Half Year 2022 Argo Blockchain PLC Earnings Call

To ask a hash of currently installed machines and another onex Ashford machines that will be installed by the end of October .

Our current active mining powers about 60 megawatts across the three facilities.

Margin for the first six months of 2022 was 71% continues to be the highest amongst our peers.

Down from 81%, but from from the first half of 2021 still a very good margin I'm proud of the team for continuing to have really good efficiencies. Even as you know the price of Bitcoin is fell during the first half of the year.

And the money margin.

71% translates into an average cost per bit coin of roughly $10000 and again that's for the first half of the year.

At Argo, we're focused on sustainability last week, we released our sustainability report for the calendar year of 2021.

We continue to be carbon neutral by using completely renewable power in Quebec and by offsetting our scope two and three emissions from from other mining locations.

Our fall sustainability report.

Our full sustainability report is our website I encourage everyone to check it out it is a downloadable PDF.

Our hotel at the end of July was 1295 to coin a we sold a significant amount of bitcoin during the second quarter and in July I'll speak about it in a few more slot slides.

And kind of get into the reasons why.

This roughly 300 bitcoin and bitcoin equivalents includes 227 bitcoin equivalents that are managed by Argo labs.

That represents about 17% of our digital asset holdings and.

And again I'll have another update on art allows a bit later in the presentation.

So that's argo at a glance.

Now for the Q2 2022 highlights I'm, obviously, the most important milestone for this for US this year.

And for Q2 was the energized Jason of Helios.

And the commencement of our mining activities in May is a really big moment for the company. Once we have brought you know once we brought Helios online it's been off to the races in terms of boosting our hatch rate. We ended the quarter with about $2 two extra cash which is a 38% increase from the first quarter.

Other highlights for.

The quarter is we obtained up to $71 million of machine financing from <unk>.

Which has enabled us to continue to build out Helios and install machines.

We also executed an agreement with epic to work with them on designing and manufacturing custom mining machines, using Intel block scale, ASIC chips, which we're very excited about <unk>.

And lastly, we held our annual general meeting in June where shareholders approved all of our proposed resolutions.

So for those of you our shareholders that are on the call. Thank you for for for voting. If you were able to do it.

Take part in the AGM.

Alright.

A little bit more about our financial performance during the second quarter, we mined 469 bitcoin.

That's essentially flat from the prior quarter for the first half of the year, we mined 939, bitcoin a 6% increase over the same period last year.

This reflects the growth in hatch rate offset obviously by a higher network difficulty.

We generated revenue of $14 4 million U S for $11 8 million pounds. In Q2. This is a 20% decrease over our revenue from the first quarter of this year again primary driver was the decrease in the price of Bitcoin, which fell from an average price in Q1 of about 40.

<unk> 2000 233000 are.

And in this quarter, which was about a 20% decrease as well.

The global Hatch rate also continued to climb in Q2 at.

As miners to put more and more machines on a network that they've ordered last year during the bull market and so network typically was up about 11% higher than in Q1.

All of this meant that our adjusted EBITDA for Q2 was $3 2 million or $2 6 million pounds. This was down from $14 5 million of adjusted EBITDA in the first quarter again to two main drivers are for that one as we had higher operating costs at Helios than we anticipated largely due to two <unk>.

Power prices.

You know the the power prices are are driven by macroeconomic factors.

Clearly in the war in Iraq, sorry, the Horn Iraq The war in Ukraine.

Which has driven up the price of natural gas.

Texas has a lot of renewable power on its grid, but it also has a lot of natural gas power generation and so the overall cost of power.

Texas is affected by the price of natural gas in and we've been feeling the impact of that in our power costs at Helios a.

The second factor was higher G&A and operating expenses in the quarter.

And this is due to a couple of different things one the impairment of intangible assets, which is about 30% of our G&A cost and Alex will go into that in detail a little bit later on also the depreciation of the the Helios facility.

And then lastly, and increased insurance costs, specifically, our D&O insurance premiums increased after we listed on NASDAQ.

We upgraded our policy because we are in the U S and that's something you need to do cost of doing business in the U S.

And this is kind of unfortunate, but it is an important investment when it comes to retaining.

The kind of directors that we want at Argo.

And again, Alex is going to go into more detail a little bit further on them in.

In our in a few features future slides.

So for the quarter, we had a net loss of $38 million, which was driven mostly by the 38 million negative change in fair market value of our <unk> holdings.

Under our accounting treatment, we mark to market the.

The value of our holdings based on the current price of Bitcoin.

This is not unique to us pretty much all the miners in the space that have the corner the balance sheets have had to write down the value of their other bitcoin holdings.

At at the end of the quarter, we held 1953, bitcoin and bitcoin equivalents on the balance sheet.

Obviously with the drawdown on the price of bitcoin during the year and especially in the second quarter, our revenue and our earnings took a hit we've had some issues on the cost side with the higher costs at Helios, which which we believe are temporary as we ramp up operations.

And overall.

Despite the difficult.

Macro environment I'm happy with our financial performance given the decline in the price of Bitcoin a week.

