Argo Blockchain plc (ARBK) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. And welcome to the Argo Blockchain Q3 2021 Results Investor Presentation. [Operator Instructions] And now I’d like to hand over this to Tom Divine, Vice President of Investor Relations. Good afternoon.

Thanks, Mark. Before turning it over to Peter, I’d like to go over some quick disclaimer language. Comments made during this call may include forward-looking statements within in the meaning of applicable securities law regarding the future performance of Argo Blockchain and its subsidiaries. These statements are current expectations and as such are subject to a variety of risk and uncertainties that could cause actual results to differ material from current expectations. These risk and uncertainties are described in more detail in the Risk Factor section of the company’s filings and reports with Securities and Exchange Commission, copies of which may be obtained at www.sec.gov. Subsequent events and developments may cause these forward-looking statements. The company specifically disclaims any obligation or intention to update or revise the forward-looking statements as a result of changed events or circumstances that occur after the date of this release except as required by applicable law. In today’s discussion we will refer to non-IFRS financial measures, including money, margin and EBITDA. For reconciliation of these measures to the most nearly comparable IFRS measure, please refer to the reconciliations provided in our earnings release published yesterday. Which can be found on the Investor Relations page of our website at www.argoblockchain.com. Finally, this conference call is being webcast. The webcast link is also available on the Investor Relations section of our website. I will now turn it over to Argo Blockchain’s CEO, Peter Wall.

