Argo Blockchain plc

Good afternoon and welcome to the Argo blockchain four year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q&A tab that's situated on the right hand corner of your screen. Just please simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll, and I'm sure if you could give that your kind attention, the company would be most grateful. Without any further ado, I'd like to hand over to Peter Wall, CEO. Good afternoon.

thank you mark uh thanks everyone for joining us welcome to our 2021 full year uh results call uh as mark said i'm peter i'm the ceo of argo blockchain with me today is alex appleton our cfo and tom devine our head of investor relations our vp of investor relations tom's going to pop up a little bit later and is curating some of the questions as they come in So great to have you with us. Thank you for joining. It's been a busy morning for us so far with the results coming out. We've done a little bit of media. Hopefully some of you that have followed the company closely have had a chance to see some of those interviews we've done. And if not, we'll share them on our social media soon. All right, so let's jump into the presentation. Normal legal disclaimer off the top. The next slide, for those of you that have seen a lot of our presentations before will look familiar with a little bit of changes to it. Most importantly, the 3.6 exahash. So that is our mining capacity that is contracted and existing. We're adding the two exahash from Bitmain, from the Bitmain order that we have. The 20,000 machines that we ordered following the IPO back in September, those are starting to be installed at Helios next month, month of May, which is just a few days away. And the plan is still in progress and still looking good to have those installed by the end of October. So we're confident that that two exahashes is going to be reached by the end of October, given all of the pieces that we have in place currently. That exahash of 3.6 translates to about 44,000 mining machines. That's 24,000 machines already in our current fleet. And then the extra 20,000 that is coming from the bitmain order that I was just talking about. As I think everyone knows, we're very focused at Argo on sustainability. Being an ESG-friendly miner is a big part of our company values, a big part of our story. We were the first Bitcoin miner to be 100% carbon neutral last year. We put out a climate strategy along those lines. We'll be releasing an update to that report in the very near future. And a big reason we were able to achieve that carbon neutrality is being located in certain regions. First of all, in Quebec, using hydroelectric power, we're following the same strategy by setting up in West Texas where there's an enormous amount of renewable power, 85% of the power in the West load zone where we are in West Texas is coming from renewables, primarily wind. So that story continues for us and is a key part of who we are and what we do. On the Bitcoin HODL side of things, at the end of March, our Bitcoin HODL was 2,700 Bitcoin and Bitcoin equivalent. 10% of that is allocated to Argo Labs. As many of you know, we launched Argo Labs earlier this year. It's our in-house innovation arm focused on non-mining activities within the broader blockchain and Web 3.0 ecosystem. And I'll give a little update later in the presentation about the activities of Argo Labs. Finally, our mining margin for 2021 was 84%, which is amongst the highest of all our peers, and is a number we're really proud of. All right, so then on the right-hand side of this slide, you see a map of our two locations where we're mining, our two regions where we're mining, Texas and Quebec, the facilities in Bay Como and Mirabel, and then the new flagship facility we're opening very soon in Texas, the Helios facility. All right, I'm gonna jump ahead to the next slide, which is the slide that I think everyone's been waiting for today, which is our financial highlights from last year. So as you can see, it was a great year for us, a transformational year for Argo. Our revenue was 100 million USD or 74 million pounds, an increase of 291% from the year before. Our EBITDA was 71 million US or 53 million pounds, up 594% from the previous year. Our net income was 42 million U.S. or 31 million pounds up, you know, less up from from two million in 2020. Our Bitcoin mine for the entire year was was 2000, 2045. So just just north of 2000. And as I said before, that money margin was about 84 percent. At the end of the year, we held two thousand five hundred eighty five. Sorry, two thousand five hundred ninety five Bitcoin and Bitcoin equivalents on the balance sheet. Um, and that was at the end of the year, uh, end of December, uh, 2021. On the chart on the right, you can see our mining margin was very strong and consistent in the 80s for the entire year. This was driven largely by the high price of Bitcoin, as well as us really being able to control our operating costs, very good hosting costs with our core scientific deals that we're mining with, or currently still are mining with, but soon will not be, as well as the low cost of power that we have in Quebec. The temporary drop in global hash rate that took place with the Chinese ban on Bitcoin mining in mid last year also helped our performance. That was across the board for all miners, and that kept margins strong throughout the year. So to summarize the year, 2021 was a great time to be a miner with access to low-cost power, and we are very much feeling the same way about 2022. All right, I'm going to jump ahead to our key operational highlights and milestones from 2021. So I'm not going to go through them all. It was a busy year. A lot happened, but I'm going to point out a couple of the major highlights that took place for the year. Probably the most important one for the year was our acquisition of the Helios project in the Texas Panhandle. That happened in the first quarter. Uh, the Helios project was a shovel ready project. It gave us an incredible foundation for the growth that we have today. Uh, it was a part of our shift in strategy from being hosted, uh, at third parties like core and GPU one. to owning and operating our own infrastructure. So that took place in the first quarter. In the second quarter, we closed the acquisition of two data centers in Quebec, one in Mirabelle and one in Bay Como. We were originally hosting our machines at these facilities going back as far as 2018 in the case of Mirabelle. And that was a big part of our moving into owning and operating our own infrastructure. The third quarter saw the listing or saw us list on the NASDAQ in the US. It was a huge moment for the company. It was something that we worked on towards for much of the year. It was something that a lot of shareholders and stakeholders were asking for. It's something that's obviously very common in this space for miners to be listed now on NASDAQ. And that's because it's the most important access or gives the best access to the US capital markets, which is obviously a very large pool of capital. As part of that listing, we raised 130 million US and some of that capital immediately went towards the 20,000 machine bitmain order that we are now starting to install in Helios. All right. In the fourth quarter, we, you know, we didn't stop. We also had the installation of about 530 more petahash of machines, which came from orders that we placed earlier in the first half of the year. We also made great progress on Helios. We broke ground there in the third quarter, but by the end of the fourth quarter, we had completed the main structure and the outside facade of the building. And I'll talk a little bit more about Helios a little bit later in the presentation and give some more updates. All right. Jumping ahead to some key metrics. So on this page, you can see how dramatic our growth was. A lot of up and to the right from 2020 to 2021. On the hash rate side, we grew from about 0.6 exahash to 1.6 exahash. Our revenue went from 26 million. These are all figures in the US, 26 million to 100 million. Our money margin also doubled up to 84%. Our EBITDA went from 11 million in 2020 to 71 million in 2021. net income from about 2 million U.S. to 42 million. And our cash and digital assets at year end went from 9 million to 125 million U.S. at the end of December 2021. So really some important metrics. And obviously, we're very pleased with the growth for the year. All right. However, it's not only about machines and only about power and only about capital. It's also about people. And as we started to own and operate our own facilities, we really needed to grow our team and bring the necessary expertise in-house. Our headcount grew from around seven people. We were a very small company at the start of 2020 when I took over as CEO. Actually, at the end of 2020, we were still at seven people to around 39 people at the end of 2021. As of right now, we're approaching