Frontloaded a lot of expenses as we continue to grow the business.

The team is doing a great job and you know the main thing is that we continue to add hash rate and continue to grow hatch rates.

And are in control of our own destiny at Helios.

Alright moving on.

To Treasury management.

So throughout 2022, we've adjusted.

Our whole strategy.

And become more comfortable with selling bitcoin. This is nothing new this is something we've done over the course of the company's history Ah. It's one of the levers we can pull on a when needed and obviously, we'd love holding bitcoin, we love, we believe bitcoins, an appreciating asset, but its also liquid asset that again.

You know something that we can tap into when needed.

During the second quarter, we sold 1167 bitcoin.

One thing to note about this the sales is that where we've been quite happy with our use of derivatives to generate an uplift on our realized the coin sales proceeds. So in Q2, we realized an incremental $500 per bitcoin sold through the use of derivatives and this generated approximately $2 million of.

Additional proceeds.

Derivatives is not something entirely new to us we've been using them since Q4 of 2021 to help mitigate price volatility in June we took another step further we hired a full time derivatives trader to help us build out our our treasury.

And our risk management strategy going forward and to my knowledge. We are the first among miners to do this.

It shows that we are kind of leaning into our efforts to strengthen our our treasury management.

[laughter].

So we use the proceeds of our bitcoin sales to fund our operating expenses.

Two two paper capital expenditures and most significantly to deleverage the company and reduce the balance of our bitcoin backbone.

As bitcoin prices continue to slide in Q2, the company made the strategic decision to Derisk the liability of the bitcoin back loans and reduce our exposure.

Didn't want to get into a position, where we had to liquidate a bitcoin.

Very low prices.

So through a combination of derivatives and deleveraging.

[laughter], sorry pardon me.

We have significantly reduced our exposure on the bitcoin background and we now have only $6 7 million.

Outstanding on the loan.

We now only have $6 $7 million outstanding on the loan as of July 31st.

Alright.

Kind of like my voice recovered for a moment.

It's early here, but it's not that early.

It's not it's not like when I'm in British Columbia, and do the five a M. This is eight am should be what should be fine.

Alright Helios update this is a photograph that we took him last week.

At the site you can see a beautiful day in Texas.

Air Coolers, all 50 Air Coolers are now in on the left hand side you can see the office that is almost done would be a good spot for the team to.

Meetings into due administrative work.

And you can see.

Farmers fields in the distance they've got some immigration there because there's lots of green and a site. The site is really coming along and looking fantastic.

In terms of other updates from Helios.

So as I mentioned, you know one of the first slides, we're making good progress on the installation of the approximately 20000 between F 19 J pros.

We purchased last year.

The ops team has been just hammering away has the process of installation down to a science, they're installing hundreds of machines. A day. If you haven't seen any of the update videos, we put out recently.

Take a look at our Youtube channel, we have a couple of videos from Helios, including one that highlights the dunk team, that's putting the machines into the emerging tanks.

In July the dunk team hit a daily record of 960 machines installed in one day, which is fantastic.

Hats off to them.

It's remarkable what they've done given that we've really built that team from scratch just starting in January .

In July we also completed our machine swap agreement with core scientific we are now 100% operating our own machines no longer had any machines hosted with third parties.

<unk> is a big milestone for us culmination.

Of the strategic pivot we made in early 2021.

When we decided to acquire the <unk>.

Two data centers in Quebec.

I'm, sorry give me one SEC.

As I've said many times before we believe that by owning and operating our own infrastructure and we have more control over the machines ultimately can achieve better performance.

We also think there's a strong economic argument to run your own facilities.

Power costs fluctuate much better to have control, we've seen recently with facilities our hosts calling up post even saying Hey, we had to add some extra power cost down because our power costs have gone up.

When you're running your own facilities, you don't have that kind of that kind of a you don't get those kind of phone calls.

Certainly in Quebec, our facilities.

Taking an ownership we've seen great results.

As well as you know in the last six months or in the last few months of operations at Helios in terms of performance, we've been very happy with the performance.

As I mentioned in a prior slide we are seeing higher costs than we anticipated Helios driven by the impact of higher natural gas prices on on electricity prices and higher power prices in general around the world.

I'm, just kind of give a bit of background on that and kind of where we're at and how that's come about.

What we're looking at moving forward.

So we energized Helios in May power prices were elevated the summer has essentially already begun.

It didn't make sense for us to lock in.

<unk> PPA agreement at those higher prices, a PPA being a power price at a power purchase agreement. So we decided to sign an index P. P. A where we pay spot prices and wait until.

A few months later into the fall when it gets cooler.

We expect a fixed price PPA would be able to to be founded at better prices.

Since we are exposed to higher power prices during the summer peak period of high demand.

We are essentially very focused right now on the power market, we can curtail operations.

And power prices spiked and it's generally in the afternoon hours not always.

We've got a great system the operations and technology team has set up a system when prices are very high we can curtail almost immediately.

Additionally, we are also participating in what is called the four coincident peak program through ERCOT manages the grid.