Thank you, Tom. Nice to be with everyone this morning, this afternoon, we're in a variety of time zones ourselves on the management team. Just kind of a quick lay of the land, so presenting today will be myself and Alex Appleton. Our presentation will be about 30 minutes. We'll go over our Q3 results. And then we'll open it up for questions. Also, on the call from the management team, we have Sebastien Chalus, our Chief Strategy Officer; and Davis Zapffe, our General Counsel; and you guys have already met Tom. So, let's get started. All right. So, third quarter third quarter was a very busy quarter for us as I think a lot out of you know. And this is the first time we've held a quarterly earnings call with our investors since we listed on NASDAQ in September. So as a dual listed company on the LSE and on NASDAQ, I think, most of you know, we believe in providing timely updates to our investors whenever possible. And although it's not a require by the SEC, we believe that these quarterly calls will be an important way to keep our shareholder base informed and engaged. After all, as I've said many times before, it's you, the shareholders that own the company. So, I'm pleased be here with, with you today to provide insights into our results and to give investors an opportunity to learn more about Argo. We believe we are trailblazers in the cryptocurrency world. Among other things, we are the first crypto company to issue regular monthly operational updates, starting back in January of 2020 which seems like a long time ago now. The market was obviously in a very different place and we've provided a good deal of transparency to our shareholders no matter what the market cycle that we've been in. So, it's my commitment to you that we'll hold these quarterly earning calls in order to keep everyone informed. As this is our first earnings call, I also want to take a moment to give a brief intro to Argo. I think many of you are familiar with the company, but some of you may not be as familiar. We're an ESG focused, cryptocurrency mining and blockchain infrastructure company based in UK, Canada, and the U.S. As of September 30, we had about 21,000 mining machines in our fleet with a total capacity of about 1.075 Exahash, or 1,075 Petahash that's SHA-256 mining, for Bitcoin mining. I think as many as you know we also mind Zcash about 5% to 10% of our hash rate goes towards Zcash, on the Equihash algorithm. We have two owned and operated facilities in Québec which are powered by Hydro. And we also have hosted facilities through our engagement with Core Scientific in the U.S. three different facilities at core we have machines. A key part of the Argo story has always been sustainability which has been central to our strategy and our values since we founded the company. With the first crypto company miner that we know of to actually release a climate strategy, not just say we're ESG friendly, but actually put a climate strategy out. And the first to be climate positive, which means we mitigated our scope 1, 2, 3 greenhouse gas emissions for both 2020 and 2021, and then gone beyond we've reached that zero and then gone beyond that. Our main strategy has always been from inception to use low cost, renewable power for all of our mining operations. And this is why we are so excited about growing our operations with a new flagship facility in Dickens County, in West Texas. A facility which will rely principally on renewable energy for power. I'll get into more detail on our Texas efforts a little bit later on. Importantly, we've been able to grow our business and produce results while being climate positive. Specifically, we’re an industry leader in mining margin, achieving a company record 85% mining margin in Q3, which translates to a direct cost per Bitcoin mined of US$6,293. Another key component of our strategy, which many of you are familiar with is our smart-growth philosophy by which we seek to optimize the timing and pricing of our purchase mining rigs, and therefore maximize the ROI on those purchases. As we say, the right machines, at the right I'm for the right price. So, let's dig into our results a little bit for the third quarter we generated record revenue of US$26 million and record EBITDA of US$28 million. For our UK Francis, £19 million of revenue and £21 million of EBITDA. We mined 597 Bitcoin this quarter, which was a 20% increase over the second quarter of this year. And that brings our total Bitcoin total to 1,836 as of September 30, 2021. Obviously, we are bullish on Bitcoin. We believe that we'll continue to appreciate value, and because of this we continue to hold the Bitcoin that we mind to the extent it's not needed to fund our growth in operations. I also want to give an update on some additional machines and hash rate that we're installing at Core Scientific that we purchased earlier this year. Many of you have been asking for an update on these machines. And they are been coming on a little bit later than expected due to logistical challenges in shipping machines from Asia. So currently we've installed 165 Petahash of the 610 expected this quarter. Let me just hop to the next slide there. So, most of the remaining 445 Petahash is expected to be installed by the end of this month. There is more machines going in this week for instance, and the balance of the machines will be installed by the end of the year. Once these machines are installed this will bring our total mining capacity to about 1.7 Exahash. We also announced on September 30 an order for 20,000 S19J Pro machines from Bitmain, these machines are expected to be delivered starting in Q2 2022 to our mining facility in Texas. And based on this order alone, we expect the installation to be finished by the end of Q3 2022. And that'll take our total projected mining capacity due to 3.7 Exahash and that excludes any potential hash rate uplift from our immersion cooling tech that we're putting in in Texas. And obviously any other machines that we purchase. In terms of purchasing other machines, we're continuing to monitor the market and we'll make additional machine purchases when appropriate and announce those to the market. All right so just a few kinds of general comments on the crypto space. It's obviously been exciting few months, it's exciting, few years. It continues to be a dynamic space. Never boring. This year, obviously in particular has been pretty incredible. Most recently with the ban on cryptocurrency mining, and then cryptocurrency trading in China there has been a huge influx of miners coming to the United States. The U.S. now represents 35% of global hash rate. Then you add another 10% of the global hash rate from Canada and North America represents almost 50% of global hash rate. If you go back, a year ago, this is something a lot of us were talking about of the fact that hash rate has migrated this quickly to North America is really extraordinary and has happened much faster than anyone expected. We're also seeing increased adoption of Bitcoin in the global financial system. Financial institutions are becoming more comfortable with investing in Bitcoin. We recently saw the launch of some Bitcoin futures, ETFs and this continued adoption is also showing up in the form of increased institutional investor interest in crypto and crypto mining as a way to gain exposure to Bitcoin and other crypto currencies. Obviously, we are very excited about the prospects for crypto in general and Argo in particular. And that brings us really to the reason we're here today on this quarterly earnings call. And that's that in September we listed on the NASDAQ in the United States. It was a big moment for us and something that we're proud of took an enormous amount of effort from our team to get it over the line. It was more complicated coming from London than if we'd been listed in somewhere else in North America for instance. We strongly believe that a dual listing makes sense for Argo as accessibility to capital is really important to the growth of our company. Many of you were calling for this strategy for a long time. And we heard those calls. And NASDAQ listing gives us access to the largest pool of capital in the world. As a result of the listing, we're able to raise approximately US$115 million net of fees and expenses. And this capital is already going to work for general corporate purposes including specifically, obviously the purchase of more mining machines and to build and develop that out the infrastructure at our mining facility in Dickens County, Texas. All right. So, speaking of Dickens County, we're going to talk a little bit about Texas. So, as I've talked about many times before Texas is becoming a very popular location for Bitcoin. The secret is out. And Texas’s share of global hash rate is dramatically increasing. It seems like monthly. So, why are folks moving to Texas? Why are minor setting up shop in Texas? And the answer is very simple, low-cost power, and an abundance of low-cost renewable power specifically. In fact, Texas is the largest generator of wind power in the U.S. There's currently about 23 gigawatt of renewables online in Texas. And that's mostly wind. And then there's an additional 10 gigawatts of wind and solar that are coming online in the next few years, mostly solar. So, if you think wind was the kind of renewable choice of the past in the last 10 years, solar is the kind of renewable choice of the future in Texas. There's still lots of wind. Texas is obviously a very unique environment, unique power environment, because it has its own power grid, which is managed primarily not entirely, but primarily by an entity called ERCOT, which is the ELECTRIC RELIABILITY COUNCIL of TEXAS. And because of the changing generation mix in Texas and the high peak loads that they need during the summer or the cooler winters, ERCOT offers some very interesting ancillary programs for large power users like crypto miners. Controlled load response, or CLR basically allows miners to shut down all or part of their operations at peak times in exchange for certain types of incentives. And this mechanism allows mining facilities to provide a baseload of demand for renewable power and at this same time to essentially immediately shed load at times of peak demand. There is very few industries that have this type of flexibility that are able to balance generation i.e., energy production with load, i.e., power use. So, by miners kind of helping balance generation and load, we're helping to increase the resiliency of the grid and promote the increased use of renewable power in Texas. And that's not just miners saying it, that's actually statewide elected officials, ERCOT folks, there's lots of support for Bitcoin miners being connected to the Texas grid. So, we're building out our Helios facility in Dickens County. It's about an hour east of Lubbock. We own 160 acres of land there that is next door, right next door and I'll show you some photos in a minute to an electrical substation. And that substation has 5.5 gigawatts of power. We have access to up to 800 megawats of power coming out of that substation. Phase 1 of our facility, which is under construction now will be 200 megawats and will be using immersion cooling tech at the facility, which given the dust, and the temperature and just the general kind of interest now and increase in the amount of immersion cooling that's happening in the space, we believe is immersion cooling, is the future. And will be much more efficient than air cooling and will allow us to push the machines harder and run them longer than if we were using air cooling. We'll be hiring at least 20 local people in Dickens County and support for the project has been very strong from the local community. I was recently down there. There is some YouTube videos on the site. Some of you might have seen, might have not seen if you haven't seen them, it's a great community. And we made a couple nice videos, so it's probably worth checking out if you've got time. Alright. So, in terms of construction, it's well underway. These pictures up on the screen now were taken in the last couple days. They are pouring the concrete for the slab, for the building pad making good progress. The building, I spoke to our team down there yesterday, and the building will start to be stood up on that pad this week and will be installed over the next about six weeks, four to six weeks. And it's projected to be up by the end of the year. In terms of the what the site looks like, this is actually, I'm going to draw on here for a minute. So, this is the site, the building footprint. So, it's 135,000 square feet. And this drone shot was taken a couple weeks ago. So, we're much further, as you saw in the last picture, we're further along with the slab now. We have our own concrete batch plant on the site. It's an hour east of Lubbock, as I said, so it's a long way to bring concrete. So, we've made the decision to create our own concrete on the site. A lot of concrete needed for the slab. The building has actually started to arrive. So, if you see here well, most of the building is there already. As I said, it's going to start to be stood up this week. And this is how it's arriving. It's arriving in the back of shipping containers. It was built offsite. So, it's essentially a big Lego project. And they'll be installing the building starting on this side and then working down that way. So, this is the kind of a wide shot of the entire site. The previous shot was just over here. So that's where the building is being created. Now that's the first phase. But you can see there's 160 acres of property there. So, lots of space to rinse and repeat to expand and make up to – yes, put up more buildings in the future. The Cottonwood Substation is here and that's where we're tapping into. And our substation is being built right here. Again, this was taken a couple weeks ago, this drone shot. So, the interconnection will go like this into there, and then the power will come into there. Over here in the distance you see the McAdoo wind farm. There's a number of wind farms in the adjacent area in Dickens County and West Texas. It's a huge place for wind. I was talking to a local the other day and they said, finally, our we've always been known as a very windy place. Finally, it's being used for something good. So, lots of development happening or development has happened, and when you are down there, you see lots of more turbines going up. All of that wind power is also in such abundance that it's causing power congestion at the substation. So, by building the facility next to the substation, we're helping to provide load. And that eases the congestion. There is very little local load. The nearest large city of Lubbock uses about 400 megawats and we'll be using – and that's 200,000 people, we'll be using 200 megawats at our facility alone, for the first phase. All right. So, here's the Cottonwood substation, as I said, it's 5, 5.5 gigawatts of power. And this is what will be tapping right into. The vast majority of the power coming into this substation is coming from renewable power generated in the area. When we are down in Dickens County a few weeks ago on our trip we spent a lot of time with the community, the local judge, Dickens County judge, Kevin Brendle is the highest-ranking elected official in the county. He is very excited and supportive of the project. Dickens County is a rural area of Texas that has been historically very reliant on agriculture as its primary economic engine, but a lot of those jobs have left. So, Judge Brendle and the community really appreciate the opportunity and benefits that Argo can bring to the county in the form of jobs, tax revenue, future to element. So, while we were there, he helped organize the community barbecue, kind of a getting to know you event with the community we had about 300 folks show up. And we introduced Argo explained what Bitcoin mining is, what cryptocurrency is and talked about our plan to develop a world-class mining facility in the community. As we're investing millions of dollars into the county, we feel like it's important for us to be good corporate citizens and good neighbors and build strong long-term relationships. So, we announced our first public service project, which is the refurbishment of the community pool in Spur, which Spur is the largest town in Dickens County. It's the town of about 1200 people. And the pool has been closed there since 2009. The county has been unable to find the funds to refurbish the pool. So, we're excited about the opportunity to give back to Dickens County with a project that is needed and has been very well received. And we hope that shareholders and stakeholders appreciate our efforts in that regard. As I mentioned earlier, there is really strong political support for crypto and Bitcoin mining in Texas. During my recent trip, I had the opportunity to participate in a panel at the Texas blockchain summit, very well-organized event. The Texas Blockchain Council‏ it together, and they're doing a terrific job of mobile and advocating for the crypto industry in Texas. There is just tremendous amount of support for cryptocurrency mining in Texas right now. And we're excited to be there. All right. So, with that, I'll turn the presentation over to our CFO, Alex Appleton who is going to walk us through our financial performance for the quarter.

