ARGO BLOCKCHAIN PLC
Company Registration No. 11097258 (England and Wales)
ARGO BLOCKCHAIN PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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ARGO BLOCKCHAIN PLC
COMPANY INFORMATION
Directors
M I Shaw
R Chopra
M Perrella
P G Wall (resigned in February 2023)
A Appleton (resigned in January 2023)
S Gow (resigned in February 2023)
Company secretary
MSP Corporate Services Limited
Company number
11097258
Registered office
Argo Blockchain PLC
Auditor
Broker
Bankers
Registrar
Solicitors
Eastcastle House, 27/28 Eastcastle Street
London, United Kingdom, W1W 8DH
PKF Littlejohn LLP
15 Westferry Circus, Canary Wharf
London, United Kingdom, E14 4HD
finnCap Limited
1 Bartholomew Close
London, United Kingdom, SW1E 5DH
Canadian Imperial Bank of Commerce
South Vancouver Island, 1175 Douglas
Street, Victoria, BC, Canada, V8W 2E1
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol, United Kingdom
BS13 8AE
Fladgate LLP
16 Great Queen Street
London, United Kingdom, WC2B 5DG
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ARGO BLOCKCHAIN PLC
CONTENTS PAGE
COMPANY INFORMATION
CONTENTS PAGE
CHAIRMAN’S STATEMENT
BOARD OF DIRECTORS
STRATEGIC REPORT
DIRECTORS’ REPORT
DIRECTORS’ REMUNERATION REPORT
NOMINATION COMMITTEE REPORT
AUDIT COMMITTEE REPORT
CORPORATE GOVERNANCE REPORT
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURE (TCFD) REPORT
DIRECTORS’ RESPONSIBILITIES STATEMENT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
GROUP STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF FINANCIAL POSITION
GROUP STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
GROUP STATEMENT OF CASH FLOWS
COMPANY STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
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COMPANY INFORMATION
BASIS OF PREPARATION
ACCOUNTING POLICIES
FINANCIAL RISK FACTORS
ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
KEY JUDGEMENTS AND ESTIMATES
REVENUES
EXPENSES BY NATURE
AUDITOR’S REMUNERATION
EMPLOYEES
DIRECTOR’S REMUNERATION
EARNINGS PER SHARE
TAXATION
INVESTMENT IN SUBSIDIARIES AND LOSS ON SALE OF SUBSIDIARY
INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
BUSINESS COMBINATION
INTANGIBLE FIXED ASSETS
3
2
3
5
8
9
16
22
29
31
34
36
49
50
57
58
60
62
64
66
68
69
69
69
70
79
82
83
84
85
85
86
87
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88
89
91
91
94
95
ARGO BLOCKCHAIN PLC
19.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
TANGIBLE FIXED ASSETS
DIGITAL ASSETS
SHARE OPTIONS AND WARRANTS
ORDINARY SHARES
RESERVES
TRADE AND OTHER PAYABLES
LOANS AND BORROWINGS
FINANCIAL INSTRUMENTS
COMMITMENTS AND CONTINGENCIES
RELATED PARTY TRANSACTIONS
CONTROLLING PARTY
POST BALANCE SHEET EVENTS
97
101
102
104
104
105
105
107
109
109
109
109
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ARGO BLOCKCHAIN PLC
CHAIRMAN’S STATEMENT
2022 was a year of transformation for Argo Blockchain. In the first half of the year, we completed the development
and construction of the Helios facility in Dickens County, Texas. We energized Helios in May 2022 and began mining
operations, and we increased our total hashrate capacity by more than 50%. However, we faced numerous headwinds
as our business model was challenged by sharp declines in Bitcoin price, increases in the global network hashrate,
increases in energy prices, and macroeconomic and geopolitical factors. At the end of 2022, we made the strategic
decision to sell the Helios facility and use the proceeds to reduce debt on our balance sheet. Following the transaction,
we have strengthened Argo’s management team, renewed our emphasis on financial discipline and operational
excellence, and crafted a strategy to resume our growth. With these steps, we are in a much better position to improve
our mining operations and grow the business.
2022 in Review
Our main focus in 2022 was to complete the build out and energization of the Helios facility. In Q1 2022, we raised
additional financing in the form of secured debt from NYDIG to complete construction at Helios. On 5 May 2022, we
successfully energized Helios and commenced mining operations. With 180 MW of capacity and utilizing 100%
immersion-cooling technology, the Helios facility is one of the largest and most technologically-advanced Bitcoin
mining facilities in the United States.
In the same month, we began taking delivery of the new Bitmain Antminer S19J Pro machines that we ordered in
September 2021. We installed the new machines in monthly batches and grew our total hashrate capacity by more
than 50% from 1.6 EH/s in April 2022 to 2.5 EH/s in September 2022.
As we brought operations online at Helios, we began to transition away from our hosted operations at facilities owned
by Core Scientific (“Core”). Between May and July 2022, we completed a machine swap with Core, whereby new-in-
box Bitmain S19J Pro machines were delivered to Helios in exchange for Core taking over our existing fleet of Bitmain
S19 machines hosted in its facilities. This machine swap mitigated the logistical challenges and downtime associated
with unplugging and shipping the mining machines from Core’s facilities to Helios. After completion of the machine
swap in July 2022, 100% of Argo’s mining machines were operating in our own facilities.
One of the attributes that made the Helios project an attractive investment for Argo was its location in the Texas
Panhandle, where more than 85% of the installed power generation capacity comes from wind and solar. Not only is
this strategy consistent with our stated goal of using renewable sources of energy to power our mining operations, but
Texas has long been known for having low-cost electricity due to the high percentage of renewable power on its grid.
Several external factors, however, resulted in elevated electricity prices during Q2 and Q3 of 2022 when we were
commencing operations at Helios. Russia’s invasion of Ukraine and the subsequent sanctions on Russian petroleum
exports disrupted the energy markets. This, along with unusually low stocks of natural gas in US storage facilities,
resulted in a historic spike in the price of natural gas. While Texas has a large amount of renewable energy generation,
it also has a significant amount of natural gas-fired generation. The increased natural gas price also caused an
increase in electricity prices, making it cost prohibitive to sign a fixed price power purchase agreement (“PPA”). This
had a negative impact on our mining performance and profitability.
Additionally, the global network hashrate continued to increase throughout 2022 despite the material decline in Bitcoin
price. The depressed price of Bitcoin and the elevated global hashrate caused hashprice, the primary measure of
mining profitability, to reach all-time lows in Q4 2022. The low hashprice and elevated power prices significantly
reduced Argo’s profitability and ability to generate free cash flow. During Q4 2022, we evaluated several strategic
alternatives to restructure our balance sheet and improve our cash flow.
On 28 December 2022, we announced a series of transactions with Galaxy Digital Holdings, Ltd. (“Galaxy”) that
strengthened our balance sheet, improved our liquidity position, and enabled us to continue mining operations. As
part of the transactions, we sold the Helios facility and real property in Dickens County, Texas to Galaxy for £54 million
($65 million) and refinanced existing asset-backed loans via a new £29 million ($35 million), three-year asset-backed
loan with Galaxy. The transactions reduced total indebtedness by £34 million ($41 million) and allowed us to simplify
our operating structure.
Importantly, we maintained ownership of our entire fleet of more than 27,000 mining machines. Pursuant to a new
two-year hosting services agreement with Galaxy, our 23,650 Bitmain S19J Pro mining machines at Helios will remain
in operation at that facility. Under the hosting agreement, we have access to the base power rate that Galaxy obtains
through its PPA, and we pay them an incremental hosting fee based on our actual electricity usage.
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ARGO BLOCKCHAIN PLC
The hosting agreement with Galaxy allowed us to keep our mining machines operating at Helios and mitigated any
mining machine downtime from the sale of the Helios facility. Furthermore, we believe that the immersion-cooling
system we developed and implemented at Helios provides for a superior operating environment for our mining
machines.
After the year end, we completed the transition of operations at Helios over to the Galaxy team, and we have been
working closely with them to optimize our mining operations and performance.
We continue to operate both data centers that we own in Quebec, Canada. Our Baie Comeau site is over 40,000
square feet and has 15 MW of 99% renewable power capacity sourced from the nearby Baie Comeau hydroelectric
dam. Our Mirabel facility, located adjacent to the Mirabel airport near Montreal, has approximately 30,000 square feet
of mining space with 5 MW of 99% renewable power capacity sourced from Hydro-Quebec. We also operate a
cleaning and repair center at Mirabel, along with servers and computing equipment for proof-of-stake activities and
other blockchain infrastructure needs.
Going forward, in the near term we will be focusing on optimization by improving the operational efficiency of our
Quebec facilities and utilizing excess capacity at these sites. Both data centers have access to 99% renewable
electricity from hydropower at competitive power prices. Additionally, we are expecting the delivery of 2,870 units of
the ePIC Blockchain machine (known as the “BlockMiner” machine), in early Q3 2023. These new BlockMiner
machines, representing an incremental 300 PH/s of hashrate capacity, will be deployed at our Quebec facilities.
Financial results
Revenue in 2022 was £47.4 million ($58.6 million) compared to £74.2 million ($100.2 million) in 2021. Adjusted
EBITDA was £1.0 million ($1.2 million) compared to £55.0 million ($74.2 million) in 2021. Loss attributable to
shareholders totalled £199.5 million ($246.7 million). In 2022, total capital expenditures, net of disposals, were £5.4
million ($6.7 million), with nearly all going towards Helios infrastructure construction and the purchase of mining
machines.
Operating results
In line with Argo’s expansion of mining operations in 2022, the Group’s total hashrate capacity increased by more
than 50% from 1.6 EH/s in April 2022 to 2.5 EH/s by September 2022. The Group also has 280 Megasols of Z-cash
mining capacity on Equihash. Argo’s mining margin averaged 54% for the full year 2022, which is lower than the 84%
mining margin achieved in 2021. The decrease in mining margin from 2021 was driven by the decrease in the Bitcoin
price, the increase in energy costs, and the increase in global hashrate (and associated increase in network difficulty).
Bitcoin macro environment
The decrease in the price of Bitcoin throughout 2022 was accompanied by a change in monetary policy by central
banks and a significant drawdown across all digital assets. In March 2022, the US Federal Reserve raised interest
rates for the first time since 2018 as it began to address rising inflation. Assets that were considered higher risk,
including high-growth technology stocks and highly-correlated digital assets, including Bitcoin, saw outflows as
investors factored in higher forecasted interest rates and reduced market liquidity.
In May 2022, the collapse of the Luna/UST stablecoin caused turmoil in the crypto market into turmoil as forced
liquidations continued to put downward pressure on digital assets. Several high-profile collapses subsequently
followed, including hedge fund Three Arrows Capital, Celsius, and most significantly FTX and Alameda Ventures. In
the midst of this crypto downturn, the price of Bitcoin reached a low of less than $16,000 in November 2022.
Despite the 77% drop in the price of Bitcoin from its all-time highs in November 2021, the network hashrate continued
to increase for the twelfth consecutive year. Additionally, even though Bitcoin miners like Argo faced increased
network difficulty and lower profitability, they continued to validate transactions and secure the network; in total,
~53,000 blocks were mined in 2022, generating over ~$10 billion in aggregate revenue for Bitcoin miners.
Commitment to Sustainability
Since inception, Argo has always maintained a strong focus on environmental sustainability. This is why we located
our mining operations in Quebec, where they are powered by hydroelectricity, and the Texas Panhandle, where more
than 85% of the installed generation capacity comes from renewable sources. Since 2021, Argo has been committed
to achieving net-zero carbon emissions. The Company has also released a full climate strategy and became the first
Bitcoin mining company to announce climate positive status. We achieved this through our use of renewable energy
6
ARGO BLOCKCHAIN PLC
to power mining operations, and by offsetting more scope 2 and 3 greenhouse gas emissions than we emitted in both
2020 and 2021. We are in the process of accounting for our greenhouse gas emissions for 2022.
To our knowledge, we are the first publicly traded cryptocurrency mining company to publish a report in accordance
with the Task Force on Climate-related Financial Disclosures (“TCFD”) Recommendations and Recommended
Disclosures (see page 36).
Leadership changes
In February 2022, Argo expanded its board by appointing Raghav Chopra as an independent non-executive director.
In March 2022, the Company hired Seif El-Bakly, CFA as Chief Operating Officer.
Following the end of the period, on 30 January 2023, Chief Financial Officer and Executive Director Alex Appleton
resigned from his positions to pursue other opportunities. After a formal recruitment process led by an executive
search firm, the Board appointed Jim MacCallum as Chief Financial Officer effective 5 April 2023.
On 9 February 2023, Chief Executive Officer and Interim Chairman Peter Wall resigned from his positions to pursue
other opportunities. Matthew Shaw became Chairman of the Board, and the Board appointed Chief Operating Officer
Seif El-Bakly to serve as Interim CEO.
Strategic focus in 2023
With the completion of the Helios sale to Galaxy at the end of 2022 and the leadership changes in Q1 2023, Argo is
entering a new chapter in its story. As 2023 progresses, we are focused on growing our business with a strong
emphasis on operational excellence and financial discipline. Specifically, we intend to:
• Optimize our mining operations across our Quebec facilities and the Helios facility
• Control operating expenses and maximize cash flow
• Strengthen the balance sheet
• Explore organic and inorganic growth opportunities
On behalf of the Board, I would like to thank all of our shareholders and stakeholders. I am excited for Argo to continue
in its mission of powering the world’s most innovative and sustainable blockchain infrastructure.
Matthew Shaw
Chairman of the Board
28 April 2023
7
ARGO BLOCKCHAIN PLC
BOARD OF DIRECTORS
Matthew Shaw (Chairman of the Board)
Matthew Shaw became Chairman of the Board in February 2023. He brings over 25 years' experience as an
international banker, corporate adviser and serial entrepreneur. He has been specialising in the blockchain and
cryptocurrency sector since 2017. He is currently CEO of Webslinger Advisors, a specialist web3 advisory and
administration firm which provides services to Cayman Foundations/DAOs. He previously co-founded Protos Asset
Management, a Swiss company that manages a cryptocurrency fund, and co-founded DeFi Yield Technologies, a
DeFi firm acquired by Dispersion Holdings (now AQRU). He is also currently CEO of Blimp Technologies and president
of a proprietary family investment company.
Raghav Chopra (Non-Executive Director)
Raghav Chopra is an investor with over 16 years of experience and is currently Managing Partner of Tephra Digital,
a digital assets focused investment firm. He was most recently a Portfolio Manager for AllianceBernstein LP, and he
has over a decade of experience in managing a significant and wide range of technology investments at leading hedge
funds. Prior to that, Mr. Chopra was an Associate in private equity at The Carlyle Group and an Analyst in investment
banking at Goldman, Sachs & Co. Mr. Chopra serves on the Board of the Harvard Club of New York City Foundation
and is a member of the Economic Club of New York.
Maria Perrella (Non-Executive Director)
Maria Perrella most recently served as the Chief Financial Officer of MDA, a Canadian-based international space
mission partner, and the previous twelve years at Automation Tooling Systems Inc. (ATS)(ATA.TSX), a TSX-listed
automation company with over 4,500 employees across six countries. Her various roles have allowed her to develop
skills in financial planning and corporate governance and compliance, and her many years as a Chief Financial Officer
have provided her with extensive experience in M&A, capital markets, and strategic corporate finance. Maria is a
Chartered Public Accountant in Ontario, Canada
Peter Wall (Former CEO and Interim Executive Chairman)
Alex Appleton (Former CFO and Executive Director)
Sarah Gow (Former Non-Executive Director)
8
ARGO BLOCKCHAIN PLC
STRATEGIC REPORT
The directors present their strategic report on the Group for the year ended 31 December 2022.
Principal activity
The Group’s principal activity is that of cryptocurrency mining.
Review of the business and future developments
Argo Blockchain plc (the “Company”) was incorporated on 5 December 2017. Argo Blockchain plc is the parent holding
company of the Argo group of companies including Argo Innovation Labs Inc., a British Columbia, Canada
Corporation, and Argo Innovation Facilities (US), Inc., a Delaware, United States Corporation (collectively “Argo” or
“the Group”).
On 3 August 2018 the Company’s Ordinary Shares were admitted to the standard segment of the Official List of the
UK Listing Authority and to trading on the London Stock Exchange. The Company’s Ordinary Shares traded on the
OTCQB® Venture Market under the ticker symbol “ARBKF” from 13 January 2021 until 23 February 2021, and traded
on the OTCQX from 24 February 2021 to 31 December 2022. The Company’s American Depositary Shares (ADSs)
have traded on the Nasdaq Stock Market (“Nasdaq”) since 24 September 2021.
My Chairman’s statement provides an in-depth review of 2022; rather than repeating that, I have concentrated on
looking forward in this report.
Argo entered 2023 on the heels of a transformational series of transactions with Galaxy. The strategic sale of the
Helios facility enabled us to strengthen our balance sheet by reducing debt, increase our liquidity and cash position,
and streamline our operations. We also reduced our headcount by 54%, which lowered our G&A expenses. Perhaps
most importantly, the transactions with Galaxy allowed us to maintain ownership of our entire mining fleet and to
continue with mining operations.
Bitcoin was one of the best performing assets during the first quarter of 2023, with its price appreciating by more than
70% compared to the Nasdaq Composite Index (17%), the S&P 500 (7%), and the FTSE 100 (2%). One factor that
may be contributing to Bitcoin’s performance is the market expectation that the Federal Reserve is nearing the end of
its tightening cycle and may even reduce interest rates within the next year. Additionally, Bitcoin adoption continues
to grow globally, as evidenced by the increase in the number of Bitcoin wallet addresses with non-zero balances.
Argo is one of the longest-tenured publicly traded mining companies in the market. We have a rich history, a
tremendous culture, and a demonstrated track-record of developing world-class Bitcoin mining facilities. With a
seasoned management team in place, the Company looks forward to growing the business with a strong emphasis
on operational excellence and financial discipline.
Group strategy and business model
We are targeting a balance between owning and operating our own mining facilities and utilizing third party facilities
with access to reliable, low-cost and renewable energy. Throughout the Company’s history, we have invested in
purchasing, building and operating mining facilities. We will continue to explore the acquisition and development of
future mining facilities that provide opportunities to utilize wasted or stranded energy. This could include using mobile
and/or modular mining infrastructure. We will continue to evaluate opportunities from hosting providers that would
offer reliable, low-cost, renewable power in order to balance the gap between our available capacity and the power
needed to run our mining operations.
We believe the combination of increased mining difficulty, driven by greater network hashrate, and the periodic
adjustment of reward rates, such as the halving of Bitcoin rewards, will drive the increasing importance of power
efficiency in cryptocurrency mining over the long term. As a result, we are focused on deploying our mining machines
at locations with access to reliable renewable power sources, as successfully doing so should enable us to reduce
our power costs.
Over the long term, we will look to diversify our sources of revenue and value creation by investing in and developing
other commercial opportunities at the intersection of energy, finance, and technology. We plan on leveraging our
team’s expertise and relationships in the industry to invest in or develop mining advisory services, software or financial
services related to blockchain technology or to the cryptocurrency mining industry.
Performance of the business during the period and the position at the end of the year
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ARGO BLOCKCHAIN PLC
The financial results for 2022 reflect a year in which Bitcoin, along with all digital assets, experienced a major
drawdown in price. Mining margin was further impacted by increased energy prices in the United States. Despite
these headwinds, Argo grew its mining fleet by 55%, from 1.6 EH/s to 2.5 EH/s. This is compared to an 49% increase
in the global hashrate in 2022.
Revenue (GBP)
Mining Margin
£8
£6
)
m
£
(
e
u
n
e
v
e
r
g
n
n
M
i
i
£4
£2
£-
100%
80%
60%
40%
20%
0%
i
n
g
r
a
M
g
n
n
M
i
i
Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22
Key performance indicators
The Board monitors the activities and performance of the Group on a continuing basis. The main performance
indicators applicable for the Group is mining revenue and mining profit.
KPI
2022
2021
% Change
Mining revenue (£000s)
£47,267
£70,325
(33%)
Mining profit1 (£000s)
£25,633
£59,268
(57%)
Mining margin
54%
84%
(36%)
Bitcoin mined (number)
2,156
2,045
Total hashrate capacity (EH/s)
Average network difficulty (T)
2.5
20.3
1.605
30.4
5%
56%
49%
1. Mining profit defined as mining revenue minus direct costs (excluding depreciation and amortization of mining
equipment).
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ARGO BLOCKCHAIN PLC
Non-IFRS Reconciliation
The following table shows a reconciliation of Bitcoin and Bitcoin Equivalent Mining Margin to gross margin, the most
directly comparable IFRS measure, for the years ended December 31, 2022 and December 31, 2021.
Year ended
Year ended
31 December
31 December
2022
£’000
2021
£’000
Gross profit/(loss)
(34,460)
53,646
Depreciation of mining equipment
Change in fair value of digital currencies
Realised loss / (gain) on sale of digital currencies
Cryptocurrency management fees
Mining profit
Bitcoin and Bitcoin Equivalent Mining Margin
16,549
113
43,526
(96)
25,632
54%
11,129
(1,191)
(437)
(3,879)
59,268
84%
The following table shows a reconciliation of Adjusted EBITDA to net income/(loss), the most directly comparable
IFRS measure, for the years ended December 31, 2022 and December 31, 2021.
Year ended
Year ended
31 December
31 December
2022
£’000
2021
£’000
Net income/(loss)
(194,231)
30,765
Interest expense
Depreciation / amortisation
Income tax (credit) / expense
EBITDA
Change in fair value of digital currencies
Realised loss / (gain) on sale of digital currencies
Impairment of assets
Impairment of intangible assets
Loss on sale of subsidiary and investments
Loss on sale of fixed assets
Foreign exchange
11
18,321
23,449
(361)
(152,822)
113
43,526
45,143
4,168
44,804
18,779
(17,250)
2,142
11,521
8,506
52,934
(1,191)
(437)
-
535
629
-
589
ARGO BLOCKCHAIN PLC
Legal and restructuring fees related to restructuring
Share based payment charge
Adjusted EBITDA
Principal risk and uncertainties
9,590
4,928
979
-
1,938
54,997
While the Group focuses on self-mining, the Board considers the principal risks for the Group to be volatility in the
cryptocurrency market, specifically downside risk to Bitcoin, energy price risk, access to the capital markets, and
general sentiment regarding crypto assets as a whole. The Group operates in an uncertain environment and is subject
to a number of risk factors. The Board considers the following to be of particular relevance, but this is by no means
an exhaustive list as there may be other risk factors not currently known.
Market conditions
Market conditions, including the cryptocurrency market values and general economic conditions and their effect on
exchange rates, interest rates and inflation rates, may impact the ultimate value of the Group regardless of its
operating performance. The Group also faces competition from other organisations, some of which may have greater
resources.
Cyber risk
The Group holds digital assets via software and hardware which may prove to be vulnerable to data security breaches
in the future. Data security breach incidents may compromise the confidentiality, integrity or availability of data such
that the data is vulnerable to access or acquisition by unauthorised persons. These data security breaches may result
in the unrecoverable loss of digital assets. The Group’s hardware devices and remote servers holding the Group’s
data may be breached and result in the loss of valuable data. Loss of the private keys required to access the digital
assets may result in irrecoverable loss of access to the digital assets, which may not be covered by insurance (whether
in full or part). In order to mitigate these risks, the Group holds its assets with third party specialist crypto-currency
custodians with a number of security measures in place.
Cryptocurrency price volatility
Revenues are denominated in cryptocurrency or tokens. These ‘digital assets’ can be subject to high levels of volatility,
and it may not always be possible for the Group to trade out or effectively hedge its position. The Group will always
seek to manage the price volatility risk and actively monitor its portfolio of digital assets. The majority of the Group’s
crypto assets (as per note 22) are stored in Bitcoin, which dominates the crypto market. Cryptocurrency exchange
rates have exhibited strong volatility. Many factors outside of the control of the Group can affect the market price of
cryptocurrencies, including, but not limited to, national and international economic, financial, regulatory, political,
terrorist, military, and other events, adverse or positive news events and publicity, and generally extreme, uncertain,
and volatile market conditions. Extreme changes in price may occur at any time, resulting in a potential loss of value
of our entire portfolio of cryptocurrencies, complete or partial loss of purchasing power, and difficulty or a complete
inability to sell or exchange our digital currency.