This results also in some curtailment during peak periods on specific days.

It's some short term pain for long term gain because it will ultimately lower power lower our power costs for for next year. So it's going to take us a little while I mean, the kind of big picture is we're still bullish on the Texas power market, but it will take us some while to season into the market and that's really what's happening in the summer.

One more pizza on power in Texas in July we shut down our mining operations a call in a couple of different.

Different occasions in response to a voluntary conservation alert from ERCOT.

ERCOT again, who manages the grid they sent out a note asking power users across the state to reduce their electricity usage.

We were voluntarily complied.

And saw this as an opportunity to demonstrate to.

To state regulators to the general public that bitcoin miners can help stabilize the grid and get power back during times of peak demand.

From what we understand minors generally.

As a group are complied as well in Texas, and curtailed and Gabe over 1000 megawatts or one gigawatt of power back to the grid. It's a lot of power about it's over 1% of kind of the average.

Or the or the maximum capacity of generation.

In Texas.

And what it meant is during that particular time of high demand ERCOT was able to keep the grid balanced and avoid any issues.

Yeah.

Alright moving on.

So.

This slide will look familiar again to folks who have been.

Some of our recent presentations.

We've been using it to illustrate kind of the various work work streams that are taking place throughout the year.

As I mentioned, the big named machine installation is taking place in batches will continue through the end of October .

This order is already 100% pay for we had no issues with delivery from Bip mean, I'm feeling very confident in meeting this timeline for installation.

[noise].

[laughter] pardon me on.

On the custom mining machines, using Intel ASIC chips, we have an update on how that's been progressing our we've been working closely with Intel we've been working very closely with epic.

And we are now redesigning the machines.

Slightly in order to boost their efficiency.

And this redesign has extended the design process. It will also delay the deployment of the machines until Q1 of 2023.

We've also decided to scale back the number of chips were ordering from Intel, which reduces our overall hatch rate guidance and I'm going to jump ahead to the next slide.

To get a little more detail.

Okay.

[noise] not sure what's happening to my voice today, but.

It's been good for the last few days and I'm not sure.

I've already had the Rona so I don't think it's that.

All right give me one SEC.

Yeah.

So.

Halfway capacity, we have a as I said in last night, we've revised our hatch rate guidance to reflect the new expectations around the Intel based machines.

Again this is a slide that we've been showing you know throughout the year and that's kind of not be now what are our growth our attach rate. So.

So let me just kind of walk through the history of it and then kind of walk through how we're looking at the next couple of quarters.

So at the end of Q2, we had 2.2 minus X. The hassle of capacity. This includes the retirement of the 17 series, which we announced earlier this year, which was about 460 penthouse of capacity.

As I said, we're in we're continuing installation of the <unk> S. I T J pros.

Those are the 20000 machines that we put in last year as well as the 10000 that have come from course of 30000 of this 19 G probes.

That is an extra one extra harsh coming from those machines by the end of October and that takes us to $3 two extra harsh of this year.

Again, those machines completely paid for no issues and team is hammering along the tactics what that represents is a doubling of our hydro capacity in 2022.

On the Intel rigs.

Given the kind of market conditions decline in the price of bitcoin.

We decided to scale back the Intel ASIC machine order by about 50%. So we originally had one point X a harsh coming from the Intel machines, we're reducing that to about 900 pet or how should we expect that to come online in Q1 of 2023 that is a realistic conservative date.

We still are excited about these machines.

We still believe that there was the right move to to partner with with epic and to get these rigs from from Intel.

Again their custom made to our specification designed to run an immersion.

And one of the benefits to that relationship with both Intel and epic is that there was a lot more optionality and have more ability to adjust our capital spending based on market conditions. This is a different type of relationship than when you buy it means.

What do you pay a huge deposit.

Front in advance.

And then it gets very tricky if you change your mind or you don't have the capital.

They have the optionality to to the Intel <unk> and epic races, which are real asset here.

And so given that they point prices have come down significantly we feel like it's prudent to scale back some of our capital expenditures preserve optionality.

Move more into you know our 2020 smart growth model not overextend ourselves reduce risks and those of you that weren't around in 2020, I talked a lot about smart growth and essentially you have an approach where we balance ambitious growth plans with also being conservative.

And and kind of reacting to market conditions.

So we're in a down market right now.

And we need to be smart about capital preservation.

And about growing intelligence intelligently about reducing risk about not overextending ourselves.

So after incorporating this adjustment to our forecast our new hatch rate guidance is $3 two extra hash.

By the end of the year with hatch rate increases of four one by the end of Q1 2023.

This does not include any uplift from overclock. It. So we haven't been over clocking through the summer, we do expect to be able to overclock as temperatures come down.

You know overclock in is something that does is affected by temperature and by environment. It's been really hot in Texas very difficult to overclock into summer.

So again these are conservative numbers, because there's no overclock in that for that three point to like that.

In terms of capital needed, we need to raise an additional $25 million to $35 million to achieve the incremental hatch rate of four onex.