Thank you, Peter. As Peter mentioned, we had a strong quarter from a financial perspective. It was highest revenue quarter we've had to-date generating nearly $26 million of revenue in the quarter which was an 8% increase over the previous quarter and a 360% increase over the same period last year. The primary drivers for this increase an increased mining capacity coupled with the recent rise of the price of Bitcoin that we've seen. In the first nine months of 2021 we generated nearly $60 million of revenue which is a 238% increase over the same period of 2020. In third quarter, our net income was $17 million. And our year-to-date net income is $28 million. So, 2021 is continuing to be a strong year for us. Long may that continue. Our gross profit for the third quarter was $31 million. Some of our Egalite amongst you might notice that that's higher than our revenue for the period. How is that possible? Whether it’s due to the change in value of our Bitcoin holding which is reflected in the income statement in the line changing fair value of digital currencies. So, in the third quarter, when there was a significant increase in the price of Bitcoin, which goes into this calculation of our gross margin you see this volatility and this change in our gross profit. However, in terms of our Bitcoin, our mining margin, which is defined as mining revenue, less direct cost divided by mining revenue that stayed relatively consistent in the 80s. Onto our cost, average direct cost per Bitcoin mined. And I want to go back to a metric that Peter mentioned earlier, this is the direct cost of Bitcoin mined. And for the third quarter, we mined Bitcoin of average direct costs these direct costs are our power of hosting costs per Bitcoin of $6,293 which at moment is 15% of each Bitcoin's fair market value. So, this is the inverse of the mining and margin that we often discuss, which are 85% is one of the best in the industry. Something we're really proud of. And this is one of the primary examples of how we're creating value for shareholders. We're able to mine this Bitcoin, add it to our huddle at a direct cost that is a fraction of its market value. So, it's a good business to be in. Over the past year we've continued to increase our mining capacity and the efficiency of our fleet. And this coupled with the increasing Bitcoin prices driven our mining margin from 52% in Q4 2020 to 85% this quarter. This is why we've achieved such a steep rate of growth. Critical to this strategy is the cost of power. And once our Texas facility is online, our cost of power and therefore our direct cost per Bitcoin mined will be significantly less than what it is today. So, our mining margin versus Bitcoin price, while the price of Bitcoin is obviously a key driver of our business and our profitability, it's not had an outsized impact on our mining margin. So, throughout 2021, we've seen the price of Bitcoin going from $29,000 to over $60,000 where it is today and back again? However, our mining margin has remained relatively consistent. As I said earlier at over 80%. On to our balance sheet. Now our balance sheet has been strengthened significantly. This year, especially taking into account the recent capital raise as part of the NASDAQ listing. In addition, I'd also highlight our holding which at the end of September our digital currencies holding with 1,836 Bitcoin, which at that time was valued at $79 million as at the end of September which is a significant increase from the $4 million at the end of 2020. We had $86 million of cash on hand at the end of the quarter. Some of which subsequently the quarter we've used to pay back part of the Galaxy loan. So as at the end of September, we had $45 million loan with Galaxy we've paid $25 million of that back leaving us with remaining $20 million Bitcoin backed loan with Galaxy. We have very little debt overall, even adding that in, we have the lease, we have the mortgage and we have that Bitcoin backed loan. And with that cash on hand and our [indiscernible], Argo has sufficient flexibility to pursue our strategic growth balance in Texas, infrastructure and machines, et cetera. So that's all I wanted to highlight. And now I'll turn it back over, Peter. Thank you all.

