James Cirrone

Argo Blockchain released its second quarter earnings numbers Tuesday. These show depressed revenues and a very slight increase in bitcoin mined in the first six months of the year, ending on June 30.



However, the mining company has two other things under consideration beyond its 31% decrease in revenue during the first half of 2023, compared with the same period last year.&nbsp;



Those are: the need to de-leverage from its debt — worth $72 million as of July — and the weeks-long Texas heatwave that has kept power prices high, according to Argo CEO Seif El-Bakly.



When it comes to the company’s debt, things have certainly improved. As of June 30, 2022, Argo was $143 million in the hole. Furthermore, in this quarter, it has paid down roughly $4 million in pre-existing financial obligations.&nbsp;



A significant portion of Argo’s debt is tied up with Galaxy Digital through a $35 million asset-backed loan secured by the some 23,619 Bitmain S19J rigs located at its Helios site. <a href="https://blockworks.co/news/bitcoin-miner-argo-to-sell-largest-facility-to-stay-afloat-stock-doubles">Galaxy purchased the Texas site for $65 million</a> in December 2022 and now hosts Argo’s miners.



To continue paying down debt, Argo sold roughly $1 million worth of <a href="https://blockworks.co/tag/ethereum">Ethereum</a> in May, and in July, the company completed a share placement in the UK that netted $7.5 million. About $1.8 million of the share proceeds went toward debt reduction. 



Shifting to its mining stats, Argo has increased its hashing power to 2.6 exahashes per second (EH/s) and the end of year goal is to nudge that up to 2.8 EH/s. To achieve this, the company aims to add 1,628 more BlockMiner rigs to its facilities in Quebec, on top of the existing 1,242 BlockMiners.&nbsp;



“We are confident that by the end of the year, all of the nearly 2900 machines will be deployed,” El-Bakly said on an earnings call. “Given the current deployment rate, I&#8217;m confident that we can likely deploy them before Q4 of 2023.”



In Texas at the flagship Helios facility, Argo is dealing with a dramatic heatwave that has persisted throughout the summer.&nbsp;



Helios is located in Dickens County, a part of north Texas. And according to a <a href="https://www.dallasnews.com/news/weather/2023/08/04/the-north-texas-heat-wave-when-will-this-end-how-many-100-degree-days-have-we-had/">report</a> from the Dallas Morning News, north Texas has seen 41 days that reached temperatures of at least 100 degrees.&nbsp;



El-Bakly explained that Helios’ fixed power purchase agreement (PPA), which was struck during the first half of 2023, has been “ultimately a good hedge, and it&#8217;s proving itself to be very valuable so far for the third quarter.”



The PPA covers a “significant portion” of the Helios facility’s power load, but not all of it.



He went on to say that this is the best possible time for bitcoin’s price to be slightly down, as strange as that sounds.&nbsp;



“The reason is…when you essentially have a fixed PPA…you can pretty much use those power blocks and sell it back to the grid,” he explained.&nbsp;



He continued, “The higher the Bitcoin prices are, the more of an opportunity cost it is for us not to mine. And at times, it&#8217;s actually more beneficial for us not to mine and sell that power back to the grid, rather than keep mining.”



To that end, Helios generated $1.1 million worth in power credits in the second quarter, which would have been equivalent to mining an additional 38 bitcoin on top of their six month total of 947.



Still, perhaps the most important question that analysts had for El-Bakly and chief financial officer Jim MacCallum was how they plan to position themselves ahead of the upcoming bitcoin halving.&nbsp;



El-Bakly said the focus is to reduce fixed costs and operating costs while also deleveraging. He seemed to also hint that future real estate sales could be on the table going forward, similar to what was done with Helios last year.&nbsp;



“In the past, we&#8217;ve mentioned excess inventory and real estate as examples of non-core assets that we can potentially monetize to generate additional cash,” El-Bakly said.



“We&#8217;re currently in advanced discussions with some of those,” he added.



