Argo Blockchain plc

Good afternoon, ladies and gentlemen, and welcome to the Argo Blockchain PLC Q1 2022 results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. They can be submitted at any time using the Q&A tab. Just type your questions in and press send. The company may not be in a position to answer every question it receives during today's meeting. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. And as usual, I'm sure the company would appreciate your participation. And I'd now like to hand over to CEO Peter Wall. Good afternoon.

Thank you, Mark. Thanks, everyone, for joining us this afternoon or this morning, depending on where you're located. I'm Peter. I'm the CEO of Argo Blockchain. With me today also is Alex Appleton, who's our CFO. And Alex is in the UK. And Tom Devine is with us as well. He has his camera off. He'll come on for the Q&A section at the end. Tom's our head of investor relations. So we're going to walk through our Q1 Q2. Ernie's presentation. This slide will look familiar to you. It's our normal legal disclaimer. I'm not gonna go through it, but it covers the usual language about forward-looking statements. All right, so our opening slide is our classic Argo at a glance slide. Again, familiar to many of you who have tuned in to our presentations over the years. Not much has changed on this slide since our presentation last, I guess it was a few weeks ago, our 2021 year-end call. Our contracted hash rate is 3.6 exahash. That includes 1.6 exahash of our current capacity, along with another 2 exahash from our Bitmain order. As we, I think, as everyone hopefully knows, we've already started installing this 2 exahash of machines from the Bitmain order at Helios, and we are expected to complete that process by the end of October. Installation is going well. Team on the ground is doing a great job. So the 3.6 exahash translates into about 44,000 mining machines, and that's about 24,000 of our current fleet, and then another 20,000 from the Bitmain order that I was just talking about. I think, again, as everyone knows at Argo, we're very focused on sustainability on ASG. We were the first Bitcoin miner to be 100% carbon neutral last year and are continuing that this year. Our Bitmain hodl at the end of the year was just under 2,700 Bitcoin and Bitcoin equivalent. And 10% of that is allocated to Argo Labs for non-mining activities. That is our innovation arm. As we discussed on the last earnings call, we're now more comfortable with using a portion of our monthly mining Bitcoin to fund our operating expenses and continued growth. So we'll talk about that a little bit later as well. And lastly, our money margin for Q1 was 76% amongst the highest of all our peers and a really good number considering market conditions for the first quarter. All right, slide number four is kind of a snapshot of our 2021, our 20, geez, I keep saying that, our Q1 2022 results. We generated a revenue of 19.5 million, just under 15 million pounds. That's a 9% increase over our revenue from the first quarter of 2021. Our adjusted EBITDA, which excludes non-cash items like share-based payments and unrealized change in the value of our HODL was 19.1 million US or 14.5 million pounds. Our net income came in at 2.1 million US or 1.6 million pounds. And we mined 470 Bitcoin, which is a 21% increase over the same period last year. I also mentioned earlier our money margin for the quarter was 76%. That translates into a direct cost per Bitcoin mined of just under $10,000, $9,779 to be exact, or 7,448 pounds. This mining margin is a drop from the 84% mining margin that we saw for the full year of 2021. And that's primarily due to a higher global hash rate and the associated increase in difficulty. And that's not surprising. We knew that if the price of Bitcoin didn't come up and network difficulty continued to rise, that mining margins would likely come down a little bit for the first quarter of this year. At the end of the quarter, we held 2700 Bitcoin and Bitcoin equivalents on the nose, on the balance sheet. uh just a quick note you know in terms of transparency i want to acknowledge these results are not the best we've ever had we always knew that q1 was going to be a bit of a slog we knew that we'd see some sluggish performance as our hash rate stayed flat at 1.6 exahash while we were building helios the focus for q1 was to get helios online we've done that I'm very proud of our operations team for doing as well as we've done with a 76% margin for the quarter amongst the highest of our peers, as I said. And obviously, I'm super proud that we launched Helios two weeks ago. All right, onto a few more points for Q1 2022. Again, our focus, rather than growing our hash rate, was executing our plans for Helios. Along those lines, I've said many times, looking forward, you need three things to be a successful miner. You need access to power, you need access to rates, you need access to capital. We're very well set with access to power at Helios. Our interconnection agreement there is 800 megawatts of capacity. I know that there's been reports out, people have been talking about ERCOT slowing the pace of grid connections for new Bitcoin mining facilities in Texas. ERCOT, who are the folks who manage the grid in Texas. We have our interconnection agreement in hand for the full 800 megawatts, so we don't anticipate any negative impacts from adjustments that ERCOT is making. Our specific location as well is a particular advantage for us because we are very far from major centers and there is almost no local load where we're based. So we're really confident in our access to that 800 megawatts. With respect to RIGS, again, power, RIGS, capital, with respect to RIGS, we signed a supply agreement with Intel to purchase their new block scale ASIC chips this year. We'll be deploying those into custom-made mining machines at Helios during the second half of this year. On the capital side, we also strengthened our access to capital by establishing a financing relationship with NYDIG, and that came in two different forms. One was in February. We borrowed approximately $27 million for a loan secured by electrical infrastructure that's deployed at Helios. These are things like high voltage, low voltage transformers, etc., And then just a few weeks ago, we signed an additional agreement. This happened after our earnings call. We said we were continuing to explore debt. And then we announced, yes, here's a debt deal. And that was an additional agreement with NYDIG to borrow 71 million U.S. And that is secured by some of the money machines at Helios. I'll go into a little bit more detail on these loans on this loan later on. We also signed an agreement with Core Scientific, our hosting provider, in the first quarter of this year to do a machine swap. We have about 10,000 S19s that were located at some of Core's facilities. And rather than spend the money and the effort and the time to unplug these machines and ship them to Helios, which would have resulted in downtime, Core is sending us brand new machines, brand new S19J Pros, and we're swapping out the machines that we have. that we already have at core so as we install these new machines in batches between may june may june july core will take ownership of our s19s that are located in their facility and we've already done the first of those swaps along the way so it's an elegant solution it avoids major operational risk and it benefits both us and courts it's truly a win-win So once that machine swap deal is complete at the end of July, we'll be operating all of our machines and we'll no longer have any machines hosted at third parties. We also officially launched Argo Labs this quarter. I'll talk through a slide on Argo Labs a little bit later on in some of the projects that they're working on. And finally, we strengthened our board of directors with the appointment of Raghav Chopra. Formerly a portfolio manager at a large asset management firm in the US, since left that firm to start his own digital assets fund. And this has allowed him to come and join our board. So we're very excited to have him. He's added a ton of value already. All right. Moving on to our Helios update. So definitely the most exciting thing that's happened for the company in 2022 so far is that we've officially opened Helios. We had an event, I guess it was two weeks ago now. We energized the facility on May 5th and we actually started mining Bitcoin that day. So here's kind of one of our latest photos. You can see the substation that we've built that's connecting to the Cottonwood substation in the foreground and in the background is the facility. 125,000 square feet with the air coolers coming out on the side. In that picture, if you look carefully, you can see a tent on the left side down the building where there's – that was where we had our opening event – our part of the opening event, the food for the opening event on May 5th.

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