All right. Thank you, Alex. All right. So, we're going open it up for questions now. Tom has been gathering them both there were pre-submitted questions that folks sent in and then there has been questions that are coming in through the Q&A chat on the side here of the – yes you guys have been submitting as we're going. So, Tom, do you want to just start firing him out?

Yes. Thanks Peter. So, our first question comes from Ramsey El-Assal at Barclays.

Do you anticipate purchasing additional mining machines for the West Texas facility? And if so, how are you thinking about the timing of your next equipment order?

All right. Maybe I'll start that one. And then Sebastien, do you want to jump on after me?

Sure.

So, thanks for the question, Ramsey. Of course, we want to fill up Texas as efficiently as we can and as quickly as we can. And Davis and myself, and a couple of us other folks were down at the site recently and just standing there seeing that power right next door, seeing the renewable power off in the distance feels like the only constraint is capital to build out that site. It's just really exciting. It literally feels like Bitcoin mining nirvana. So, we've put an order in now, which is kind of a baseload order for 2022 that's 20,000 machines. It's roughly 60, 70, 80 megawats, depending on how we run them. Which means there's room for more growth there. And so, in terms of how we think about purchasing machines, again, it's about smart growth. So, we're looking for machines that we feel like are going to ROI in that 12- to 18-month window that are available to be installed along the timeframe that we need. There is also creative it's not necessarily about Bitcoin, always, obviously, again, we're starting with the S19s, which mine on SHA-256, but there is also opportunities to look for coins that are outside the box a little bit we've done that in the past with our Equihash miners and then there are used machines. There's lots of different opportunities to build out the roster of machines in West Texas. And Seb is kind of in charge of that. So maybe I'll let him add some more color to that.