Capital Raising
The Group’s activities are capital intensive, and the Company may need to raise additional capital to fund its
operations, pursue growth strategies, including potential acquisitions of complementary businesses, and respond to
competitive pressures or unanticipated working capital requirements. The Company has previously raised equity and
debt, however may not be able to obtain additional debt or equity financing on favourable terms, if at all, which could
impair its growth and adversely affect its existing operations. The Group may be required to accept terms that restrict
its ability to incur additional indebtedness or to take other actions including terms that require it to maintain specified
liquidity or other ratios. In order to mitigate these risks, the Company keeps its financing requirements under review
and actively manages its activities and operations within the resources available to it.
Property and development risk
The Group’s strategy is to balance its operations between owning and operating its own mining facilities and utilising
third party facilities with access to reliable, low cost and renewable energy. The development and maintenance of our
own properties could incur unexpected costs, delays or problems, or the properties may have insufficient capacity for
our future expansion. As further capacity is required, we will be reliant on implementing upgrades and further
12
ARGO BLOCKCHAIN PLC
development at our property which may be constrained by local laws, consents or other approvals which may create
delays, unexpected problems or issues that could adversely affect the Group’s ability to develop or operate the facility.
While the Group will take prudent precautions to minimise the risks in such development and expansion, these may
not be successful.
Hosting counterparty risk
The Group relies upon a third-party facility to host a majority of its machines and is therefore reliant on the third party
for the provision of hosting and related services, including maintenance. Should the third party not fulfil its obligations
to the Group, or should that third party suffer an insolvency or related event, the Group’s operations may be materially
and adversely affected. The Group has sought to limit this risk by entering into contracts with an established third
party with a proven track record, however this is not a guarantee of future performance. The Group has also entered
into other agreements with its host, and there is a risk that non-performance under one agreement could adversely
affect the performance under other agreements with the same counterparty.
Climate change
The Group is aware that Bitcoin mining is power intensive and has an environmental impact as a consequence. The
Board engaged Guidehouse, a leading consultancy and solutions provider, to research and advise on science-based
solutions towards Argo's long-term strategy to eliminate its climate impact. This work provided a full climate action
plan to achieve Argo's goal of becoming a net zero greenhouse gas (GHG) company. The full climate action reports
for 2021 are available on the Company’s website, and the report for 2022 is forthcoming.
Additionally, the Company is the first publicly traded cryptocurrency miner to publish a report in accordance with the
Task Force on Climate-related Financial Disclosures (“TCFD”) Recommendations and Recommended Disclosures
(see page 36).
Electricity supply and price
The Group’s activities require substantial and sustained electrical provision and its profitability is dependent on
securing acceptable electricity prices. Should electricity not be available in the quantities the Group’s operations
require (whether intermittently or for a sustained period) or should the service be unreliable, the Group’s operations,
revenue and profitability may be materially adversely affected. If the price of electricity increases (whether as a result
of local, national or international events or pressures), the Group’s profitability may be materially adversely affected.
Technology and supply risks
Argo operates within a highly technological environment where software and hardware are consistently updated. To
ensure the Group remains as a leading provider and stays ahead of its competitors, it needs to continue to invest in
its technology, software, and hardware which requires a large amount of capital. The Group procures its software and
hardware from third party providers and is reliant on those third parties complying with their obligations to the Group.
Should a third party fail to comply with its obligations to the Group, the Group’s operations, revenue and profitability
may be materially adversely affected.
Risk relating to the Group’s business strategy
The Group is dependent on the ability of the directors to identify suitable opportunities and to implement the Group’s
strategy. There is no assurance that the Group’s activities of mining for itself will continue to be successful even
though internal forecasts continue to suggest otherwise.
Dependence on key personnel and management risks
The Group’s business is dependent on retaining the services of a small executive management team, and the loss of
a key individual could have an adverse effect on the future of the Group’s business. The Group’s future success will
also depend in large part upon its ability to attract and retain highly skilled personnel. This risk is managed by offering
salaries and share options that are competitive in the current market.
Regulatory risk
The Group operates in a rapidly evolving sector, the regulatory approach to which is not always certain and is still
developing. The Group seeks to comply with all applicable law and regulation, however breach of any regulatory
requirements may give rise to reputational, financial, or other sanctions against the Group. The Board considers these
13
ARGO BLOCKCHAIN PLC
risks seriously and designs, maintains, and reviews the policies and processes so as to mitigate or avoid these risks.
While the Board has a good record of compliance, there is no assurance that the Group’s activities will always be
compliant.
Litigation risk
The Company is currently subject to a class action lawsuit over alleged misleading statements made by Argo
during the initial public offering of its American depositary shares on Nasdaq in 2021. The case, Murphy vs Argo
Blockchain plc et al, was filed in the Eastern District of New York on 26 January 2023. The Company refutes
all of the allegations and believes that this class action lawsuit is without merit. Argo is vigorously defending
itself against the action.
Gender composition
At the end of the year the Company had the following gender composition of employees and directors:
Gender Composition
Directors
Senior Management
Employees
Male
4
8
25
Female
2
1
14
Promotion of the Company for the benefit of the members as a whole
The directors believe they have acted in the way most likely to promote the success of the Company for the benefit
of its members as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the directors to:
● Consider the likely consequences of any decision in the long term
● Act fairly between the members of the Company
● Maintain a reputation for high standards of business conduct
● Consider the interests of the Company’s employees
● Foster the Company’s relationships with suppliers, customers and others
● Consider the impact of the Company’s operations on the community and the environment
The Company operates as a crypto mining business, which is inherently speculative in nature and, with volatile
revenue, at times may be dependent upon fund-raising for its continued operation. The nature of the business is well
understood by the Company’s members, employees, and suppliers, and the directors are transparent about the cash
position and funding requirements.
The application of the s172 requirements can be demonstrated in relation to the most significant decision made during
2022, in addition to the disclosures made in the Directors’ Report and the Strategic Report:
Strategic Sale of Helios facility
During the year under review, the Group faced significant headwinds stemming from challenging economic
conditions. During the year, the Group faced a significant increase in electricity costs as a result of global
disruption to energy and fossil fuel markets, depressed cryptocurrency prices and higher network hashrate
resulting in greater competition for mining cryptocurrencies. All of these factors, taken together, reduced the
Group’s free cash generation and resulted in pressure on the Group’s finances.
In Q4 2022, the Group explored a number of strategic options to address the challenging economic conditions
and to seek to ensure the long term success of the Group. Among other options, an equity raise from a
strategic investor, a restructuring of debt obligations, joint ventures, asset sales, and strategic consolidation
were considered by the Board.
14
ARGO BLOCKCHAIN PLC
In considering the options available to the Group, the Board considered, amongst other factors, the factors set
out in s172 of the Companies Act 2006. The Board was particularly focused on ensuring that the decision was
in the best long term interests of the Company’s shareholders, its counterparties, employees, and the
communities in which the Group operated. The Board sought advice from legal and financial advisers and
carefully weighed the options available to the Group.
Ultimately, the Board considered a strategic sale of Helios to Galaxy provided the Group with the best path
forward and the best outcome for all stakeholders. In particular:
•
the sale of Helios to Galaxy provided operational certainty to the Group’s future operations, through
the entry into a hosting agreement with a well capitalised counterparty;
• Galaxy provided certainty to the Group’s employees that were engaged at the Helios site, and by
extension to the Group’s remaining employees through greater certainty of the Group’s continued
operations;
the sale provided a route for the Group to remain solvent and avoid bankruptcy and debt restructuring,
which could have negatively impacted the Group’s shareholders, creditors and counterparties; and
•
• Galaxy agreed to continue the Group’s engagement with the local community at Helios, and to
continue to fund (in accordance with the Group’s existing commitments) community projects.
Responsibilities to local communities
As a crypto mining company with operations in Canada and the United States, the Board is mindful of its
responsibilities to the communities and environments in which it works. The Group sources its electricity from
predominantly renewable sources (hydropower in Canada and wind in Texas) and participates in demand
response programmes to curtail usage in peak times to assist in ensuring resilience of the local power grid. In
addition, the Group has explored ways to capture and usefully utilise the heat generated from its operations,
both to improve efficiency and provide added value. The Group has also taken steps to offset its carbon
emissions, and it has taken steps to improve overall efficiency of its operations. Further details are set out in
the Group’s report on the TCFD Recommendations on page 36 of this Annual Report.
Employees
The interests of employees are a primary consideration for the Board; in March 2023 (after the end of the financial
year under review), all employees were granted equity in the Company in order to align incentives and enable
employees to share in the future success of the Group. Personal development opportunities are encouraged and
supported.
This report was approved by the Board on 28 April 2023 and signed on its behalf by:
Matthew Shaw
Chairman of the Board
15
ARGO BLOCKCHAIN PLC
DIRECTORS’ REPORT
General Information
The directors present the Annual Report and audited consolidated financial statements for the year ended 31
December 2022.
The Company was incorporated on 5 December 2017. Argo Blockchain plc is the parent holding company of the Argo
group of companies including Argo Innovation Labs Inc., a British Columbia, Canada Corporation, and Argo Innovation
Facilities (US), Inc., a Delaware, United States Corporation.
On 3 August 2018 the Company’s Ordinary Shares were admitted to the standard segment of the Official List of the
UK Listing Authority and to trading on the London Stock Exchange. The Company’s Ordinary Shares traded on the
OTCQB® Venture Market under the ticker symbol “ARBKF” from 13 January 2021 until 23 February 2021, and traded
on the OTCQX from 24 February 2021 to 31 December 2022. The Company’s American Depositary Shares have
traded on Nasdaq since 24 September 2021.
Future developments
The Group continues to focus its strategy on self-mining cryptocurrencies as detailed further in the Strategic Report.
Dividends
The directors do not propose a dividend in respect of the period ended 31 December 2022.
Directors
The Board is responsible for the Company’s objectives and business strategy and its overall supervision. Acquisition,
divestment and other strategic decisions will all be considered and determined by the Board including, when
circumstances permit, whether the payment of dividends, issue or buy back of shares is appropriate.
Attendance at Board meetings:
Member
Peter Wall
Matthew Shaw
Alex Appleton
Maria Perrella
Sarah Gow
Raghav Chopra
Meetings
attended
60 of 60
60 of 60
59 of 60
59 of 60
58 of 60
58 of 58*
* Raghav Chopra was appointed to the Board on 23 February 2022.
The Board met 60 times in 2022, including 50 times over the last four months of the year, as Argo evaluated several
strategic alternatives to restructure our balance sheet and improve our cash flow, ultimately consummating in the
transaction with Galaxy.
The Board leads the Company within a framework of appropriate and effective controls. The Board has responsibility
for establishing, operating, and monitoring the corporate governance values of the Company. The Board also has
overall responsibility for setting the Company’s strategic aims, defining the business objective, managing the financial
and operational resources of the Company and reviewing the performance of the officers and management of the
Company’s business. The Board has taken appropriate steps to ensure that the Company complies with Listing
Principles 1 and 2 as set out in Chapter 7 of the Listing Rules and (notwithstanding that they only apply to companies
with a Premium Listing) the Premium Listing Principles as set out in Chapter 7 of the Listing Rules.
The Company supports the concept of an effective Board leading and controlling the Company. The Board is
responsible for approving Company policy and strategy. It meets regularly and has a schedule of matters specifically
reserved to it for decision. Management supplies the Board with appropriate and timely information and the directors
are free to seek any further information they consider necessary. All directors have access to advice from the General
Counsel and independent professionals at the Company’s expense. Training is available for new directors and other
directors as necessary.
16
ARGO BLOCKCHAIN PLC
All directors are subject to re-election every three years and, on appointment, at the first AGM after appointment. In
2021, the Company established a nomination committee. Prior to this, and given the size of the Board, all director
appointments were approved by the Board as a whole.
Communications with shareholders
Communications with shareholders are given a high priority. In addition to the publication of an annual report and an
interim report, there is regular dialogue with shareholders and analysts. The Annual General Meeting is viewed as a
forum for communicating with shareholders, particularly private investors. Shareholders may question the Chairman
and other members of the Board at the Annual General Meeting. All published information for shareholders is also
available on the Company website, including annual and interim reports, circulars, announcements and significant
shareholdings.
Accountability and audit
The Board presents a balanced and understandable assessment of the Company's position and prospects in all
interim and price sensitive reports to regulators as well as in the information required to be presented by statutory
requirements.
The Company’s Audit Committee has responsibility to supervise and review the Company’s audit and financial
procedures. In relation to the activities of the Audit Committee during the year, please see the Audit Committee Report
in this Annual Report.
Internal control
The Board has responsibility for designing and implementing systems of internal control and for reviewing the
effectiveness of these systems. The risk management process and systems of internal control are designed to
manage rather than eliminate the risk of the Company failing to achieve its strategic objectives. It should be recognised
that such systems can only provide reasonable and not absolute assurance against material misstatement or loss. As
the Group has expanded, the Company has reviewed and developed its internal systems and processes and will
continue to do so going forwards.
Political donations and political expenditure
The Group did not make any political donations or expenditure.
Directors’ and officers’ liability insurance and directors’ indemnities
The Company maintains directors’ and officers’ liability insurance, which gives appropriate cover for legal action
brought against its directors. Qualifying third-party indemnity provisions for the benefit of the Company’s directors,
secretary and other officers were in force during the year ended 31 December 2022 and to the date of this report. In
addition, the Company has agreed to indemnify former directors of the Company in respect of their appointments as
directors
Financial Instruments
Information about the use of financial instruments by the Company and its subsidiaries is given in note 27 to the
financial statements.
Activities in the field of research and development
During the year under review, the Group did not have any material activities in the field of research and development.
Post balance sheet events
Effective 30 January 2023, Alex Appleton resigned from his positions as Chief Financial Officer and executive
director to pursue other opportunities.
Effective 8 February 2023, Sarah Gow resigned from her position as non-executive director on the board of
directors due to health reasons.
Effective 9 February 2023, Peter Wall resigned from his positions as Chief Executive Officer and Interim
Chairman of the board of directors to pursue other opportunities.
17
ARGO BLOCKCHAIN PLC
Effective 9 February 2023, the Company appointed Matthew Shaw as the Chairman of the Board.
Effective 9 February 2023, the Board appointed Seif El-Bakly as the Company’s Interim Chief Executive
Officer; he retained his position as the Company’s Chief Operating Officer.
Effective 5 April 2023, the Company appointed Jim MacCallum as the Company’s Chief Financial Officer.
Directors and directors’ interests
The directors who held office during the period and up to the date of signature of the financial statements were as
follows:
Director
Peter Wall
Matthew Shaw (Chairman of the Board, Chair of the Nomination Committee)
Alex Appleton
Maria Perella (Chair of the Audit and Remuneration Committees, Member of the
Nomination Committee)
Sarah Gow
Raghav Chopra (Member of the Audit and Remuneration Committees)
Appointment/resignation
during the year
Appointed 1 January 2020
Resigned 9 February 2023
Appointed 17 July 2019
Appointed 29 July 2021
Resigned 30 January 2023
Appointed 29 July 2021
Appointed 29 July 2021
Resigned 8 February 2023
Appointed 23 February 2022
Directors’ share holdings
Director
Maria Perella
Matthew Shaw
Peter Wall*
Alex Appleton**
Sarah Gow***
Ordinary Shares and
ADSs at 31 December
2022
Percentage of Issued Share
Capital
6,000 ADSs
0.01%
137,289 Ordinary Shares
0.03%
1,560,000 Ordinary Shares
0.32%
39,415 Ordinary Shares
0.001%
2,760,000 Ordinary Shares
0.58%
* Peter Wall resigned as a director with effect from 9 February 2023.
** Alex Appleton resigned as a director with effect from 30 January 2023.
*** Sarah Gow resigned as a director with effect from 8 February 2023.
Directors’ option holdings
Name
Date of Grant
Aggregate number of
options over Ordinary
Shares granted
Exercise
Price
Exercise
Conditions
Lapse Date
Peter Wall*
25 July 2018
1,000,000
16 pence
18
1/3 on the
first
anniversary
of admission,
1/36 of the
total options
25 July 2024
ARGO BLOCKCHAIN PLC
Peter Wall*
5 Feb 2020
3,270,0001
7 pence
Matthew Shaw
17 July 2019
537,037
16 pence
Matthew Shaw
5 Feb 2020
294,048
7 pence
Alex Appleton**
3 Feb 2021
158,898
94 pence
Alex Appleton**
22 Sept 2021
1,250,000
157 pence
Matthew Shaw
22 Sept 2021
250,000
157 pence
Sarah Gow***
22 Sept 2021
500,000
157 pence
Maria Perrella
22 Sept 2021
500,000
157 pence
Raghav Chopra 23 May 2022
500,000
49 pence
* Peter Wall resigned as a director with effect from 9 February 2023.
** Alex Appleton resigned as a director with effect from 30 January 2023.
19
monthly
thereafter
1/12 per
month
commencing
of 4th month
from issue
1/3 on the
first
anniversary
of admission,
1/36 of the
total options
monthly
thereafter
1/12 per
month
commencing
of 4th month
from issue
1/24/month
starting on
4th month
from issue
6/36th after 6
month
anniversary,
1/36th
thereafter
6/36th after 6
month
anniversary,
1/36th
thereafter
6/36th after 6
month
anniversary,
1/36th
thereafter
6/36th after 6
month
anniversary,
1/36th
thereafter
6/36th after 6
month
anniversary,
1/36th
thereafter
Feb 2030
17 July 2025
4 Feb 2030
2 Feb 2031
21 Sept 2031
21 Sept 2031
21 Sept 2031
21 Sept 2031
23 May 2032
ARGO BLOCKCHAIN PLC
*** Sarah Gow resigned as a director with effect from 8 February 2023.
1. Peter Wall exercised 430,000 shares options on 23 May 2022.
Going Concern
The directors, having made due and careful enquiry, are of the opinion that the Group has adequate working capital
to meet its obligations over the next 12 months. The directors therefore have made an informed judgement, at the
time of approving the financial statements, that there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. As a result, the directors have adopted the
going concern basis of accounting in the preparation of the annual financial statements, more detail can be found in
the accounting policies. However, the Board notes that the significant debt service requirements and the volatile
economic environment indicate the existence of material uncertainties that may cast significant doubt regarding the
applicability of the going concern assumption, and the auditors have made reference to this in their audit report. (Note
3).
Financial Risk Management
The Group has a simple capital structure and its principal financial assets are cash and digital assets. The Group is
subject to market risk by way of being exposed to volatility in crypto asset value and variations in foreign exchange
rates. The Group has little exposure to credit risk due to holding its reserves with credible institutions. The Group may
also be exposed to liquidity and capital risk, due to the nature of operations and the requirements for mining hardware
acquisition. The Group manage these risks through portfolio management and maintenance of sufficient working
capital. Further details of risks can be seen within the Strategic Report or in the Notes to the accounts.
Capital Structure
The Company’s capital structure is comprised of one class of ordinary shares. There are no restrictions on the transfer
of the ordinary shares, and there are no persons holding securities carrying special rights regarding the control of the
Company. The rights over shares under the Company’s employee share schemes are set out in Note 22 of the
financial statements. There are no restrictions on voting rights nor, so far as the Company is aware, any agreements
between holders of securities that may restrict the transfer of securities or voting rights.
Substantial shareholders
There are no substantial shareholders as at the date of the report.
Controlling shareholder
The Group does not have a controlling shareholder.
Directors
The Company’s directors are appointed in accordance with, and have the powers and authorities set out in, the
Company’s articles of association.
Takeovers
There are no significant agreements that take effect, alter or terminate on a change of control of the Company following
a takeover. Other than the entitlement to a notice period and reimbursement of expenses in the normal manner, there
are no agreements with the Company and its directors or employees for compensation for loss of office or employment
as a result of a takeover bid.
Greenhouse gas emissions
Details about the Group’s greenhouse gas emissions, energy consumption, energy efficiency disclosures, and
broader climate risk management strategies are included in the TCFD Report on page 36.
Employee and business relationships
The Group consists of the Chief Executive Officer (interim), the Chief Financial Officer, 3 Non-executive directors and
8 (including the Chief Executive Officer (interim) and the Chief Financial Officer) key management personnel, which
facilitates the direct and frequent communication between all parties and thereby the interests of all concerned are
considered on a regular basis. Due to the nature of a small team and the wide and varied skills possessed, key
strategic business decisions are generally discussed and analysed by all concerned.
20
ARGO BLOCKCHAIN PLC
A significant part of any business is maintaining a good relationship with its suppliers and the Group is well aware of
the need to ensure that its current main supplier Galaxy, which provides hosting services for the Group’s machines at
Helios and has provided the Group an asset-backed loan, is managed carefully. We maintain a close working
relationship with Galaxy with regular meetings and an open dialogue, and we continue to meet our accounts payable
as they fall due. As a result, the Group has considered the strategic and longer term impact of decisions relating to its
current and future relationships with its material suppliers and lenders and has sought to ensure that any decisions
made appropriately balance the short, medium and long term objectives of the Group, with a view to generating and
maintaining long term shareholder value.
Diversity Policy
The Company does not currently have a formal written policy on diversity as it was previously not of a size or stage
of development to warrant one. However, all decisions made during the year under review were made on merit and
without regard to protected characteristics. The Company will consider the adoption of a formal diversity policy in due
course, having regard to the nature and scope of the Group’s operations.
Provision of Information to Auditor
So far as each of the Directors is aware at the time this report is approved:
•
•
there is no relevant audit information of which the Company's auditor is unaware; and
the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant
audit information and to establish that the auditor is aware of that information.
Auditors
The auditors, PKF Littlejohn LLP have indicated their willingness to continue in office, and a resolution that they be
re-appointed will be proposed at the annual general meeting.
This report was approved by the Board on 28 April 2023 and signed on its behalf by:
Matthew Shaw
Chairman of the Board
21
ARGO BLOCKCHAIN PLC
DIRECTORS’ REMUNERATION REPORT
2022 key achievements:
•
•
•
adoption of new equity incentive plan to provide flexibility to offer suitably tailored equity incentivisation to
the Group’s employees across the globe;
comprehensive review of remuneration, including benchmarking of peers, to enable the Group to attract,
retain and develop talent in a competitive labour market while remaining mindful of challenging market
conditions; and
successfully managing retention during a period of uncertainty and change in the Group’s operations.
2023 areas of focus:
•
•
•
administration of the new equity incentive plan;
continue with comprehensive review of remuneration; and
refine and improve employee retention strategies.
Letter from the Chair of the Remuneration Committee
Dear Shareholder,
I am pleased to introduce the Directors’ Remuneration Report for the year ended 31 December 2022.
The Remuneration Committee met three times during the financial year, and all of the Directors on the Committee
attended all of these meetings. Its role is to formally oversee matters relating to compensation, including benchmarking
remuneration against comparable peers, the adoption of a new equity incentive plan, and the grant of awards under
that plan to align the remuneration of our team with the interests of our shareholders.
The Remuneration Committee consists of myself, as Chair, and Raghav Chopra as member. In February 2023, I
became Chair, replacing Sarah Gow who stepped down (as detailed below), Matthew Shaw moved off the Committee,
and Raghav Chopra was appointed as his replacement. The Committee has discretion to invite members of the
executive management of the Company to the meetings as required and considers the input and recommendation of
executive management to be critical to ensuring a well-developed remuneration strategy. Therefore, executive
management were invited to present to the committee at the appropriate junctures during the year. In order to ensure
appropriate scrutiny of decisions, no director was present when their own remuneration was considered or approved
/ voted on their own remuneration.
The Group’s primary remuneration challenge is the different market norms and expectations between the jurisdictions
in which it operates. The reward markets in the UK and US have significant differences, particularly in the technology
sector, and market expectations in the UK can present challenges to the Group in structuring attractive remuneration
packages, particularly for the Company’s senior executive leadership. More generally, the Group is also competing
against significantly larger and better capitalised companies in the cryptoasset sector, who do not have the same
limitations.
During the year under review, the Company’s remuneration strategy was to deliver remuneration packages consistent
with the Company’s Remuneration Policy and market norms that provide a balanced structure of short-, medium- and
longer-term remuneration. Remuneration packages typically comprised a competitive base salary, appropriate annual
bonuses and longer-term equity incentivisation. In addition, the Company has offered competitive benefit and pension
offerings based on the market norms in the country in which the relevant team member is engaged.
