second quarter, which would have been equivalent to mining an additional 38 bitcoin on top of their six month total of 947.



Still, perhaps the most important question that analysts had for El-Bakly and chief financial officer Jim MacCallum was how they plan to position themselves ahead of the upcoming bitcoin halving.&nbsp;



El-Bakly said the focus is to reduce fixed costs and operating costs while also deleveraging. He seemed to also hint that future real estate sales could be on the table going forward, similar to what was done with Helios last year.&nbsp;



“In the past, we&#8217;ve mentioned excess inventory and real estate as examples of non-core assets that we can potentially monetize to generate additional cash,” El-Bakly said.



“We&#8217;re currently in advanced discussions with some of those,” he added.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Texas heatwave raises power costs for Argo Blockchain amidst debt repayment

David Canellis

<div id="highlights-block_6274044c0931c" class="highlights">
 <ul>
 <li>Argo Blockchain stock surged up to 10% after saying its new flagship mine in Texas is ready to generate crypto next week</li>
 <li>The London-based company has borrowed nearly $100 million from NYDIG in the past few months to acquire mining rigs for the site</li>
 </ul>
 
</div>



Argo Blockchain says its new crypto facility in Texas is fully energized and ready to start mining next week.



Argo celebrates the milestone with an inauguration ceremony at the facility on Thursday afternoon. The company’s London-listed stock surged up to 10% on the announcement and currently sits about 7% above its previous close.&nbsp;



The 320-acre Dickens County plot, Helios, will serve as Argo’s flagship bitcoin mining operation moving forward. Argo has two smaller facilities in Quebec.



Argo <a href="https://www.theblockcrypto.com/post/123386/argo-filing-reveals-texas-mining-facility-could-cost-up-to-2-billion-to-build" target="_blank" rel="noreferrer noopener">projected</a> costs of up to $2 billion to get Helios online last November, <a href="https://www.londonstockexchange.com/news-article/ARB/2021-full-year-results/15428672" target="_blank" rel="noreferrer noopener">financed</a> by debt offerings and offloading some of the bitcoin it mines every month.



In fact, word <a href="https://www.coindesk.com/business/2022/05/04/argo-blockchain-borrows-70m-from-nydig-to-buy-mining-rigs/" target="_blank" rel="noreferrer noopener">broke</a> of a $70-million loan from crypto service provider NYDIG Wednesday, cash Argo will use to acquire more mining rigs — bringing the total loan above $97 million. Argo’s market capitalization is around $370 million.



&#8220;I&#8217;m extremely grateful to everyone who has been involved in the planning and execution of Helios,” CEO Peter Wall said in a statement. “We started construction on the facility in July 2021 and it is a tremendous achievement that the site will commence mining operations in less than 12 months.



The UK firm said the 20,000 Bitmain S1PJ Pro mining rigs bought last September are still being delivered and installed. Argo will continue receiving and installing the Bitmain machines in batches between May and October of this year but didn’t specify how many rigs were already housed at the site.



Argo also signed a different <a href="https://www.theblockcrypto.com/linked/137672/argo-blockchain-and-core-scientific-swap-bitcoin-mining-fleets" target="_blank" rel="noreferrer noopener">deal</a> with fellow mining org Core Scientific in March that sees the two companies swap thousands of ASICs. Argo intends to exchange its less powerful Antminer S9s – which were housed at Core Scientific – for more Bitmain S1PJ Pro machines.



Some of Core Scientific’s rigs have already been installed, with the rest to be delivered and set up throughout July. Argo will also be one of the first to receive Intel’s new mining chips, which are <a href="https://cms.blockworks.co/intel-unveils-latest-energy-efficient-asic-mining-chip/" target="_blank" rel="noreferrer noopener">pegged</a> as more efficient than some off-the-shelf ASICs currently available.



Right now, Argo <a href="https://argoblockchain.com/" target="_blank" rel="noreferrer noopener">wields</a> 1.605 exahashes per second (EH/s), equivalent to about 0.7% of Bitcoin’s hash rate. Marathon Digital Holdings, the largest crypto mining company by market value, <a href="https://ir.marathondh.com/news-events/press-releases/detail/1281/marathon-digital-holdings-announces-bitcoin-production-and" target="_blank" rel="noreferrer noopener">maintained</a> 3.9 EH/s as of March – more than double Argo’s current capacity. 



Over the next few years, Argo says its new site will eventually harness 800 megawatts (MW) of electricity. This would surpass the 750 MW planned to flow through rival Riot Blockchain’s Texas <a href="https://www.cnbc.com/2021/10/31/bitcoin-mining-giants-bitdeer-riot-blockchain-in-rockdale-texas.html" target="_blank" rel="noreferrer noopener">site</a> in Rockdale, some 350 miles away.



