Reflecting on Argo Blockchain’s bull run

Reflecting on Argo Blockchain’s bull run

At seemingly the eleventh hour, Argo Blockchain (ARBK)  found a savior.

On Wednesday, December 28, Argo was finally provided with a much needed lifeline, by formally announcing the agreement to sell their flagship site Helios, in Dickens County, Texas, to Galaxy Digital (GLXY) for $65 million.

Let’s take a brief look at the last two years to understand how the company got to this point.

Reflecting on Argo Blockchain’s bull run
Source: Argo Blockchain

Q1 2021

With the Bitcoin price rapidly rising during the first quarter of 2021 and reaching $62,000 in April 2021, many Bitcoin miners saw this as further opportunity to grow their businesses, raising funds via dilution and placing significant orders for mining rigs and building infrastructure to support them.

Argo Blockchain, based in London and trading on the London Stock Exchange, was no different in terms of ambition and in March 2021 finalized the acquisition of their 160 acre site in West Texas for the sum of $17.5 million. Although at the time it appeared expensive, the site did come with all the approvals for building an initial 200 MW Bitcoin mining facility with the potential to grow to 800 MW.

The first phase of the facility was completed on time and within budget and energized on the 5th May 2022. If you consider the cost of installing immersion cooling is in the region of $400-$500,000 per megawatt (MW), that would provide a build cost of $80-100 million, and with the land cost added, you have a site with a value upwards of $100 million.

Raising capital during a bull cycle

Argo Blockchain raised capital through dilutions, in 2021, and the majority came at a significant discount in price to attract institutional investors, increasing the number of ordinary shares from 300 million to 478 million in 2021. This increase included its September 2021 IPO on the Nasdaq, which raised $112.5 million for the issue of 7.5 million American Depositary Shares (ADS), equivalent to 75 million ordinary shares.

While not favored by many investors, dilution has been a common strategy for public miners to gain much needed capital for further expansion.

Raising debt in a bear cycle

Having exhausted share dilution, Argo Blockchain looked to other financial levers available–notably debt.

  • This started with raising a total of $45 million in Bitcoin backed loans with Galaxy Digital, a sum that has since been repaid.
  • A further $40 million in unsecured debt in November 2021,  which is due for repayment in 2026.
  • Added to this were two loans with NYDIG, totaling $93.3 million secured against mining rigs.

Argo began regularly selling Bitcoin by August 2022 to service its $145 million in debt, with principal and interest payments alone exceeding $4 million monthly.

With the price of Bitcoin continuing to fall, it was only a matter of time before that cash runway would be fully depleted. Troubles were only increased by a drastic swing in the cost of energy at Helios, increasing 2-3 times the price of the previous year.

Reflecting on Argo Blockchain’s bull run

October warnings

In October 2022 the company was successful in negotiating with NYDIG to restructure their debt, sell a consignment of new unopened S19 miners to CleanSpark (CLSK) and receive a potential offer of funding from an unnamed strategic investor. Unfortunately, the strategic investor later backed out.

With the price of Bitcoin continuing to fall in price Argo Blockchain announced on December 9, 2022 that it would cease operations if an investment did not materialize. On the same day the company accidentally published draft materials on its website saying that it was voluntarily filing for Chapter 11 bankruptcy protection, which led to its stock being temporarily suspended on the London Stock Exchange and then on the NASDAQ.

Galaxy Digital buys Helios

Some much needed aid arrived for Argo Blockchain after the recent announcement that it had sold the Helios site to Galaxy Digital for $65 million. The site would further be used for hosting Argo Blockchain’s machines.

Lastly, the company signed a $35 million equipment financing deal with Galaxy Digital, using the net benefits of sale to meet the debt repayments to NYDIG and another smaller secured lender. Galaxy Digital will look to sign a fixed power purchase agreement, which will therefore benefit both companies. It should be noted that Argo Blockchain have not sold any of their miners and are maintaining a total hash rate capacity of 2.5 EH/s.

In summary, these last 18 months have been extremely challenging for the company, having previously achieved a market capitalization in excess of $1 billion , during the early phase of the bull cycle of 2021, to then be on the verge of filing for Chapter 11 bankruptcy protection. Luckily, the company can “live to fight another day,” as Argo Blockchain CEO Peter Wall put it in a video to investors.

Having repaid the NYDIG loan in full, it appears that Argo still has debt of approximately $80 million supported by a fleet of miners worth $40-45 million. The debt with Galaxy Digital has a longer time frame to repay which should help Argo to meet its financial obligations. If they were to default on the loans with Galaxy Digital, the mining machines will subsequently become the property of Galaxy Digital which will automatically increase their self mining capacity.

For Argo investors, the Galaxy Digital news is more than likely a breath of fresh air. Another miner, with a healthy financial backing such as Galaxy Digital, was able to backstop Argo. As such, investors rewarded Argo with a 50% increase in its stock price, from December lows of around £3.00 per share to £6.30.


The writer of this article holds investments in Argo Blockchain, along with other public mining firms.

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