So we had said earlier in Q1 that we need to raise $50 million to get to five X a harsh we've reduced our capital requirements in line with our reduction at the highest rate guidance.

In terms of capital opportunities were inactive discussions.

S providers.

Confident in our ability to raise the capital on good terms.

It's one of the benefits of being now around for four and a half years, which is a lifetime in this space. We have a good kept a good track record lots of folks want to talk to us and there's some really interesting opportunities that are out there.

That are sort of <unk>.

Non traditional.

For lack of a better term, it's not going to get into the details. We are obviously very aware of that you know there's lots of.

Strong feelings about dilution, we want to make sure that the shareholders are taken care of particularly given where the market's at right now.

But we are confident that we can raise that $25 million to $35 million to.

To achieve the the hatch rate of.

Four onex, a harsh without taking on any any significant.

That that is going to not be put us in a good place.

That's our uprate uptake too harsh rate capacity.

I'm.

Looking into into 2023.

You know what does the runway look runway for growth look like.

In short lots of room for growth.

Cause of both Helios and of the relationship with Intel.

Helios phase one is ramping up throughout this year, we expect to be using the full 20 megawatts of power by late this year early next year.

Beyond that we have an additional 600 megawatts of capacity that.

We can develop over the next few years.

And that's a fantastic runway and theres not a lot of folks that have that much capacity in their pipeline for for for power.

In terms of our supply agreement with Intel that's another key differentiator for us.

We've been able to you know customers driving these machines to run emerging I don't have to rely on off the shelf machines and.

And again very able to get very granular with with the machines.

So we feel like these two factors combine to.

To give us a really fantastic runway for growth of up to 20 extra hatched by the end of 'twenty 'twenty four.

And yeah that's.

That is our house a runway for growth.

So labs, a quick update on our go lives as folks who have heard about art elapsed before no. It's focused on non mining activities are kind of the.

Innovation wing of the company.

The labs.

Quick summary of our participating in disruptive sectors of the broader blockchain and web three ecosystems.

One of the kind of new updates for AGA labs is there's a new initiative, where they are providing advisory and consulting services to projects within the blockchain space. This allows the company and those are the labs to meet founders discovered new innovations.

That are leading to better diversification, all while generating revenue for Argo and some of the services that are the largest providing include token economics.

Took an economic design.

Market analysis and infrastructure support.

Yeah.

Alright in terms of what we have deployed our resources into.

You can see in the Pie chart on the right.

Kind of the breakdown of all of the various projects or some of the various projects that are the largest deployed into.

I want to 0.1 out in particular, just to give you a kind of a sense of what are the largest duane.

One of them is called Astral, it's a decentralized compliance layer that sits between defy apps and users and verifies Ky see AML compliance.

It's obviously something that needs to happen is kind of compliance layer for D. Five device scale.

And to achieve more adoption.

And because it reduces ultimately counterparty risk and enables regulatory compliance. We believe it's something that is really going to catch on those are key hurdles for meaningful institutional adoption. So the Argo labs team has met with the Astro management team multiple times been impressed by their background and their their expertise.

We participate in the project seed round early this year.

And the Astra team is now raising a C.

Heres a fundraising round at a much higher valuation than when we originally came it so that's exciting for us.

At this time I think shows that this is the type of projects that we're pursuing.

Alright, so that is our go labs and I'm now going to turn it over to Alex to go into some more details on our financial performance after the quarter and for the half year.

Thank you Peter.

So overall pizza.

Alright. Thank you know we suffered from the fallen bitcoin like many of our peers. So that's changing about you know when we look back to December bitcoin was in the mid Forty's and slightly higher and that's what brought about 40 some thousand dollar mark.

I thought at the end of June it was closer to $20000.

Of course, as we revalue all Bitcoin holdings.

We had a loss on the change in fair value of digital currencies.

You can see both the gross profit line that in terms of profit and mining marching them. Some home center is still very strong, though often want to how that stacks up against our peers.

Well that was really pleasing result for us.

As we look further down the P&L, we look at our operating expenses administrative expenses for the first half of the they run about 10 million pounds.

S Pizza touched upon earlier there are some significant one off costs, if you like but particularly when comparing to previous periods.

The impairment of the intangible assets and really when we're talking about tangible assets.

That is the it'd be outgrow mobs holdings, which you just demonstrated in previous slides.

We impair those assets. So they they are cognizant tangible assets the movement and my father, you guys through got Mr. Tibet expenses, whereas the movement in any bitcoin Bobby you go to the both the gross profit line discussed your administrative expenses and that was about 30% all 3 million pounds worth of impairment. So obviously that was a significant portion oh.

The administrative expenses increase Peter also mentioned the Helios facility coming online and so I think it's kind of come online at the beginning of may be stocks depreciate that.

I appreciate that for 25 years.

And then also the insurance that Peter just mentioned D&O insurance, we want belts and braces, we want the rolls Royce and if you'd like to have insurance policies in order to be able to attract and retain directors as we've moved across the pond.

And operating them in the model to just the environment.

It's very important that we have protection directive on the kind of direction that we want to trucks.