The Committee took the following key decisions in relation to remuneration during the year:
•
•
•
recommended seeking shareholder approval of the Company’s new equity incentive plan at the 2022 AGM
(such approval was subsequently obtained);
designed and oversaw implementation of retention bonuses for key personnel in line with typical market
norms to reflect the effect of both the challenging market conditions and the significant uncertainty in the
sector and the impact of the proposed disposal of Helios on the Group; and
in recognition of the additional time, effort, and commitment required in connection with the admission of the
Company’s shares to Nasdaq in 2021, during 2022 the Company awarded cash bonuses to Peter Wall and
Alex Appleton.
The Committee has also considered the impact of inflationary pressures on both the Group and its staff and made
cost of living salary increases for each of its staff in respect of fiscal year 2023.
22
ARGO BLOCKCHAIN PLC
The Committee remains focused on ensuring that the Group’s remuneration policy is implemented through an
appropriate remuneration strategy that enables the Group to attract, retain and develop appropriately skilled and
experienced staff sufficient for the Group’s present and anticipated requirements. The Committee is also determined
to ensure that remuneration incentivises staff to deliver on both financial and non-financial objectives.
Following the end of the financial year:
• Peter Wall and Alex Appleton resigned as CEO and CFO of the Company, respectively;
• Sarah Gow stepped down as a non-executive director of the Company;
• Seif El-Bakly was appointed as Interim CEO; and
•
Jim MacCallum was appointed as the Company’s CFO.
Following the year under review, the Company made payments in lieu of notice of CAD 834,850 to Peter Wall in
respect of his resignation and £145,833 to Alex Appleton in respect of his resignation. Sarah Gow waived her
entitlement to notice pay in connection with her resignation. Details of these payments will be included in the
Company’s next annual report.
The Committee determined Mr. El-Bakly’s and Mr. MacCallum’s remuneration for serving as Interim CEO and CFO,
respectively, based on a review of benchmarking against relevant comparables in the market.For the coming year,
the Committee considers the following are the key strategic remuneration priorities:
•
•
oversight and administration of the new equity incentive plan and
continue with comprehensive review of employee remuneration, award and retention strategies, including
long term equity-based remuneration.
Maria Perrella
Chair of the Remuneration Committee
28 April 2023
23
ARGO BLOCKCHAIN PLC
Directors Remuneration Report
Membership of the Remuneration Committee
During the year, the Company’s Remuneration Committee consisted of Matthew Shaw, Maria Perrella and Sarah
Gow. Sarah Gow served as Chair of the committee.
Following the end of the year under review, Sarah Gow resigned as a director of the Company and Maria Perrella
was appointed as the Chair of the Remuneration Committee. The Committee would like to thank Sarah for her
contribution to the Committee during the year.
Role of the Remuneration Committee
The Remuneration Committee’s role is to determine and operate a remuneration policy that supports the Company’s
strategy and promotes long-term sustainable success and aligns the interests of directors with shareholders.
The Remuneration Committee’s primary responsibilities include:
•
•
•
•
identifying, reviewing and proposing policies relevant to executive officer compensation;
evaluating each executive officer’s performance in light of such policies and reporting to the Board;
determining any equity long-term incentive component of each executive officer’s compensation in line with
the remuneration policy and reviewing its executive officer compensation and benefits policies generally; and
reviewing and assessing risks arising from the Company’s compensation policies and practices.
Advisors to the Committee
None.
Directors' remuneration (audited)
Details of directors’ remuneration during the year ended 31 December 2022 is as follows:
Director
Salary
and fees
Bonus
Gain on
exercise of
options/
warrants
Loss of
office
2022 Total
Fixed
element
Variable
element
£
£
£
£
£
£
£
Executive Directors
P Wall*
A Appleton**
339,223
281,023
150,8831
97,1391
Non-executive Directors
S Gow ***
M Perrella
M Shaw
R Chopra
Total
70,399
121,391
118,030
105,492
-
-
-
-
180,600
-
-
-
-
-
-
-
-
-
-
-
670,706
339,223
331,483
387,162
281,023
97,139
70,399
121,391
118,030
70,399
121,391
118,030
105,492
105,492
-
-
-
-
1,035,558
248,022
180,600
nil
1,464,180
1,464,180
428,622
* Peter Wall resigned as a director with effect from 9 February 2023.
** Alex Appleton resigned as a director with effect from 30 January 2023.
*** Sarah Gow resigned as a director with effect from 8 February 2023.
1. Amounts shown reflect the discretionary cash bonuses that our Board awarded to the Executive Directors in 2022 for
performance in 2021.
24
ARGO BLOCKCHAIN PLC
Details of directors’ remuneration during the year ended 31 December 2021 is as follows:
Director
Salary
and fees
Bonus
Gain on
exercise
of
options/
warrants
Loss of
office
2021
Total
Fixed
element
Variable element
£
£
£
£
£
£
£
Executive Directors
P Wall
A Appleton
I MacLeod
221,404
66,968*
77,000
Non-executive Directors
221,404 3,611,369
148,877
-
- 4,054,177
215,844
-
221,404
66,968
- 2,014,087
132,100
2,223,187
77,000
S Gow
M Perrella
M Shaw
M D’Attansio
J Savage
C Sullivan
Total
16,282
16,282
36,769
25,000
25,577
-
-
-
-
-
- 1,203,810
-
16,282
-
16,282
- 1,240,579
-
-
-
-
-
-
-
-
25,000
25,577
16,282
16,282
36,769
25,000
25,577
-
-
3,832,773
148,877
2,146,187
-
-
1,203,810
-
-
-
485,282
370,281
6,829,266
132,100 7,816,929
485,282
7,331,647
Note – there were no taxable benefits or pension paid to any of the directors during the year
*Fees from when he became a director on 29 July 2021
Ian MacLeod resigned on 28 July 2021, Marco D’Attanasio and James Savage both resigned on 29 July 2021, Colleen
Sullivan resigned on 8 November 2021. Please refer to Directors’ Report for dates of appointments during the 2021
financial year.
Ian MacLeod’s compensation for loss of office was calculated in accordance with giving 12 month’s notice, which is
in line with other executive directors and is comparable with other publicly listed entities.
Details of the share options and warrants granted to the directors during the period are included within the Directors’
Report. These shares were issued in accordance with the terms of the relevant scheme or deed governing their grant.
The option awards to directors are based on a fixed exercise price and, once vested in accordance with their terms,
are not subject to further adjustment in light of share price appreciation or depreciation. The awards to the directors
were not based on a target share price, and therefore share price has not been considered in determining vesting of
the awards.
Total pension entitlements (audited)
The Company does currently not have any pension plans for any of the directors and does not pay pension amounts
in relation to their remuneration.
The Company has not paid out any excess retirement benefits to any directors or past directors.
Payments to past directors (audited)
The Company has not paid any compensation to past Directors.
25
ARGO BLOCKCHAIN PLC
Statement of directors’ shareholding and share interests (audited)
The Directors who held office at 31 December 2022 and who had beneficial interests in the Ordinary Shares of the
Company are summarised as follows:
Director
Peter Wall*
Alex Appleton**
Sarah Gow***
Maria Perrella
Matthew Shaw
* Peter Wall resigned as a director with effect from 9 February 2023.
** Alex Appleton resigned as a director with effect from 30 January 2023.
*** Sarah Gow resigned as a director with effect from 8 February 2023.
Details of these beneficial interests can be found in the Directors' Report.
Service Agreements and Letters of Appointment
Position
Chief Executive Officer and
Chairman
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
On 21 March 22, the Company entered into an employment contract with Seif El-Bakly, pursuant to which Mr. El-
Bakly serves as our Chief Operating Officer (the “EB Employment Agreement”). Under the terms of the EB
Employment Agreement, Mr. El-Bakly is entitled to receive a base salary annually, participate in the Company’s group
health benefits, participate in the Company’s group employer-match RRSP program, and earn a bonus as determined
by
the Board. Mr. El-Bakly's compensation
increased when he accepted
the role of
Interim CEO.
Under the EB Employment Agreement, we may terminate Mr. El-Bakly’s employment by providing Mr. El-Bakly with
the minimum (i) notice, or pay in lieu thereof, or some combination of the two, (ii) severance pay (if applicable), (iii)
period of benefits continuation, (iv) vacation pay, and (v) other entitlements, if any, as required by Employment
Standards Act within the Province of Quebec, and in each case, subject to the severance provision with the EB
Employment Agreement, provided that we may terminate the services of Mr. El-Bakly at any time with immediate
effect for certain reasons including misconduct, criminal offense, or other reasons “for cause” under the Employment
Standards Act within the Province of Quebec. Mr. El-Bakly may terminate his contract with us by providing the
company with a minimum of 3 months notice. The EB Employment Agreement also contains restrictive covenants
pursuant to which Mr. El-Bakly has agreed to refrain from competing with us or soliciting any persons who could
materially damage our interests if involved in a competing business, for a period of twelve months following his
termination of services.
Prior to their respective resignations, the service contracts with Peter Wall and Alex Appleton were on a continuous
basis, subject to customary termination provisions, and terminable upon 12 months’ and 4 weeks’ notice, respectively,
given by either party.
The appointments of Maria Perrella, Matthew Shaw and Raghav Chopra are subject to a 3 year term and to termination
upon 3 months’ notice given by either party. Prior to her resignation, Sarah Gow was engaged on the same terms.
Terms of appointment
The services of the directors engaged during the year under review were provided under the terms of agreement with
the Group are dated as follows:
Director
Peter Wall (resigned 9 February 2023)
Matthew Shaw
Alex Appleton (resigned 30 January 2023)
Maria Perrella
Sarah Gow (resigned 8 February 2023)
Year of
appointment
2020
Number of
years
completed
4
2019
2021
2021
2021
26
4
2
2
2
Date of current
engagement letter
14 January 2020
7 September 2019
4 September 2020
21 July 2021
21 July 2021
ARGO BLOCKCHAIN PLC
Raghav Chopra
2022
1
23 February 2022
Performance relative to market index
Comparing the total shareholder return of an ordinary share in Argo Blockchain plc against the total shareholder return
of the FTSE All-share index. For the year ended 2022, ARB saw a fall in share price from 97.8p to 6.3p, a 94%
decrease. In the same period, FTAS fell from 4,208.02 to 4,075.13, a decrease of 3%.
UK 10-year CEO table and UK percentage change table
The directors have considered the requirement for a UK 10-year CEO table and UK percentage change table. The
directors do not currently consider that including these tables would be meaningful because, the CEO remuneration
is not currently linked to performance, therefore any comparison across years or with the employee group would be
significantly skewed and would not add any information of value to shareholders. The CEO’s remuneration is disclosed
in full in the directors’ remuneration section. The directors will review the inclusion of this table for future reports.
Relative importance of spend on pay
The directors have considered the requirement to present information on the relative importance of spend on pay
compared to shareholder dividends paid. Given that the Company does not currently pay dividends this would not
provide meaningful disclosure to shareholders.
Description
Wages, salaries and remuneration
Bonus
Compensation for loss of office
Share based payment
Total
Consideration of shareholder views
2022
£’000
1,036
248
nil
1,522
2,806
The Board will consider shareholder feedback received and guidance from shareholder bodies. This feedback, plus
any additional feedback received from time to time, is considered as part of the Group’s annual policy on remuneration.
At the general meeting held on 6 September 2021 the following votes were cast on the remuneration policy, equity
incentive plan and equity awards for non-executives:
Resolution
To approve the remuneration policy
To approve the equity incentive plan
To approve equity awards for non-executives
For
77%
33%
82%
Against
23%
67%
18%
In light of shareholder feedback, the Company amended the equity incentive plan and put it to shareholders at the
Company’s 2022 AGM, where the votes cast were as follows:
Resolution
To approve the equity incentive plan
Policy for new appointments
For
71%
Against
29%
Base salary levels will take into account market data for the relevant role, internal relativities, the individual’s
experience and their current base salary. Where an individual is recruited at below market norms, they may be re-
aligned over time (e.g. two to three years), subject to performance in the role. Benefits will generally be in accordance
with the approved policy.
For external and internal appointments, the Board may agree that the Group will meet certain relocation and/or
incidental expenses as appropriate.
27
ARGO BLOCKCHAIN PLC
Other matters
The Company does not currently have any annual or long-term incentive schemes in place for any of the directors
and as such there are no disclosures in this respect. The share options granted are discussed above.
Maria Perrella
Chair of the Remuneration Committee
28 April 2023
28
ARGO BLOCKCHAIN PLC
NOMINATION COMMITTEE REPORT
Letter from the Chair of the Nomination Committee
Dear Shareholder,
I am pleased to present the Nomination Committee’s report for the year ended 31 December 2022.
The Nomination Committee met three times during the financial year under review. and all of the directors on the
Committee attended all three of these meetings. At a high level, its role is to:
•
•
•
draw up selection criteria and appointment procedures for board members;
recommend nominees for election to its Board and its corresponding committees; and
assess the functioning of individual members of Board and executive officers and reporting the results of
such assessment to the Board.
Composition of the Committee
The Nomination Committee as originally constituted consisted of myself, as Chair, Sarah Gow and Maria Perrella.
Sarah Gow resigned as a director following the end of the year under review, and we thank Sarah for her contribution
to the Committee. The Nomination Committee met three times during the financial year, and all of the directors on the
Committee attended all of these meetings.
In light of the current structure of the Board, in the near term the Nomination Committee will be comprised of me, as
Chair, and Maria Perrella. The membership of the committee will be reviewed on an ongoing basis, particularly in light
of the wider composition of the Board, and any changes announced in due course.
The Committee has discretion to invite members of the executive management of the Company to its meetings as
required and considers the input and recommendation of executive management to be critical to ensuring the
Committee’s activities reflect the ongoing needs of the Company. Therefore executive management were invited to
present to the committee at the appropriate junctures during the year.
Focus of the Committee
During the year under review, the Committee’s focus was on:
•
•
•
the appropriate size and makeup of the Board;
any appropriate changes and/or additions to the Board;
and the identification, recruitment and screening of potential candidates.
On an ongoing basis, the Committee carefully considers the structure of the Board and executive management and
ensures that the Board and executive management have an appropriate balance of skills, expertise and talent. The
Committee and the Board are committed to ensuring that appointments are based on merit and objective criteria
aligned with the Company’s needs, and that every effort is made to ensure equality, diversity and inclusion are at the
heart of the appointment process.
Appointments
During the year under review, Raghav Chopra was appointed as a non-executive director of the Company filling a
vacancy following Colleen Sullivan’s resignation in 2021. Mr. Chopra brought a wealth of experience within the capital
markets and financial technology sectors that complemented the skillsets of the remaining members of the Board.
Following the year under review, Peter Wall and Alex Appleton resigned as CEO and CFO respectively, and Sarah
Gow resigned as a non-executive director of the Company. Following consideration of the Company’s immediate
requirements by the Committee and the Board, Seif El-Bakly was appointed as Interim CEO and Jim MacCallum was
appointed as the Company’s new Chief Financial Officer. As these are not currently board roles, neither Seif nor Jim
will be subject to re-election at the upcoming AGM.
Matthew Shaw was appointed as a director of the Company by shareholders at the Company’s 2020 AGM, and as
such each must retire and seek re-appointment at the Company’s 2023 AGM.
29
ARGO BLOCKCHAIN PLC
Equality, Diversity and Inclusion
The Company does not currently have a formal written policy on diversity as it was previously not of a size or stage
of development to warrant one. However, all decisions made during the year under review were made on merit and
without regard to protected characteristics. The Company will consider the adoption of a formal diversity policy in due
course, having regard to the nature and scope of the Group’s operations.
Future Work
As part of its work during the coming year, the Committee will consider the Company’s present and near future
requirements and will review the composition of the Board, succession planning for management, the role of the CEO
and the structure of the overall management of the Company going forwards. Further announcements will be made
in due course.
Matthew Shaw
Chair of the Nomination Committee
28 April 2023
30
ARGO BLOCKCHAIN PLC
AUDIT COMMITTEE REPORT
Letter from the Chair of the Audit Committee
Dear Shareholder,
I am pleased to present the Audit Committee’s report for the year ended 31 December 2022.
The Audit Committee met six times during the financial year under review, and all of the directors on the Committee
attended all of these meetings. At a high level, the Audit Committee is responsible for, among other things:
•
•
•
•
•
•
•
the appointment, compensation, retention and oversight of the work and termination of any independent
auditor engaged for the purpose of preparing or issuing an audit report or performing other audit services;
pre-approving the audit services and non-audit services to be provided by its independent auditor before the
auditor is engaged to render such services;
evaluating the independent auditor’s qualifications, performance and independence, and presenting its
conclusions to the full Board on at least an annual basis;
reviewing and discussing with the executive officers, the Board and the independent auditor its financial
statements and its financial reporting process;
approving or ratifying any related person transaction (as defined in its related person transaction policy) in
accordance with its related person transaction policy;
reviewing and overseeing the adequacy and effectiveness of its financial reporting and internal control
policies and systems; and
reviewing and recommending amendments to the Code of Business Conduct and Ethics.
Composition of the Committee
The Audit Committee as originally constituted consisted of myself, as Chair, Matthew Shaw and Sarah Gow. Sarah
Gow resigned as a director following the end of the year under review, and we thank Sarah for her contribution to the
Committee.
In light of the current structure of the Board, in the near term the Audit Committee will be comprised of myself, as
Chair, Raghav Chopra, and Matthew Shaw. Brief biographies of each of the members of the Committee, including
their professional experience and qualifications are set out on page 8.
As required by the Disclosure Guidance and Transparency Rules (DTRs), Nasdaq Rule 5605(c)(2)(A)(ii), section 301
of the Sarbanes-Oxley Act 2002 and Rule 10A-3 of the Exchange Act the Committee comprises:
•
•
•
a majority of independent directors;
at least one member with competence in accounting or auditing, or both;
as a whole, competence relevant to the sector in which the Group is operating.
The Board considers that, in light of their respective professional experience and expertise, the members of the
committee have recent and relevant financial experience, including competence in accounting matters relevant to the
sector of operation, and operational experience in businesses at a similar stage of development.
Committee Meetings
The Committee has discretion to invite members of the executive management of the Company to its meetings as
required and considers the input and recommendation of executive management to be critical to ensuring the
Committee’s activities reflect the ongoing needs of the Company. Therefore, executive management were invited to
present to the committee at the appropriate junctures during the year.
Where the Committee considers matters relating to the audit of the Group, the Committee invited David Thompson,
the lead audit partner for the Group at PKF Littlejohn LLP, to attend the meeting. His attendance was critical to
ensuring the Committee has access to Mr Thompson’s independent judgement and ensuring the Committee can
solicit his views on matters to be considered or addressed as part of the audit.
The Committee also meets independently to consider matters relating to financial management and audit, providing
a forum for discussion of the agenda for the year ahead and strategic priorities for the Committee.
31
ARGO BLOCKCHAIN PLC
Focus of the Committee
During the year under review, the Committee’s focus was on:
•
reviewing the Company’s financial reporting processes, taking into account changes to the business during
the year under review;
• working with the Group’s auditors to consider matters arising from the Group’s previous audit and the
measures necessary to address them;
• monitoring the effectiveness of the internal control and risk management systems adopted by the Group,
regarding financial reporting of the Group;
reviewing the audit of the Group, in particular noting areas for potential improvement;
considering the independence and suitability for reappointment of the Group’s auditors, PKF Littlejohn LLP;
communicating with the Board the findings of the audit, and its contribution to the integrity of the Group’s
financial reporting;
considering the integrity of the Company’s and the Group’s financial statements, the processes and
procedures for the Company’s monthly operational updates and reviewing significant financial issues and
judgments contained in them;
reviewing the Group’s internal financial reporting function, in particular its structure, staffing and resources;
and
considering the Group’s management and internal reporting metrics.
•
•
•
•
•
•
As a result of its work, the Committee brought in a new CFO subsequent to 31 December 2022 and recommended
the reappointment of PKF Littlejohn LLP.
Following the year under review, the Audit Committee has considered its priorities for the year ahead. The sale of
Helios to Galaxy resulted in a significant change to the nature and scale of the Group’s operations, and therefore the
Audit Committee will consider the impact of the transaction on the Group’s systems, processes and controls with a
view to ensuring they remain appropriate for the Group’s ongoing requirements.
Performance Evaluation
The year under review was the first year the Group had established a formal audit committee. As such, the year under
review was the first opportunity for the Audit Committee establish its processes and approach to delivering on its
responsibilities. Given the significant change to the Group at the year end, the Audit Committee intends to review its
performance and objectives in light of the Group’s ongoing requirements. Given the nature and scope of the Group,
the Committee does not currently consider an external performance review would be of significant benefit to the
Group, however the Committee will continue to review the appropriateness of such a review on an ongoing basis.
Significant Judgment in relation to financial statements
The Committee has considered the following matters, being significant accounting areas which required the exercise
of judgement or a high degree of estimation during the year, together with details of how these were addressed. Some
of the matters considered were of a one-off nature, while others will have a continuing applicability to the Group’s
business.
Significant issue and explanation
Impairment for Mining Machines
The Group is required to perform impairment
reviews of its capital assets on an annual basis
to determine the appropriate value of those
assets. Following the disposal of Helios, the
Group’s principal capital assets are its data
centres in Canada and its fleet of mining
machines. While properties are long life assets,
mining machines have a finite useful life, and
therefore it is imperative the Group correctly
accounts for the impairment based on the
Work undertaken by the Committee
The Committee has considered management’s
assessments of the appropriate value of the
Company’s mining machines at the reporting
date. This included specifically considering and
approving the predicted useful life remaining,
the market value of the machines, the relative
profitability of the machines compared with other
alternatives available in the market.
Impairment was also a significant issue for the
Group’s auditors, who reported its findings to us.
32
ARGO BLOCKCHAIN PLC
Group’s current expectations of the machines’
useful life.
Going concern basis for the financial statements
and viability statement
The Committee reviewed and challenged
management’s assessment of forecast cash
flows, including applying appropriate
sensitivities, and the potential impact of future
uncertainties, the Group’s financial resources
and potential sources of additional liquidity. The
Committee was satisfied that the application of
the going concern basis for the preparation of
the financial statements remained appropriate.
External Audit
During the year, the Audit Committee assessed the independence and effectiveness of PKF Littlejohn LLP and
considers that that they remain independent from the Group and provide an effective external audit of the Group. The
Committee has therefore recommended that PKF Littlejohn LLP be proposed for reappointment at the upcoming
Annual General Meeting.
PKF Littlejohn LLP has been the auditor of the Company since its inception in December 2017, and David Thompson,
lead audit partner for the Group at PKF Littlejohn has lead the Group’s audit since 2020. While retendering and change
of personnel is not currently required as a result of these requirements, the Group and PKF Littlejohn LLP will comply
with the restrictions and limitations applicable to re-appointment of auditors and maximum terms of audit personnel,
which require PKF Littlejohn LLP to rotate audit personnel engaged on the Group’s audit and impose a maximum
engagement period for PKF Littlejohn LLP as the Company’s auditor.
Non-audit services
During the year, PKF Littlejohn did not provide any non-audit services to the Group and therefore no issues regarding
the objectivity or independence of PKF Littlejohn LLP arose from the provision of non-audit services.
Maria Perrella
Chair of the Audit Committee
28 April 2023
33
ARGO BLOCKCHAIN PLC
CORPORATE GOVERNANCE REPORT
The QCA 10 Principles of Corporate Governance
The board of directors of Argo Blockchain PLC recognises the importance of corporate governance and has decided
to apply the Corporate Governance Code published by the Quoted Companies Alliance (the ”QCA Code”). A copy of
the QCA Code is available at https://theqca.com/corporate-governance/. The QCA Code sets out a standard of best
practice for small and midsize quoted companies. The QCA’s ten principles of corporate governance are set out
below, along with a description of the Company’s approach to the relevant principle.
Principle 1: Establish a strategy and business model which promotes long-term value for shareholders
The Group is a UK based provider of cryptocurrency mining with its mining operations located in Canada and the US.