about 100 people when you include all of our data center ops team members. On the senior management team, we also added several key folks to round out the original crew that consisted of myself, Perry, and Seb, and then Alex, who joined in 2020. Davis Zapfi is our general counsel, runs our legal department. Justin Nolan was the co-founder of the Helios project and really the force behind, you know, getting set up in Dickens County. He found the land and set up the project after the acquisition of DPN, which was his company. Justin came on board and has been a really key part of our business development team and is leading our efforts there. Jean Esquier works very closely with Perry Hathi. He's our VP of Technology and Development. and has been primarily focused on the design and the build-out of the immersion system at Helios. Theo Papadakis is our VP of data center operations, comes from the world of data centers, a long career in that space, and he's built a world-class data center operations team to manage our three data centers, obviously with a huge focus in Texas right now. And then finally, Tom Devine, who is on the call today, you'll see him pop up a little bit later. He leads our investor relations and as well as our government relations efforts. All right. So that is 2021 in a nutshell. Obviously, this is a fast moving space. 2021 already seems like a long time ago. So for the rest of the presentation, I'm going to talk about 2022 and beyond. Obviously, there's a lot going on with us as a company, a lot going on in the space. I love this picture. This picture was taken just a couple of days ago, I think two days ago. That's the latest shot from our Helios facility. You can see the rapid development that's taken place there over the last six, seven, eight months. You know, the dry coolers coming up on the side are almost to the end of the line. So great, great development. And really, that is our primary focus for the rest of this year. So let's jump ahead to the key initiatives for the year. So Completion of phase one of Helios is still slated to fully be baked out and finished by the end of this year. That includes filling it up completely with machines and obviously having all the infrastructure in place ahead of time for those machines. Our construction team's done just an absolutely incredible job. The substation is complete and that taps into the Cottonwood substation, which is across the fence line. all of that being said we expect our hash rate to grow to five and a half extra hash by the end of this year uh and that's a number that uh we're very proud of you know our whole kind of philosophy i think people that follow the company closely know has been to to really focus on growth and to make sure that we are slow and steady and focusing on you know quarters and years And so today we're happy to say that our expectations will be five and a half exahash by the end of this year. And we'll get into those details a little bit more. I know there's folks asking, what does that entail? What does that not entail? But that's a really a key number for us and something that we believe is absolutely achievable by the end of this year. You know, the philosophy is really to kind of under promise and over deliver as much as we can. And certainly, I think the speed with this, the speed with which we built this facility has been amazing. And, you know, just even on the ground in Dickens County, people are saying they've never seen anything like it. So it's pretty awesome what our team has done. Furthermore, we're also, you know, not just working on infrastructure, but we're also developing a custom designed mining rig, which will utilize the Intel block scale ASIC chips. And I'll talk a little bit more about what that's going to look like in a slide coming up. All right, a couple more shots of Helios. So on the left-hand side, you can see the immersion tanks, which are on double-decker racks. Shout out to the double-decker buses in London. On the right-hand side, you can see a photo of our Helios facility staff during the recent onboarding activities. We've got about 40 staff there now. We have another 20 temporary labor. So we've got an incredible team. They're charging ahead, doing incredible work. We'll have some more content, some more video coming out soon, very soon about the work that's going on there and are really excited to announce to the market when that facility is energized. That's the next big step for us there. On the immersion cooling side of things, we've discussed before how Helios has been built to use our proprietary immersion cooling system that we've co-designed with a large US-based global manufacturing company. I think as everyone knows in Texas, it gets hot, it's dusty, it's windy. It's not a great environment for mining unless you're using immersion. which allows you to protect the machines. It's more efficient at keeping the machines cool. It keeps particulate matter, dust, sand out, and all of that extends the lifespan of the machines. In addition to that, we think that we can get a significant hash rate boost out of the machines, i.e. overclock them when running them in an immersion environment compared to air-cooled. All that being said, the system that we're building in Texas, once it's fully deployed, will be one of the largest immersion cooling systems in the world. All right, in terms of machine development, You know, we announced earlier this year a relationship with Intel, and one of our key focuses is building a custom mining rig to utilize the Intel chips that are coming out of that relationship. We're very proud. We're excited to be one of the four companies that Intel has chosen to work with us as they enter the Bitcoin mining space. And having them enter the space is incredibly important. It gives the Bitcoin mining space more credibility to have, you know, a blue chip company like Intel coming in. But it also will benefit the industry to have a more diverse supply chain and more options for ASICs and also to have chips available as opposed to fully baked machines. We think our custom mining rig, which is going to use these Intel mining chips, is going to be significantly cheaper on a cost per terahash basis than what's currently available off the shelf in the market. And this will allow us to further increase our hash rate at competitive margins. In terms of developing that machine, we have a great relationship with the third-party manufacturer. We're working very closely with them on the design of the mining machine from top to bottom, and we expect to be able to deploy these machines towards the end of the year. So along those lines, this is what the look ahead for the year looks like to get us to the 200 megawatts at Helios. You can see some of the kind of major work streams here that have been completed or that are in progress. We've been on time with the construction of the Helios facility and the substation. We are working to finalize the demand response pieces with ERCOT. That's obviously a really important part to be able to take advantage of the ancillary services. ancillary services that ERCOT offers in Texas. The installation of the immersion equipment is going very well. That includes the dry coolers that I just mentioned that you can see on the outside of the building, as well as the tanks and the pumps and the piping inside the facility. Obviously, all that needs to be in place before we can start putting machines to work and mining. In terms of the installation of machines, we expect to start installing machines very soon, both the core scientific machines as well as the bitmain machines. So you can see those two lines here. The core machine swap has been structured in a way to mitigate any downtime. So as we receive the new machines and install them in batches, Core will take over the hash rate from our machines located in their facilities. And that will take place on four different particular dates. This will eliminate kind of downtime and also having to unplug the machines and ship them to Helio. So we're really pleased with that arrangement with Core. Once we complete the core swap at the end of July, we'll be 100% self-owned and operated with no more hosting arrangements, which is another big milestone for us. In terms of energization, you see a little dot there, a little diamond. It does feel like a diamond because it's so important for us. It's slated to happen very soon. Very, very soon, we'll make an announcement to the market when it happens. It's obviously a critical event to get mining operations started at Helios. And then finally, on the Intel piece, we are currently in the design testing phase for the Intel machines. And we expect to deploy those machines towards the end of this year and then into 2023. So you can see the dotted line on the chart. That is when we expect to deploy the Intel machines. And yeah, and then there'll be more into 2023 as well. We