Member Info for Hexam

*end 2020

Hi K3VMC. As per earlier note the additional costs are mainly the cost of the actual rigs. Rough breakdown of current c.£2m monthly costs is:

£1m - mining costs
£0.2m - admin costs (wages etc.)
£0.5m - costs of machines pre end 2000 (via depreciation)
£0.3m - lease costs of recent (4500) machines installed

Agree K3VMC - the main difference is the actual cost of the mining rigs. These are not included in the mining margin but still have to be paid for. These costs are currently around £0.8m per month (via depreciation and leasing costs).

You are correct Denby. Insiderknowledge seems to be lacking some...um...Insider Knowledge.

I agree, I think $8k is closer to the breakeven point but this is only for mining profit. Needs around double this to make an overall profit (i.e. to cover all the costs beyond operational mining costs). Main point though is if/when BTC recovers then this will accelerate profit as affects those held not only those mined in the future - and will get all the 'lost' profit back.

Anyway not too concerned with temporary low profits or even losses - plenty of companies at the moment in that boat and not many of those have no debt.

The machines have been delayed at most 4 months (last ones now expected in October rather than June) but actually less than that as installation is staggered and some machines have already been installed. The 1900-2000 comes from existing machines so that should be met comfortably - just a question of how many more than this. Crisis, what crisis?

@Jackunion - beautifully put!

Indeed Kitty - though did you mean £50m rather than £5m as I assume you're talking about annual revenue? With any sort of decent BTC recovery, and the increased capacity you mention, this should be more like £100m and maybe much more. In any event it highlights the strong financials and, as you say, the good buying opportunities dependent on one's outlook on BTC.

Agree Blubay - quite a bit of nervousness and fear around at the moment, and that means small drops can easily turn into bigger drops as some panic. Topped up again though as what matters for me is what the company is doing (still all good from what I can see) and where BTC is going to be next year and beyond. So not too concerned with short term movements, unsettling as they are, as I'm confident that the SP will sort itself out once BTC does and the large profits flow (even at this level of BTC the profits for 2021 will take a big leap compared to last year).

Of course if BTC/crypto generally has no future - or it is a grim one - then that would be a different story but I'm not sure why anybody thinking that would be anywhere near ARB in the first place.

Agree with the comments about board breaks - good for the sanity. For me it is not just the trolls so much - they can easily be ignored. Unfortunately they’re not and too often it just descends into a pantomime exchange of infantile insults from both sides. Tiresome stuff and hardly a great image to encourage others to invest or contribute.

It’s a beautiful day though so off to enjoy it and hope everybody else can too :)

@Deano40 - this is hard to say. I think they still have a fair bit left over from the the Q1 fund raises but a lot of this is presumably earmarked for Texas etc.

So probably only a few months or so but this doesn’t mean they’ll have to sell any of the current HODL as they can meet ongoing costs from monthly revenue (so the HODL will still increase but at a lower rate).

They could decide to sell some of current HODL anyway (if they feel the timing is right) or alternatively they could raise further funds (again if they feel this Is the best option).

Bottom line is that I don’t think this is something to worry about as I don’t see them being boxed into a corner and having to sell HODL that they don’t want to.

Hi 600 - the reported revenues have only fallen 18% as these figures depend on the average BTC value during the month not those at the end of the month. As BTC was fairly flat in the first part of the month this means the average hasn't fallen as much as the end month values and the 18% drop is pretty much as expected. The important thing though is as you say i.e. what BTC does for the rest of the year as this will ultimately dictate what is reported in full year profits and on the balance sheet. So no surprises in the numbers and with a HODL over 1100 all looking good - assuming the drop in BTC is temporary.

Hi JTF - I think that was just the second round of investment to retain their 25% on top of the £1m originally invested (at 3p per share).

I believe that is correct and we have option to retain that 25% with further investment if pluto do further fund raises. This has already happened as ARB invested about £1m initially (paid via sales of DOT) then when Pluto raised a further c£28m ARB retained their 25% holding by investing £7.3m more (using cash from the Q1 share issues).