Argo’s Helios will make do with just 200 MW for now, one-fifth of its targeted energy expenditure. The company reckons this will still boost its overall maximum hash rate by 243% to 5.5 EH/s by the end of the year.&nbsp;



If that happens, Argo could handle a hash rate of more than 20 EH/s overall, equal to around 9% of the Bitcoin network’s current capacity.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.

Argo Stock Jumps as it Celebrates Opening of Texas Bitcoin Mine

Ben Strack

<div id="highlights-block_6201855325a4b" class="highlights">
 <ul>
 <li>Firm’s upcoming ETF to follow launches of its Bitcoin Strategy ETF (BTF) and Balance Sheet Opportunities ETF (VBB)</li>
 <li>The fund is set to have Argo Blockchain and Bitfarms as its top two holdings</li>
 </ul>
 
</div>



Valkyrie Investments is set to launch an ETF focused on bitcoin mining operators with an emphasis on sustainability.



The Valkyrie Bitcoin Miners ETF (WGMI) will begin trading Tuesday on the Nasdaq. It invests in publicly traded miners using renewable energy as their primary energy source and carries an expense ratio of 75 basis points. WGMI is short for “WAGMI,” crypto nomenclature for “we’re all gonna make it.”



Roughly 77% of the energy consumed by the companies in the ETF — on a portfolio-weighted basis — is from renewable energy sources such as solar, wind, hydropower and geothermal. Most are US-based businesses, although some are headquartered in Canada and the UK.



“We have found that mining companies that went the extra step here, versus carbon-neutral pledges or other initiatives, tend to maintain a lower overhead because renewable energy often costs less than other sources,” Valkyrie Funds CEO Leah Wald told Blockworks. “This tends to raise profitability.”



Registered investment advisors (RIAs), financial advisors and other market participants are looking to invest in pockets of the digital assets industry “in a climate-conscious manager,” Wald said.



“We believe that bitcoin miners are leading the green energy revolution and that providing more access to people seeking opportunities to align with environmentally friendly companies can only serve to help make the environment cleaner,” she said.



Argo Blockchain and Bitfarms are set to be the top holdings in WGMI with a 10% portfolio weighting. Other top holdings include Cleanspark, Hive Blockchain Technologies and Stronghold Digital Mining.



Argo and Bitfarms mined 172 bitcoin and 301 bitcoin, respectively, in January.



Based in London, Argo Blockchain last year committed to being “climate positive” by 2030.



“We’re pleased to see another crypto mining ETF approved, especially one that has a sustainability focus,” Argo Blockchain CEO Peter Wall told Blockworks in an email. “We think there is a strong market for investors in the sector as a whole, but especially for environmentally focused miners.”



Bitfarms has five facilities in Quebec and acquired a 24-megawatt (MW) hydropower farm in Washington in November. It also began operating a 10-MW farm in Paraguay last month. Each facility is powered with 99% hydropower.



Valkyrie’s new product follows <a href="https://cms.blockworks.co/viridi-launches-first-us-clean-energy-crypto-mining-etf/" target="_blank" rel="noreferrer noopener">the launch</a> of Viridi Funds’ Cleaner Energy Crypto-Mining &amp; Semiconductor ETF (RIGZ) in July. The fund costs 90 bps and has $11 million of assets.



RIGZ has Bitfarms and Argo Blockchain as its third- and fourth-largest holdings, allocating about 8.8% and 6.6%, respectively to the miners, as of Feb. 7. Investments in Marathon Digital and Hut 8 Mining account for a combined 20% of the portfolio.



The WGMI launch comes after Valkyrie <a href="https://cms.blockworks.co/valkyrie-bitcoin-futures-etf-launch-confirmed-for-friday/" target="_blank" rel="noreferrer noopener">launched its Bitcoin Strategy ETF</a> (BTF) — primarily investing in bitcoin futures contracts — in October. The fund group also brought to market its Balance Sheet Opportunities ETF (VBB) in December. The offering invests in the stocks of companies with exposure to bitcoin.



BTF has about $40 million assets under management, while VBB has less than $1 million.



The Securities and Exchange Commission denied Valkyrie’s proposal to launch an ETF that would invest in bitcoin directly in December. The agency has rejected the applications from a handful of other issuers, <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">leaving uncertainty</a> around when it will OK such a product.



“We have a number of ideas we are currently exploring based on feedback from stakeholders, investors and other partners,” Wald said, declining to comment further.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.