won't stop with just the fourth quarter. So what does all this mean in terms of our hash rate? You know, bringing Helios online, completing phase one will obviously have a significant impact on our hash rate. So right now we have 1.6 exahash in capacity. We started Q2 there. We'll see an increase in hash rate as we start to install the 20,000 S19J Pros that we ordered from Bitmain. These rigs are going to be delivered, as I've said many times before on this presentation and others, in May. starting in May and then through to the end of October. And then the core machines are part of that 1.6 exahash, so we won't get an increase in exahash from them, obviously. At the end of the year, we'll see an additional uplift in hash rate as we deploy the Intel ASIC machines. That's another bump of about 1.8 exahash. So we expect to end the year around five and a half extra hash with most of that hash rate at Helios with the full 200 megawatts online. This does not include any uplift from immersion. So we're trying to be conservative about our hash rate projections. Again, under promise, over deliver. So this is kind of nameplate hash rate, not including immersion. And then remember, we still have another 20 megawatts of capacity. Our Quebec facilities where we're mining both Bitcoin and Zcash. All of our Zcash mining is taking place in Quebec. We currently do not have any mining other than Bitcoin mining slated for the Helios facility. All right, jumping ahead to the future. Um, we, we think that one of the, you know, the primary benefits of our Helios facility is obviously the potential for this, this, you know, growth, this, this runway for growth. We've got an interconnection agreement for 800 megawatts of power, which means we have an additional 600 megawatts of capacity remaining once this 200 megawatts is up and going. We also have the ASIC supply agreement, which we've just been talking about, and that will provide us with a steady supply of machines. In terms of manufacturing those machines, we're working with a third party to custom manufacture those. And that, again, we are confident will result on a cheaper cost per terahash basis than what's currently available in the market. So add all of these factors together, the power and the access to chips, and we see us getting to north of 20 exahash by 2024. This would include the full development, obviously, of the additional 600 megawatts of capacity at Helios. So even though we are still only in phase one, you know the 200 megawatts we've taken steps uh to you know for the future phases already we announced earlier this year that we ordered four additional transformers that will take us up to the full 800 megawatts of power there's a long lead time on those that you know they they will be coming uh in the first and second quarter of next year so it's important we get those orders in but we have a clear path to getting there to the to the full 800 megawatts built out all right so that's the plan for for machines and obviously that's the plan for power, but how are we going to pay for it? What are we doing on the capital side of things? So taking a quick look back, you know, as, as, as everyone knows this business is a capital intensive business. And since the beginning of 2021, we've raised nearly 300 million of external capital. Some of that has been equity, like the private placement loans that took place in early 2021 and and the NASDAQ listing, but we've also issued debt like the Bitcoin back loan, the 40 million in baby bonds, and the infrastructure loan that we've done with NYDIG. What we're seeing in this space is a continued maturation of debt markets, and that is where we are looking at focusing on our capital raising efforts moving forward. So that takes us to the next slide, which is how we're going to finance our growth in 2022. So in order to complete phase one of Helios, which includes both a little bit more capital infrastructure and then machines to fully build out the 200 megawatts, we need roughly 125 million of additional capital. You know, as I've said many times, we have three levers which we can pull on when we're raising capital, debt, equity and selling Bitcoin. Right now, we plan to raise the additional capital through a combination of debt and Bitcoin. we don't anticipate issuing equity in 2022. As the step market is maturing, we've seen lots of opportunities, including machine financing. We've built some really strong relationships with the leading capital providers in the space over the last three, four years, particularly over the last 12 months, strong relationships with Galaxy, with NYDIG, with other new folks who are moving into the space. They're all looking to deploy capital and looking to reputable miners. to deploy that with. So we're in a really good position on the financing side, and that's our focus. In terms of selling Bitcoin, I think as most people know, in 2021, we didn't sell much Bitcoin. We financed our growth with equity and with a little bit of debt. However, going forward, we're taking a slightly different approach and selling a portion of our monthly Bitcoin production to cover our operating expenses and to help fund our growth plans. So if you think about the history of the company, going back to 2019, 2020, we had to sell Bitcoin to cover operating costs to help fund our growth. 2021, we didn't sell any. This year, we're taking a bit of a blended approach and doing a mix of debt and Bitcoin. All right. Moving on to ESG, obviously, as I said from the start, a key part of our story, a key part of who we are. Um, and you know, that's a key part of why we've located our mining facilities, where we have first off in Quebec, uh, where, you know, where the machines are running off hydroelectric power. And now in the Texas panhandle where most of the generation capacity is coming from wind power. Uh, last year we put out a climate strategy, became carbon neutral, um, first company in the space to do that. 2021 update is forthcoming, um, uh, to, to, to kind of report on that and, and, and the 2022. climate strategy coming out alongside that. On the S side of things, the social side of things, our focus is really to be a good corporate citizen in the communities that we're working in. So our efforts in Dickens County, we feel are bringing economic benefits. We have a very solid relationship with the community there. During the construction phase at Helios, we created about 130 construction jobs. We have 40 full-time jobs that we've created for phase one of the facility. Most of the hiring has taken place in Dickens County. Some of it's from the neighboring region, from the Lubbock area. We've got another 20 part-time staff or kind of temporary staff that are helping in the last push to get the facility up and running. We also have made a contribution back to the community to refurbish the community pool. And that pool has been closed since 2009. That project is underway and we're working with the community to get that completed as quickly as we can. On the governance side of things, we've strengthened our board of directors with the addition of three new members in the last 12 months. We've added Raghav Chopra, who has a great experience, background in banking and investing. Sarah Gao, who has a finance and asset management background. And Maria Perella, who brings a wealth of experience as a former public company CFO. So we're very grateful to have them on the board. We're a stronger company because of that. They're very active. And the board is in a really great place. So I'm very pleased with that. All right. Finally, let me say a quick word about Argo Labs before I turn it over to Alex. We started Argo Labs last year, although we've kind of informally always, you know, those of you that know the company well, we've informally always felt like there's opportunities in the blockchain ecosystem at large. And really, Sebastien Chalut, who's our chief strategy officer, has been leading that for many years now. We now have this codified group called Argo Labs. It's a six-person team led by Seb. And they are really looking for ways for us to participate in the disruptive sectors of the blockchain and Web 3.0 ecosystem. So just like it was a small team of us that started the mining side of things, it's a small team that's kind of working on the innovation side, the non-mining side of things. And generally, the goal for this team is to take a portion of our Bitcoin holdings and generate additional uplift that simply outperforms holding Bitcoin or that outperforms simply holding Bitcoin. so far we've allocated them 10 of our total digital assets uh that's going well they're doing a great job so far and we'll reassess that uh the amount of allocation that they have on a quarter by quarter basis all right that is uh my slides i'm going to hand it over to alex for a couple uh for him thanks peter um so it's um it's really been a great year um i know peter's