Thanks, Peter. So, yes, there is three areas we're looking at to add machines. As Peter said, we're always about smart growth, so, we're constantly looking at different options. We're obviously looking at the main manufacturers like Bitmain and MicroBT, but we're also looking at the machines on the secondary market, especially given the performance of those machines in immersion cooling. But we're also always looking at other suppliers, potentially Altcoins that we might identify from time to time, such as Epic, for example, for new orders.

All right. Thanks Ramsey. And thanks, Seb. Tom?

Yes. Our next question comes from Darren Aftahi at ROTH Capital Partners.

At the Texas facility is the building prefabricated. And if so, is all the material already procured or is there a risk of procuring materials?

Yes, thanks for the question, Darren. So, the building is prefabricated. It's arriving in containers, the last container scheduled to arrive this week. And in terms of the rest of the machine procurement that's needed, that was done a long time ago, Darren. Thankfully all of the low voltage transformers, medium voltage, high voltage, we put those orders in very early on. So, we're feeling really good about the timeline that we have set which is opening the facility end of March early eight, April, 2022, very late Q2 sorry, very late Q1 or early Q2.

Our next question comes from Jon Petersen at Jefferies.

Where do you expect your total Exahash capacity to be at the end of the first quarter 2022? And how should we think about the deployment above the 20,000 miners that we recently announced?

Seb, do you want to take that one?

Sure. So, we have that, as Peter said, we have that 20,000 miners order. That's kind of a baseline that's adding approximately to Exahash to our overall capacity. As we said earlier, we are always on the lookout to add our capacity. We have much more power available in our West Texas facility. So, we're on the lookout and we will definitely take any opportunity that we see that fits in our current smart growth strategy.

All right. Our next question, Peter has come from our shareholders. One question we've been getting a lot of questions on is, has to do with the dilution from additional equity offerings. Can you comment on that?

Yes, sure. Obviously, this is something that a lot of shareholders have been giving us feedback on both through reaching out directly to the company and through social media. And the way we look at fundraising, the way we look at growth is essentially we know that we need to grow to survive and to thrive in this business long-term. And there's three levers that we can pull on in order to fund our future growth. The first lever is selling Bitcoin, selling cryptocurrency. The second is raising debt. And the third is raising equity. Over the course of the history of the company we've pulled on all three levers. For the first few years of the company, we really only had the option of pulling on the first lever. And if you go back to 2020, we sold a lot of Bitcoin. And in retrospect, that was a painful. You look back and you're like, no, btu the Bitcoin we sold in 2020, but we didn't have a choice. We didn't have opportunities or very few opportunities for debt and equity. Then fast forwarded this year, we've done, we've pulled on the debt lever, we've pulled on the equity lever. Debt we've done, we have a mortgage on our facilities in Quebec. We've done a Bitcoin backed loan. We've done machine financing. We're comfortable with all those decisions that we've made around debt. On the equity side, we've done three different fundraisers this year raised just under $200 million. No, that's a decent war chest in this business, but this is an expensive business. It's a capital-intensive business. And I understand that people get frustrated about dilution. I'm a shareholder in other companies as well. And you always want to own as big a piece as you can. But what we're really focused on is long-term growth, long-term success. And where are we going to be in six months, 12 months, to twenty-four months, how we get there is the decisions we make today about what we're doing. And that's why we're excited about Texas. That's a huge opportunity for us in Texas. I can't overstate how important that low-cost power, that low-cost renewable power is going to be for us to be the captains of our own ship, for us to be able to control all aspects our mining operations. We haven't had that luxury so far, and that's going to be – it's really an enormous step for us, particularly, because we're doing it with immersion, which is going to be, we feel the best immersion system for the lowest cost out there. Then you add in kind of all the other things that we're doing on the non-mining side of the business, which we haven't really talked a lot about publicly and you'll be hearing about more of that in the future. But we feel like those two kinds of foundations that we're building, are going to set us apart long-term. There's lots of companies that are coming into this space now. There's more and more publicly traded miners that are listing every quarter. And so, we need to differentiate ourselves. And the way we're going to do that is by and smarter than everyone else. And building a foundation for the long-term.

Great. Thanks Peter. Another question that we've been getting a lot from shareholders has to do with the shares that are traded on the OTCQX exchange. Can you give some background on how these shares came to be traded on that exchange as well as how that will be impacted by the recent NASDAQ listing?