The business focusses on acquiring the most up to date and efficient hardware to support its mining facilities with a
focus on return on investment and prioritises the utilisation of renewable energy sources (wherever possible) at the
most competitive prices.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Group seeks to communicate with shareholders to ensure that its financial performance and strategy are clearly
understood. This is achieved through regular updates by RNS to the London Stock Exchange, filings with the Security
and Exchange Commission in the United States and meetings with various shareholders. The Group attends investor
conferences in the UK and USA and ensures its website provides accurate information and is kept up to date.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long
term success
Our stakeholder groups include our employees in Canada, the United Kingdom, United States of America and our
business partners. Employees are kept informed of the Company’s progress and development by way of semi-monthly
meetings and have access to the Board at all times. We aim to recruit and retain our staff by ensuring our pay and
conditions are competitive in the marketplace and offer training and career development where appropriate. We seek
to maintain a good business relationship with our business partners who are well-respected experts in their field.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the
organisation
The Group considers robust systems and controls will enhance the Group’s ability to manage and respond to
challenges and opportunities. The Group previously had a small number of employees and had adopted systems and
controls commensurate with the nature and scale of its operations. During the year under review, the Group
significantly increased its headcount, particularly in connection with the development of Helios. As such, the Group
developed more defined and robust systems, controls and processes to provide the ability to continue to scale as
necessary. With the sale of Helios to Galaxy, the Group is in the process of adopting revised systems and controls in
line with its agreements with Galaxy, while simultaneously reviewing its systems for its owned and managed properties
to ensure they remain appropriate for the size and nature of operations.
The Board is responsible for overall supervision of the Group’s operations while the Company’s CEO and CFO are
responsible for the implementation of the systems and controls across the Group and recommending improvements
and revisions to the Board for consideration. As part of its systems and controls, the Group has adopted clearly
defined roles and responsibilities, with clear lines of reporting and supervision. Given the Group’s current stage of
development, the Group considers the processes and procedures adopted provide the necessary framework for
effective risk management throughout the organisation, while retaining flexibility and the opportunity to continue to
develop in line with the Group’s future strategy.
Principle 5: Maintain the Board as a well-functioning, balanced team led by the chair
The Board is led by Matthew Shaw as the Company’s Chairman, supported by the senior management team and
other non-executive directors. Matthew Shaw was appointed as the Company’s Chairman following the departure of
the Company’s previous Interim Chairman, Peter Wall, in February 2023. He is supported by Seif El-Bakly, the
Company’s Interim Chief Executive Officer, Jim MacCallum, the Company’s Chief Financial Officer, and the
Company’s two other non-executive directors. Members of the Company’s senior management team are invited to
Board meetings as necessary and appropriate. The Board considers that each director has the required level of
34
ARGO BLOCKCHAIN PLC
expertise and experience in his or her field, and regular Board meetings are held to discuss all key matters and the
Board functions well and is appropriately led.
Principle 6: Ensure that, between them, the directors have the necessary up-to-date experience, skills and
capabilities
The Board is comprised of individuals with appropriate expertise and experience, each of whom brings a differing but
complementary skillset to the Board. All the directors receive regular updates on the Group’s operational and financial
performance and attend frequent Board meetings where key issues are discussed at length. The Board is responsible
for the appointment, removal and re-election of directors and when such a decision is required it will take account of
the Company’s need for a balance of market, operational and financial expertise. All directors have the ability to take
independent professional advice at the Company’s expense where they consider it necessary to ensure they fulfil
their duties in an appropriate manner.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The Board is constantly reviewing the Group’s and its own performance based on internally set performance indicators
and utilises those performance evaluations and indicators to identify areas of success and the potential for
improvement.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
The Board, together with the Company’s senior management team is conscious to impart and maintain a forward-
looking corporate culture throughout the Group, based on ethical values and respect for the contributions of the
Company’s staff. The Board leads by example and sets high standards and expectations for the Company’s staff.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision
making by the Board
As a company with a Standard Listing, the Company is not required to comply with the provisions of the Corporate
Governance Code published by the Financial Reporting Council. However, in the interests of observing best practice
on corporate governance, the Company intends to comply with the provisions of the QCA Code insofar as is
appropriate having regard to the size and nature of the Company and the size and composition of the Board.
The Company’s Standard Listing means that it is also not required to comply with those provisions of the Listing Rules
which only apply to companies on the Premium List. The UK Listing Authority will not have the authority to (and will
not) monitor the Company’s compliance with any of the Listing Rules which the Company has indicated that it intends
to comply with on a voluntary basis, nor to impose sanctions in respect of any failure by the Company so to comply.
Principle 10: Communicate how the Company is governed and is performing by maintaining dialogue with
shareholders and other relevant stakeholders
The Company is proactive in communicating with shareholders and other relevant stakeholders, on an annual basis
by way of the Annual Report and the financial statements, and more regularly through the half year Interims, monthly
operational updates and regulatory announcements. Outside of formal communications, the Company engages with
shareholders and interested parties through Q&A sessions and other informal updates. The Company maintains a
comprehensive website, which is available at https://argoblockchain.com.
35
ARGO BLOCKCHAIN PLC
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURE (TCFD) REPORT
Argo recognizes the adverse effects caused by climate change and is committed to assessing and managing both
the impact of climate change on our operations and our impact on the planet. Investors, employees, regulators,
members of the community in which we operate and other stakeholders want to understand how we are planning for
and adapting to climate change. The Task Force on Climate-related Disclosures (TCFD) provides a framework that
enables companies to communicate climate-related financial risks to this audience.
At Argo, our stakeholders have high expectations of how we operate as a business. Since the Company’s inception,
Argo has been committed to sustainability which includes the objectives of minimizing our waste and carbon footprint
as well as creating disclosures on an annual basis that align with our stakeholders’ expectations. We have made
considerable progress with our climate strategy since 2020, whose adoption and acceptance have been well received
by our organization and external stakeholders, and we became a climate positive company in 2021.
In compliance with Listing Rule 14.3.27(2)R, our climate-related financial disclosures are set out below. These are a
mixture of fully and partially compliant with the TCFD Recommendations and Recommended Disclosures. We have
structured the report so that it follows the 4 TCFD pillars with the 11 recommended disclosures set out in Figure 4 of
Section C of the TCFD Annex entitled “Guidance for All Sectors”. When drafting this report, we also reviewed whether
any of the sector-specific Supplemental guidance within Section E of the TCFD Annex entitled “Supplemental
Guidance for Non-financial Groups” was relevant; however it was deemed that Argo could not be categorised within
one of the sectors provided within these supplements. All TCFD related disclosures are included below and our
sustainability report for 2022 will be produced as a standalone report later in 2023. The Company has decided not to
gain assurance for the content of this report nor the GHG emissions or other KPIs included within.
The Company consists of a small team and hence is still developing the resources in order to be fully compliant with
all the TCFD’s Recommendations and Recommended Disclosures. Since this is our first year publishing a TCFD-
aligned report, we recognize the gaps that we must cover in order to achieve full compliance with the TCFD’s
Recommendations and Recommended Disclosures. In the future, we intend to evaluate our practices and consider
opportunities to enhance our disclosures on an ongoing basis consistent with our objective to incorporate and expand
our best practice reporting. Over the next year we will create a roadmap to full compliance, whilst acknowledging that
it is not only the Company’s reporting that can be improved. We need to build on what we have done this year and
ensure the Company is implementing the necessary strategies, structures, resources, and tools to manage the risks
and opportunities posed by climate change. We will also consider the work being conducted by the Transition Plan
Taskforce so that we are aligning our climate-related reporting with best practices, which goes beyond our regulatory
obligations. By next year, the Company expects to have made progress against the Governance, Strategy and Risk
Management pillars. This is expected to be done by further formalizing the Company’s ESG-related Governance
structure, developing the Scenario Analysis conducted and by expanding the Company’s risk management process.
In accordance with LSE Listing Rule 14.3.27(2)R, the table below sets out whether Argo has made disclosures fully
or partially consistent with the TCFD recommended disclosures:
TCFD Pillar
TCFD Recommended Disclosures
Compliance
Status
Governance
Strategy
Risk
Management
Board’s oversight of climate-related risks and opportunities
Management’s role in assessing and managing climate-related
risks and opportunities
Climate-related risks and opportunities the organization has
identified over the short, medium and long term
Impact of climate-related risks and opportunities on the business,
strategy, and financial planning
Resilience of the organisation’s strategy, taking into consideration
different climate-related scenarios, including a 2°C or lower
scenario
Organization’s processes for identifying and assessing climate-
related risks
Organization’s processes for managing climate-related risks
Partial
Partial
Full
Partial
Full
Partial
Partial
Disclosure
Location
(page)
37
38
38
42
44
46
46
36
ARGO BLOCKCHAIN PLC
Metrics and
targets
Processes for identifying, assessing, and managing climate-
related risks are integrated into the organization’s overall risk
management
Metrics used by the organization to assess climate-related risks
and opportunities in line with its strategy and risk management
process
Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas
(GHG) emissions and the related risks
Targets used by the organization to manage climate-related risks
and opportunities and performance against targets
Partial
Partial
Partial
Partial
46
46
47
48
Governance
Recommended disclosure: a. Describe the Board’s oversight of climate-related risks and opportunities
The board of directors monitors the Company’s overall sustainability performance against its stated ambition and
targets. It therefore has oversight responsibility for Argo’s climate strategy and performance, whereas the CEO has
ultimate responsibility for setting Argo’s ESG strategy and performance objectives as well as oversight of its
implementation and execution.
The Board is informed about the Company’s climate-related progress through Board meetings and annual reports
from the ESG Committee. It is the CEO who reports to the Board on ESG and climate-related issues at each Board
meeting on an ad-hoc basis as required.
The Board uses climate-related issues to guide them when:
• Finalising annual budgets (purchase of Renewable Electricity Credits (RECs), Verifiable Emissions
Reductions (VERs) as well as the costs associated with efficiency gains, data collection and calculation).
• Monitoring Implementation and Performance (with regards to the metrics outlined on page 48)
• Overseeing major capital expenditures (ensuring our facilities are located on low carbon emission grids and
built to be as efficient as possible)
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ARGO BLOCKCHAIN PLC
Recommended disclosure: b. Describe management’s role in assessing and managing climate-related risks
and opportunities
The CEO is responsible for achieving Argo’s strategy and ESG objectives, whereas day-to-day responsibility for such
tasks is delegated to the ESG Committee. The ESG Committee is chaired by the CEO and includes the COO, VP of
Technology and Development, VP of Mining and VP of Investor Relations. The ESG Committee has climate-related
expertise and is supported by external climate experts on a regular basis providing the Company with both data
proficiency and strategic advisory. The committee is responsible for the management and implementation of ESG
initiatives and directives. To do this, the committee meets semi-monthly to (i) assess climate-related issues, (ii)
develop and discuss the status of ongoing climate-related initiatives and (iii) monitor and track progress against certain
KPIs.
One of the major challenges that the Bitcoin mining industry faces is its reputation regarding energy consumption and
GHG emissions. Hence, over the past year the ESG Committee has taken a stakeholder focus and created initiatives
focused on supporting, and in some cases educating, certain stakeholder groups to ensure that the Company’s
climate change strategy is in line with their expectations. We identify key stakeholders according to Argo’s impact on
their interests as well as their ability to influence our strategy and objectives. Hence, management’s role is to engage
with our key stakeholders which includes shareholders, suppliers, employees, local communities, society, and local
governments on climate-related issues.
Strategy
Recommended disclosure: a. Describe the climate-related risks and opportunities the organization has
identified over the short, medium, and long term.
We recognise that climate-related risks and opportunities present a potential material impact to our business and are
committed to taking the necessary steps recommended by the TCFD to assess the severity of the business risks and
the value of the opportunities on our business.
This year we worked with a third-party consultant to conduct a climate screening and opportunity exercise, including
interviews with key internal stakeholders across the group. The process involved exploring the range of climate
impacts that may present material risks and opportunities across three-time horizons:
• Short-term (0-1 years): Aligned to our financial planning cycle.
• Medium-term (Up to 5 years): This period is considered the timeframe for major product and market shifts.
•
Long-term (5 - 25 years): This time-horizon helps to capture the potential physical / transitional risks and
opportunities that reflect the commitments made by national governments and the long-term damages
associated with climate change.
The tables below generally describe the climate-related risks that are considered by the Company over the timeframes
described above. We expect this list to grow as we further evaluate these risks and the associated business impacts:
38
ARGO BLOCKCHAIN PLC
Climate-related Risks
Transition Risks
Climate Risk
Drivers
Summary Description and Business
Impact
Mitigation and Adaptation
Policy & Legal
Increased costs
for energy from
carbon pricing
Federal authorities may pursue and
implement legislation and regulation
that seeks to limit the amount of
carbon dioxide produced from
electric generation, which would
affect the availability and price of
electricity sourced from power grids
that are dependent upon fossil fuel-
fired sources of power generation.
Where we purchase electricity from
the grid, this could impact us in a
potentially material adverse
manner. The bankruptcy or
insolvency of any power generator
or wholesale market supplier from
whom we expect to obtain supply
for our mining operations could also
result in a curtailment or loss of
supply, which would have a
material adverse effect on our
ability to continue mining
operations.
Market
Increased Costs
of ASIC mining
machines
There are risks related to the
potential disruption of our global
supply chain by climate-related
issues for cryptocurrency mining
hardware, and difficulty in obtaining
new mining machines that may
have a negative effect on our
business.
We are focused on deploying our
mining machines at locations with
access to low-cost and reliable
renewable power sources, as
successfully doing so should enable us
to reduce our power costs. Our
Quebec facilities are primarily powered
using renewable hydroelectric power,
and our operations in Texas are in the
Texas Panhandle, where more than
85% of the installed electricity
generation capacity comes from
renewable sources. We will continue to
work with power grids and electric
generators who have an abundance of
remote renewable electricity because
this aligns with the Company
sustainability principles and climate
strategy. As an additional benefit, the
use of lower-emission sources reduces
our risk exposure to the potential
introduction of carbon pricing and
associated reduced availability of fossil
fuel-fired electric generation.
While we have typically purchased our
mining machines from Bitmain, we
have diversified our access to mining
machines by establishing a relationship
with ePIC Blockchain Technologies
(“ePIC”). We are purchasing ePIC’s
new mining machines that utilize Intel’s
Blockscale ASIC chip. We will continue
to assess our supply chain
management and opportunities to
reduce our risk exposure to any
disruption to our key suppliers.
Main
Affected
Time
Horizon
Medium to
Long term
Medium to
Long term
39
ARGO BLOCKCHAIN PLC
Reputational
Damage
Increased awareness and any
adverse publicity in the global
marketplace about potential
impacts on climate change by Argo
or other companies in our industry
could harm our reputation. This
could therefore have a material
adverse effect on our financial
position, results of operations and
cash flows.
Argo’s stakeholders and society in
general are becoming increasingly
climate conscious. Argo recognizes
this – we have always been, and
always will be, committed to promoting
sustainability. We routinely emphasize
our commitment to sustainability
through our ongoing PR and
communications efforts. Additionally,
we are involved in several initiatives
that focus on educating these
stakeholders on the positive impact
that Bitcoin mining operations can
have for the energy transition,
including the incentivization of
renewable energy development and
stabilization of power grids via demand
response. We have also put in place
an ambitious climate strategy and
attained a climate positive status in
2021.
Physical Risks
Climate Risk
Drivers
Summary Description and Business
Impact
Mitigation and Adaptation
Acute
Disruptions to
our facilities and
operations
Extreme weather events have the
potential to disrupt or damage
Argo’s operations. Flooding,
heatwaves, wildfires, droughts, and
rising sea levels could all impact the
business. Insufficiently prepared
facilities could be unable to deal
with more frequent and intense
occurrences of such events.
Chronic
An increasing number of volatile
weather conditions, particularly
unusually hot (cold) or mild (warm)
summers could impact the price of
energy. Due to Argo’s electricity
demand from the grid, it could be
that Bitcoin mining companies are
requested to shut down leading to a
material adverse effect on the
Company’s revenue.
Due to the nature of our operations
and facility ownership structure, Argo is
in a position to be able to locate its
operations in areas that are of
relatively lower risk or relocate mining
machines if there are ongoing
operational disruptions related to acute
weather disruptions. We will explore
assessing the risk exposure of our
current sites and develop location-
specific Business Continuity Plans
(BCP).
Variability in weather conditions have
already impacted Argo’s operations. In
Quebec, Argo curtails its operations in
the winter months to help stabilize the
power grid. In Texas, Argo voluntarily
curtails operations when electricity
prices are high, which often occurs
during extreme weather events. While
our property strategy takes climate-
related issues into account, we will
seek to explore incorporating these
weather-related risks into our potential
site location decisions.
Short to
Long term
Main
Affected
Time
Horizon
Medium to
Long term
Short to
Long term
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ARGO BLOCKCHAIN PLC
Climate-related Opportunities
Transition Opportunities
Climate Risk Drivers
Summary Description and
Business Impact
Mitigation and Adaptation
Our mining hardware primarily
consists of Bitmain Antminer T17,
S17, S19, and Z11 machines,
featuring the latest application-
specific integrated circuits (“ASICs”)
for cryptocurrency mining. These
machines offer superior speed and
efficiency in cryptocurrency mining
compared to general computing
hardware. In addition, our
operations in Texas utilize
immersion cooling technology,
which improves efficiency, extends
the lifespan of the mining machines,
and reduces costs. Due to the
infancy of these machines, moving
forward Argo will continue to
explore the large opportunities for
improvement with regards to
efficiency.
Bitcoin mining can play a valuable
role in the transition to a low carbon
economy. Bitcoin mining has the
capability to balance the grid and
hence provide value to power
producers who deploy renewable
energy generation. In the short-
term, Texas provides the greatest
opportunity for this as the grid
operator, ERCOT, has worked with
Bitcoin miners to assist with
increased integration of renewable
energy into the grid. Bitcoin mining
therefore indirectly supports the
deployment of additional renewable
electricity and in the long-term could
be deployed in other regions. We
will continue to explore
opportunities to foster strategic
relationships with independent
power producers.
Resource Efficiency
Enhancing our Bitcoin mining
operational efficiency presents an
opportunity to reduce operating
costs and bolster our reputation.
We compete against our peers on
the efficiency of our operations
and hence improving it is a
cornerstone to our strategy.
Energy Source
Renewable energy
procurement and
deployment
Bitcoin miners may have the
potential to enhance the shift
toward decentralized energy
generation by co-locating near
renewable energy producers and
acting as a sink for excess energy
production. Serving as a sink or
flexible load is valuable as it
provides a market mechanism for
use of excess electricity, allowing
generators to increase
intermittent renewable energy
generation into the grid without
fear that it won’t be used and
uncompensated for. This may
reduce operating costs and
increase revenue, capital
availability, and reputation. Bitcoin
mining’s unique ability to serve as
a buyer of last resort for excess
energy encourages further
investment in renewable projects.
This, in conjunction with demand
response, enhances grid
resilience.
41
Main
Affected
Time
Horizon
Short to
Long term
Short to
Long term
ARGO BLOCKCHAIN PLC
New Products and
Services
Markets
Ability to form new
and strategic
partnerships
Argo’s stakeholders and society
in general are increasingly climate
conscious. Those who invest in
Bitcoin may want to be assured
that the cryptocurrency they buy
has a low-carbon intensity. This
has led to the development of
market-based tools to incentivize
sustainable production of Bitcoin.
As the world is transitioning its
energy system there will be
pressure on companies to reduce
their GHG emissions and by-
products that impact the
environment negatively. In order
to deal with these impacts,
companies will need to
collaborate with each other to find
solutions and reduce the risk of
regulatory action and reputational
damage.
Argo has actively explored and
pursued various opportunities to
promote the sustainable production
of Bitcoin. In 2021, we announced
the creation of the world’s first
Bitcoin mining pool powered by
clean power, Terra Pool.
Argo has a unique opportunity to
enable the transition to a net zero
economy through the use of its
Bitcoin mining operations. Below
are three examples of potential
strategic partnerships that the
Company is exploring:
•
Independent Power
Producers
• Oil & gas producers
Local municipalities
•
Please see below for an expansion
of how Argo can and foster these
relationships.
Short to
Long term
Short to
Long Term
Recommended disclosure: b. Describe the impact of climate-related risks and opportunities on the
organization’s businesses, strategy, and financial planning.
In 2020 we defined our climate-related goals and ambitions with specific targets identified to guide our activities,
and we set our objective of being a climate positive company. Our strategy to be a climate positive company is
based on 6 steps:
1. Minimising emissions at the outset – intentionally locating our own operations on grids with low emissions as
well as investing in energy saving and efficiency measures at our own facilities.
2. Scope 1 emissions – No scope 1 emissions as we have no power generation or generator use at our own
facilities.
3. Scope 2 emissions – Minimise scope 2 emissions through the use of low-emission grids. For any residual
scope 2 emissions, RECs are purchased at owned (Argo) or hosted facilities for emissions created by
electricity use.
4. Scope 3 emissions – VERs purchased for emissions resulting from all Argo activities in its value chain.
5. Additional VERs – Additional VERs purchased to become climate positive.
6. Third-party verification – Argo assessment validated by an accredited third-party verification consultant.
In alignment with these targets, we are focused on addressing the risks and opportunities identified above by
integrating climate considerations in our:
• Strategic Partnerships
Argo continually seeks potential opportunities and looks for new ways for our Bitcoin mining operations to provide
value to other corporations, utility companies, and government agencies. Below is a non-exhaustive list of some
examples of ideas that we are in the process of evaluating:
42
ARGO BLOCKCHAIN PLC
› Electricity generators or independent power producers – We are evaluating opportunities to co-locate our
mining operations with renewable energy producers in order to gain access to “behind the meter” electricity. This
type of relationship with a power generator can be symbiotic because we can gain access to low-cost electricity
and the power producer will have a buyer of last resort for its electricity regardless of the market price obtainable
through the power grid.
›
Local municipalities – Exploring partnerships with local municipalities to use waste heat from our facilities and
provide this heat to the municipality or nearby facilities such as greenhouses that can make use of the heat. This
creates a savings for the greenhouse as they can reduce the heat they need. In addition to creating an economic
opportunity for both parties, this also saves energy and reduces our collective environmental impact.
› Oil & gas Producers – There is potential for partnerships with oil & gas companies who produce natural gas as
an unwanted by-product of their oil production. Currently, oil & gas producers typically dispose of the unwanted
natural gas via venting or flaring, which releases methane into the atmosphere. On a 100-year timescale, methane
has 28 times greater global warming potential than carbon dioxide and is 84 times more potent on a 20-year
timescale. Instead of venting or flaring the waste gas, it can be combusted in a generator to provide electricity for
Bitcoin mining operations. Combusting the natural gas reduces methane emissions by up to 99% when compared
to venting or flaring. This therefore provides an opportunity for both parties since a Bitcoin miner can help reduce
the methane emissions of oil & gas producers whilst the Bitcoin miner gains access to low-cost energy for its
Bitcoin mining machines.
• Energy/Resource Efficiency
Additionally, we have worked on becoming more efficient with the energy we use through purchasing more energy-
efficient technologies. These initiatives have included:
›
Locating the Helios site in the West Load Zone of Texas where more than 85% of the installed generation capacity
is renewable.
› Constructing the Helios facility so that it uses high-efficiency immersion cooling technology.
› Purchasing the most efficient Bitcoin mining machines on the market.
These initiatives ensure that we keep pace with the transition to a net-zero economy by proactively complying with
evolving regulation, providing energy efficient technology and maintaining a strong reputation amongst our
stakeholders.
• Stakeholder engagement
We have taken a proactive approach to developing a more efficient and cleaner industry through the promotion of
transparency, sharing of best practice and education to the public about the benefits of Bitcoin and Bitcoin mining.
We have done this through several avenues:
› Argo is a founding member of the Bitcoin Mining Council, which educates the public on the increasing amount of
renewable energy used for Bitcoin mining. It also seeks to improve reporting and increase the amount of data
available on the use of renewable energy within the sector.
› Argo is a signatory of the Crypto Climate Accord, which is a private sector-led initiative for the entire crypto
community focused on achieving net-zero emissions from electricity consumption by 2030 for its signatories.
› Argo is a member of the UNFCCC Climate Neutral Now initiative, committing the Company to measure, reduce,
contribute, and report emissions on a yearly basis.
› Engage with regulators and policymakers at the state and federal level to educate them on the benefits of Bitcoin
mining
• Site location
Our property strategy includes criteria that considers the availability of renewable electricity and the sites’ exposure
to the physical risks of climate change.
43
ARGO BLOCKCHAIN PLC
Recommended disclosure: c. Describe the resilience of the organization’s strategy, taking into consideration
different climate-related scenarios, including a 2°C or lower scenario.
We conducted a climate-related scenario analysis this year with the aid of a third-party consultant to further validate
our climate strategy. This year we carried out a scenario-based climate change risk assessment exercise to determine
potential implications of climate risks on our business and strengthen the resilience of our strategy moving forward.
