Member Info for Hexam

Hi Beta - I used the H2 numbers as these are detailed - I'm not aware of any detail on a monthly basis in either Q4 or Q1 so not sure they can be used?

As to the improvements since H2 how do you know if any structural cost savings achieved, and not already in H2 2021, are greater than the inflationary cost pressures that we know are now hitting? Is there any evidence that the other revenue items this year are higher than late last year? And what about interest - that is surely higher than last year?

Also I don't see how you can say Q2 will easily outperform Q4 2021. Having said that I agree that Q2 could end of cash positive if June is good enough ($800m+ at US Box Office) but my point was we are not cash positive as of now.

I think though in essence we agree on the key thing though and we shouldn't get caught up too much in the detail - that is:

Providing Box Office improves as much as I think, and you suggest, then the business will soon be cash flow positive and making profits. Just have to see just well Top Gun, June and the following months all do. Early signs are promising though - especially with Top Gun.

FP - Certainly wouldn't 'poo poo' you as you are perfectly correct. ARB is currently operating around 80% of what its EH suggests even before allowing for the extra coming from zcash so really it is less than 80%.

In my numbers I assumed the 80% improves to 95% (comparable to other miners but in reality still worse really as again this includes additional BTC from zcash conversion). The reason for the improvement assumed is two-fold. First Q1 suffered from bad weather and possible testing/moving of machines. Both are (hopefully) short term factors. Second, the new machines should perform close to or at 100%.

AB has effectively assumed 100% efficiency as his approach works from the theoretical EH share - but again with no extra allowance either from zcash.

All the above is before any immersion benefits too.

Hi Allkap - Yes, the payment to Regal Shareholders was made in H2 but is excluded from the numbers I gave as it is an exceptional item (the footnote on the CINE slide clearly states this). So the cash flow I gave would be a negative of $150m or so if it (and other exceptional items) were included (as total adjustment for such items was £62m).

I agree it is not that much of a concern as things are now getting better but it is just a bit frustrating that some post here as if CINE is already cash positive and making profits which is misleading. Come Q3 though, and possibly even Q2 if June is good enough, I would hope that CINE will be positive on both metrics.

Thanks AB and good that you used a different approach as that acts as a check in itself.

If I do my numbers on the same basis (i.e. without depreciation and before immersion) I get $18k per BTC so a fair bit higher and the main reasons are that my electricity costs are higher (I suspect yours may be more accurate) but I also assumed 'fixed' costs went up 50%. I think it is unrealistic to suppose that they remain unchanged as the organisation continues to grows (more staff etc.). Most 'Fixed' Costs don't stay fixed in practice.

So I think anywhere between your number and mine is reasonable but as you say there are too many uncertainties to even begin to pretend any particular number is accurate. At least it gives (without depreciation or capex) a ballpark guide though as to the operational cash costs per month per BTC - before immersion - though share based payments are also a non-cash cost.

AllKap - Thanks, I appreciate it but I am simply talking about cash (not EBITDA as this is just one of the starting points from which cash can be derived) and I understand fully how depreciation etc. works from my own background. By the way the finance expenses are large - mainly from the lease payments, which are not included in EBITDA, as well as the interest.

I worked out the cash flow from the accounts and this agreed very closely with the figure that CINE gave themselves in their presentation which was a negative of $89m for H2 2021. This is key for understanding whether they may need to borrow more or can start repaying debt and for the second half of the year they were still losing cash (and indeed they did drawdown more from their loan facility in H2).

The adjusted profit before tax is simply from got from deducting the half-year figure ($659m loss) from the full year figure ($823m loss).

These numbers are CINE's (not mine) and excluded one-offs (like the tax credit you mentioned, impairments etc). Of course there could be one-offs in 2022 as well but these could be positive or negative. At the moment though it seems clear (unless I've missed something) that normal operations are probably still cash negative at the moment and the company is still making losses BUT that this will change in the second half of 2022 IF the box office picks up as much as we hope.