The board would want to attract and keep you know he is looking at this and don't look about policy. That's part of that GW is looking through that D&O policy and ensuring those call them should the worst case happened. We've also got insurance on the building the Helios facility building itself.

We've seen pictures of the building a huge building with a lot of mine isn't it and I'll say that that is a very costly expense as well.

However in terms of all the G&A costs are the main cost within there as people are waiting.

Wage and salary, but most businesses you've.

You've seen over the past.

Particularly beginning of this year end of last year, we've really strengthened to pay them. We've got a significant C. Suite now we have a very strong executive team underneath them and whatnot has gone to maintenance, but going forward, we will not have significant highest there's no gaps at the moment.

In terms of those two.

<unk>.

So therefore, as we build out the extra harsh.

Bill about Helios facility.

Do not expect the G&A costs to increase significantly in basketball the money profits that come from my increased Australia are all most of them are false strike down to the bottom line and so that's really pleasing place to be and we've got that foundation in place ready and poised to take advantage of the increase in extra harsh on the profits of about what generates.

Onto share based payments. So again just as a reminder, this is the charge that goes through the P&L all round for the share options and warrants that are.

Or out the foreign exchange Foreign exchange you will see in a number of places, particularly if you've gone through the rns in any detail.

The the dollar or as the pound has weakened against the dollar.

Have a gain.

In the income statement like counting gang.

I actually thought it was just there was a question that went through that in terms of you know.

How does this how does the exchange impact is and what is the cost of that this is an accounting transactions. So it calls we mined bitcoin, which we can sell it in either.

Dollars.

British pounds Canadian dollars et cetera.

In terms of actual exchange costs, we don't suffer any significant exchange costs. So we're well placed from that point of view.

Moving further down the path.

Now we've got the interest expenses I'll come onto off net profile when we move on to the balance sheet, but in terms of our weighted average cost of capital was still below 10%, which is really pleasing place to be and I mean given.

12.

14, 15 months ago. When we first took off and we were looking at that in order to help accelerate growth.

All of a sudden interest rates that we were able to gain on price machine financing you know it was the high teens that were offered them. So that's come down significantly and even the bitcoin backbone, which which today stands well below 10% was above that 10%.

So our overall weighted average cost of capital there as well in line with if not better.

So we're very pleased with where that stands.

Those are not moving down to the income tax you can see the income tax credit that so when we are when.

When we calculated our tax charge at the end of last year and most of that came from our Canadian NCR trading entity.

We are we were going through a process with the Canadian press.

The authority back to understand exactly how they were going to treat almost since the guidance that we've given.

By that point was we wouldn't be able to offset previous losses.

Having finalized the tax return at the end of June we are able to offset those so that's what I talk to your tenants from it and that has meant that we've significantly reduced the tax charge from the previous from the said one December position. So that's that's really pleasing and in addition to that we're able to spread that cost over a period of time as well.

The future.

So moving on to how we line up with our peers.

So again as Peter said we.

<unk> talked about this before you know we want to be in Tia a minus we want to be enough about highest.

T. I said that we are protected for them from the downturns when these softening a bit corn products.

And how do we do that well.

Two ways really the inputs on the input really to bitcoin mining is power and power costs and pizza touched upon this already are our long term goals still stands to to at least achieve that and stop on boutiques three cents per kilowatt hour if not lower so that is why we will stand in the in the longer term.

And then also on the other side in terms of the the output of the machines. You know emerging cooling is going to be able to mean that each of our units were going to be able to push hard and as we get into the <unk>.

Cooler times of the year that we're gonna be able to push those machines hard and we'll see that come through into that mine profit mining margin. So we continue to be operating very effectively when compared to the compared to our peers.

Yeah.

In terms of our balance sheet.

First thing to mention.

Is how we.

Spike significant headwinds that we part of this year our rigorous approach.

Our approach to cash flow and Treasury management has meant that we've been cash neutral.

So we're well placed there.

In terms of our digital assets you can see that we revalue, we revalue those as we've talked about moving down fixed assets.

The mainly that he lost 17 helps them change the color on the Helios facility in the state transferred from assets under construction, two assets and use them and stuffs depreciate them.

Now.

In terms of our debt profile, we've talked about this before.

At one point our.

I forgot what you learn with was $50 million, we reduced it to the end of June it was around about 22 million U S. Dollar and it's now a $1 7 million in U S dollars and I haven't like in this too.

We've used an overdraft if you'd like to build house, because you kind of get you don't use your machines as collateral and so you actually have them in your possession cant use infrastructure until you have it built.

As financing we've used to stop gap of the of the loan.

Loan to help fund these things, which we have to pay in advance and then after we bought them on the ground to be refinance we leverage we changed our debt profile. So that the profit generating unit the machines themselves. The debt is matched against the profit generating units themselves the infrastructure.

So we bought finance on the finances, a little bit essentially more that Peter talks about potentially more maturing financing. So in terms of reaching that 25 $75 million required to get swapped pocket.

<unk> ran up on suspicion often asked about the debt market that is still available.

Its still out there.