Touched on a lot of these these figures already, but I think it's worth sort of going through them in a little bit more detail. You know, revenue is up to 100 million dollars, 74 million pounds. That's been driven by both the increase in the Bitcoin price, which Peter's mentioned, and also our increased capacity, most of which in this year actually came on towards the end of the year. So that additional 500 per hash at the end of the year. So we'll see the full impact of that as we go into 2022. And then also, of course, with the expansion of Helios mining margin has remained very strong. Again, you know, Peter already said this among the market leading of Bitcoin miners. And we intend to stay there. And that's why we're moving in towards Helios, where we have access directly to that low cost of power. And so your margins you've seen from our operational updates, margins have tightened a little bit, but still well into the 70s, which is enviable across most industries. And we're going to stay at the very in that tier A of miners by having access to low cost power and also the machines that we're building out and the immersion element of that as well. So that's spent for gross profit, very strong, very strong for the year, through $70 million there, £50 million at 70%. In terms of operating costs and expenses, yes, they have increased. We've Peter's gone through how we've strengthened the executive team. We strengthened the management team within the business. And also, as we've grown and we move to the owned and operating model, we'll also we take it on more staff in terms of employee costs, et cetera. So you have seen an increase in in the sort of general administrative expenses there. Additionally, you know, with the dual listing, we do incur more fees, more professional fees, more consulting fees, etc. So you'll also see those costs going through the operating costs and expenses there as well. I'll draw your attention as well to the share based payment charge that is on there. That's two million pounds or two point six million dollars. That is actually that's the charge that is taken on to the counting adjustment. So it's not actually a cash flow through through the business. And that takes us down to our total operating expenses there of 10 million pounds. Still a very healthy profit. operating profit, which we're really proud of, which we've achieved this year, £43 million there. In terms of other income and expenses, we've taken on some debt, so we have some increased interest expenses there, and then there's some different revaluations, etc., which lead us down to our net income. um of 30 million pounds so a really pleasing year and one really proud of and as i say we're well positioned to continue uh continue on the growth phase and continue a very profitable level the balance sheet so this year as peter said you know we have um We've had a number of private placements, which has really strengthened the balance sheet. So you can see the end of the year, we've got a very strong balance sheet, significantly stronger than last year in terms of our net. Our net assets are well into the 200 million, 220 million or so. And what have we done with the cash that we've actually raised? So the great majority of that has gone into machines. I had the machines that we've installed and put on the ground. So it's about 40 million pounds worth of machines that we've installed and put on the ground and purchased. There's a lot of cash that we've used to actually put up the prepayments of the machines, mostly for the bit main order. So that's nearly 50 million with the bulk of that being for the bit main order. We've also invested obviously heavily in Helios and that asset as well. So there's over £70 million has also gone into that. Alongside that, as Peter said, we've been able to continue to hodl and grow. um you know to move forward uh with our strategy of now selling some part of what we mine um and also we're all we have a number of options around debt um which um which are very and and there's a question actually in there about the interest rates and how that's impacted us we're actually seeing you know interest rates come down I remember the first the first Bitcoin back loan that we had back in June of 21, you know, the interest rate was over 12%. We've seen that fall significantly during the year. At the year end, the interest rate was 8% and we're seeing continued downward pressure, you know, on the cost of capital. So we're very pleased with where we're sat. And as we look forward, we look forward with optimism into the coming year and very excited to see Helios opening in the very near future. Peter, back to you, sir.