Yes, sure. So, the OTC I always say listing and I get in trouble from the lawyers because it's not a listing, it's an OTC trading opportunity, we'll call it because it's not officially a listing. But the OTC came about a year ago. So, if you go back to October, November of this time, last year, we were looking for ways to access the North American market. We weren't ready for the NASDAQ yet. It was a huge time commitment and obviously it's expensive to list on the NASDAQ. And it's a long process. So, we looked at the OTC market it as a kind of a baby step into the U.S. market. And we started conversations with the folks there, went through the process and in late December we were listed or we were tradeable on the OTC market. And we moved very quickly through the stages to Pink, the QB and the QX, which is kind of the three stages. We very quickly got to the top tier in January or February. And that was great for North American investors. It gave them an opportunity to access our shares, which wasn't previously available, because if you are a North American, it's hard to buy shares on the LSE. Most folks don't have global equity account where they can call up their broker and buy shares on the LSE. It's hard to buy them through your traditional means in North America. And at the same time, we started to grow as a company in the first quarter of this year and we saw that obviously it made sense for us to start looking at the NASDAQ listing. And we started that process in January, February and it took a long time we just completed in September. It was an enormous amount of effort. So that whole time frame, there was an opportunity for North Americans to buy our shares through the OTC. And we think it was a good thing. It gave people a chance to participate in being an Argo shareholder. Now, fast forward to where we are now end of September, we list on the NASDAQ. So, what happens to those OTC shares? We've gone from the minor leagues to the major leagues. We want to be on the big board, we're there and we've got OTC shareholders. So, there is a mechanism to convert those shares from OTC to the NASDAQ. It's not a mechanism that's controlled, or set by us, or the cost is set by us. And it costs $0.05 a share which is annoying. Frankly, it's not a great mechanism. We wish it was free, but it's not. And so, OTC shareholders have the option to convert those shares to the NASDAQ or they can hold them and trade them on the OTC, continue to trade them. So that listing still exists, not a listing, but quasi listing still exists and they can buy and sell their shares on the OTC. What we had said earlier this year was that we would give folks to the end of the year, we would support our QX listing. We would keep it to the end of the year. And then at the end of the year, we would let it expire and those shares would still be tradeable on the OTC, but they would no longer be a QX listing. They would be a pink sheets listing. So, they'd be kind of downgraded to the junior version of the OTC. Given that the expectation is over time, there'd be more and more liquidity on the NASDAQ as opposed to the OTC, because it's the bigger board and people are more familiar with it and it’s generally brokers deal with NASDAQ and less with OTC. So, we made the decision this week which we're just announcing now to maintain our OTC QX listing. So, people have another year. So, we'll do it for another year. And then people can convert over the next year if they want, if they choose to or if they want to continue to hold them on the OTC, they can. But it will extend that timeframe for another year. And hopefully that'll give folks a chance to make a decision about how where they want to hold those shares.

Great. Our next question has been asked a lot and it has to do with our lack of communications during the quiet period after the NASDAQ IPO. Can you comment on that?

Yes, sure. Been a source of frustration, I think, for shareholders and management alike. Alex is smiling because we do pride ourselves on being a transparent company. And that goes back to when I took over as CEO in January, 2020, and we started the, the monthly operational updates and we started engaging with shareholders big and small alike and trying to communicate as much as we could. The challenge when you are listing on the NASDAQ is you are in a regulatory environment that's very strict and one false move and you can upset the apple cart. And so, we chose to be very compliant with our regulatory advisors or listen to our regulatory advisors. And there's a quiet period on the front side and the backside of a NASDAQ IPO. And that's just a fact of life. And so, we didn't like it. We were able to do less than we normally do across the Board, events like this, social media, et cetera, et cetera. And we hope that shareholders appreciate that particularly now that we are in two different regulatory environments, the LSE and the NASDAQ, we have to be smart about how we engage. We want to engage as much as we can. It's in our nature to engage as much as we can. But we also have to make sure that we're on side on the regulatory side of things. So, moving forward we hope that we continue to build trust and credibility with our shareholders by engaging like this when we can, as much as we can, you'll see our social media will start to go back to normal. But there is also times where we're not going to be able to communicate as much as we used to given the new environment that we're in. And we hope that we built enough trust and credibility amongst our shareholders, that they appreciate that. And we're growing up as a company. And so, we have to just – we have to stick – true to our values, but at the same time, we have to make sure that we're playing within the rules of engagement.

Great. Our next question comes from Joseph Vafi at Canaccord Genuity.

Can you discuss M&A opportunities now that you are public and especially relative to having more capacity for growth in Texas? And how does M&A compare to some big purchasing more miners?

Sure. Thanks for the question, Joseph. So, we haven't talked publicly about M&A opportunities in the space. Obviously, the space is growing quickly. There's lots of opportunities big and small out there, but we have – we're – I can't really say anything publicly Joseph, other than I'm going to get myself in trouble. It sounds like I'm trying to hide something on M&A. And here is what I can say, we're always looking at opportunities to partner with smart companies to acquire people that make sense to – we acquired DPN. That's how we moved to Texas. That's how we found the site. I would expect in this site, in the space in general, that you'll be hearing that M&A is going to start to happen. In terms of big miners merging, I just see a huge upside there for, and I'm talking generally, I'm not talking about us because if you've got a chunk of capital, you're better to put it into miners and infrastructure than you are to buy another mining company. It just makes more sense because you can buy newer machines, et cetera, et cetera. I'm not saying that a merger is never going to happen between some of the big miners, but I think that's how – if you talk to a lot of folks, that's how they are thinking about it. I think that as this space develops, you're going to start to see cryptocurrency companies’ kind of take a bit of a DCG approach. If you think about DCG, they now own 180 different companies, and they kind of keep adding bolting on pieces. I think you're going to see miner start to do that. But that's kind of how we're thinking about it in general, in the space. Sebastien, do you want to add, or Alex, do you want to add anything to that?

