Texas heatwave raises power costs for Argo Blockchain amidst debt repayment

Argo Blockchain launched its second quarter earnings numbers Tuesday. These present depressed revenues and a really slight enhance in bitcoin mined within the first six months of the yr, ending on June 30.

Nevertheless, the mining firm has two different issues into account past its 31% lower in income in the course of the first half of 2023, in contrast with the identical interval final yr.

These are: the necessity to de-leverage from its debt — price $72 million as of July — and the weeks-long Texas heatwave that has stored energy costs excessive, in accordance with Argo CEO Seif El-Bakly.

In relation to the corporate’s debt, issues have definitely improved. As of June 30, 2022, Argo was $143 million within the gap. Moreover, on this quarter, it has paid down roughly $4 million in pre-existing monetary obligations.

A good portion of Argo’s debt is tied up with Galaxy Digital by a $35 million asset-backed mortgage secured by the some 23,619 Bitmain S19J rigs positioned at its Helios website. Galaxy bought the Texas website for $65 million in December 2022 and now hosts Argo’s miners.

To proceed paying down debt, Argo offered roughly $1 million price of Ethereum in Could, and in July, the corporate accomplished a share placement within the UK that netted $7.5 million. About $1.8 million of the share proceeds went towards debt discount.

Shifting to its mining stats, Argo has elevated its hashing energy to 2.6 exahashes per second (EH/s) and the tip of yr aim is to nudge that as much as 2.8 EH/s. To attain this, the corporate goals so as to add 1,628 extra BlockMiner rigs to its amenities in Quebec, on prime of the present 1,242 BlockMiners.

“We’re assured that by the tip of the yr, the entire almost 2900 machines can be deployed,” El-Bakly stated on an earnings name. “Given the present deployment charge, I’m assured that we will doubtless deploy them earlier than This fall of 2023.”

In Texas on the flagship Helios facility, Argo is coping with a dramatic heatwave that has persevered all through the summer season.

Helios is positioned in Dickens County, part of north Texas. And in accordance with a report from the Dallas Morning Information, north Texas has seen 41 days that reached temperatures of no less than 100 levels.

El-Bakly defined that Helios’ mounted energy buy settlement (PPA), which was struck in the course of the first half of 2023, has been “in the end a very good hedge, and it’s proving itself to be very invaluable up to now for the third quarter.”

The PPA covers a “significant slice” of the Helios facility’s energy load, however not all of it.

He went on to say that that is the absolute best time for bitcoin’s worth to be barely down, as unusual as that sounds.

“The reason being…once you primarily have a hard and fast PPA…you’ll be able to just about use these energy blocks and promote it again to the grid,” he defined.

He continued, “The upper the Bitcoin costs are, the extra of a chance value it’s for us to not mine. And at occasions, it’s truly extra helpful for us to not mine and promote that energy again to the grid, somewhat than hold mining.”

To that finish, Helios generated $1.1 million price in energy credit within the second quarter, which might have been equal to mining a further 38 bitcoin on prime of their six month complete of 947.

Nonetheless, maybe an important query that analysts had for El-Bakly and chief monetary officer Jim MacCallum was how they plan to place themselves forward of the upcoming bitcoin halving.

El-Bakly stated the main focus is to cut back mounted prices and working prices whereas additionally deleveraging. He appeared to additionally trace that future actual property gross sales could possibly be on the desk going ahead, much like what was executed with Helios final yr.

“Previously, we’ve talked about extra stock and actual property as examples of non-core belongings that we will doubtlessly monetize to generate more money,” El-Bakly stated.

“We’re at the moment in superior discussions with a few of these,” he added.

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