All right. Thank you, Alex. I'm now going to invite Tom Devine, our VP of Investor Relations, to come on. Tom has been gathering questions both from before the presentation and from during the presentation in the chat group on the side or the Q&A section on the side. And he's going to read out some questions and then Alex and I will answer them.

Yeah, thanks, Peter. We've been getting a lot of questions from folks who are listening in as well as some of the sell side research analysts. So I'm going to go through some of those. So our first question comes from Jason B. His question is, is immersion uplift included in the five and a half exit hash target that we've announced for the end of twenty twenty two?

All right. Thanks, Jason. So the answer is no. Again, we're trying to make sure that, you know, we are conservative with our projections under promise over deliver. So the five and a half X does not include an uplift from immersion.

OK, great. Thanks, Peter. Our next question comes from Darren of Tahi at Roth Capital Partners. What sort of advantage do you think the supply agreement with Intel can give you versus other miners?

Thanks for the question, Darren. In terms of the supply group with Intel, the advantage for us is that we will have a better access to a stable source of chips, which in turn will mean cheaper hash rate growth, ability to customize our mining rigs. That's a really important factor when you're using immersion cooling. I think, as you know, Darren, we like to be very granular, very much in control, very much optimize our machines and our mining. We run a very kind of custom mining shop this is not a plug-and-play or a plug-and-pray kind of a company um so the more we can get granular with our machines and the more we can have access to chips that we can build our own custom rigs and we can do so cheaper and we can put those into an immersion um environment and that allows us to to really get the most out of our mining operations

Great. Our next question comes from Finastis S. Could you explain what the equipment financing agreement with NYDIG entailed? And is it for electrical equipment pre-orders needed for the 600 megawatts?

Sure.

Alex, you want to take that one or you want me to take that one?

Yeah, absolutely. I'll take it. It's for electrical infrastructure that we have on the ground at the moment. We were really pleased with that. NYDIG is a great partner to have in this space. And again, back to the interest rate, 8.25% is very competitive when compared with the traditional sector. So it was a really good deal for us. And it's something that will provide an opportunity going forward for as we build out Helios, that will give us further collateral to be able to use for further debt initiatives.

Great. Our next question comes from Joe Voffey at Canaccord. Could you go into a bit more detail on the ASICs you are purchasing from Intel? I believe they are not putting full systems together. Do you have a design partner at this point?