In building our scenarios, we used the Intergovernmental Panel on Climate Change (IPCC) warming scenarios, which
provides pathways for assessing the physical impacts of climate change from varying degrees of GHG emissions in
the atmosphere. Since many of the publicly-available climate-related scenarios that exist focus on transitions in heavy-
emitting sectors (e.g. utilities, heavy industry), the majority of the assumptions in these existing scenarios do not
directly impact Argo. As such, we drafted three qualitative transition scenarios, drawing from existing scenarios and
trends, and combined them with three warming scenarios:
Assumptions:
Business-as-usual
RPC 8.5 - Extremely high emissions scenario with global mean temperature expected to rise by 3.7°C (2.6-4.9°C) by
end of the century. The scenario assumes high dependence on fossil fuels and no policy-driven mitigation.
Qualitative assumptions – Limited regulation and impact of climate risks and emissions performance on the
Company’s reputation. There is uneven pressure regarding climate action and emission reduction targets, with limited
investment in renewable electricity. Insurance becomes increasingly expensive and demand for RECs begins to
outstrip supply resulting in much higher prices to purchase these RECs. Investors in crypto have limited interest in
acquiring currencies that have been produced with fewer emissions.
Delayed transition
RPC 6.0 – High emissions scenario with global mean temperature expected to rise by 2.2 °C (1.4-3.1°C) by end of
the century, which assumes emissions peak around 2080 and then decline.
Qualitative assumptions – There is uneven regulatory action from state to state in the US and globally, with some
setting stringent climate expectations and others not incorporating ESG into regulatory standards. This means that
some regions decarbonize quicker and employ renewable electricity whilst others fail to do so. Prices of RECs vary
by region.
Net-zero
RPC 2.6 – A stringent pathway with a large regulatory push and the development of new technologies enable the
likelihood of keeping global temperature rises below 2°C by 2100.
Qualitative assumptions – Strong local, state, and national-level regulation and action on building performance
standards and energy benchmarking, which includes high penalties for non-compliance. Potential high investment
costs to bring manufacturing locations in line with state, local, and national laws. Strong impact of emissions
performance on company reputation and market value, which is seen worldwide in nearly all geographies and across
investors, potential employees, and society. Nearly 100% of electricity generation globally is from renewable electricity
sources and societies have adapted to become more electrified.
Business Impacts
Below is a table that summarizes the results of the scenario analysis in which we identified how each scenario may
impact Argo’s business and operations:
RCP 8.5 / Business-as-usual
RCP 6.0 / Delayed Transition RCP 2.6 / Net-zero
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ARGO BLOCKCHAIN PLC
Physical
climate risks
Increased chances of property damage due to floods and
increased wildfires
Increased energy usage as a result of increased cooling
required at our facilities due to increase in ambient
temperature.
Increased risk of heatwaves and droughts affecting energy
prices and supply chain.
Impacts of flooding and
droughts on the
semiconductor industry,
already being observed within
supply chain.
Transition
Climate risks
The Company has very low
potential exposure to carbon
pricing and the associated
policy/legal risks. However,
Argo will see an increase in
insurance payments, the price
of RECs and disruptions to its
supply chain due to the
reduced supply in raw
materials.
Heightened legal and
regulatory risks due to
uneven application. This
makes it more difficult for
Argo to operate in certain
regions as legal and
regulatory action is highly
uncertain. Argo’s climate
strategy sees a higher cost
due to the price of RECs but
there is a low exposure to
carbon pricing. There is
limited reputational damage.
Transition
opportunities
Opportunities for strategic
partnerships are limited due to
a lack of investment in
renewables and the lack of
appetite to reduce flare /
methane gas emissions.
Markets associated with green
Bitcoin gain little interest.
There are certain
geographies where Argo can
locate its operations where
the Company can make use
of strategic partnership
opportunities. Green Bitcoin
gains interest but only in the
medium to long term.
The Bitcoin mining industry’s
reputation is increasingly
scrutinized and Argo as a
result has a higher risk
exposure to reputational
damage as well as policy/legal
risks. There is a relatively
larger risk exposure to indirect
carbon pricing with the price of
fossil-fuel based electricity
increasing in the short-term.
There is a large demand for
technologies that enable
demand response initiatives to
help balance the supply and
demand of electricity on the
grid, which boosts Argo’s
ability to develop strategic
partnerships. Argo is
presented with opportunities to
benefit from renewable
electricity deployment and the
requirements to decrease flare
/ methane gas emissions.
Green Bitcoin also gains the
most interest as investors are
climate conscious with their
decision making.
Company Resilience to Climate Risk
In all scenarios there is a focus on energy efficiency because this is a key variable on which Argo competes with its
peers.
The Company has set a climate strategy that approaches the risks and opportunities associated with each scenario,
however, the greatest opportunities are presented from the Net Zero scenario where Argo Blockchain is positioned to
help enable the energy transition with the increased deployment of renewable electricity and demand response. This
is why the Company has positioned itself as a climate leader and why it is encouraging other companies to follow suit.
We are therefore currently trying to manage these risks so that we are well-prepared across these different types of
scenarios and will try to incorporate these insights into our climate strategy moving forward. However, this is only our
first climate-related scenario analysis, and we will work over the next year to expand this analysis and in the next 4
years will work to quantify the financial impacts of these different scenarios.
Although these are the risks and opportunities that currently face the Company, we will continue to identify new and
emerging climate-related risks that could impact the Company.
45
ARGO BLOCKCHAIN PLC
Risk Management
Recommended disclosure: a. Describe the organization’s processes for identifying and assessing climate-
related risks.
Argo identifies and assesses risks associated with climate change across all transition risks (policy and legal,
technology, market changes and reputation) and physical risks (both acute and chronic). Processes that help identify
climate-related risks and opportunities include:
› Monitoring changes in the external policy environment, including existing and emerging legislation, and
national and international government announcements.
› Observing market developments, such as advances in technology that may reduce our operating costs, or
›
changes in perception about the industry’s impact on the environment
Internal and external judgement using resources such as regulatory guidance, industry reports and peer
comparisons.
We use these and other processes to identify risks relating to climate change, and to determine their significance.
The Company has yet to formalize a process in which climate-related risks are assessed in terms of their significance
relative to other principal risks and assessing the potential size and scope of the risk.
Recommended disclosure: b. Describe the organization’s processes for managing climate-related risks.
Risk management is undertaken by the board of directors. The Board recognizes climate change as a financial risk
and has delegated responsibility to the management team to monitor and report climate-related risks as well as lead
the response across the organization. The management team will also track as to where any new climate-related risks
may arise. This has resulted in targets being set so that management can track climate-related KPIs and report
progress to the Board.
Recommended disclosure: c. Describe how processes for identifying, assessing, and managing climate-
related risks are integrated into the organization’s overall risk management.
The Board has assigned climate change as a Principal Risk because it is aware that Bitcoin mining is power intensive
and has an environmental impact as a consequence. Climate change is integrated into the Company’s overall risk
management programme, which seeks to minimise potential adverse effects on the Company’s financial performance.
In addition, due to the nature of the climate-related risks to our business and strategy, many elements are already
captured within other Principal Risks, such as Electricity Supply and Price, and Technology and Supply risks. This
approach enables us to capture a more holistic picture of the climate-related risks.
Metrics and Targets
Recommended disclosure: a. Disclose the metrics used by the organization to assess climate related risks
and opportunities in line with its strategy and risk management process.
In addition to measuring and disclosing our absolute scope 1, 2 and 3 emissions, we internally track and monitor
climate-related metrics and KPIs to further help us manage climate-related risks and opportunities:
• Electricity consumption (kWh)
• Renewable Energy consumption (kWh)
• Hashrate (EH)
• Mining Efficiency (EH/GW)
• Emissions intensity (kgCO2e/$1 revenue)
The Company has not yet set an internal or external carbon price as we have minimal exposure, nor have we
incorporated climate-related metrics into the Company’s remuneration policy.
We plan to expand our climate-related scenario analysis and disclosure in the future to better quantify climate-related
risks and opportunities achieved.
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ARGO BLOCKCHAIN PLC
Recommended disclosure: b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG)
emissions and the related risks
A full view of our greenhouse gas emissions data for the last 3 years can be found below. We use energy to power
our ASIC mining machines, as well as light and cool the facilities in which our machines operate. Since 2020 we have
been focused on reducing our operational emissions through investing in energy saving and efficiency measures at
our own facilities and by locating our operations on grids with relatively low emission electricity supply.
Most of the Group’s emissions come from the electricity that is used to power our ASIC mining machines in North
America. As the Group does not have any mining operations in the UK, there were minimal GHG emissions in the UK
However, along with our host, Argo purchased Renewable Electricity Credits (RECs) in 2021 for these emissions,
which supports our electricity suppliers in their deployment of renewable electricity. While our emissions increased by
62% from 2020 to 2021, due to the significant growth of the Group and the building of the Helios facility, Argo’s overall
mining efficiency improved by 34%. Argo is in the process of calculating its 2022 emissions and hence are unable to
disclose the figures within this report.
Argo has previously published its emissions as part of the Company’s annual sustainability report, which has
customarily been published outside of and subsequent to the Annual Report. Argo is therefore in the process of
calculating its 2022 emissions and hence are unable to disclose the figures within this report. We will disclose the
Group’s emissions for the 2022 financial year later this year within the Company’s annual sustainability report.
The Group is cognisant that our stakeholders would prefer reporting is consolidated within and released at the same
time as the Annual Report, together with the supplementary climate-related financial information included throughout
this report. As this is the first year the Group has reported in line with the TCFD Recommendations and Recommended
Disclosures, its internal processes and data collection periods have previously been tailored for the later publication
date of the Group’s annual sustainability report. Over the coming year the Group will work to revise its processes to
enable the Group’s 2023 emissions to be included within the Company’s Annual Report.
Categories
Scope 2
Electricity Use
Scope 3
C1: Purchased Goods and
Services
C2: Capital Goods
C3: Fuel & Energy
C4: Upstream T&D
Total Scope 1, 2 and 3
2020 Total Emissions
(MTCO2e)
46,880
2021 Total Emissions
(MTCO2e)
61,077
46,880
10,389
89
281
7,705
2,314
57,269
61,077
31,819
378
20,597
7,653
3,191
92,896
The GHG data boundary includes our operations in the US and Canada. The GHG emissions have been calculated
using the GHG Protocol Corporate Accounting and Reporting Standard of the Greenhouse Gas Protocol. The data
presented above uses a market-based approach which accounts for >99% of the GHG emissions and energy
consumption in respect of activities where we are the operator.
A GHG verification assessment was undertaken using recognized assessment tools and approaches (i.e., The GHG
Protocol Corporate Accounting and Reporting Standard with reporting, information, and data collected and provided
by Argo) and complies with the requirements and general guidance for companies compiling and reporting on
corporate-level GHG emissions inventory.
Scope 1 emissions are not reported due to no power generation or generator use at our own facilities. Our Greenhouse
Gas reporting period is from January 1st to December 31st for 2020 and 2021.
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ARGO BLOCKCHAIN PLC
Recommended disclosure: c. Describe the targets used by the organization to manage climate-related risks
and opportunities and performance against targets.
In 2020, Argo set the objective of being a climate positive company and in 2021 Argo reached this goal, releasing a
full climate strategy and becoming the first Bitcoin mining company to announce climate positive status through its
use of renewable energy to power mining operations, and by offsetting more scope 2 and 3 greenhouse gas emissions
than we emitted in 2020and 2021 Although we are yet to be climate positive for the year 2022, we are in the process
of calculating the Group’s 2022 emissions and once that is complete, we will purchase the necessary RECs and
VERs.
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ARGO BLOCKCHAIN PLC
DIRECTORS’ RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations. Company law requires the directors to prepare financial statements for each financial
year. Under that law the directors have prepared the Group and parent company financial statements in accordance
UK-adopted international accounting standards. Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company
and of the profit and loss of the Group and Company for that period.
In preparing these financial statements, the directors are required to:
● Select suitable accounting policies and then apply them consistently;
● Make judgements and accounting estimates that are reasonable and prudent;
● State whether applicable UK-adopted international accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements; and
● Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also responsible to make a statement that they consider the Annual Report and financial statements
taken as a whole, is fair, balanced and understandable and provides the information necessary for the shareholders
to assess the Group’s and Company’s position and performance, business model and strategy.
Website publication
The directors are responsible for ensuring the Annual Report and the financial statements are made available on a
website. Financial statements are published on the Company’s website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in
other jurisdictions. The maintenance and integrity of the Group and Company’s website is the responsibility of the
directors. The directors’ responsibility also extends to the on-going integrity of the financial statements contained
therein.
Directors’ responsibilities pursuant to DTR4 (Disclosure and Transparency Rules)
The directors confirm to the best of their knowledge:
● The Group and Company financial statements have been prepared in accordance with UK-adopted
international financial reporting standards and give a true and fair view of the assets, liabilities, financial
position and profit or and give a true and fair view of the assets, liabilities, financial position and profit and
loss of the Group and Company; and
● The Annual Report includes a fair review of the development and performance of the business and financial
position of the Group and Company together with a description of the principal risks and uncertainties that it
faces.
On behalf of the Board:
Matthew Shaw
Chairman
28 April 2023
49
ARGO BLOCKCHAIN PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ARGO BLOCKCHAIN PLC
Opinion
We have audited the financial statements of Argo Blockchain plc (the ‘parent company’) and its subsidiaries (the
“group”) for the year ended 31 December 2022 which comprise the Group Statement of Comprehensive Income, the
Group and Parent Company Statements of Financial Position, the Group and Parent Company Statements of
Changes in Equity, the Group and Parent Company Statements of Cash Flows and notes to the financial statements,
including significant accounting policies. The financial reporting framework that has been applied in their preparation
is applicable law and UK-adopted international accounting standards and as regards the parent company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 December 2022 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards;
the parent company financial statements have been properly prepared in accordance with UK-adopted
international accounting standards and as applied in accordance with the provisions of the Companies Act
2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard
as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 3 in the financial statements, which indicates that due to the group’s debt service obligations
and the exposure to Bitcoin, power and hashprice price which have shown significant volatility over recent years,
resulting in a current loss recorded for the year. As stated in note 3, these events or conditions, along with the other
matters as set forth in note 3, indicate that a material uncertainty exists that may cast significant doubt on the
company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s
and parent company’s ability to continue to adopt the going concern basis of accounting included a review of
management’s cash flow forecasts to June 2024, along with an assessment of the “disaster scenario” forecast as well
as its likelihood. The audit team performed sensitivity analysis on the hashprice applied throughout the assessment
period. We have reviewed all key inputs into the cash flow forecasts, with particular emphasis on those areas of
judgement and estimation uncertainty such as the hashprice, power costs and hashpower, and ensured they are
appropriate and no evidence of management bias exists.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
For the purposes of determining whether the financial statements are free from material misstatement, we define
materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably
knowledgeable person, relying on the financial statements, would be changed or influenced. We also determine a
50
ARGO BLOCKCHAIN PLC
level of performance materiality which we use to assess the extent of testing needed to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole.
The group materiality for the financial statements as a whole was set at £763,000 (2021: £758,400). This was
calculated based on an average of 1% of total revenue for the year and 2.5% of the loss before tax (2021: 1% of total
revenue for the year). The change in the basis for calculation was a result of the change in the focus during the year
following a decrease in hashprice, increased power costs and the resulting sale of the Helios facility due to position
the entity was in, and therefore the key factor in determining performance has been to assess not just revenues but
results for the year. The percentage used is a reflection of the perceived risk in the industry and the significant growth
of the group, which therefore enabled greater coverage of revenue from the audit procedures undertaken.
The parent company materiality for the financial statements as a whole was set at £457,800 (2021: £118,700). This
was calculated based on 2% of total expenditure, which was same benchmark was used in the prior year. However,
as per ISA 600 requirements, this has been capped at an amount lower than group materiality, which we assessed
in line with the group performance materiality threshold. We have determined this to be the principal benchmark of
the parent company, as revenue is generated solely through its subsidiaries. A key management target is to minimise
parent company expenditure, in order to maximise the utilisation of funds within the trading subsidiary. In addition to
this, legal and professional fees have significant increased in the year through the sale of Helios and other advice
obtained, and is the key figure within expenses in the current year. Materiality for the subsidiaries has been calculated
on individual levels either on the same basis as that of the group, capped at group performance materiality, 2% of net
assets and 1% of Gross assets.
These significant components of the group, were audited to a level of materiality ranging from £44,174 to £457,800.
Performance materiality was set at 60%.
Performance materiality for the group financial statements was set at £457,800 (2021: £455,000) and the parent
company was set at £274,680 (2021: £83,000), being 60% of materiality for the financial statements as a whole. The
performance materiality for the group and all subsidiaries is based on our assessment of the relevant risk factors e.g.
previous experience of misstatements, management’s attitude towards proposed adjustments, and the level of
estimation inherent within the group and the subsidiaries including the parent company. We agreed to report to those
charged with governance all corrected and uncorrected misstatements we identified through our audit with a value in
excess of £38,150 (2021: £37,920) for the group and for the parent company a value in excess of £22,890 (2021:
£5,935). We also agreed to report any other audit misstatements below that threshold that we believe warranted
reporting on qualitative grounds.
Our approach to the audit
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. In particular,
we looked at areas involving significant accounting estimates and judgement by the Directors, and those areas
assessed to be Key Audit Matters as presented below. We also addressed the risk of management override of internal
controls, including among other matters consideration of whether there was evidence of bias that represented a risk
of material misstatement due to fraud.
We assessed all components of the group for their significance in order to determine the extent of the work to be
performed on them in order to obtain sufficient and appropriate audit evidence on which to base the group audit
opinion. Those entities of the group which were considered to be significant components, being Argo Blockchain plc,
Argo Innovation Labs Inc, Argo Innovation Facilities (US) Inc., GPU.One 9377-2556 Inc., GPU.One 9366-5230 Inc
and Argo Operating US LLC. were subject to full scope audit procedures by PKF Littlejohn LLP. Procedures were
performed to address the assessed risks of material misstatement.
We did not rely on the work of any component auditors.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
51
ARGO BLOCKCHAIN PLC
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty
related to going concern section we have determined the matters described below to be the key audit matters to be
communicated in our report.
Key Audit Matter
How our scope addressed this matter
Recognition and valuation of cryptocurrency assets
(Note 21)
This is considered a Key Audit Matter because the
crypto assets’ value at reporting date is subject to
management judgement and estimation uncertainty for
those holdings which are not frequently or not yet
traded. In addition to this, the group holds different
tokens for different purposes which attracts differing
accounting treatments, and therefore the incorrect
treatment applied may have a material impact on the
financial statements.
The volatility of the crypto assets’ values increases the
valuation risk also. Moreover, the crypto assets are held
across numerous wallets both internal and external,
which gives rise to increased completeness and
existence risks.
The group during the year entered into material
transactions involving the purchase, mining and
disposal of crypto assets.
transactions
The type and form of these assets can differ significantly
with regard to the ability to make payments, trade or
exchange. In addition, not all crypto assets have an
the digital
active market whereby
currencies take place with sufficient frequency and
volume in order to provide pricing information on an
ongoing basis. Crypto assets can be subject to high
levels of volatility. Therefore, there is a significant risk of
material misstatement of said assets, due to both the
significant management estimate
the
volatility attributed to crypto assets.
involved and
in
Accounting treatment of the disposal of Helios and
accounting implications of the subsequent hosting
agreement including an assessment of whether this
meets the criteria of a Right of Use asset under IFRS
52
In responding to the identified key audit matter we
completed the following audit procedures:
• Confirming good title to and quantities of the
Crypto assets within the Group’s wallets and
obtaining direct confirmation from relevant
custodians;
• Reviewing and testing underlying agreements
giving rise to the receipt of Crypto assets;
• Performing an assessment of the fair values
attributed to the Crypto assets at the transaction
date and year end date, by vouching the value
of quantities held to a third party website;
• Assessing the Crypto portfolio held at the year
end and ensuring that only the Crypto
currencies traded on an active liquid markets
have been measured at Level 2 on the fair value
hierarchy table;
• For those Digital Assets which arise from Single
Agreements For Future Tokens (“SAFTs”),
parachain auction funds, and staked tokens with
vesting periods, obtaining evidence of the
contribution made and assessing for evidence
of impairment or future trading;
• Performing an assessment of the liquidity of the
tokens held and any impact on the subsequent
measurement thereto; and
• Discussing with management the strategy for
the holding of said digital assets and reviewing
the relevant accounting treatment applied.
Key observations:
We are satisfied that those currencies which are
actively traded are recorded at their fair value based
on an active market, and those which are not are
recorded at a true reflection of their fair value.
We are satisfied that the group has title to the digital
assets as recorded within these financial statements.
In responding to the identified key audit matter we
completed the following audit procedures:
ARGO BLOCKCHAIN PLC
16 (Note 19)
At the end of the year, the group entered into an
agreement with Galaxy to dispose of the Helios facility
in order to reduce the level of debt on the Argo balance
sheet in order to continue to trade as a going concern.
A hosting agreement has been agreed with Galaxy as
part of this disposal to host the Argo machines within
the Helios facility.
As part of this agreement, management need to assess
whether this meets the requirements of IFRS 16 –
Leases, and therefore a Right of Use asset to be
recognised along with a supporting lease liability. The
asset may also be subject to an impairment test.
There is a risk that the incorrect accounting treatment has
been applied and the disposal inadequately treated
which could give rise to a material misstatement.
Carrying value of mining machines (Note 19)
The group holds a significant value of mining machines
as the year end, which is made up of newly acquired
machines in the year as well as those in place from prior
periods.
The machines acquired in the current year were at a
significantly higher price than the current value of the
same machine. This is directly a result of the crash in
the price of bitcoin during the year. The prices fluctuate
based on the hashpower rating and the price of bitcoin.
The acquisitions were made whilst the price of bitcoin
was high, and they were delivered and installed
following the price crash.
In addition to this, there has been a significant increase
in power costs incurred within the Helios facility, which
therefore gives rise to longer payback periods, which
has triggered an impairment indicator under IAS 36, and
thus management are required to prepare an
assessment of the recoverable amount of said
machines, being the higher of their fair value less costs
to sell and the value in use.
This was deemed to be a Key Audit Matter as a result of
the areas of management judgement and estimation
uncertainty into the value in use calculation.
53
• Vouching the consideration relating to the
disposal to supporting documentation;
• Obtaining managements calculation of the
disposal of the Helios facility and performing a
recalculation of the resulting gain or loss through
vouching to the purchase agreement;
• Obtaining a copy of the Hosting agreement and
reviewing managements technical accounting
paper of whether the criteria of IFRS 16 is met
and challenging thereto; and
• Reviewing the post year end performance of the
group following the implementation of the
Hosting agreement to ensure consistency with
conclusions reached by management in respect
of the Right of Use asset.
Key observations:
We are satisfied that management have appropriately
reflected the disposal of the Helios facility and the new
hosting agreement in place with Galaxy does not meet the
criteria for a Right of Use asset to be calculated and
recognised, and therefore is appropriately reflected in the
financial statements.
In responding to the identified key audit matter we
completed the following audit procedures:
• Reviewing the technical accounting memo and
value in use calculations prepared by BDO,
challenging the assumptions made thereto
including obtaining both corroborative and
contradictory evidence of the key inputs;
• Obtaining evidence of current selling prices of
new and used machines in order to assess the
recoverable value if the machines were to be
sold to a third party and to also assess the
validity of the salvage value as part of the VIU
calculation;
• Performing sensitivity analysis on the key inputs
in the value in use calculations prepared;
• Engaging the PKF internal valuation team to
perform a WACC calculation to compare
against the discount rate applied by
management in their assessment; and
• Reviewing the disclosures in the financial
statements and ensuring they provide a true
and fair view of management’s assessment
performed.
ARGO BLOCKCHAIN PLC
Key observations:
We are satisfied that the inputs into this model reflect
management’s best assessment of the carrying value
and have been appropriate applied and disclosed.
Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual
report29. Our opinion on the group and parent company financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
●
●
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
● adequate accounting records have not been kept by the parent company, or returns adequate for our audit
●
have not been received from branches not visited by us; or
the parent company financial statements and the part of the directors’ remuneration report to be audited are
not in agreement with the accounting records and returns; or
●
certain disclosures of directors’ remuneration specified by law are not made; or
● we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of
the group and parent company financial statements and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the
group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
54
ARGO BLOCKCHAIN PLC
going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
● We obtained an understanding of the group and parent company and the sector in which they operate to
identify laws and regulations that could reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through discussions with management, industry
research and application of cumulative audit knowledge and experience of the sector.