They said we have lots of discussions I think if I was a new entrant to the market it would be difficult, but we have a history. We've been through these bad markets. We survive the bad market. We've got a history of repaying debt, you've got a history of being profitable we've got a history of being in CD rates. So we're well placed them too.

<unk> been able to access the debt market still.

But to your pizza.

Alright, Thank you Alex.

Alright, so that brings us to the end of our formal presentation, you've probably heard enough of us Nattering on particularly me with my Squeaky voice today.

And so we're going to move ahead now to.

Questions and Tom to mine has been gathering questions from some analysts that are that are on the call as well as from the chat function here through the investor meet platform I'm going to hand, it over to Tom and he is going to fire some questions out.

Thanks, Peter our first question comes from Darren Abtahi at Roth Capital Partners why are you doing a redesign on the epic Intel machines.

Yeah, It's a good question Darren.

Ultimately there's.

You know that the main reason is we had designed the machines in the first half of this year.

For a particular type of market environment that we were in now.

Now.

We're a hash rate was kind of the most important thing and actually it is always important but efficiency is also super important. So we've had the opportunity to talk to the guys had epic.

And to make the machines more efficient to put them on an even closer to the EF 19 XP.

Kind of up from where they were previously and ultimately that means that the machines are going to kind of act like.

Well.

And then if I can use a car analogy Darren if you think about an F. One car.

They do one thing really well they drive really fast.

And the Asics are essentially F. Once they are out there on the track blasting away solving these problems.

But they are generally designed to go you know not not there's not a large.

Amount of flex in terms of how fast they can go the way we are redesigning. These machines is that they can go very fast and they can also be very efficient. So there's a huge range that they are able to operate with them and we think that's going to be really important, particularly with the having coming up in 2024, So we've decided to kind of push back the.

The delivery on these a little bit a couple of extra months in order to make sure that we have that flexibility that we have that range for those machines.

And that they are able to be particularly in kind of the market conditions that we're in we're able to be really efficient or if things. Rep. Then we can really pushing really hard so they can make super overclocked or super under clock as opposed to operate within a smaller band.

Yeah. So that's that's that's that's why we're at we're tweaking it love it.

Great. Our next question is from Jove off via Canaccord could you give us an idea of where you'll end the year in terms of exit hash versus power, but the extra half.

It requires.

You have additional energized capacity do you have any views on using that power.

Yeah. So 3.2 extra hashed, Joe is roughly going to take us to about 120 megawatts of power.

Quebec were mostly running the 11th there's there's some <unk> there.

Few EF 19, so that three point T X or how should pick 190, and it's primarily all in Texas and Thats roughly translates to about 120 megawatts and then when we've got you know the the next roughly onex of assets coming in.

In Q, you know Q1 for the Intel rigs now that's another chunk of megawatts there.

So you think about it we've got some.

Some flex some power we are looking for ways to be opportunistic with that that that capacity.

As you know in this space you need rigs need power you need capital. We've got lots of power, we can monetize that so I'm not going to get into any details, but we're exploring opportunities to monetize that power them.

And and we're putting out update out to the market.

As we have any announcements.

Great. Our next question comes from Jon Peterson of Jefferies with power costs coming back down when do you think a PPA will be locked in for Helios and will that PPA include the ability to sell power back to the grid.

Yeah. So that's that's the whole intention John with the PPA is to be able to participate in the ancillary programs from ERCOT and that includes demand response and controlled load responses and you'd be able to essentially being energy trader with your power.

We've obviously had higher energy prices than were anticipated.

In the spring.

April may when we were kind of looking to lock in a fixed price PPA I know some continued throughout the summer. So we're expecting again those to come back down in the next couple of months to lock in a PPA.

And then and then kind of be able to move from there and participate in all the you know the those ancillary services at the ERCOT grade has to offer.

Great. Our next question is for Alex and this comes from Kevin Dede H C. Wainwright is there a write down expected on the 17 series that we retired or are they fully depreciated.

Hi, Kevin.

So the C 17 theory, we installed base.

Second half of 2019 and early 2020, so that some of those machines will still have a net book value.

We'll still be a write down but it's relatively small given given how long they've been installed indeed some of them are already fully depreciated. So it's certainly not significant.

Yeah.

Great.

Next question comes from Ramsey at Barclays.

We will incentivize by ERCOT to turn off operations. This summer and can you provide any additional color there.

Yeah. Thanks, Ramzi, so we were not.

Purchased able to participate in the in the ERCOT ancillary services.

Because.

We don't have a fixed price PPA, yet you really need that in order to to to participate.

Our registered in the ancillary services, we're doing testing right now with ERCOT.

But we're not going to participate until we have a fixed price PPA.

Great. Our next question is also for Alex from Bill at Stifel. The company has made significant prepayments for both the EF 19, J pros and Intel block skilled chips are you able to confirm how much is remaining is it the $2 2 million as per the notes on the trades.

Tables.

Unfortunately, it's not the $2 7 million I wish them, a bill in terms of where we stand today, we fully paid for the main machines.