Sure. Thanks, Joe. So those I'll give you a little bit of a background on how we came to work with Intel and then a little bit about the custom mining rigs. So Intel reached out to a number of folks in the space back in around Q4 of last year. and said, hey, we're going to be developing a mining chip. Are you all interested in working with us? And of course, we said, absolutely, we'd be very interested. And they said, listen, we're only going to work with miners that fit, that kind of align with our values on the ESG side of things in particular. so we walked through what we're doing what we've been doing and what we are doing on the esg side of things and they said that sounds great you guys sound like a good fit and then you know through that relationship by the way they found that we have a very strong technology team you know led by our cto perry and so there's been lots of collaboration and lots of conversation with intel about what they're doing um and there's been lots of education kind of back and forth on both sides so it's been it's been a really good relationship so far um we're excited to be working with them In terms of, you know, what that final system is going to look like. Yeah, you're right, Joe, they are not putting a full system together. They're developing chips. That's what they do. That's what they're really good at. And then, you know, just like they sell chips to, you know, computing computer manufacturers like Dell, they're going to sell chips to certain miners that can then put them to work in their own machines. So there is an opportunity to either go with a supplier from Intel or to go with a supplier of our choice, a third party of our choice. So we haven't announced that yet, what we're doing, but we will be working with a third party to develop these custom mining rigs. And as soon as that relationship is ready to announce to the market, we will. But it's something that we're really excited about and something that we think is a key differentiator for us at this point.

Great. Thanks, Peter. Our next question was pre-submitted, and it has to do with ERCOT. To what extent do the new Texas ERCOT rules for mining companies limit the power available at Helios?

Yeah, it's another good question. So this is not something that we think is going to affect us. We have our interconnection agreement in place for the full 800 megawatts of capacity. We also have a really solid relationship with ERCOT. We were actually just at a meeting with them this week in Texas. We also have a relationship as a client of Priority Power. Priority Power is an industry leader in mining energy services. They manage interconnection agreements. They manage PPAs. They manage power load flexibility. They're really kind of the key folks in Texas that you want to be working with. So because of those relationships, because we already have our pieces in place, we're not – worried about any changes to ERCOT. And we encourage ERCOT to make sure that folks in Texas are getting the power that they need and miners are getting the power that they need. And I think that that's exactly what's going on. I think probably most importantly for us, we've also chosen to be in a particular region that has a very high generation capacity, but a very low local load. which means there's very little demand for power, but lots of power being made. And this makes our flexible load really important for that region and really important for grid stability. So I think ERCOT, you know, the first time I said to Brad Jones, who's the head of ERCOT, hey, we're setting up a 200 megawatt facility in Dickens County, Texas, in the West Load Zone. He looked at me and he said, we need load in that area. That's amazing. That's great. So I'm very pleased with where we've chosen to set up and I don't see any issues in Texas with the grid for us.

Our next question comes from Darren of Tahi at Roth Capital Partners. On the core machine swap, how do you mitigate downtime during that? And is that your initial way of filling Helios?

Yeah, so I covered this a little bit in the presentation, Darren. The swap is structured so that we avoid downtime. So as the machines from core are arriving, we're installing them, and then we'll be swapping out for the machines that are already at core. Our machines are already at core. So we're not anticipating any downtime. We've kind of taken that into consideration. That's part of why You know, we've structured the deal as we have. We have a good relationship with Cora. We've worked with them for many years. You know, we're friends with those guys. But ultimately, we want to be, you know, the captains of our own ship and be able to run our own facility. So the relationship, you know, is coming to an end in an amicable way. By the end of July this year, we'll have, you know, all of those machines that are all that capacity that that core will be at our facility. And what I can tell you is that those machines from core have already started arriving to a significant degree in Texas. So that process is already underway. And that process will will take place at the same time as the in parallel with the installation of the bit main machines that are also starting to arrive at Helios right now.

Great. Our next question from Suthan Sukumar at Stifel. On the incremental capital needs for phase one, what will this money be spent on? Is this infrastructure or rig procurement?

Yeah, it's a good question. Thanks, Susan. So if you think about kind of our three main buckets of CapEx for the rest of this year, you know, there's infrastructure, there's Bitmain machines, and then there's Intel machines. You know, the infrastructure, the vast majority of that is already paid for. Obviously, we built it. If you work with construction folks, you need to pay them as you're building. So that's pretty much already done and paid for. Tiny bit of infrastructure costs left, but not a whole lot. The second, on the Bitmain machines, we've paid the 20,000 machines, Bitmain order, we have paid for north of two thirds of those. So the majority of those machines are already paid for. And then the last piece is the Intel machines, we have, you know, a deposit with Intel, we've we've we've started that relationship. But the the majority of that capital will be for for machines. And the majority of the machine capital will be for the Intel side. Alex, you want to add anything to that?

No, I think you've pretty much pretty much covered it, Peter. As you say, the majority left is machines. Significant majority is machines. As Peter said, you know, we're two thirds of the way through. As we stand today, we're over two thirds of the way through the main payments. And looking forward, it's Intel that is the cost main cost within that one to five million.

Great. Our next question we've gotten a few times from Kevin R and some others in the chat. Do you intend on looking at the option of building our own solar fields and wind farms at Helios?