● We determined the principal laws and regulations relevant to the group and parent company in this regard to
be those arising from:
o Companies Act 2006
o Canada Business Corporations Act
o Securities Law
o Anti Money Laundering Legislation
o Disclosure Rules and Transparency rules for listed entities
o SEC regulations
o Local tax laws and regulations
● We designed our audit procedures to ensure the audit team considered whether there were any indications
of non-compliance by the group and parent company with those laws and regulations. These procedures
included, but were not limited to:
o A review of the Board minutes throughout the year and post year-end
o A review of the RNS announcements
o A review of general ledger transactions
o Discussion with management
o Obtained confirmation from legal advisors
● We also identified the risks of material misstatement of the financial statements due to fraud. We considered,
in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls,
the risk relating to the valuation of digital assets and the impairment assessment of property, plant, and
equipment to be an area of potential for management bias. The valuation of the digital assets held at the
year-end have been classified as “level 2” in the fair value hierarchy table, and supporting evidence has been
obtained from a relevant trading platform to support the fair value of assets held.
In all of our audits, we addressed the risk of fraud arising from management override of controls by performing
audit procedures which included, but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are
unusual or outside the normal course of business.
●
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those
leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases
the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater
regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery,
collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
55
ARGO BLOCKCHAIN PLC
Other matters which we are required to address
We were appointed by the Board on 26 February 2021 to audit the financial statements for the period ending 31
December 2020 and subsequent financial periods. Our total uninterrupted period of engagement is 4 years, covering
the periods ending 31 December 2018 to 31 December 2021.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent
company and we remain independent of the group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone, other than the company and the company's members
as a body, for our audit work, for this report, or for the opinions we have formed.
David Thompson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London E14 4HD
28 April 2023
56
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Note
£’000
£’000
Year ended
December 2022
Year ended
December 2021
Revenues
Direct costs
Change in fair value of digital currencies
Gross (loss)/profit
Operating costs and expenses
Share based payment charge
Gain on hedging
Operating (loss)/profit
Fair value revaluation of variable consideration
Fair value (loss)/gain of investments
Loss on sale of subsidiary and investment
Loss on disposal of fixed assets
Finance costs
Other income
Impairment of tangible fixed assets
Impairment of intangible assets
Equity accounted loss from associate
(Loss)/profit before taxation
Tax credit/(expense)
(Loss)/profit after taxation
Other comprehensive income
Items which may be subsequently reclassified to
profit or loss:
- Currency translation reserve
- Equity accounted OCI from associate
-
Fair value gains on intangible digital assets
Total other comprehensive (loss)/income, net of
tax
Total comprehensive (loss)/income attributable
to the equity holders of the Company
Earnings per share attributable to equity owners
(pence)
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
7
8
21
8
22
7
25
15
14
19
8
7
19
18
16
13
16
47,363
(38,183)
(43,640)
74,204
(22,186)
1,628
(34,460)
53,646
(27,534)
(4,928)
1,695
(65,227)
4,038
(328)
(44,804)
(18,779)
(18,321)
3,012
(45,143)
(4,168)
(4,872)
(194,592)
(8,887)
(1,938)
-
42,821
236
183
(629)
-
(2,142)
-
-
-
(1,198)
39,271
361
(8,506)
(194,231)
30,765
1,735
(6,571)
(414)
(5,250)
(410)
6,571
414
6,575
(199,481)
37,340
(40.98p)
(40.98p)
7.7p
7.4p
The income statement has been prepared on the basis that all operations are continuing operations.
57
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF FINANCIAL POSITION
As at 31 December
2022
£’000
As at 31 December
2021
£’000
Note
ASSETS
Non-current assets
Investments at fair value through profit or loss
Investments accounted for using the equity method
Intangible fixed assets
Property, plant and equipment
Right of use assets
Total non-current assets
Current assets
Trade and other receivables
Digital assets
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share Capital
Share Premium
Share based payment reserve
Fair value reserve
Currency translation reserve
Other comprehensive income of equity accounted
associates
Accumulated surplus/(loss)
Total equity
Current liabilities
Trade and other payables
Contingent consideration
Loans and borrowings
Income tax
Deferred tax
Lease liability
Total current liabilities
Non-current liabilities
Deferred tax
Issued debt - bond
Loans
Lease liability
Total liabilities
Total equity and liabilities
15
16
18
19
19
20
21
23
23
24
24
24
24
24
25
25
26
13
13
13
27
26
58
344
2,374
1,744
63,850
435
68,747
5,641
368
16,662
22,671
91,418
478
143,748
6,801
-
1,768
-
(141,393)
11,402
8,310
-
9,624
-
2,196
4
20,134
6,586
31,356
21,492
448
59,882
91,418
403
13,817
5,604
111,604
350
131,778
63,359
80,759
11,803
155,921
287,699
468
139,581
1,905
414
33
6,571
52,838
201,810
15,245
8,071
23,391
7,679
286
7
54,679
541
26,908
3,391
370
85,889
287,699
ARGO BLOCKCHAIN PLC
The Group financial statements were approved by the Board of Directors on 28 April 2023 and authorised for issue;
they are signed on its behalf by:
Seif El-Bakly Chief Executive Officer (Interim)
The accounting policies and notes on pages 69 to 109 form part of the financial statements.
Registered number: 11097258
59
ARGO BLOCKCHAIN PLC
COMPANY STATEMENT OF FINANCIAL POSITION
Note
As at December
2022
£’000
As at December
2021
£’000
ASSETS
Non-current assets
Investment in subsidiaries
Investments at fair value through profit or loss
Investments accounted for using the equity method
Tangible fixed assets
Total non-current assets
Current assets
Trade and other receivables
Intercompany receivable, net
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share Capital
Share Premium
Share based payment reserve
Other comprehensive income of equity accounted
associates
Accumulated (loss)/surplus
Total equity
Current liabilities
Trade and other payables
Contingent consideration
Total current liabilities
Non-current liabilities
Loans and borrowings
Total liabilities
14
15
16
18
20
20
23
23
24
24
24
25
25
26
53,495
73
2,374
1,821
57,763
456
8,572
115
9,143
12,181
73
13,817
-
26,071
8,598
175,859
126
184,583
66,906
210,654
478
143,748
6,801
-
(120,113)
30,914
4,636
-
4,636
31,356
31,356
468
139,581
1,905
6,571
18,986
167,511
8,164
8,071
16,235
26,908
43,143
Total equity and liabilities
66,906
210,654
60
ARGO BLOCKCHAIN PLC
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and
related notes. The company’s total comprehensive loss for the year was £139.1m (2021: loss of £3.6m). The
Group financial statements were approved by the board of directors on 28 April 2023 and authorised for issue; they
are signed on its behalf by:
Seif El-Bakly
Chief Executive Officer (Interim)
The accounting policies and notes on pages 69 to 109 form part of the financial statements.
Registered number: 11097258
61
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CHANGES IN EQUITY
Share
Capital
Share
Premium
Currency
translation
reserve
Share based
payment
reserve
Fair
Revaluation
Reserve
£’000
£’000
£’000
£’000
£’000
Other
comprehensive
income of
associates
£’000
Balance at 1 January 2022
468
139,581
33
1,905
414
Total comprehensive income for
the period:
Profit for the period
Other comprehensive income
Total comprehensive income for the
period
Transactions with equity owners:
Share capital issued
Share based payment charge
Share options/warrants exercised
Total transactions with equity
owners
-
-
-
10
-
-
10
-
-
-
4,167
-
-
4,167
-
1,735
1,735
-
-
-
-
-
-
-
-
4,928
(32)
4,896
Balance at 31 December 2022
478
143,748
1,768
6,801
-
(414)
(414)
-
-
-
-
-
6,571
-
-
(6,571)
(6,571)
-
-
-
-
-
Accumulated
surplus/
(deficit)
Total
£’000
£’000
52,838
201,810
(194,231)
-
(194,231)
(5,250)
(194,231)
(199,481)
-
-
-
-
4,177
4,928
(32)
9,073
(141,393)
11,402
62
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CHANGES IN EQUITY
Share
Capital
Share
Premium
Currency
translation
reserve
Share based
payment
reserve
Fair
Revaluatio
n Reserve
Balance at 1 January 2021
Total comprehensive income for
the period:
Profit for the period
Other comprehensive income
Total comprehensive income for the
period
Transactions with equity owners:
Share capital issued
Issue costs of share capital
Share based payment charge
Share options/warrants exercised
Total transactions with equity owners
£’000
304
£’000
1,540
-
-
-
164
-
-
-
164
-
-
-
150,977
(12,936)
-
-
138,041
£’000
443
-
(410)
(410)
-
-
-
-
-
£’000
£’000
75
-
-
-
-
-
-
1,938
(108)
1,830
414
414
-
-
-
-
-
Other
comprehensive
income of
associates
£’000
-
-
6,571
6,571
-
-
-
-
-
Accumulated
surplus/
(deficit)
Total
£’000
£’000
21,965
24,327
30,765
-
30,765
6,575
30,765
37,340
-
-
-
108
151,141
(12,936)
1,938
-
108
140,143
Balance at 31 December 2021
468
139,581
33
1,905
414
6,571
52,838
201,810
63
ARGO BLOCKCHAIN PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Capital
Share Premium
Share based
payment reserve
Other comprehensive
income of associates
Balance at 1 January 2022
Total comprehensive income for the
period:
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with equity owners:
Share capital issued
Share based payments charge
Share options/warrants exercised
Total transactions with equity owners
£’000
468
£’000
139,581
-
-
-
10
-
-
10
-
-
-
4,167
-
-
4,167
Balance at 31 December 2022
478
143,748
£’000
1,905
-
-
-
-
4,928
4,896
6,801
£’000
6,571
-
(6,571)
(6,571)
-
-
-
-
-
Accumulated
surplus/
(deficit)
£’000
18,986
Total
£’000
167,511
(139,098)
-
(139,098)
(139,098)
(6,571)
(146,830)
-
-
-
4,177
4,928
-
9,073
(120,112)
30,915
64
ARGO BLOCKCHAIN PLC
Share Capital
Share Premium
Share based
payment reserve
Other comprehensive
income of associates
Balance at 1 January 2021
Total comprehensive income for the
period:
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Transactions with equity owners:
Share capital issued
Issue costs of share capital
Share based payments charge
Share options/warrants exercised
Total transactions with equity owners
Balance at 31 December 2021
£’000
304
£’000
1,540
£’000
75
-
-
-
164
-
-
-
164
468
-
-
-
150,977
(12,936)
-
-
138,041
139,581
-
-
-
-
1,938
(108)
1,830
1,905
65
Accumulated
surplus/
(deficit)
£’000
22,429
Total
£’000
24,348
(3,551)
-
(3,551)
(3,551)
6,571
3,020
-
-
108
108
151,141
(12,936)
1,938
-
140,143
£’000
-
-
6,571
6,571
-
-
-
-
6,571
18,986
167,511
ARGO BLOCKCHAIN PLC
GROUP STATEMENT OF CASH FLOWS
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for:
Depreciation/Amortisation
Foreign exchange movements
Loss on disposal of tangible assets
Finance cost
Loss on sale of subsidiary and investment
Fair value change in digital assets through profit or loss
Impairment of intangible digital assets
Impairment of property, plant and equipment
Investment fair value movement
Share of loss from associate
Non-cash settlement of management fees
Revaluation of contingent consideration
Derecognition of contingent consideration
Hedging gain
Share based payment expense
Working capital changes:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease/(increase) in digital assets
Net cash generated/(used in) from operating activities
Investing activities
Investment at fair value through profit or loss
Acquisition of subsidiaries, net of cash acquired
Cash disposed of on disposal of subsidiary
Investment in associate
Proceeds from sale of investment
Purchase of tangible fixed assets
Proceeds from disposal of tangible fixed assets
Purchase of digital assets
Proceeds from sale of digital assets
Mining equipment prepayment
Net cash generated from/(used in) investing activities
Financing activities
Increase/(decrease) in loans
Proceeds from issue of loan in conjunction with the disposal of
subsidiary
Lease payments
Loan repayments
Interest paid
Proceeds from debt issue – net of issue costs
66
Year ended
December
2022
£’000
Year ended
December
2021
£’000
(194,592)
39,271
23,449
(17,250)
18,779
18,321
44,804
43,640
4,168
45,143
328
4,872
-
(4,038)
-
(1,695)
4,928
(15,250)
(83,021)
36,751
(70,663)
-
-
(1,357)
-
-
(87,353)
10,028
-
84,225
-
5,543
78,418
8,033
(75)
-
(18,321)
-
11,511
589
-
2,142
629
(1,628)
535
-
(183)
1,198
(1,561)
(236)
(352)
-
1,938
(13,628)
12,289
(80,331)
(27,817)
(220)
(664)
-
(7,353)
772
(78,972)
-
(15,009)
11,308
(47,426)
(137,564)
22,239
-
(7,379)
(1,196)
(122)
26,908
Note
18, 19
14
21
18
19
15
16
8
25
22
20
25
21
15
17
19
16
15
19
21
21
14
26
ARGO BLOCKCHAIN PLC
Proceeds from shares issued – net of issue costs
23
Net cash (used in)generated from financing activities
-
(68,055)
134,684
175,133
Net increase in cash and cash equivalents
Effect of foreign exchange on cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2,935
1,924
11,803
16,662
9,752
-
2,051
11,803
Material non-cash movements:
● The Group sold its Helios facility during the year, in exchange for paying down existing debt and obtaining
●
new debt. See Note 19 for additional details.
In March 2022, the Group entered into an agreement to exchange mining machines and terminate a hosting
agreement. See Note 19 for additional details.
Group - net debt reconciliation
Current loans and borrowings
Current lease liability
Non-current issued debt – bonds
Non-current loans and borrowings
Non-current liability – lease
Cash and cash equivalents
Total net debt
26
26
26
Year ended
31 December
2022
£’000
(9,624)
(4)
(31,356)
(21,492)
(448)
16,662
(46,262)
Year ended
31 December
2021
£’000
(23,391)
(7)
(26,908)
(3,391)
(370)
11,803
(42,264)
The directors also consider their digital assets of £2.1m (2021 - £80.7m) as a liquid holding and as such net
funds/(debt) would be £(44.2m) (2021 – £65.4m).
67
ARGO BLOCKCHAIN PLC
COMPANY STATEMENT OF CASH FLOWS
Cash flows from operating activities
Loss before tax
Adjustments for:
Share of loss from associate
Fair value adjustment on contingent consideration
Foreign exchange movements
Share based payment expense
Loss on disposal of investment in subsidiary
Impairment of assets
Working capital changes:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Investing activities
Purchase of investments
(Increase)/decrease in loan to subsidiary
Net cash (used in(/generated from investing activities
Financing activities
Proceeds from debt issue – net of issue costs
Proceeds from shares issued – net of issue costs
Net cash generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Company - net debt reconciliation
Non-current loans and borrowings
Cash and cash equivalents
Total net (debt) / asset
68
Year ended
December
2022
Year ended
December 2021
Note
£’000
£’000
(138,633)
(3,551)
4,872
(4,038)
(6,158)
4,928
104,252
15,120
8,142
(3,328)
(14,843)
1,198
(409)
-
1,938
-
-
(8,411)
7,741
(1,494)
-
14,832
14,832
(7,353)
(154,075)
(161,428)
-
-
-
(11)
126
115
26,908
134,684
161,592
(1,330)
1,456
126
Year ended
Year ended
31 December
2022
31 December
2021
£’000
£’000
(31,356)
115
(31,241)
(26,908)
126
(26,782)
20
25
8
13
26
26
ARGO BLOCKCHAIN PLC
NOTES TO THE FINANCIAL STATEMENTS
1.
COMPANY INFORMATION
Argo Blockchain PLC (“the company”) is a public company, limited by shares, and incorporated in England and Wales.
The registered office is Eastcastle House, 27-28 Eastcastle Street, London, W1W 8DH. The company was
incorporated on 5 December 2017 as GoSun Blockchain Limited and changed its name to Argo Blockchain Limited
on 21 December 2017. Also on 21 December 2017, the company re-registered as a public company, Argo Blockchain
plc. Argo Blockchain plc acquired a 100% subsidiary, Argo Innovation Labs Inc. (together “the Group”), incorporated
in Canada, on 12 January 2018.
On 4 March 2021 the Group acquired 100% of the share capital of DPN LLC and was merged into new US entity Argo
Innovation Facilities (US) Inc (also 100% owned by Argo Blockchain plc).
On 11 May 2021 the Group acquired 100% of the share capital of 9377-2556 Quebec Inc and 9366-5230 Quebec
Inc. These are held by Argo Innovation Labs Inc. (Canada).
On 22 November 2022, the Group formed Argo Operating US LLC and Argo Holdings US Inc.
On 21 December 2022, Argo Innovation Facilities (US) Inc became Galaxy Power LLC. On 28 December 2022, the
Group sold Galaxy Power LLC.
The principal activity of the group is that of Bitcoin mining.
The common shares of the Group are listed under the trading symbol ARB on the London Stock Exchange. The
American Depositary Receipt of the Group are listed under the trading symbol ARBK on Nasdaq. The Group bond is
listed on the Nasdaq Global Select Market under the trading symbol ARBKL.
The financial statements cover the year ended 31 December 2022.
2.
BASIS OF PREPARATION
The financial statements have been prepared in accordance with UK-adopted international accounting standards and
with the requirements of the Companies Act 2006. The financial statements have been prepared under the historical
cost convention, except for the measurement to fair value certain financial and digital assets and financial instruments
as described in the accounting policies below.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts
in these financial statements are rounded to the nearest thousand GBP. Argo Innovations Labs Inc., 9377-2556
Quebec Inc, and 9366-5230 Quebec Inc.’s functional currency is Canadian Dollars; Argo Operating US LLC and Argo
Holdings US Inc.’s functional currency is United States Dollars; all entries from these entities are presented in the
Group’s presentational currency of Sterling. Where the subsidiaries functional currency is different from the parent,
the assets and liabilities presented are translated at the closing rate as at the Statement of Financial Position date.
Income and expenses are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of the transactions).
69
ARGO BLOCKCHAIN PLC
Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities,
income and expense. Actual results may differ from these estimates. The significant judgements made by
management in applying the Group’s accounting policies and the key sources of estimation uncertainty are disclosed
in Note 6.
3.
ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below.
Going Concern
The preparation of consolidated financial statements requires an assessment on the validity of the going concern
assumption. 2022 was a challenging year for Bitcoin miners: the depressed price of Bitcoin and the elevated global
hashrate caused hashprice, the primary measure of mining profitability, to reach all-time lows in Q4 2022. In addition,
global events resulted in disruption to fossil fuel energy markets which resulted in a significant increase in electricity
prices. The low hashprice and elevated power prices significantly reduced Argo’s profitability and its ability to generate
free cash flow. During Q4 2022, the Group evaluated several strategic alternatives to restructure our balance sheet
and improve our cash flow.
On 28 December 2022, the Group announced a series of transactions with Galaxy Digital Holdings, Ltd. (“Galaxy”)
that improved the Group’s liquidity position and enabled the Group to continue its mining operations. As part of the
transactions, Argo sold the Helios facility and real property in Dickens County, Texas to Galaxy for £54 million and
refinanced existing asset-backed loans via a new £29 million, three-year asset-backed loan with Galaxy. The
transactions reduced total indebtedness by £34 million and allowed Argo to simplify its operating structure.
While the Galaxy transactions strengthened the Group’s balance sheet, material uncertainties exist that may cast
significant doubt regarding the Group’s ability to continue as a going concern and meet its liabilities as they come
due. The significant uncertainties are:
1)
The Group’s debt service obligations of approximately £22 million to 30 June 2024. Please see the net debt
tables under the Group and Company cash flow statements for further information of the Group’s exposure to liabilities
and net position at the year end.
2)
The Group’s exposure to Bitcoin prices, power prices, and hashprice, each of which have shown volatility
over recent years and have a significant impact on the Group’s future profitability. The Group may have difficulty
meeting its liabilities if there are significant declines to the hashprice assumption or significant increases to the power
price, particularly where there is a combination of both factors. The Directors’ assessment of going concern includes
a forecast drawn up to 30 June 2024 using the Group’s estimate of the forecasted hashprice. Power costs are now
also partially fixed per kilowatt hour as Galaxy has hedged the majority of the power obligations at Helios and, as per
the hosting agreement in place, the Group has access to this power. Anticipated power costs based on this
arrangement are reflected in the forecast prepared.
Offsetting these potential risks to the Group’s cash flow are the Group’s current cash balance, the Group’s ability to
generate additional funds by issuing equity for cash proceeds and selling certain non-core Group assets.
Based on information from Management, as well as independent advisors, the Directors have considered the period
to 30 June 2024, as a reasonable time period given the variable outlook of cryptocurrencies and the Bitcoin halving
due in May 2024. Based on the above considerations, the Board believes it is appropriate to adopt the going concern
basis in the preparation of the Financial Statements. However, the Board notes that the significant debt service
requirements and the volatile economic environment, indicate the existence of material uncertainties that may cast
significant doubt regarding the applicability of the going concern assumption and the auditors have made reference
to this in their audit report.
70
ARGO BLOCKCHAIN PLC
Revenue and Other Income Recognition
Mined income: The Group recognised revenue during the period in relation to mined crypto. The Group enters into
contracts with the mining pool. The performance obligation is identified to be the delivery of crypto into the Group’s
wallet once an algorithm has been solved. The transaction price is the fair value of crypto mined, being the fair value
per the prevailing market rate for that crypto currency on the transaction date, and this is allocated to the number of
crypto mined. These criteria for performance obligation are assessed to have occurred once the crypto has been
received in the Group’s wallet. Mining earnings are made up of the baseline block reward and transaction fees of
between 5% to 10%, however, these are bundled together in the daily deposits from mining and therefore are not
capable of being analysed separately.
Management fees: The Group recognised management fees on the services provided to third parties for management
of mining machines on their behalf, ensuring the machines are optimised and mining as efficiently as possible. The
performance obligation is identified as the services are performed, and thus revenue is recorded over time.
Other Income: The Group receives credits and or coupons for the purchase and use of "Application-Specific Integrated
Circuits ("ASICs") on a periodic basis for Bitcoin Mining. These credits are provided to the Group after it purchases
ASICs based on the variance between the price paid by the Group versus the reduction in ASIC prices. The credits
are transferable. The Group elects to sells the credits at the market rate to willing buyers upon receipt of the credits.
Other income is recognised at the date the sale is completed.
Derivative Contracts – Hedging: In 2022, the Group used derivatives contracts in connection with some of its lending
activities and its treasury management. Derivative contracts are susceptible to additional risks that can result in a loss
of all or part of the investment. The Group’s derivative activities and exposure to derivative contracts are subject to
interest rate risk, credit risk, foreign exchange risk, and macroeconomic risks. In addition, Argo is also subject to
additional counterparty risks due to its potential inability of its counterparties to meet the terms of their contracts. The
Group participates in both Future and Forward contracts as well as option contracts. Some of these derivatives are
listed on exchange whereas some of these are traded over the counter.
Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated financial statements from the date the Group
gains control until the date the Group ceases to control the subsidiary.
The group consists of Argo Blockchain plc and its wholly owned subsidiaries Argo Innovation Labs Inc, Argo Operating
US LLC and Argo Holdings US Inc., 9366-5230 and 9377-2556 and Argo Innovation Labs Ltd. Argo Innovation Labs
Ltd has been dormant since incorporation.
In the parent company financial statements, investments in subsidiaries, joint ventures and associates are accounted
for at cost less impairment.
The consolidated financial statements incorporate those of Argo Blockchain plc and all of its subsidiaries (i.e., entities
that the group controls through its power to govern the financial and operating policies so as to obtain economic
benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are
incorporated from the date that control passes. On the basis that Argo Innovation Labs Limited was dormant during
the year and is immaterial to the Group, it was not included in these consolidated financial statements.
All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used into line with those used by other members of the
group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated
on consolidation.
71
ARGO BLOCKCHAIN PLC
Business Combinations
The group applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of
the acquire and the equity interests issued by the group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition
date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either
at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable
net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held
equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from
such re-measurement are recognised in profit or loss.