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Argo

Texas heatwave raises power costs for Argo Blockchain amidst debt repayment

TeraWulf released its second quarter earnings Monday morning, showing a continued trend of upward momentum for the American bitcoin miner.&nbsp;



TeraWulf’s revenue came in at $15.5 million for the three months ending on June 30, representing an increase of 34% quarter over quarter, according to the <a href="https://www.globenewswire.com/news-release/2023/08/14/2724293/0/en/TeraWulf-Reports-Second-Quarter-2023-Results-Financial-Results.html">report</a>. This was buoyed by the company’s revenue per bitcoin rising 21%.



The company’s total self mining hash rate jumped 67% to 5.5 exahashes per second (EH/s). Similarly, it also self-mined 70% more bitcoin in the second quarter.&nbsp;



These strong numbers were telegraphed by TeraWulf more than doubling its operating mining power since the beginning of the year. July’s average operating hash rate clocked in at 4.7 EH/s, while January’s was 2 EH/s, according to data provided by TeraWulf.



Given these numbers, TeraWulf CEO Paul Prager expressed confidence in the company’s continued positive performance. However, he didn’t just say he was confident. He revealed that he was a fellow investor in TeraWulf.



“In only the last year, I have personally invested over $12 million of my own money. And collectively, our insiders own approximately 55% of the company&#8217;s shares,” Prager said on the earnings call.



He continued, “In short, we only win if you win.”



TeraWulf CEO Paul Prager cited its Lake Mariner data center in New York as a major driver of future growth. It’s a site that TeraWulf touts as 91% zero-carbon (mostly hydropower and nuclear).&nbsp;



“As we move into the third quarter, we are actively expanding our Lake Mariner facility by 60% with the addition of 43 [megawatts] of infrastructure and 18,500 of the latest generation S19j XPs,” Prager said in a statement. “This near term expansion will further establish TeraWulf as one of the most efficient mining fleets in the sector.”



Chief Financial Officer Patrick Fleury added that profitability post halving in 2024 is top of mind. To that end, Fleury claimed on the earnings call that 18,500 new miners could immediately reduce the unit economic cost to mine bitcoin by 17%, savings that would make it much easier to generate cash flow when block rewards are cut to 3.125 BTC per block next year.



Furthermore, both Prager and Fleury see the bitcoin mining industry consolidating as the halving event comes closer, with Prager saying there’ll be natural winners and losers.



Fleury pointed to how independent power producers and oil and gas companies have merged over the last twenty or so years, leaving fewer and fewer firms. He said he believes the same will happen with bitcoin mining since it&#8217;s a commodities industry similar to oil and gas.



“There&#8217;s 20-something public companies in the space. That&#8217;s just too many and anybody that&#8217;s been around commodity markets long enough has seen consolidation,” Fleury said.



<h2 class="wp-block-heading">More on TeraWulf&#8217;s mining operations</h2>



TeraWulf&#8217;s Lake Mariner data center there completed construction on its second building in June 2023. With two buildings now up and running, the Lake Mariner site has 110 megawatts (MW) of operating capacity, with a goal of 153 MW by the end of the year.&nbsp;



With all of that added power, TeraWulf expects to increase its total self-mining hash rate to 7.9 EH/s, according to the earnings release. 



The Lake Mariner site is also getting a third building to house newly-ordered mining machines. That could be finished by the end of 2023.&nbsp;



TeraWulf’s other location, the fully nuclear-powered Nautilus facility in Pennsylvania, has now reached a fully operational 50 MW and 1.9 EH/s. The plan is to expand that to 100 MW, pending capital availability.



Prager added that TeraWulf’s lack of reliance on carbon-based energy positions the company well for he believes “will be an increasingly stringent regulatory environment.”



TeraWulf’s interest in nuclear power goes back at least to January 2023, when an executive told Blockworks that <a href="https://blockworks.co/news/bitcoin-mining-nuclear-energy">the company is in talks with nuclear operators throughout the country</a> to power mining rigs.&nbsp;



Also back in January, TeraWulf was at times trading below $1, attaining the label of a penny stock. Its shares, under ticker symbol WULF, have since charged into the green by over 250% year to date. On Monday morning as of 9:40 am ET, the stock traded away around 10% of those gains.



Updated Aug. 14, 2023 at 9:42 am ET: Added further insight from TeraWulf earnings call.



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