Thanks for the question, Kevin. So the short answer is yes, in the long term, it's something that we're looking at as an option. Obviously, Texas is a great spot for both solar and for wind. That's why there's so much renewable development there. In terms of the short term, we're really focused on this 200 megawatts, using grid power. And then the next phase is the remaining 600 megawatts, which we have the interconnection agreement with. But obviously, you know, as we develop as miners in this space, as the industry develops, you're seeing kind of two key, well, really three key developments. And that is getting closer to rigs. You're seeing that with our Intel deal, getting closer to power. You're going to start to see miners get closer and closer to power because that is a key, key piece of mining. And then and then the last one getting closer to capital and you see more and more capital providers coming into this space. And, you know, as we've mentioned in this presentation on the debt side. So all of those things are happening because those are the three kind of key pieces to be a successful miner. And so obviously generating your own power from renewables is something that, you know, as a miner, you need to be thinking about in the future.

Our next question comes from John Peterson. Can you talk a little bit more about your Intel mining rigs? Is all the expansion in fourth quarter 2022 likely to come from the Intel chips? And can you give us any indication of the cost per terahash on these Intel mining machines?

Thank you, John. John from Jefferies, JJ. So in short, yes, the increase in the fourth quarter of this year will be coming from Intel. As you saw in our chart, that's really where the growth in hash rate is going to be coming from at Helios. In terms of cost per terahash, we don't have a cost per terahash that we're able to share yet. We are very optimistic that the cost per terahash will be lower um then you know um that then off the shelf uh uh off the shelf options right now um and and so that's a key piece of it as well as the ability to have control over you know the design of the machines uh and the software etc etc to be able to optimize in an immersion environment

Great. Our next submitted question from the chat is from Thanasis. Are you actively staking or earning APY in any way on your 10% hodl at Argo Labs, such as Ethereum, Solana, Atom, etc.? ?

Thanks, Thanasis, again. So yes, a significant portion of our hodl is in validators, in nodes, is staked, and is deployed in DeFi in a way that gets us an ability to earn a good APY.

Our next question is from Ramsey Ellisall at Barclays. How are you thinking about the impact of sanctions on mining in Russia? Will we see the global hash rate drop if miners in Russia are crippled by sanctions?

Yeah, it's a good question, Ramsey. I think the last kind of number I saw of Russia was roughly 10% of global hash rate. Obviously, you know, the recent events with Bit River having to shut down and they're, if not the biggest, one of the biggest players in Russia will have an impact. I don't think it's going to have the same kind of impact on global hash rate the way that the mining ban in China happened. or did, I think it might slow things down a little bit in terms of growth, but I don't think it'll be that significant. I think the place to watch hash rate growth right now is the United States. And lots of miners, lots of publicly traded miners have put numbers out and said, we're gonna be at XX a hash by this particular date. And we'll have to see if they hit those numbers that they've put out. For us, this is the year of execution. 2021 was the year of growth. 2022 is the year of execution. So we've been really focusing on, you know, as I've said a couple times in this call, you know, under promising and over delivering and making sure that, you know, if we put a number out, we're 100% confident that we can meet it.

Our next question comes from Abby R. What impact have supply chain issues had on the business?

Yeah, thanks, Abby. Listen, you know, global supply chains are tough around the world. Definitely, you know, it's been a little bit more challenging to meet our deadlines, but we are still able to stay on schedule with Helios. We have someone who works full time with us now at Argo that we fired recently as part of that, you know, team of 100 that we're building out. who is working on logistics and supply chain pieces. She's an expert in that world. So that's been very helpful. And it's something we take seriously and put a lot of effort into. We saw an increase for sure in shipping costs for miners. It's approximately 50 to 100% more expensive now than it was two years ago to ship miners. So that's something that we need to be cognizant of when we're building out our budgets, etc., But while they've had an impact for sure, we feel like we've been able to weather them because of the efforts of our team.

Great. Our next question comes from Alan Howard at Tennyson. How are you thinking about the build out at Helios for future phases? Will it be less expensive than phase one and will it be spread out evenly over the next three years?

Hey, Alan, thank you for the question. So yeah, listen, we have a significant runway at Helios, as I've said, this 600 megawatts. It's a big chunk to fill. We are gonna focus our CapEx costs there first on the infrastructure and the building, and then second on the rigs. In terms of the infrastructure side of things, Our expectation is, yes, it will be less expensive. We know, you know, we've learned as we've grown. We've also done a lot of the groundwork in Texas to make sure that we're getting, you know, have the right relationships in place with the right suppliers. We've already put some of the long lead items in, as I mentioned, for the big transformer pieces. And some of those pieces are already prepaid. So, yes, in terms of the infrastructure side, our expectation is that it will be less expensive than phase one. In terms of the rig side, again, thanks to this relationship with Intel, our cost per terahash is expected to be lower than it is, than it will have been for the first 200 megawatts.

Our next question comes from Luke P. Are you concerned with countries and cities getting involved in mining? Or do you think you have a competitive advantage with your infrastructure?

Thanks, Luke. Good question. I think you're probably referring to what happened recently with the news, I think, from Fort Worth. So overall, we're not concerned about cities and countries getting involved. In general, we see this as a positive thing. We believe in decentralization. That's kind of the whole point of the Bitcoin network. We have a clear competitive advantage with our mining experience, with our current infrastructure, with our future infrastructure. So listen, we're excited about the space in general growing and all of the incredible momentum that the space has. Even though the equity markets have slowed down a lot, it feels to me like the crypto markets, while they're under a little bit of pressure, are really charging ahead. And I'm excited about, you know, this year and the years to come.