Contingent consideration is classified either as equity or as a financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the
equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying
amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date
of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-
acquisition movements in other comprehensive income is recognised in other comprehensive income with a
corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate
equal or exceeds its interest in the associate, including any other unsecured receivables, the Group does not
recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the
associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the
associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between
the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of
profit/(loss) of associates in the income statement.
Gains and losses resulting from upstream and downstream transactions between the Group and its associate are
recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates.
Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Dilution gains and losses arising in investments in associates are recognised in the income statement.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the CEO or equivalent. The directors consider that
the Group has only one significant reporting segment being crypto mining which is fully earned by a Canadian and
USA subsidiary for the financial year ended 31 December 2022.
72
ARGO BLOCKCHAIN PLC
Loans and issued debt
Loans and issued debt are recognised initially at fair value, net of transaction costs incurred. Loans and issued debt
are subsequently carried at amortised cost; any difference between the proceeds and the redemption value is
recognised in the income statement over the period of the borrowings, using the effective interest method. Loans and
issued debt are removed from the statement of financial position when the obligation specified in the contract is
discharged, cancelled or expired. Loans and borrowings and issued debt are classified as current liabilities unless the
Group has an unconditional right to defer settlement of a liability for at least 12 months after the end of the reporting
period.
Intangible assets
Intangible fixed assets comprise of the Group’s website and digital assets that were not mined by the Group and are
held by Argo Labs (our internal team) as investments. The Group’s website is recognised at cost and are subsequently
measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recorded within
administration expenses. Digital assets recorded under IAS 38 have an indefinite useful life initially measured at cost,
and subsequently measured at fair value.
Argo’s primary business is focused on cryptocurrency mining. Argo Labs is an in-house innovation arm focused on
identifying opportunities within the disruptive and innovative sectors of the broader cryptocurrency ecosystem. Argo
Labs uses a portion of Argo’s crypto assets to deploy into various blockchain projects.
Increases in the carrying amount arising on revaluation of digital assets are credited to other comprehensive income
and shown as other reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are
charged in other comprehensive income and debited against the fair value reserve directly in equity; all other
decreases are charged to the income statement.
The fair value of intangible cryptocurrencies on hand at the end of the reporting period is calculated as the quantity of
cryptocurrencies on hand multiplied by price quoted on www.coingecko.com, one of the leading crypto websites, as
at the reporting date.
Costs relating to the development of website are capitalised once all the development phase recognition criteria of
IAS 38 "Intangible Assets" are met. Amortisation is charged on a straight-line basis over the estimated useful life of 5
years. The useful life represents management's view of the expected period over which the Group will receive benefits
from the Website, as well as anticipation of future events which may impact their useful life, such as changes in
technology.
Goodwill is initially measured at cost (being the excess of the consideration transferred and the amount recognised
for non-controlling interests and any previous interest held of the net identifiable assets acquires and liabilities
assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the
difference is recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from
such remeasurement are recognised in profit or loss.
Tangible fixed assets
Tangible fixed assets comprise of right of use assets, office equipment, mining and computer equipment, data centres,
leasehold improvements, and electrical equipment.
Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of the right of use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any
lease incentives received. Right of use assets are depreciated on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets.
Office equipment assets are measured at cost, less any accumulated depreciation and impairment losses. Office
equipment is depreciated over 3 years on a straight-line basis.
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of
amortisation and any impairment losses. Cost includes the original purchase price of the asset and any costs
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ARGO BLOCKCHAIN PLC
attributable to bringing the asset to its working condition for its intended use. An item of property, plant and equipment
is recognised as an asset if it is probable that future economic benefits associated with the asset will flow to the entity,
and the cost of the asset can be measured reliably.
Data centres: Depreciation on the data centres is recognised so as to write off the cost or valuation of assets less
their residual values over their estimated useful lives of 25 years on a straight-line basis from when they are brought
into use. Depreciation is recorded in the Income Statement within general administrative expenses once the asset is
brought into use. Any land component is not depreciated.
Mining and computer equipment and leasehold improvements: Depreciation is recognised so as to write off the cost
or valuation of assets less their residual values over their estimated useful lives. It is 3 to 4 years in the case of mining
and computer equipment and 5 years in the case of the leasehold improvements, on a straight-line basis. Depreciation
is recorded in the Statement of Comprehensive Income within direct costs.
Electrical equipment: Depreciation is recognised on a straight-line basis to write off the cost less their residual values
over their estimated useful lives of 3 years.
Management assesses the useful lives based on historical experience with similar assets as well as anticipation of
future events which may impact their useful life.
Impairment of non-financial assets
At each reporting period end date, the Group reviews the carrying amounts of its non-financial assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an individual asset, the Group and Company estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Digital assets
Digital assets consist of mined bitcoin, and do not qualify for recognition as cash and cash equivalents or financial
assets and have an active market which provides pricing information on an ongoing basis.
The Group has assessed that it acts in a capacity as a commodity broker-trader as defined in IAS 2, Inventories, in
characterising its holding of Digital assets as inventory. If assets held by commodity broker-traders are principally
acquired for the purpose of selling in the near future and generating a profit from fluctuations in price or broker-traders’
margin, such assets are accounted for as inventory, and changes in fair value (less costs to sell) are recognised in
profit or loss. Digital assets are initially measured at fair value. Subsequently, digital assets are measured at fair value
with gains and losses recognised directly in profit or loss.
Digital assets are included in current assets as management intends to dispose of them within 12 months of the end
of the reporting period. Digital assets are cryptocurrencies mined by the Group. Cryptocurrencies not mined by the
Group are recorded as Intangible Assets (see note 18).
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and demand deposits with banks and other financial
institutions, that are readily convertible into known amounts of cash, and which are subject to an insignificant risk of
changes in value. The Group considers the credit risk on cash and cash equivalents to be limited because the
counterparties are banks with high credit ratings assigned by international credit rating agencies.
Financial instruments
Financial assets: Financial assets are recognised in the Statement of Financial Position when the Group becomes
party to the contractual provisions of the instrument. Financial assets are classified into specified categories. The
classification depends on the nature and purpose of the financial assets and is determined at the time of recognition.
Financial assets are subsequently measured at amortised cost, fair value through OCI, or fair value through profit and
loss.
The classification of financial assets at initial recognition that are debt instruments depends on the financial asset’s
contractual cash flow characteristics and the Group’s business model for managing them. The Group initially
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ARGO BLOCKCHAIN PLC
measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss,
transaction costs.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that
are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred
to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash
flows, selling the financial assets, or both.
Subsequent measurement: For purposes of subsequent measurement, financial assets are classified in four
categories:
● Financial assets at amortised cost
● Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
● Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments)
● Financial assets at fair value through profit or loss
Equity Instruments: The Group subsequently measures all equity investments at fair value. Dividends from such
investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments
is established. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the
statement of profit or loss as applicable.
Financial assets at amortised cost (debt instruments): This category is the most relevant to the Group. The Group
measures financial assets at amortised cost if both of the following conditions are met:
● The financial asset is held within a business model with the objective to hold financial assets in order to
collect contractual cash flows; and
● The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are
subject to impairment. Interest received is recognised as part of finance income in the statement of profit or loss and
other comprehensive income. Gains and losses are recognised in profit or loss when the asset is derecognised,
modified or impaired. The Group’s financial assets at amortised cost include other receivables and cash and cash
equivalents.
Derecognition: A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial
assets) is primarily derecognised (i.e., removed from the Group’s consolidated Balance sheet) when:
● The rights to receive cash flows from the asset have expired; or
● The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement;
and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group
has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has
neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the
asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case,
the Group also recognises an associated liability. The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has retained.
Impairment of financial assets: The Group recognises an allowance for expected credit losses (ECLs) for all debt
instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual
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ARGO BLOCKCHAIN PLC
cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted
at an approximation of the original EIR. The expected cash flows will include cash flows from the sale of collateral
held or other credit enhancements that are integral to the contractual terms.
The Group recognises an allowance for ECLs for all debt instruments not held at fair value through profit or loss. ECLs
are based on the difference between the contractual cash flows due in accordance with the contract and all the cash
flows that the Group expects to receive, discounted at an approximation of the original EIR. For credit exposures for
which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit
losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a
lifetime ECL).
For the years ended 31 December 2022 and 2021 the Group has not recognised any ECLs.
For other receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as
permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss
allowance based on the financial asset’s lifetime ECL at each reporting date.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain
cases, the Group may also consider a financial asset to be in default when internal or external information indicates
that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit
enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering
the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement
activity.
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A
financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred. The Company has an Intercompany loan due from its 100% Canadian
subsidiary for which there is no formal agreement including payment date and therefore it cannot be considered to be
in breach of an agreement and accordingly the loan is not subject to adjustments and is maintained at its book value
in the financial statements.
Financial liabilities: Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through
profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs. The Group’s financial liabilities include trade
and other payables and loans.
Subsequent measurement: The measurement of financial liabilities depends on their classification, as described
below:
Loans and trade and other payables: After initial recognition, interest-bearing loans and borrowings and trade and
other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised
in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as
through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and
other comprehensive income. This category generally applies to trade and other payables.
Derecognition: A financial liability is derecognised when the associated obligation is discharged or cancelled or
expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying
amounts is recognised in profit or loss or other comprehensive income.
Equity instruments: Equity instruments issued by the group are recorded at the proceeds received, net of transaction
costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion
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ARGO BLOCKCHAIN PLC
of the group. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group
uses the definition of a lease in IFRS 16.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less
any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the
lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the
right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same
basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the
discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. The lease
liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in
future lease payments.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the
right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to
zero.
Taxation
The tax expense represents the sum of tax currently payable or receivable and deferred tax.
Current tax: The tax currently payable or receivable is based on taxable profit or loss for the year. Taxable profit or
loss differs from net profit or loss as reported in the income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the
reporting end date.
Deferred tax: Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable
that taxable profits will be available against which deductible temporary differences can be utilised. Deferred income
tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates
and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and
there is sufficient taxable profit available against which the temporary difference can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the
asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and
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ARGO BLOCKCHAIN PLC
liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and
the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense unless those costs are
required to be recognised as part of non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to
terminate the employment of an employee or to provide termination benefits.
The group does not have any pension schemes.
Share-based payments
Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of
the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed
on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A
corresponding adjustment is made to equity.
When the terms and condition of equity settled share-based payments at the time they were granted are subsequently
modified, the fair value of the share-based payment under the original terms and conditions and under the modified
terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over
the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the
original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less
than the original fair value.
Cancellations or settlements are treated as an acceleration of vesting and the amount that would have been
recognised over the remaining vesting period is recognised immediately.
As a result of the increase in share price and the impact of the estimation of share-based payments the Group has
now recognised an expense for the outstanding share options and warrants.
Foreign exchange
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of
the transactions. At each reporting end date, monetary assets and liabilities that are determined in foreign currencies
are retranslated at the rates prevailing on the reporting end date - Gains and losses arising on translation are included
in the income statement for the period. At each reporting end date, non-monetary assets and liabilities that are
determined in foreign currencies are retranslated at the rates prevailing on the opening balance sheet date. Gains
and losses arising on translation of subsidiary undertakings are included in other comprehensive income and
contained within the foreign currency translation reserve.
Earnings per share
Basic earnings per share is calculated by dividing:
●
the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary
shares;
● by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account:
●
●
the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares; and
the weighted average number of additional ordinary shares that would have been outstanding, assuming the
conversion of all dilutive potential ordinary shares.
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4.
FINANCIAL RISK FACTORS
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s
overall risk management programme seeks to minimise potential adverse effects on the Group’s financial
performance. Risk management is undertaken by the Board of Directors.
Market Risk
The Group is dependent on the state of the cryptocurrency market, sentiments of crypto assets as a whole, as well
as general economic conditions and their effect on exchange rates, interest rates and inflation rates. During the year
the Group sold its digital assets held at 31 December 2021 at a significant loss. The Group now sells its Bitcoin
production as it is mined to reduce the impact of Bitcoin prices.
The Group is also subject to market fluctuations in foreign exchange rates. The subsidiary (Argo Innovation Labs Inc.)
is based in Canada, and transacts in CAD$, USD$ and GBP. 9377-2556 Quebec Inc. and 9366-5230 Quebec Inc.
are based in Canada and transact in CAD. Argo Innovations Facilities (US) Inc., Argo Holdings US Inc. and Argo
Operating US LLC are located in the United States of America and transacts in USD. The Group bond is denominated
in USD. Cryptocurrency is primarily convertible into fiat through USD currency pairs and through USD denominated
stable coins and is the primary method for the Group for conversion into cash. The Group maintains bank accounts
in all applicable currency denominations.
Foreign currency sensitivity
The following tables demonstrate the sensitivity to a reasonable possible change in USD and CAD exchange rates,
with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value
of monetary assets and liabilities.
2022
2021
2022
2021
Change in USD
rate
+/-10%
Effect on profit
before tax
£’000
+/- 4,302
Effect on pre-
tax equity
£’000
-
+/-10%
+/-250
+/-87
Change in CAD
rate
Effect on profit
before tax
£’000
Effect on pre-
tax equity
£’000
+/-10%
+/- 1,471
-
+/-10%
+/-1,611
+/-3,208
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ARGO BLOCKCHAIN PLC
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonable possible change in interest rates on the portion of
the loans and borrowings affected. With other variables held constant, the impact on the Group’s profit before tax is
affected through the impact on floating rate borrowings, as follows.
Increase/decrease
in basis points
+/-180
Effect on
profit before
tax
£’000
+/-522
0%
+/-0
2022
2021
Credit risk
Credit risk arises from cash and cash equivalents as well as any outstanding receivables. Management does not
expect any losses from non-performance of these receivables. The amount of exposure to any individual counter
party is subject to a limit, which is assessed by the Board.
The Group considers the credit risk on cash and cash equivalents to be limited because the counterparties are banks
with high credit ratings assigned by international credit rating agencies. However, the banking sector is not currently
favourable toward crypto based businesses in all of the jurisdictions that the Group operates and as such the Group
has opened accounts with a number of Tier 2 banks in order to mitigate the risk of an account being deactivated or
closed by the bank. Management continues to assess various opportunities to partner with FDIC-insured banks and
or financial institutions.
The Company considers the intercompany loan to its subsidiary (Argo Innovation Labs Inc.) to be fully recoverable
based on review of projected cash flows and acceptance of regular payments directly to the Company’s creditors.
The carrying amount of financial assets recorded in the financial statements represent the Group’s and Company’s
maximum exposure to credit risk. The Group and Company do not hold any collateral or other credit enhancements
to cover this credit risk.
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ARGO BLOCKCHAIN PLC
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
Management updates cashflow projections on a regular basis and closely monitors the cryptocurrency market on a
daily basis. Accordingly, the Group’s controls over expenditure are carefully managed, in order to maintain its cash
reserves. The Treasury committee meets on a weekly basis to make decisions around future cashflows and working
capital requirements. Decisions may include considering debt/equity options alongside selling Bitcoin.
The table below analyses the Group’s non-derivative financial liabilities and net-settled derivative financial liabilities
into relevant maturity groupings, based on the remaining period at the Statement of Financial Position to the
contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are
essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual
undiscounted cash flows.
The Group complied with all covenants during the year and through to the reporting date.
At 31 December 2022
Loans
Lease liabilities
Issued debt – bonds
At December 2021
Loans
Lease liabilities
Issued debt – bonds
Capital risk management
Less than 1
year
Between 1
and 2 years
Between 2
and 5 years
Over 5 years
9,624
4
-
11,314
8
-
10,178
12
31,356
23,901
21
-
2,188
42
-
693
63
26,908
-
424
-
-
251
-
The Group’s objectives when managing capital is to safeguard the Group’s ability to continue as a going concern, in
order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital
structure. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders or issue new shares.
The Group carefully monitors its EBITDA vs. debt, net assets vs. debt and market capitalisation vs. debt ratios. Please
see the net debt tables below the cashflows and note 27 showing the fair value hierarchy of liabilities.
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5.
ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
The Group has adopted all recognition, measurement and disclosure requirements of IFRS, including any new and
revised standards and Interpretations of IFRS, in effect for annual periods commencing on or after 1 January 2022.
The adoption of these standards and amendments did not have any material impact on the financial result or position
of the Group.
At the date of authorisation of these financial statements, the following Standards and Interpretation, which have not
yet been applied in these financial statements, were in issue but not yet effective:
Description
Standard or
Interpretatio
n
Effective date
annual
accounting period beginning
on or after
for
IAS 1
Amendments – Presentation and Classification of Liabilities
IFRS 16
Amendments – Lease liability in a sale and leaseback
IAS 1
IAS 8
IAS 12
Amendments – Disclosure of Accounting Policies
Amendments – Definition of Accounting Estimates
Amendments – Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
IAS 17
Amendments – Insurance Contracts
TBC
TBC
1 January 2023
1 January 2023
1 January 2023
1 January 2023
The Group has not early adopted any of the above standards and intends to adopt them when they become effective.
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KEY JUDGEMENTS AND ESTIMATES
6.
In the application of the Group’s accounting policies, the directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised where the revision affects only that period, or in the period
of the revision and future periods where the revision affects both current and future periods. The estimates and
assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and
liabilities are outlined below.
Valuation of tangible and intangible fixed assets – Notes 18 and 19
The directors considered whether any impairments were required on the value of the property, plant and equipment.
In doing so they made use of forecasts of revenues and expenditure prepared by the Group and came to the
conclusion that impairment of those assets were required based on current forecasts. Key assumptions include Bitcoin
production, hashprice and the discount rate.
The assets held within Argo Labs are classified as intangible assets. Any impairment of these assets is reflected in
the income statement and any increases in fair value are reflected in the fair value reserve. Argo Labs is an in-house
innovation arm focused on identifying opportunities within the disruptive and innovative sectors of the broader
cryptocurrency ecosystem. Argo Labs uses a portion of Argo’s crypto assets to deploy into various blockchain
projects.
Valuation of investments in subsidiaries and amounts due from group companies – Note 20
The Board considered amounts due from group companies and whether any further impairments were required on
their carrying value. When considering these amounts they made use of forecasts of the profitability of the subsidiary
and of their revenues and expenditure and concluded that impairment of those assets was unnecessary based on
current forecasts and performance during the first part of 2023.
The forecasts to support this were built using our existing internal models showing positive cash contribution and
profitability of the subsidiaries and their future value to the Group as a whole. Both pre and post year end these models
continue to show that the contribution to the Group is at least the carrying value of these investments and as such no
impairment has been recognised.
Share-based payments – Note 24
During the year (and in previous years) share based payments were made based on the fees due to certain individuals
for services to be performed by them in the future. In calculating these payments, where possible the Directors
consulted with professional advisers to establish the market rate for these services. In addition to this, the company
has also issued warrants and options to Directors, consultants and employees which have been valued in accordance
with the Black Scholes model. Significant estimation and judgement is required by the directors when using the Black
Scholes method. Further details of these estimates are available in note 22.
Investments accounted for using the equity method – Note 16
The Group holds significant influence over certain entities that are accounted for under the equity method of
accounting. The shareholdings and nature of relationship details are in Note 16. The equity accounted loss has been
calculated based on the latest management accounts made available by the investee company, which were
unaudited.
Contingent liabilities – Notes 13 and 28
The Group is subject to tax liabilities as assessed by the tax authorities in the jurisdictions in which it operates. The
Group has recorded its tax liabilities based on the information which it has available, as described in Note 13.
However, a tax authority could challenge our allocation of income and transfer pricing, or assert that we are subject
to a tax in a jurisdiction where we believe we have not established a taxable connection. If successful, these
challenge could increase our expected tax liability in one or more jurisdictions. The Group is also subject to a class
action lawsuit as described in Note 28 and no accrual has been made as there is no basis to estimate any liability.
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7.
REVENUES
Crypto currency mining - worldwide
Crypto currency management fees – United States
Total revenue
Year ended
31 December
2022
£’000
47,267
96
Year ended
31 December
2021
£’000
70,325
3,879
47,363
74,204
Due to the nature of Cryptocurrency mining, it is not possible to provide a geographical split of the revenue stream.
Cryptocurrency mining revenues are recognised at a point in time.
Cryptocurrency management fees are services recognised over time.
Other Income
Argo held 2,441 Bitcoin (fair valued at £80m as at 31 December 2021) on its Balance Sheet at the beginning of
2022. The Group used up to 1,504 Bitcoins as collateral with Galaxy Digital LP for a short-term payable on demand
loan of USD$30 million (£22.2m) taken out on December 23, 2021. To protect its Bitcoin holdings used as collateral
for the loan and reduce overall exposure, Argo took positions in the markets which resulted in a net hedge gain of
£1.7m for 2022.
Gain on Hedging
Gain on Hedging
Total gain on hedging
2022
£’000
1,695
1,695
2021
£’000
-
-
84
ARGO BLOCKCHAIN PLC
8.
EXPENSES BY NATURE
Direct Costs
Depreciation of mining hardware
Hosting and other costs
Total direct costs
Administrative expenses
Legal, professional, and regulatory fees
Salary and other employee related costs
Depreciation and amortisation
Insurance
Indirect taxes
Freight, postage & delivery
Consulting fees
Repairs and maintenance
Office general expenses
Travel
Public relations and associated activities
Impairment of intangible assets
Hedging costs
Carbon credits
Audit fees
Bank charges
Capital loss
Research costs
Write off of variable contingent consideration
Settlement re Crypto mining management fees
Foreign exchange gain (loss)
Total operating costs and administrative expenses
Finance Costs
Interest on loans, including associated prepayment penalties
Total finance costs
9.
AUDITOR’S REMUNERATION
In relation to statutory audit services
Other audit assurance services
Total auditor’s remuneration
85
2022
£’000
16,549
21,634
38,183
2022
£’000
12,763
9,610
6,900
6,027
3,684
1,314
828
863
840
678
519
-
-
-
310
240
116
91
-
-
(17,250)
27,533
2022
£’000
18,321
18,321
2022
£’000
251
59
310
2021
£’000
11,129
11,057
22,186
2021
£’000
1,533
2,662
382
1,408
-
-
684
692
424
128
699
535
326
252
239
247
-
-
(352)
(1,561)
589
8,887
2021
£’000
2,142
2,142
2021
£’000
170
52
222
ARGO BLOCKCHAIN PLC
10.
The average monthly number of persons (including directors) employed by the group during the period was:
EMPLOYEES
Directors and employees
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Share based payments
2022
2021
Number
Number
82
26
2022
£’000
8,934
646
30
4,928
14,538
2021
£’000
2,286
199
25
1,392
3,902
The average monthly number of persons (including directors) employed by the company during the period was:
Directors and employees
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Share based payments
2022
2021
Number
Number
6
4
2022
£’000
1,072
44
12
4,928
6,056
2021
£’000
406
8
1
330
745
86
ARGO BLOCKCHAIN PLC
11.
DIRECTOR’S REMUNERATION
Director’s remuneration for qualifying services
Senior management loss of office
Share based payments
Total remuneration for directors and key management
2022
£’000
1,284
-
1,522
2,806
2021
£’000
856
132
431
1,419
The amounts above are remunerated through both salaries (of which, some are included in 10) and through service
companies (as disclosed in note 29). Further details of Directors’ remuneration are available in the Remuneration
report. The highest paid director during the year earned £588k (2021: £455k).
12.
EARNINGS PER SHARE
The basic earnings per share is calculated by dividing the profit/(loss) attributable to equity shareholders by the
weighted average number of shares in issue.
The Group and Company has in issue 18,698,304 warrants and options at 31 December 2022 (2021: 17,688,897).
Net profit/(loss) for the period attributable to ordinary equity holders from
continuing operations (£’000)
2022
2021
(194,321)
30,765
Weighted average number of ordinary shares in issue (‘000)
473,930
397,513
Basic earnings (loss) per share for continuing operations (pence)
(40.98)
7.7
Net profit/(loss) for the period attributable to ordinary equity holders for
continuing operations (£’000)
(194,321)
30,765
Diluted number of ordinary shares in issue (‘000)
473,930
415,201
Diluted earnings (loss) per share for continuing operations (pence)
(40.98)
7.4
The diluted loss per Ordinary Share is calculated by adjusting the weighted average number of Ordinary Shares
outstanding to consider the impact of options, warrants and other dilutive securities. As the effect of potential
dilutive Ordinary Shares in the current year would be anti-dilutive, they are not included in the above calculation
of dilutive earnings per Ordinary Share for 2022.