I'll have a portion to pay for the committed.

Intel chips and book the prepayments that are on the balance sheet at the end of June in terms of the Intel epic prepay.

Portion of what we have to pay them I cant really go into exact details on that but what I can say is that mine is fully paid I was at the day when we have a little bit more paper Intel on that Pik.

Thanks. Our next question that was submitted in the chat comes from Jason B.

He's asking for some clarification about the timing of the Intel and epic machines Peter.

Peter can you go into that a little bit.

Sure. So we expect the epic and Intel machines to be delivered and start deployment in Q1 of 2023, Jason I think that there we have been saying for a while Q4, we decided to be conservative and say Q1.

The goal is particularly to to make sure that we're we're realistic as to when those are going to be running its possible, but somewhat arrive in Q4, we're hoping we're hopeful.

But the expectation, where we're setting out to the market is for Q1 of 2023 to have those machines delivered and installed.

Yeah.

Great. We have another question from Darren at Roth Capital Partners is the lowered year in exit has guidance more a function of the delay in epic deployments or preservation of capital.

Thanks, Darren So it's really it's really both.

It's a preservation of capital as we lowered the number of chips from Intel.

But it's also due to this redesign.

Which has been kind of associated with it some supply chain bottlenecks that are of concern that we want to make sure that we worked through.

And kind of give ourselves enough time to handle.

So essentially.

It's both.

Great next question from Chris Brenda D. A Davidson given your location you know and a pretty wind heavy part of the state what are your thoughts on doing some behind the meter arrangements in the future.

Yeah listen it's something we've looked at Chris It's a good question.

The key is to find a.

Partner that is willing to do them.

The right type of PPA for you or with you and those don't don't always material materialize on the timing that you need so it's something that's on our.

It's on the list.

But ultimately it's really about finding the right counterparty and for you know for the meantime.

<unk> has been integrated in Texas is pretty good as long as you have that fixed price PPA and youre able to participate effectively in the in the ancillary services.

Great. Thanks.

Another question that we got into the chat from cigar S has.

Has there been any impact to Argo from the Celsius bankruptcy.

So no no impact for us, we haven't really had a relationship with Celsius since.

Over I think it's been 12 months since we resolved the issue that we had with them.

Yeah. So ultimately it has had no impact obviously are.

Yeah, we've been following the story closely but are just.

Just as interested observers.

Our next question from the chat from Mike W. Do we have an ideal price target for the PPA that we'll look to sign in the fall.

Hum.

We don't really make obviously the lower the lowest number as possible.

If you sign a PPA at a certain number and then you you kind of whittle that price down using the ancillary services.

So we'll see what the market is like in the next month or two.

And I can tell you those conversations are ongoing it's not something that we're even waiting for it it's an ongoing conversation, but I cant say that we have a price target with PPA again, we're targeting that two.

Two and a half cent price long term in Texas.

And and and that's something we still believe is achievable once we get that fixed price PPA.

Great. Our next question comes from John S. The Helios outdoor photo in the presentations used to show about 25% of air coolers still remain to be installed is this indicative that argo is slowing down on the infrastructure build out.

Good question, John Good observation no. So all air coolers had been installed at Helios that we need if you think about an air cooler at each of the air coolers runs a four megawatt pod. So there's 50 of them you can count them and that's 200 megawatts, we do have some additional capacity for.

But you're right about another 25% of the building.

But the plan was always to have that as as extra space white space storage space et cetera.

In the future again, that's expandable space potentially for us.

But for now.

It's it's all systems go on getting that infrastructure to 200 megawatts and we're almost there in terms of having.

All the the the tanks and the pipes and the installation gear now that all the air cools are in.

Great next question in the chat comes from John C.

When will you be appointing a fulltime chairman.

Thanks, John .

So this is something that has been we've been looking for for about a year. We have strengthened the board of directors in the last 12 months I feel really good about our board and it's about our governance process are we.

We actually have a board meeting today and we have a board that's very engaged very smart.

<unk> provides a lot of value very very diverse experienced.

Yeah.

In terms of time frame for the chairman.

It's something that we are actively looking for but we want to make sure. It's the right chairman, we kind of need a rockstar in order to take us to the next level and.

Other than.

Yeah, So I can't I can't give you an exact timing but.

We'd like to ideally find determined in the next in the next short to medium term.

Great. Thanks. The next question in the chat comes from John S. What are the future plans for Canadian operating centers.

Thank you John .

In short, we're happy with the profitability and the operations in Canada, we like the geographic diversity.

The price of powers is good and steady in Quebec.

Climate is good we felt the repair center at our Mirabel facility that helps to maintain our fleet of machines. We're also putting in.

Our global operations control center in Quebec, which is going to control kind of keep a look at our our hatch rate as a company across the board.

So the plan is just to keep hammering them away hammering kind of away with them.

If they come up facility in particular is really well built really solid and the machines there are definitely coming into their <unk>.

Ended their lifespan. So we're looking at kind of opportunities for it for the next phase of machines to go in there.

And yeah in general we're happy with them.

Great next question.