Allkap - I have looked at the income statement and balance sheet.

The second half of 2021 showed adjusted loss before tax of $164m and negative cash flow of $89m. This period includes Regal of course as well as the uplift from the higher income per person (from concessions etc.)

The average monthly US Box Office in that period was $572m. Similar to both March and April this year and May is not likely to be that much higher.

I therefore cannot see how the company is generating positive CF or profit at the moment but if you think I've missed anything then would welcome it as even though nobody likes to be wrong this would be good news so would be more than happy to be.

Please forget Debenhams, I could just have easily picked any recent failed company and again to be clear CINE has a big advantage over those companies - a product that enough people want (we just aren't seeing it yet simply as there hasn't been enough films for them to see).

*tom231 - apologies for getting your name wrong. As I said, agree with what you say. We're not at 2019 levels yet (and don't need to be in order to be profitable) and I'm more than hopeful that the rest of the year sees enough improvement to see CINE generating both cash and reported profits again.

I only used Debenhams as an example to show that just because a business is open doesn't mean it is successful.

I completely agree CINE is different and made exactly that point. But whatever anecdotal evidence of tills ringing and despite the big numbers that Dr Strange and other films have done the (highly likely) reality is that it is not yet profitable again.

I agree with everything that @tom121 said - and the next 6 months SHOULD see the business return to making money - but nothing is certain.

I don't believe CINE will collapse but if it, or another big chain, does then that surely helps the ones that remain as the same potential audience is spread over less competition?

My point is that it is not business as usual, it is business less than usual.

"Cine sells movie tickets, popcorns, and sugar water."

But they're still not selling enough tickets, popcorn and sugar water to make money.

Debenhams and many others were selling product right up until they weren't. The difference with CINE is that there is ample evidence that enough people want CINE's product but they still haven't quite got enough of it to sell. I'm confident that with the number of movies improving that CINE will move back to being a profitable business soon (and without the need for dilution) but until I see monthly box office figures consistently higher than they are now I'm not taking it for granted.

Hi Wolf,

I sort of agree with you as the answer/approach depends on what you are using it for. It really started as a view of breakeven on a accounting basis i.e. do you make a profit or not hence why all the costs are in and it was just an actual cost per BTC so it is fairly straightforward to work out (though even then I excluded some things which arguably should have been included).

I agree that projecting it forward is difficult for all sorts of reasons but the business is quite simple and the line detail wouldn't really help too much as there are just a few big ticket items that make up most of the costs.

It is still fraught with difficulty though as there are lots of variables and guesses involved - hence when asked to have a go I made this clear, gave the answer as a range and stated my assumptions.

The question was NOT about at what point is it not viable to keep the machines running. If that's the question then you only need to look at the direct operating costs (that would stop if you stopped production) and this is much closer to the $9k or so figure quoted by ARB.

Cheers FP - I quite like RI but just wish he had a more engaging way of presenting instead of his low-key, monotone delivery. He was also fairly dismissive of ARB's growth plans for the next 600mW in his recent video on the year end results which I didn't much agree with.

@HarChris - Interesting take and agree with a lot of what you say. One point though is that cash costs are a lot lower than the numbers I gave earlier as can remove the depreciation amount. So ARB has more headroom to cope with further downturns in BTC than perhaps you suggest - though of course this assumes they don't want to spend much more by way of capex (with BTC so low though not many will be investing much I guess). Taking out depreciation, but also adding interest payments, then I think cash costs per BTC mined could be as low as $10k-$15k.

“My feelings are that the management team are working toward a breakeven point of c$20k“

If they are I think they are being optimistic (unless difficulty stays flat or falls which of course may well be the case if BTC falls as you think it might).

“6 months ago when Random investors true btc cost for argo was posted!“

FP - RI still posts these and I did check my numbers against his latest ones. His were lower but he usually presents them without depreciation and also the cost per BTC has gone up in Q1 largely because of difficulty increase/poor recent mining numbers.