No, I think you pretty much covered it, Peter. It doesn't make huge amounts of sense for the miners we’ll see where the space goes,

Okay. Our, our next is how can we ensure that our rig orders and installations don't keep getting delayed?

Sebastien, you want to take that one,

Obviously, we're exposed to the same supply chain and logistic issues as the rest of the market is. But what we do on our end really work on what we can control, for example, strengthening our partnerships and relationships with the main suppliers, being in constant communication and maintaining those good relationships with, for example, Bitmain, MicroBT, but we're also working on the longer-term relationships with different type of suppliers, such as Epic, for example, to make sure we have access to those machines. And those machines order do not get delayed over time. But again, as I said, we're still exposed to the same logistical issues and supply chain issues as the rest of the market.

Great. Thanks Seb. We've got time for a couple more questions. Peter, one question that we we've also gotten a few times, it has to do with the disclosing, the price of the mining rigs that we acquired. Some of our peers have a have acquired or have disclosed the price they paid for new mining machines. Why didn't we disclose the price we paid for our 20,000 S19J Pro machines?

Yes, so obviously when we purchase machines there's two parties that are involved in the contract there's us and there's the seller of the machines. And through the history of the company, most of the time, we've had no issues with saying to the seller we want to disclose the price it's good market practice for us, we like to be transparent with our shareholders. Most recently there has been a trend with one of the sellers in the space to not want to disclose the price publicly because of competitive reasons. And we always try our best, or we've tried asked in the past to make sure that we can disclose what machines cost, but it's not entirely up to us. And it really varies. And obviously I've seen other miners recently announce had eight, for instance, recently put out a price on their machines, but that was with MicroBT. And clearly, it's purchase by purchase decision by the seller about whether they are going to be comfortable with the price being disclosed. And that's I can't get into their head about why they would want to do that or not do that, but we've seen the trend recently that some of the sellers are not wanting to disclose the price.

Got it. Thanks. Another question that we just got from your shareholders would we consider hosting any third-party machines at the Texas facility, or will it be purely machines that we own and operate?

Yes, so it's a good question. Obviously, there's a lot of power we have a up to 800 megawats of power there. We don't have any plans to become a host anytime soon to compete with Core Scientific or Compute North or Northern Data. That being said, if there was a partner who had machines or who was a good fit for us, that was looking for a space those are discussions that we would have. So, I think it's on a case-by-case basis for us if there's an opportunity for us to develop the site quicker, and we think there's a partner that makes sense, we'll have a discussion with them. But for the most part, we're looking at keeping Texas for ourselves. We really like the opportunity to be able to build it out at our own pace using our smart growth philosophy. It's a challenge on the smart growth side when you've got to deliver machines to a certain site on a certain timeframe, which we've had in the past for instance with GPU1 and which now we've acquired two of their sites. So, we don't have that problem there anymore. So, we like to be able to build out Texas at our own pace.

Thanks, Peter. Next question. Can you provide an update on our partnership with Epic?

Sure. Epic is a great partner. Just to kind of, to recap the history there February of last year, we signed a priority supply agreement with them. We were looking to buy a specific machine model from them, which was supposed to be coming out around this time, this year. And then going into 2022, they had some setbacks on the technical side of pushing that machine out to the market that weren't entirely within their control which happens when you are a technology up and when you're developing new technology in the space. We still have a very good relationship with them. We are good partners with them. We've taken that deposit that we put towards those machines and we will put it towards other machines in the future. And so that partnership is strong. Our CTOs talk regularly. They are an exciting company. We think what they're doing is important. And going back to the question about supply chain and how can we ensure that in the future, we have less exposure to some of the vagaries of the market. I mean, one of those, and I've said this before, one of the ways is to get as close as you can, to the manufacturing teams. And this is like we're in this for the long haul and the way you're in it for the long haul is you build strong relationships with smart people. And Epic is our smart people, and we have good relationship with them. And that's kind of our approach. We're not trying to be a quick flash in the parent company. We're really trying to exist long-term and thrive long-term. And we don't necessarily, going back to earlier this year, we didn't have the same kind of huge amounts of cash in the bank that some of our peers had. So, we've got to be smart. And we feel like we've been smart. And Texas was part of that. And then getting close to machine manufacturers and procurement, is another part of it. And then non-mining is another part of it. And you are going to hear more about our non-mining side of the business in the coming weeks and months.

