Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Risk Adverse
Soon we will hear about the GPU deal, my best guess is that most of our rigs will be based in the two sites we are buying , this will naturally increase our margins further ( please the statement from the interims above), I would guess some rigs will remain under GPU , whilst to look to increase capacity in the two sites, which is possible from my reading.
Peter has not only increased his margin by cutting the middleman out, but also he has diversified his risk, he will host rigs , probably some with GPU and now rigs with Core Scientific. A shrewd move.
Overheads
I mentioned in my previous posts you should compare our overheads to our competitors, ours are tiny and there’s are large.
HODL
We all want Argo to hold more coins, it makes sense, but if you look at our cashflow position at the end of December 2019, most suppliers appeared to be paid after 3months, now from the interims, we are on 2 months. Peter inherited a crap cashflow and an even worse FD, he is now on top of this, with money in bank on 1st September 2020 being £1.22 m and hold worth £1.62m. We must remember the GPU Acquisition will affect our cashflow and possibly decrease our HODL in the short term. You could argue it is better to have cheap debt as BTC is going to the moon and there is a lot of merit in doing this, but to date Peter’s risk adverse approach has worked. Due to leasing machines we are not under pressure to purchase our own so more of the coins we mine can be HODL until such time new machines need to be ordered or dividends paid in the future.
Finally, throughout 2020, peter often says in his interviews that he is ‘cautiously optimistic ‘ in the interview last week, he said ‘ extremely optimistic’
Maybe Trek’s £1 will come in the next 2 years
Stay safe
Well said Argobull.
Fantastic buy in or top up price.
The fundamentals in this business are just too strong, its profit making , a cash cow, it is massively scaling up from Q1 and more than likely a maiden dividends in H2.
Lets sit back and enjoy the ride.
My understanding is that the brokers are being appointed to get institutional investors on board ..
Risk Adverse
Soon we will hear about the GPU deal, my best guess is that most of our rigs will be based in the two sites we are buying , this will naturally increase our margins further ( please the statement from the interims above), I would guess some rigs will remain under GPU , whilst to look to increase capacity in the two sites, which is possible from my reading.
Peter has not only increased his margin by cutting the middleman out, but also he has diversified his risk, he will host rigs , probably some with GPU and now rigs with Core Scientific. A shrewd move.
Overheads
I mentioned in my previous posts you should compare our overheads to our competitors, ours are tiny and there’s are large.
HODL
We all want Argo to hold more coins, it makes sense, but if you look at our cashflow position at the end of December 2019, most suppliers appeared to be paid after 3months, now from the interims, we are on 2 months. Peter inherited a crap cashflow and an even worse FD, he is now on top of this, with money in bank on 1st September 2020 being £1.22 m and hold worth £1.62m. We must remember the GPU Acquisition will affect our cashflow and possibly decrease our HODL in the short term. You could argue it is better to have cheap debt as BTC is going to the moon and there is a lot of merit in doing this, but to date Peter’s risk adverse approach has worked. Due to leasing machines we are not under pressure to purchase our own so more of the coins we mine can be HODL until such time new machines need to be ordered or dividends paid in the future.
Finally, throughout 2020, peter often says in his interviews that he is ‘cautiously optimistic ‘ in the interview last week, he said ‘ extremely optimistic’
Maybe Trek’s £1 will come in the next 2 years
Stay safe
Since Peter took over we have seen a number of significant changes, changes in personnel, old directors being replaced with more competent directors. It was a shame James the FD left, but he chose to work with David Beckham instead of Peter (who would do that).
Since April, the management have made a conscious decision to make the business margin led instead income led. This means tighter control of costs and from an investors point of view, music to our ears. Sometimes the number of mined coins was lower than we expected but the margins were higher and our margins exceeded most if not all of our peers.
This decision was mentioned three times in the interim accounts, ‘increasing our margin operations’, ‘improve average mining margin’ and ‘development of proprietary machine optimisation tools’.
3rd Party managed services
I haven’t got a good knowledge of crypto miner rigs or optimisation and I always assumed our margin was better than the rest as we had the latest rigs and therefore an advantage over our competition. But in the latest RNS, a 3rd party has probably spent upwards of $8milllion dollars on new rigs and Argo are managing these rigs, my educated guess is that we are using the ‘in house optimisation tools’. For me this is a fantastic secondary income stream, one I expect to grow.
I am prudently estimating a monthly income of $75k and minimal associated costs it is likely the manual labour costs will be covered by looking after our own machines.
For a wealthy company to start mining, buying the rigs is relatively easy, finding someone to host them isn’t rocket science, but to start from scratch and maximise margins is difficult.
Argo has proof of the optimisation tools from their monthly figures and soon it hopefully will have proof of optimisation from a 3rd party as well.
Lease Deal
This deal is perfectly timed (delivery in February) and per the RNS on ‘extremely competitive rates on hosting and power.’ Which implies to me that it is the same or better than we have now.
After looking at the numbers and based on a flat $20k btc price in 2021 and difficulty rising throughout 2021, I believe Argo will make a prudent net monthly profit of around £500k , so £6million in total for the year. Off course a lot of btc experts are predicting much higher bitcoin prices in 2021, which will increase the bottom line.
So from the managed service contract and the lease deal, I estimate £6million net profit
We obviously have the other 16,000 rigs and my best guess based on the same criteria as above and the enhanced margins from the GPU deal we could be looking at £ 7 million.