I completely agree zstarz that most of what is on the board seems obsessed with what the SP or BTC or both has done in the last 15 mins or will do in the next 15 mins which is only relevant for those looking to buy or sell now and no bearing at all on the long-term prospects of ARB. However, I think Blubay was doing exactly the opposite and suggesting that if it passes this particularly test then it is very good sign for the future so I think it's a bit ironic that he's being pulled up for being short-termist by so many.

Like you I'm off to spend time with friends and family - not yours obviously, but mine :-) . Enjoy the screen-free time!

Bonker,

The coins bought by MARA (and us) are relevant for earnings as any appreciation on these purchased coins come directly through earnings assuming they account for them in the same way ARB does and if they don’t then to compare fairly they should be assumed to do so.

So their much higher HODL is relevant as long as you assume BTC is going to appreciate.

Although the mcaps are miles apart that in itself doesn’t mean we are undervalued against them if there are good reasons (in coins mined, margins, HODL, upcoming developments etc). I agree though that nothing I can see explains such a large difference and that IMO we are significantly undervalued in comparison.

Thanks JTF - I think you've hit the nail on the head. Forget all the geeky detail and ways of getting there, what shines through is just how profitable the company is, how much more profitable it is likely to become and that surely one day (soon) the sp will much better reflect that level of profitability!

No offence taken Argobull!

I think though that there is a formula for coming up with the expected earnings and hence the expected PE Ratio (its just a prescribed calculation with lots of assumption) but totally agree that deciding what this actually means is all opinion and guesswork. Also agree with you that we are not 'fairly valued' with RIOT and MARA and that nasdaq is likely to be a big part of the reason.

Hi JTF,

The only place I've seen it described is in the 2020 accounts (on Argo's website) but I can't remember offhand the level of detail beyond 'hosting and other costs' (and it's not easy for me to look at the moment).

It may be that the leases for the recently installed (4500) miners do/will come through this margin but I suspect not because of the way they have been represented in the accounts (with the depreciation) and as it acts in much the same way as depreciation (i.e. effectively a fixed cost) -so I would expect it to get the same treatment. However, I am not certain of this as the mining costs have jumped up a little in the last couple of months. Will only know for sure when the next accounts are published but in the meantime in the scheme of things £0.3m per month is relatively small anyway given all the other assumptions and subjectivity!

Bigger issue is HODL and I agree with Blubay that the PE could be applied to it as a proxy for the earnings it generates - so long as you are happy with the assumptions this implies. I prefer to keep it separate though when looking at 2021 full year projections so that I can make explicit assumptions around the end of year price of BTC and because it will be consistent with how the PE is actually reported. ATB H.

Hi Argobull,

I both agree and disagree with you. I agree that any valuation is subjective. My long note really only covered the calculation of earnings and even that is subjective especially when projecting forwards as lots of assumptions are required.

To translate those earnings into a value the PE ratio should be applied and each investor will have a different view of that and I totally agree that at any point it is what the market says it is worth that counts.

But aren't we all invested because we think it is worth more than the market thinks or at the very least that it will become worth more? And why exactly do we all think that? How do we know things like having a 'superstar CEO' aren't already priced in? (For avoidance of doubt I agree that he is a superstar.)

I also disagree that you can value ARB by simply applying the mcaps of RIOT and MARA, not at least without understanding the similarities and differences.

I'm playing devil's advocate a bit as this is the only share I bother to work out such financials. Normally it is more whether I think the company is good, what are its plans, does the price look low (for whatever reason). But for ARB it is possible to work out the numbers (unlike many other companies) and I wanted reassurance as I wouldn't class myself as a crypto devotee. Hence I wanted to see if the numbers backed up the hype - and I believe they do. It may not be your way of choosing investments and normally it's not mine but many investors live and breath PE ratios so hopefully what I posted will be useful to someone.

Besides you say it is a theoretical exercise but that could be said of everything that helps us decide including all the predictions based on graphs that have been seen recently, how BTC influences SP, what impact nasdaq will have etc. It's all theory and in the end we all go with our gut and what we believe in. So GLA invested here regardless of what made you take the plunge!