It comes from Lilly.

Lilly M D.

Can you talk about what is happening with flu.

Yeah, So poodle.

Digital is a obviously a investment that we made going back about a year and a half now.

We're in regular contact with the with the Pluto team I speak to them on a on a very regular basis.

At least multiple times a month.

They recently launched.

The.

The N F T minting or the NFC meeting for the resurgence game, which is a project that they're doing with them with a mace theory is a gaming company has recently launched they're leaning into the play to earn side of things, we support that and so you know, they're plugging away and in a in a down market.

And we're happy with the work that they're doing.

Perfect next question out of the chat comes from Matt T.

Do we expect all or most of our machine orders to come through.

To be the epic Flash Intel machines, where we balance that with other machine orders.

Yeah. It's a good question I think we're gonna be opportunistic Matt we'll see how the the epic machines Intel machine performance scale, we've got roughly 6000 of them 6500 of them coming in and you know in the next in the next couple of quarters.

And if those are performing really well and we'll lean into them.

We obviously like that relationship with both epic and Intel, but there is some bit made machines that are really solid and there are some deals that just <unk>.

With those as well and microbial <unk> makes good machines I mean, we've always been.

Willing to play the field when it comes to buying rigs.

But again, our primary focus is getting those epic rigs built.

The way, we want them and then and then scale with them if it's.

As appropriate.

Great. Another question that we've gotten are coming from a couple of different folks in the chat as well as some pre submitted questions including from corner S. Can you talk a little bit more about the plans at Helios beyond the initial 200 megawatts and how do you think about that incremental 600 megawatts.

Yeah, So the 600 megawatts.

Which is you know been approved for the Internet interconnection agreement.

As a real asset for us.

I think that in 2023, we can lean into it if market conditions allow.

We do have the orders in for the long lead items needed for that 600 megawatts in that.

That includes you know.

Or is that mostly as the large transformers, which.

Which are about 125 megawatts, each and it takes a year to make so those are coming late Q1 Q2.

And in terms of our.

Planning, we haven't released any any plans for the other 600 megawatts, but we do have internal are kind of planning that's going on for that 600 megawatts.

We think that you know.

It's a P.

Pretty unique asset that that power power.

Power, there, so I'm not going to get into more details than that but but we are where we're still very bullish on the Helios site.

That's a good segue into my next questions from the chat from Jared S. What are the long term value drivers for Argo.

You just mentioned that you think the runway for growth with the 600 megawatts at a good.

Strong asset that we have what else are the long term value drivers.

Yeah, and I alluded this to this year and in the presentation, well I kind of spell it out in the presentation I think one we've got the second 600 megawatts, which you need rigs power capital. That's an enormous amount of power that we have that we can lean into obviously you need the capital to build it out.

And we're continuing to work to make sure that we have the relationships.

With capital providers to find the right partners to help fund our growth because this is a capital intensive business.

Had this relationship with Intel and are committed to being an innovative miner.

And that's been we've shown that through setting up our immersion.

<unk> system are which we built from this from scratch ourselves I don't think there's anyone else in the space are that.

That has done that maybe other than riot.

And then we've got our I think our ESG bona fides, our commitment to commitment to renewables again, we're leaders in this space are.

In ESG and sustainability and that matters to people you know.

When we're having conversations people when we're recruiting people to work for us.

It's been a crazy hot summer in lots of parts of the world.

And.

We think that again being kind of a forward looking carbon neutral company is ultimately going to be a key asset for us and a key differentiator for us.

And then on the last piece I would say a focus on being efficient.

Margins for the first half of this year had been the best in the business.

The reason, we're tweaking the machines.

You know with the with the with the Intel chips is to make sure that we're focused on being efficient into the future.

And kind of growing intelligently not.

Not just buying machines for the sake of adding hash rate without it has to be the right type of Patrick So I'd say those are the key kind of long term value drivers for us.

That's great Tom Thank you very much and thanks for hosting US today, he's our questions and also thank you to everybody that submitted questions during today's presentation.

Peter I'm sure, they're going to return it to investors to provide you with a free bank wishes usual knows is very important to them, but before doing so I wonder if I may just ask you for a few closing comments before we start to investors for that feedback.

Sure. Thank you Mark.

Thank you everyone. Thanks for coming.

Coming out for our H one.

Last Q2 update obviously, it's been an interesting year so far.

2021 was an interesting year this year is different and interesting and in a different way.

We continue to believe in this space, we continue to believe in this company.

And we thank you for your engagement and I think we saw some great engagement today, and where we're cautiously optimistic.

For the second half of this year.

And I feel like we've got the right team and the right place to to continue to grow in the right way.

That's great. Thanks, Alex Tom. Thank you very much that they feel time. This afternoon. They should've been places are asking not to close this session or someone else unless you can read our achieved for the opportunity to provide your feedback and all the management team can better understand your views and expectations.

A few moments to complete but I'm sure will be greatly valued by the company on behalf of the management team of uncle Blockchain plc would like to thank you for attending today's presentation of my wish you all a very pleasant afternoon.