In Total £13 million, based on CONSERVATIVE estimates, if btc rockets earlier and stays high we could be looking at very silly figures
This is a well researched post on ARB - https://twitter.com/Melendhar/status/1325697125611659264
For any newbie or LTH , a great read
So much potential upside with little downside.
The Operational RNS is an incredible RNS on so many fronts, the leasing costs of the deal is very good and more importantly we are getting the rigs relatively soon. For anyone new to this share, there is a delay in getting the latest rigs, as Bitmain the main supplier are/were having issues with their owners.
As ARGO are margin driven and have low overheads ( compared to peers) this will be a very profitable transaction for them. The profit next year could be easily the same as the Turnover this year. The scaling up of this operation is just incredible , ARGO haven’t taken on any debt and they haven’t done a placing.
Apart from a very small loan (due to be cleared in Feb 2021), we have no outstanding debt.
The second part of the RNS , shows a secondary income stream, but more importantly for me, demonstrates Argo reputation in this space, we are managing a third parties rigs. 3rd parties don’t come to you, unless you are good.
So what news is in the pipeline
The virtual roadshow with Finncap is due to start very soon, where Peter Ward and Finncap are trying recruit more investors
News on the legal approval for the Share premium account, resulting in a share buy back or maiden dividends in 2021.
We have the GPU acquisition, to manage expectations I would guess this will be delayed, as clearly staff resources have been used in recent weeks to get this across the line. So, I expect this to happen before Christmas or in the new year.
We have the November monthly update which is expected to be awesome, btc price up, difficulty and hashrate down.
If ARGO are pursuing a dual listing and I believe they are, I would imagine this wont happen until early 2021.
Finally for me, 2021 looks incredible for ARGO, the btc bull run, where figures of $50 to $100k are being mentioned for btc price.
Stay safe all
Cracking deal on so many fronts..
Still digesting the details, the expansion plan is awesome and perfectly timed for btc bull run, the finance deal looks very good based on my projections..
So much more news on the horizon .
Stay safe
Argo, the leading cryptocurrency miner based in the UK (LSE:ARB), is pleased to announce it has successfully expanded the Company's mining capacity while simultaneously improving the Company's mining margins through lower hosting costs and generating an additional stream of revenue. Argo is pleased to have formed a solid relationship with Core Scientific as the Company's newest hosting partner and with Celsius Network as its financing partner.
Leasing Agreement
Argo has entered into an equipment lease with Celsius Network for 4,500 Bitmain Antminer S19 and S19 pro miners for a term of 24 months. Celsius Network is an innovative and fast-growing cryptocurrency lending platform which currently has over US$1.8 billion worth of assets under management.
Argo's lease, which spreads the new equipment cost over 24 monthly lease payments, allows Argo to add capacity, upgrade its mining technology and achieve economies of scale while fully retiring the capitalized cost of the miners over the term of the lease. The mining machines are valued at over US$10m.
The new mining hardware is expected to be fully operational by February 2021 and will add approximately 430 petahash to the Company's installed computing power as well as consuming approximately 15 megawatts ("MW") of electricity.
Hosting Agreement
Argo is also pleased to announce the machines will be hosted by Core Scientific which will provide physical hosting and access to electrical power for these newly leased machines at Core's existing facilities in the United States. Core Scientific is the largest digital asset mining infrastructure provider in North America and the partnership enables Argo to gain access to extremely competitive rates on hosting and power.
Mining Agreement
In addition to the purchase of machines to be leased to Argo, the Company has partnered with a third party which has purchased a new fleet of 4,378 miners to mine for its own account. These units will be delivered in February and March 2021. Argo and the third party have entered into a managed cryptocurrency mining services agreement whereby Argo will be managing the mining operations of these machines. This managed cryptocurrency mining services agreement will have an initial term of 24-months, and Argo will receive a monthly fee for these services.
Peter Wall, Chief Executive of Argo, said: "We are delighted to partner with Celsius and Core Scientific as we pursue our growth plans. These agreements allow us to secure very competitive terms on both new mining equipment and hosting costs. Argo continues to successfully expand its mining capacity while simultaneously improving mining margins and is in a strong position to benefit from the amelioration in market conditions."
Alex Mashinksy, CEO of Celsius, said: "We are excited to provide the financial backing and equipment to enable Argo to help secure the Bitcoin network. Mining is an
Dan - great post.
I thought the difference between October figure of 127 and September figure of 160 is mainly due to the increased adjustment in difficulty we saw in early October, the fact they reduced their capacity to 16,000 rigs and zcash price was pretty low in October, ( their a slight spike during the month).. I am not saying this is going to account for all of it, and off course October had an extra day , but i think it accounts for some of the difference.
HODL has gone up from 126 to 137.. Based on todays value say $14,300 thats nearly $2million ..
Dependent upon cashflow requirements for GPU , we might see HODL increase month on month, and with btc expected to go up in 2021, this looks very positive to me.
My best guess with the faulty machines, is that we get a credit note or cash back.
Plenty more news to come this month
GPU Update
Share premium account legal update
Fingers crossed - dual listing
possible purchase of new rigs
early december - the mind blowing November mining update.
the next 8 weeks are going to be very positive
stay safe
So it looks like a dividend or buyback on the cards.
I would prefer a buyback and i think the AGM resolution was upto 10% of the authorised share capital.
Good news, especially with btc value being high and the latest mining difficulty adjustment
Page 51 of the accounts - Note 24
https://argoblockchain.com/wp-content/uploads/2020/05/Argo-Blockchain-Plc-31-December-2019-FINAL.pdf