Just to add that the way I did the estimates doesn't assume a BTC price (implicit if you like in the difficulty assumed) or a coins mined per month (as that's an output rather than an input). For info the number of coins mined in my two scenarios came out as 640 BTC per month in the 0% difficulty increase scenario and 480 BTC per month in the 33% difficulty increase scenario.

I actually think that my difficulty assumptions are too aggressive but on the other hand my electricity assumption may be too conservative. Swings and roundabouts so will be interesting to see what you come up with AB as will be good to compare.

As to profit my assumption of spreading machine cost over 5 years may well not be followed by Argo. If they stick to 3 years this increases the reported cost per BTC by around $5k (on my assumptions) or $4k on the no difficulty increase scenario.

Thanks AB - though I'm not sure you're going to be happy/agree with my estimate...

I think the all-in cost at the end of the year/phase 1 may be $25-$30k per BTC based on the following assumptions (compared to Q1):

5.5 EH is reached
Difficulty Increases by one-third
Mining efficiency per EH (before immersion) improves by 20%
Electricity cost per EH improves by a third
Immersion adds 15% to coins mined and 15% to electricity costs
Fixed Costs increase by 50% (bigger operation but growth much lower than EH increase)
Fixed Costs now include share based payments
Cost of new machines + immersion total $225m but spread over a more realistic 5 years rather than 3

The answer drops out as $25k so a cautious range might be $25-$30k especially as I've assumed 5.5 EH hit.

If difficulty does not increase (e.g. because BTC stays low) then the answer drops to under $20k.

These are just my guesses and the answer varies greatly with the assumptions - which are there to be shot at! But hope this is at least a little bit useful for anybody interested in the numbers side.

Thanks - and I know what you're saying but at least he is being clear on what it represents and has said $25k is achievable. But you're right there is too much focus on this now.

But as it turns out my gut may have been wrong as even that $25k looks optimistic on first pass. I'm checking through my logic but the issue is that difficulty has more impact than I thought - it's sort of a double whammy on the number.

Thanks HarChris for your kind words. I agree that focusing on today's cost is less meaningful and for the avoidance of doubt the number I gave was simply to counter the prominence given to the $9k or so figure for current mining costs per BTC that Argo gave. This was given without much context which was actually made worse in the video later when Alex was so dismissive of two-thirds of the cost base.

Focusing on the £9k figure in the wrong context can be very misleading (as seen by many comments before on this board around this metric) but equally anybody suggesting my $34k is an indicator of long term cost per BTC is being equally misleading (but I don't think they have yet).

And as to 'suiting my narrative' as if I have some malevolent agenda is just gibberish. I focus on numbers because I believe the fundamentals are usually the most important factor to consider as a LTH (rather than TA, short term sentiment, current BTC volatility etc). So I want to understand as much about them as I can in order to influence my own decisions to buy, hold or sell as to me it is even more important to feel when to bail on an investment than as it is in deciding when to invest. Again for avoidance of doubt the financials suggest to me it is NOT the time to bail on ARB.

So I'm happy to give my own view on where the cost may be at the end of the year but it will be just my view and clearly it is not something that can be predicted with too much confidence. So I'll do a bit more thinking but my gut says your $22k looks pretty reasonable!

The company has done something and as a result the sp has dropped significantly - that is not in dispute. So expressing frustration at this I think is only natural and I wouldn't describe it as 'whingeing'. I'm just surprised at the extent of the drop given what they have done and hope that after the initial reaction this will in time be viewed a bit more positively.

Yes it is a dilution - I never said it wasn't. I also agree it is worse than an RI but not 'far' worse as the number of new shares is relatively small and so the discount. As I said the 'theory' is the that the sp should have not changed much (only around 1% or so in fact) but the text book is one thing and reality is another. Sentiment is clearly against this move (for now).