Our next question comes from Chris Brendler at DA Davidson. Can you speak more about the expanding debt financing options and the improving terms that you mentioned? We've also heard that traditional banks have become more interested in the sector. Can you give your perspective on that?

Sure, I'll start this one. And then I'll hand it over to Alex. Thanks for the question, Chris. You know, just in terms of relationships with with lenders, there's just more of them that are available that are out there now than there was, you know, 12 months ago, 18. I mean, 18 months ago, there was basically no debt financing options. Now you've got a number of very established companies, you've got new folks looking to get into the space. And as Alex said, you know, earlier terms are getting better. So You know, are market conditions impacting financing options? I'd say that lenders are going to be more select about who they're lending to. I think if you are a new miner, you know, you came out and you said, hey, I'm opening a 50 megawatt facility in, you know, name your place and you went to a lender. I think without a track record, you'd have a hard time, you know, getting financing. I think miners that have track records, that have existing teams in place, that have relationships in place, I think those are the miners that are going to be able to grow. So I think scale matters. I think reputation matters. Relationships matter. And yes, we've heard from traditional banks, but they're dipping their toes. I think it's still, we're not there yet. I think those relationships are still, those are big ships. They take a long time to turn and they need a lot of effort to turn. And so They're not quite ready to get there yet, but they're on their way.

Yeah, I just echo what Peter said there in terms of there are a lot of new movers into the market. And what comes with that is, you know, a lot more due diligence around, you know, who they're who they're planning to partner with, who they're planning to lend to. So so the track record, you know, is really important to show that, you know, we have used that we've used that wisely. You know, we've been very prudent with our debt. You know, we think we have we have more more room to take on more debt and still stay within our, you know, our prudent internal structure. EBITDA, debt ratios, etc., etc., and all of those good things. But where we stand today, we stand in a very strong position because we've got on our balance sheet a significant amount of Bitcoin as well. So we're not wholly reliant on debt. In fact, we could almost self-mine and look at using just parts of debt, etc. As we've said, that's going to be our process going forward. So we are we're in a really strong position to move forward. And the debt market remains strong and is something that we were looking into.

Great. We're getting close to the top of the hour, so we only have a few more questions from King F. Given the volatility of Bitcoin price and the unpredictability of the crypto space in general, do you have any plans or opportunities to diversify your mining capacity into different blockchain assets?

Yeah. So thanks. Thanks, King, for the question. So Argo Labs is, you know, kind of the main point of Argo Labs is diversification. And the team there is always exploring other avenues to look at. Can't share anything kind of at the moment exactly what they're looking at. But yes, it's something that, you know, we're always thinking about. In terms of mining other crypto assets, as we've done in the past with Zcash, and then you go back into 2018, we mined a host of altcoins. We're always kind of opportunistic about other crypto assets. It's hard to get them, King, at scale, get kind of machines at scale the way you can for Bitcoin mining. Once in a while, there is opportunities, again, like we had with the Z11s. mining Zcash. But for the most part, you know, our focus is on right now, making sure that Helios is, you know, the best immersion mining facility in the world. And the machines that we're focused on right now are Bitcoin machines.

Great. Our last question from Gary C. Are there plans to diversify into hosting other miners at Helios?

So thanks for the question, Gary. In terms of hosting other miners, for now, we plan on using the available power for ourselves. We're always looking at opportunities. We've had lots of conversations. When you've got a big facility coming online, people knock on your door and they say, hey, can you take some of our machines? We feel like with the margins that we have, with the team that we have, with our expertise in mining, You know, we're really good at mining. So we want to kind of use as much power as we can for ourselves. Moving into the future, you know, is there an opportunity to potentially host some folks at Helios in the next phase, potentially? And we're having, you know, some of those conversations, but nothing significant to report on in any way right now.

That's great. Thank you very much. And Tom, thank you very much indeed for hosting that Q&A and Alex and Peter for your engagement. I will shortly redirect investors to provide you with their thoughts and expectations and get their feedback. But Peter, before doing so, I wondered if I may just ask you for a few closing comments to wrap up with.

Sure. Thanks, everyone. Listen, one of the great things about being the CEO of this company is that there's so much shareholder engagement. I mean, I don't know how many people we had today on this call, but there's always lots of people sending us notes, engaging with us on social media, turning up to things like this. We really appreciate it. Hopefully, we were able to answer at least some of the questions that came out. And we've got some big things coming in the next, you know, a few weeks and months. So we're excited about where we're at. And, you know, I did say going back to, you know, the end of last year, quarters and years, and this thing takes time to build. And those of you that are sticking with us and that are, you know, believe in us, we really appreciate it. We really do. So it's a great time to be an Argonaut, I would say, and onwards and upwards.

That's great. Peter, Alex, Tom, thank you very much indeed for your time this afternoon and for updating investors. Could I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can really better understand your thoughts and expectations. This will only take a few moments to complete, but I'm sure the company will be most grateful. On behalf of the team from Argo Blockchain PLC, we'd like to thank you very much indeed for attending today's presentation. Good morning to you, Peter, over there in the US and good afternoon to everyone in the UK. Thank you.