All right, here's a question for Alex. This comes from one of our shareholders Matt S. Is the debt collateralized by Bitcoin required to be paid back at a fixed price, or does the value of the debt fluctuate with the price of Bitcoin?

Thanks, Matt. And I think Pete will say, thank you for giving him a little rest here. So, in terms of how the Bitcoin back flow works, so we're just using our Bitcoin as collateral. And in terms of a loan-to-value we’re looking somewhere between 16% and 70%. So, if you borrow $10 million, you need to put Bitcoin at that point worth of collateral of say, $13 million to $14 million. Now, if that Bitcoin falls in value what we are able to do is put more Bitcoin in to increase the value of our collateral and therefore ensure that that Bitcoin is not called. And the way that we've forecast that is to make sure that should we see a flash crash, should we see a fall in Bitcoin that we have enough Bitcoin held back, which is not under the terms of that collateral that we can fund that. So, we wouldn't be in the position where we would lose Bitcoin albeit that is written into those agreements. So, it's about managing and retaining enough in our huddle that we would always be in a position into collateralize that loan should it be required.

Alex, I got another question for you from Chris Brendler at D. A. Davidson.

Is there anything, one time in the tax rate or do you think 30% is a good run rate from here?

Thanks, Chris. In terms of tax the thing is I'm sure we're all aware is companies pay tax, not groups. So, you have to think about each of the individual companies. We currently generate profits in Canada. That's where our machines are. And we generate a loss in the UK where we have our head office function if you like, and the costs of the LSE, et cetera, the PR there myself. And so, we have those sort of management type fees. So, we generate a loss there. We can't offset them equally. So, an effective rate of 30% is about what we’re paying at the moment. However, going forward as we generate more and more profits in Canada and in the U.S. particularly, we're going to see that amount of loss in the UK via smaller and smaller parts of our overall tax pitch. So, I'd expect that effective rates start to come back down to what are the tax rates that we're paying in the U.S. and in Canada.

Thanks, Alex. We've got time, I think for just a few more questions. Peter, I think this one is for you. Now that you've completed the listing on the NASDAQ exchange, and will soon have more U.S. investors, would you ever consider de-listing from the London Stock Exchange?

So, look, we really like where we are right now. The LSC has been our home for over three years. It's a market that we are comfortable in. We have a great brand recognition in, a good relationship with our shareholders. And we're also really proud and excited to be listed in the U.S. and have access to the kind of capital that NASDAQ provides. And just to be on the bigger Board, it's exciting. So, we like being dual listed. We think it's a unique differentiator for us. We expect that as the company grows, there will be more liquidity and more volume in the U.S. And each year we'll look and evaluate where it makes sense for us to stay listed. But at this point like I said, I'm very comfortable with where we are and I don't see any reason to change that.

Okay. And our last question this morning, how do we think about our Bitcoin holdings and when would we potentially sell Bitcoin?

Right, I'm going to let Sebastien take that one.

Thanks, Peter. So, our decisions around the, our huddle level and our ideal huddle level are really based on three main factors. First, is our market analysis and our forecasts. Second, we're looking at our percentage of huddle versus the overall assets within the company and our market cap. And the third factor is our needs for fiat on an ongoing base. So, we're constantly looking at these three factors to make sure we maintain the ideal level of huddle in our treasury.

All right, that's great. Sorry, Peter, let me just in. So, thank you to everybody that has taken time to submit questions both ahead of today's event and obviously during this event. I think as Tom has just said, I think, that's covered a lot of the questions that have come in, but obviously you did have a lot of attendees on today's call, so we haven't had a chance to obviously go through everything. But of course, we will make all these questions available to you guys after today's event. Finally, Peter, I know investor feedback is important to you and to the company and I’ll shortly redirect investors to provide you with their thoughts and expectations. But I guess if I could just ask you for a few closing comments before doing so that would be great.

All right. Thanks Mark. Thanks everyone for attending. Looks like there was great turnout on the call, obviously, there's lots of excitement about Argo. And we appreciate the shareholder engagement as always. You're going to start to hear it from me a little bit more on social media again, now that we're through the stuff that we've been through in the last little while. So yes, I'm super excited about the company's prospects. We think we can continue to grow in a smart, sustainable way. The key for us in the medium term, short, medium term is building out our money and infrastructure in West Texas. I can't emphasize how exciting an opportunity that is for us. We believe you combine that with our smart growth approach to optimizing ROI machines being as such a leader on the ESG side of things that we are. And then lastly, our diversification into non-mining activities, we didn't spend a lot of time on that today, keep your eye out for more information coming about the non-mining side of Argo in the coming weeks and months. And we believe the sky is the limit for Argo. So, thank you again for joining onwards and upwards.

Peter, that's very kind of you. Thank you very much, indeed. Can I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This may take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Argo Blockchain plc, we'd like to thank you for attending today's presentation. That now concludes today's session. Good morning to Peter and the team in the U.S. and good afternoon to everybody in the UK.