87
ARGO BLOCKCHAIN PLC
13.
TAXATION
Current tax:
Current tax on (loss)/profit for the year
Adjustments in respect of prior periods
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Total deferred tax liability
2022
£’000
(8,316)
-
(8,316)
2022
£’000
7,955
7,955
2021
£’000
7,679
-
7,679
2021
£’000
827
827
Total tax (credit)/charge
(361)
8,506
No deferred tax has been recognised on the losses brought forward and carried forward on the UK, Canada and
US losses given the uncertainty on the generation of future profits.
Income tax expense
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted
average tax rate applicable to profits of the consolidated entities as follows:
Profit (loss) before taxation
Expected tax charge (recovery) based on a weighted
average of 25% (2021 - 25%) (UK, US and Canada)
Effect of expenses not deductible in determining taxable
profit
Capital allowances in excess of depreciation
Other tax adjustments
Other timing differences
Origination and reversal of temporary differences
Unutilised tax losses carried forward
Taxation charge in the financial statements
2022
£’000
(194,592)
(48,648)
26,406
6,848
205
-
(827)
15,655
(361)
2021
£’000
39,271
9,746
1,779
(3,770)
(137)
(385)
827
445
8,506
The group has tax losses available to be carried forward and used against trading profits arising in future periods of
approximately £34,000,000 (2021 - £10,476,000).
88
ARGO BLOCKCHAIN PLC
The weighted average applicable tax rate was 25% (2021: 25%).
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the
offsetting of balances within the same tax jurisdiction, is as follows:
Deferred tax liabilities
Digital assets
Gain on fair value of property acquired (see note 17)
Share of other comprehensive income of associates
Property, plant and equipment
Total deferred tax
Current portion
Non-current
2022
£’000
(286)
442
-
8,626
8,782
2,196
6,586
2021
£’000
286
442
99
-
827
286
541
A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For
example, Her Majesty’s Revenue & Customs (“HMRC”), the IRS or another tax authority could challenge our
allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our
intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual
property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we
believe we have not established a taxable connection and such an assertion, if successful, could increase our
expected tax liability in one or more jurisdictions.
14.
INVESTMENT IN SUBSIDIARIES AND LOSS ON SALE OF SUBSIDIARY
Company
Details of the Company’s subsidiaries at 31 December 2022 and 31 December 2021 are as follows:
Name of Undertaking
Argo Innovation Labs Inc.
Argo Innovation Labs Limited
Argo Innovation Facilities (US) Inc.
9377-2556 Quebec Inc.
9366-5230 Quebec Inc.
Argo Holdings US Inc.
Argo Operating US LLC
Country of
Incorporation
Canada
UK
USA
Canada
Canada
USA
USA
Ownership
Interest (%)
100%
100%
100%
100%
100%
100%
100%
Voting Power
Held (%)
100%
100%
100%
100%
100%
100%
100%
Nature of
Business
***
Dormant
*
**
**
****
*
* The provision of cryptocurrency mining services
** The provision of cryptocurrency mining sites
*** Converted from the provision of cryptocurrency mining services to cost centre in 2022
**** Holding company
89
ARGO BLOCKCHAIN PLC
Investment in subsidiaries
At 1 January
Additions
Disposals
At 31 December
2022
£’000
2021
£’000
12,181
53,494
(12,181)
53,494
-
12,181
-
12,181
The cost of the investment above is in respect of the DPN LLC acquisition further detail can be found in note 19.
9377-2556 Quebec Inc. and 9366-5230 Quebec Inc. are the GPUone subsidiaries acquired on 11 May 2021 with
registered addresses of 8 avenue William Dobell, Baie-Comeau, Quebec G4Z 1T7 and 10205 Irene Vachon, Mirabel,
Quebec J7N 3E3 respectively. More information on this acquisition can be found in note 17.
Argo Holdings US Inc. was incorporated on November 22, 2022, with a registered office of 1209 Orange Street,
Wilmington, Delaware, USA, 19801. The company contributed shares in Argo Innovation Facilities (US) valued at
£53.5m.
Argo Operations US LLC was formed on November 22, 2022, with a registered office of 1209 Orange Street,
Wilmington, Delaware, USA, 19801.
Argo Innovation Facilities (US) Inc was incorporated on 25 February 2021 with a registered address of 2028 East Ben
White Blvd. Austin, TX 78740. This entity held the Helios facility and real property in Dickens County, Texas. On
21 December 2022, Argo Innovation Facilities (US) Inc. was converted to Galaxy Power LLC . Galaxy Power LLC
was sold on 28 December 2022 pursuant to an equity purchase agreement. The proceeds received for the sale
were £53.0 million against a book value £97.8 million resulting in a loss on sale for the Group of £44.8 million.
The effects of the disposal of Galaxy Power LLC on the cash flows of the Group were:
Group
At 28 December
2023
£000
1,357
104,888
297
106,542
9,764
9,764
96,778
45,298
6,676
51,974
96,778
(44,804)
Carrying amounts of assets and liabilities as at the date of disposal:
Cash and bank balances
Property, plant and equipment
Trade and other debtors
Total assets
Trade and other creditors
Total liabilities
Net assets disposed of
Cash flows arising from disposal:
Proceeds used to paydown existing debt
Proceeds used for new loans
Total Proceeds
Net assets disposed of (as above)
Loss on disposal
90
ARGO BLOCKCHAIN PLC
15.
INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Non-current
Group
At 1 January
Foreign exchange movement
Additions
Fair value through profit or loss
Disposals
At 31 December
2022
£’000
403
20
249
(328)
-
344
2021
£’000
1,393
-
219
183
(1,392)
403
16.
INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Opening balance
Acquired during the period
Share of loss
Share of fair value (losses)/gains on intangible
assets through other comprehensive income
Closing balance
2022
2021
£000’s
13,817
-
(4,872)
(6,571)
2,374
£000s
-
8,444
(1,198)
6,571
13,817
Set out below are the associates of the Group as at 31 December 2022, which, in the opinion of the Directors,
significant influence is held. The associate as listed below has share capital consisting solely of ordinary shares, which
are held directly by the Group. The country of incorporation or registration is also their principal place of business.
Nature of investment in associates:
Name of entity Address
of
the
registered office
Emergent
Entertainment
PLC
Pluto Digital plc)
(Previously
Hill Dickinson LLP, 8th
The Broadgate
Floor
Primrose
20
Tower,
Street, London, United
Kingdom, EC2A 2EW
of
%
ownership
interest
Nature
relationship
of
Measurement
method
19.94%
Refer below
Equity
On 3 February 2021 Argo invested in Pluto Digital PLC (“Pluto”), a crypto venture capital and technology company.
The investment was satisfied with 75,000 Polkadot with a fair value at that date of £1.1m. Further to this in a second
round of funding the Group invested an additional £7.4m on 8 March 2021.
In addition, Argo holds 121,666,666 warrants at a price of £0.12 each and 35,450,000 warrants at a price of £0.06
each. If Pluto was fully diluted Argo’s ownership would be 33.26% as at 31 December 2022 including the exercise of
the share warrants.
The warrants expired unexercised in February and March 2023. In October 2022, Pluto merged with Maze Theory to
become Emergent Entertainment PLC (“Emergent”).
91
ARGO BLOCKCHAIN PLC
Argo owns 19.94% (2021 - 24.65%) of the total share capital and voting rights of the business. The Group retains the
right to appoint a board member from Argo on Emergent’s board based on its current ownership percentage.
Emergent Entertainment PLC is a next-generation entertainment company that brings storytellers and their audiences
closer together by harnessing new technologies including virtual reality, augmented reality, artificial intelligence and
blockchain.
Emergent Entertainment is a private company and there is no quoted market price available for its shares.
There are no contingent liabilities relating to the Group’s interest in the associates.
The audited financial information for the period ended 30 September 2021, together with the unaudited management
accounts for the period from 1 October 2021 to 31 December 2022, have been made available by Emergent to the
Group and the figures in the above represent Argo’s share of the loss for the period and movements in the fair value
of net assets (net of deferred tax).
Summarised financial information for associates
Set out below is the preliminary, unaudited financial information for Emergent Entertainment PLC which is accounted
for using the equity method.
Summarised Statement of Financial Position
Current
Cash and cash equivalents
Other current assets (excluding cash)
Total current assets
Trade payables
Other current liabilities
Total current liabilities
Non-current
Tangible fixed assets
Investments and other non-current assets
Total non-current assets
Financial liabilities
Total non-current liabilities
Net assets
As at
December 31,
2022
£000’s
2,964
As at
December 31,
2021
£000’s
1,759
3,650
6,614
280
74
354
106
11,596
11,702
4,809
4,809
13,153
335
2,094
88
1,494
1,582
49
56,000
56,049
2,807
2,807
53,754
92
ARGO BLOCKCHAIN PLC
Summarised Statement of Comprehensive Income, Emergent Entertainment PLC
Revenue
Cost of sales
Gross profit
Operating costs
Revaluation loss – digital assets
Loss from operations
Non-operating costs
Income tax expense (recovery)
Post-tax loss
Other comprehensive income
Total comprehensive income (loss)
2022
£000’s
352
(224)
128
(12,088)
(12,810)
(24,770)
(209)
2,579
(22,400)
(26,991)
(49,391)
January 12 to
December 31,
2021
£000’s
-
-
-
7,652
(2,394)
5,258
-
575
4,867
26,991
21,824
The information above reflects the amounts presented in the financial statements of the associate (and not Argo
Blockchain Plc’s share of those amounts) adjusted for differences in accounting policies between the Group and the
associate.
Reconciliation of summarised financial information
Summarised financial information (as adjusted)
Net assets, opening
Acquired during the period
Profit/(loss) for the period
Other comprehensive income
Closing net assets
Interest in associates (2022: 19.94%; 2021:
24.65%)*
Goodwill
Carrying value
2022
2021
£000’s
£000’s
56,052
-
(22,400)
(26,991)
6,661
2,374
-
2,374
-
34,228
(4,867)
26,691
56,052
13,818
-
13,818
*The percentage share of the associate profit or loss for the year was calculated and recorded on a month-by-month
basis, based on the movements in the percentage ownership, from the unaudited management accounts.
93
ARGO BLOCKCHAIN PLC
17.
BUSINESS COMBINATION
GPUone subsidiaries acquired from GPUone Holding Inc.
On 11 May 2021, the Group acquired 100% of the share capital of GPUone 9377-2556 Quebec Inc. and GPUone
9366-5230 Quebec Inc. from its shareholder GPUone Holding Inc. for a total consideration of £5.5m; consisting of
£212k being satisfied in cash and the balance satisfied by the cancellation of certain prepayments and deposits
previously paid by Argo to the vendor. Each of these acquired entities owned and operated a data centre within which
Argo was the lead tenant.
The acquisition was performed to enable the Group to obtain control of its hosting facility and power costs across its
facilities in Canada. From acquisition on 11 May 2021 to 31 December 2021 the GPUone subsidiaries loss amounted
to £3.4m which is fully consolidated. No revenue has been generated from these entities since acquisition, however
both entities have provided hosting services to Argo Innovation Labs Inc. Both GPUone entities were dormant up until
the date of acquisition, when the relevant assets and liabilities acquired were transferred by GPUone Holding Inc. to
these entities immediately prior to acquisition. There is no difference between the amount consolidated within profit
and loss and the amount which would have been consolidated if the acquisition happened on 1 January 2021.
The consideration was negotiated on an arm’s length basis and primarily on the basis of the valuation of the land and
buildings being acquired. The directors attribute the consideration as fair value of the land and buildings with no
goodwill being recognised as currently Argo does not anticipate hosting any third parties at these sites in the medium
term.
The fair values of the acquisition date assets and liabilities, together with any separately identifiable intangible assets,
have been provisionally determined at 30 September 2021 because the acquisition was completed late in the period.
The Group is currently obtaining the information necessary to finalise its valuation. On a £1 for £1 basis certain
deposits and other receivables totalling £668k were acquired. The directors consider these amounts fully recoverable
and as such these receivables have not been impaired. Liabilities assumed are incorporated at their cost.
The following table summarises the consideration paid for the GPUone subsidiaries and the fair value of assets
acquired and liabilities assumed at the acquisition date:
Consideration
Cash
Payment for deposits
Cancellation of prepayment and deposits
Total consideration
Recognised amounts of identifiable assets acquired, and liabilities assumed
Cash and cash equivalents
Property, plant and equipment (Note 11)
Trade and other receivables
Trade and other payables
Property mortgages
Lease liability
Goodwill
Total
£’000
213
668
4,656
5,537
£’000
4
10,779
387
(326)
(5,010)
(377)
80
5,537
Fair value of assets acquired was assessed in line with independent valuations provided by CBRE of the sites. Given
the continued demand for power sites and data centres in North America the Directors consider the valuations to be
prudent, however they are still in line with the fair value and consideration paid for the entities, primarily (as discussed
above) for Argo to gain access to the low cost of power and direct control of management of the miners at those sites.
No acquisition costs have been recognised in the above calculations.
94
ARGO BLOCKCHAIN PLC
18.
INTANGIBLE FIXED ASSETS
Group
Cost
At 1 January 2022
Additions
Disposals
At 31 December 2022
Amortisation and impairment
At 1 January 2022
Foreign exchange movement
Fair value movement
Amortisation charged during the period
At 31 December 2022
Goodwill
£’000
80
-
-
80
-
-
-
Digital
assets
£’000
5,303
1,728
(2,058)
4,973
121
(1,413)
4,601
-
3,309
Website
£’000
671
-
-
671
450
(18)
-
147
579
2022
Total
£’000
6,054
1,728
(2,058)
5,724
571
(1,431)
4,601
147
3,888
Balance At 31 December 2022
80
1,664
92
1,836
Group
Cost
At 1 January 2021
Additions
Disposals
At 31 December 2021
Amortisation and
impairment
At 1 January 2021
Foreign exchange movement
Impairment
Fair value gain
Amortisation charged during the period
At 31 December 2021
Goodwill
£’000
Digital
assets
£’000
Website
£’000
-
80
-
80
-
-
-
-
0
-
18,216
(12,792)
5,424
-
-
535
(414)
-
121
2021
Total
£’000
671
18,296
(12,792)
6,175
303
9
535
(414)
138
571
5,604
671
-
-
671
303
9
-
-
138
450
221
Balance At 31 December 2021
80
5,303
Digital assets are cryptocurrencies not mined by the Group. The Group held crypto assets during the year,
which are recorded at cost on the day of acquisition. Movements in fair value between acquisition (date mined)
and disposal (date sold), and the movement in fair value in crypto assets held at the year end, impairment of
the intangible assets and any increase in fair value are recorded in the fair value reserve.
The digital assets held below are held in Argo Labs (a division of the Group) as discussed above. The assets
are all held in secure custodian wallets controlled by the Group team and not by individuals within the Argo
Labs team. The assets detailed below are all accessible and liquid in nature.
95
ARGO BLOCKCHAIN PLC
As at 31 December 2022
Crypto asset name
BTC
Polkadot - DOT
Ethereum - ETH
USDC (stable coin – fixed to USD)
Alternative coins
As at 31 December 2022
Coins / tokens
23
32,964
698
58,151
-
Fair value
£’000
332
118
519
48
647
1,664
96
ARGO BLOCKCHAIN PLC
19.
TANGIBLE FIXED ASSETS
Group
Cost
At 1 January 2022
Foreign exchange movement - cost
Additions
Transfers to another class - cost
Disposals
At 31 December 2022
Depreciation and impairment
At 1 January 2022
Foreign exchange movement
Depreciation charged during the period
Impairment in asset
Disposals
At 31 December 2022
Carrying amount
At 1 January 2022
At 31 December 2022
Right
of use
Assets
Office
Equipment
Mining and
Computer
Equipment
Machine
compone
nts
£’000
£’000
£’000
£’000
Assets
Under
Constructi
on
£’000
Leasehold
Improvements
Data
centres
Equipment
Total
£’000
£’000
£’000
£’000
358
17
75
-
-
450
8
-
7
-
-
15
350
435
49
-
-
-
(2)
47
-
-
14
-
-
14
49
33
58,499
-
61,306
85
10,466
-
130,763
2,744
116,520
--
(60,083)
117,680
18,507
868
16,549
29,797
-
65,721
-
17,364
-
-
17,364
-
-
-
15,121
-
15,121
7,287
-
(68,593)
-
-
-
-
-
-
4
7
-
-
560
-
68,593
(68,593)
96
11,026
65
3
19
-
-
87
229
11
6,846
225
(5,817)
1,494
39,992
51,959
-
61,306
2,244
-
20
9
10,237
9,532
-
86
-
-
86
-
-
12
-
-
12
-
74
10,612
134,053
-
(128,678)
146,749
18,809
882
23,448
45,143
(5,817)
82,464
111,954
64,285
97
ARGO BLOCKCHAIN PLC
Group
Cost
At 1 January 2021
Foreign exchange movement
Acquisition through business
combination
Additions
Transfer to another class
At 31 December 2021
Depreciation and impairment
At 1 January 2021
Foreign exchange movement
Depreciation charged during the
period
Transfer to another class
At 30 December 2021
Carrying amount
At 1 January 2021
At 31 December 2021
Right of
use
Assets
£’000
Office
Equipment
£’000
Mining and
Computer
Equipment
£’000
Assets Under
Construction
Leasehold
Improvements
Data centres
£’000
£’000
£’000
Total
£’000
7,379
-
358
-
(7,379)
358
-
-
3,281
(3,273)
8
7,379
350
-
-
-
49
-
49
-
-
-
-
-
-
49
-
-
12,180
49,126
-
61,306
-
-
-
-
-
-
61,306
17,865
(62)
-
33,317
7,379
58,499
7,443
(65)
7,856
3,273
18,507
10,487
39,992
98
85
-
-
-
-
85
48
-
17
-
65
-
20
-
25,329
-
10,466
-
-
10,466
-
-
229
-
229
(62)
23,004
82,492
-
130,763
7,491
(65)
11,383
-
18,809
-
10,237
17,866
111,954
ARGO BLOCKCHAIN PLC
All property, plant and equipment is owned by the subsidiary, Argo Innovation Labs Inc. During the year, the lease
for the right of use assets was settle by purchasing the mining equipment. Book balances were transferred to mining
and computer equipment.
Acquisition of DPN LLC
On 8 March 2021 the Group completed the acquisition of DPN LLC to acquire 160 acres (with option to purchase a
further 157 acres) of land in West Texas for the construction of a 200MW mining facility for completion mid-2022.
The acquisition of DPN LLC, effectively comprising the land acquisition in West Texas, has been treated as an
asset acquisition in the financial statements. The consideration for the acquisition was an initial price of GBP 3.6m,
satisfied by the issue and allotment to the shareholders of DPN LLC of 3,497,817 new ordinary shares in Argo, with
up to a further 8.6m of shares payable if certain contractual milestones related to the facility are fulfilled.
Initial issue and allotment of GBP 3.6m has been recognised based on estimated fair value of assets received at
acquisition in line with IFRS 2 Share based payments. Contingent consideration balance of this business
combination has been subsequently measured at fair value with changes recognised in profit and loss in line with
IFRS 9. Fair value of assets acquired was assessed in line with independent valuations of site by CBRE as well as
external financial due diligence and financial modelling. Financial models used historical power purchase
assumptions for the area and the Company’s internal hash rate and Bitcoin pricing assumptions to help the
Company evaluate the financial benefits of developing a Bitcoin mining operation on the land. Work performed by
DPN LLC from August 2019, when it purchased the land, to March 2021, when it sold the land to the Company, to
prepare for a Bitcoin mining operation added to the value of the land for that purpose.
Consideration at 8 March 2021
Share based payment
Contingent consideration to be settled in shares
Total
Allocated as follows
Tangible fixed assets (Asset under construction)
Total
£’000
3,521
8,659
12,180
£’000
12,180
12,180
Property, Plant and Equipment Impairments and Loss on Sale of Subsidiary
The Group has a single line of business, crypto mining. As such, the Group has one cash generating unit (CGU). At
each reporting date, the Group assesses whether there is an indication that an asset may be impaired. If an indication
exists, the Group estimates an asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s
or CGU’s fair value less costs of disposal and its value in use. When the carrying value of an asset or CGU exceed
its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing fair value of Mining and Computer Equipment, the Group used readily available tera hash pricing
("hashprice") less a 15% discount for used equipment. In assessing value in use, the discounted estimated future
cash flows over the useful life of the mining machines using a pre-tax discount rate of 23.28%. As a result of the
analysis, an impairment of £24 million was recorded. A 5% change in the hashprice has a £6.1million impact on the
impact of the impairment. A 1% change in the discount rate has a of £1.1 million impact on the impairment.
In assessing the recoverable amount of the CGU, the Group calculated the discounted cash flows of the CGU using
a terminal growth rate of 3%. The pre-tax discount rate used was 23%. As a result of this analysis, an impairment of
£5.8 million was recorded which has also been attributed to Mining and Computer Equipment.
99
ARGO BLOCKCHAIN PLC
Impairment of Chips
In assessing the fair value of machine components, the Group used readily available chip set prices and
management’s estimate of other components in the chip sets to determine the value of chips on hand. As a result of
this analysis, an impairment of £15 million was recorded.
Loss on Sale
During the year, the Group sold chips that were previously purchased. The proceeds on these chip sales were £10,029
and the group recorded a loss on disposal of fixed assets of £18,779.
Mining Machine Swap
In March 2022, the Group entered into an agreement to exchange mining machines and terminate a hosting
agreement. With the completion of Helios, the Group no longer required third party hosting services. The agreement
provided the hosting provider with ownership of the Group's machines at their facilities in exchange for new mining
machines for our Helios facility. The hash rate between the two groups of mining machines was similar. This
transaction lacks commercial substance, therefore, IFRS 16 requires the mining machines acquired be recorded at
the book value of the mining machines transferred to the hosting service provider.
20.
TRADE AND OTHER RECEIVABLES / INTERCOMPANY
Trade and other receivables
Mining equipment prepayments
Other taxation and social security
Total trade and other receivables
Group
2022
£’000
-
4,958
683
5,641
Company
2022
£’000
-
456
-
456
Group
2021
£’000
13,194
47,426
2,739
63,359
Company
2021
£’000
8,008
-
590
8,598
Mining equipment prepayments consist of payments made and due on mining equipment due to arrive in 2023.
Other taxation and social security consist of purchase tax recoverable in Canada. GST and QST debtors are greater
than 90 days as at 31 December 2022.
COMPANY - INTERCOMPANY
Amounts due from group companies, net
Company
Company
2022
£’000
8,572
2021
£’000
175,859
Funds advanced to group companies were used for operating expenses, settle debt and purchase tangible and
intangible assets. There are no terms of repayment. The amounts due are non-interest bearing. The decrease in
2022 is as a result of the debts from Argo Innovation Facilities (US) which were converted to shares to be issued
prior to the sale.
100
ARGO BLOCKCHAIN PLC
21. DIGITAL ASSETS
The Group mined crypto assets during the period, which are recorded at fair value on the day of acquisition.
Movements in fair value between acquisition (date mined) and disposal (date sold), and the movement in fair value
in crypto assets held at the year end, are recorded in profit or loss.
All of the Group’s holding in crypto currencies other than Bitcoin are now classified as intangible assets.
At the period end, the Group held Bitcoin representing a fair value of £528k. The breakdown of which can be seen
below:
Group
At 1 January
Additions
Crypto assets purchased and received
Crypto assets mined
Total additions
Disposals
Transferred to/from intangible assets
Crypto assets sold
Total disposals
Fair value movements
Gain/(loss) on crypto asset sales
Movements on crypto assets held at the year end
Total fair value movements
2022
£’000
80,759
207
47,267
47,474
330
(84,555)
(84,225)
(43,526)
(114)
(43,640)
2021
£’000
4,637
16,569
70,325
86,894
(5,424)
(6,976)
(12,400)
437
1,191
1,628
At 31 December
368
80,759
Carrying value of digital assets pledged as
collateral
-
49,759
As at 31 December 2022, digital assets comprised 141 Bitcoin equivalents (2021: 2,441 Bitcoin).
101
ARGO BLOCKCHAIN PLC
22.
SHARE OPTIONS AND WARRANTS
The following options and warrants over Ordinary Shares have been granted by the company and are outstanding:
Grant Date
Expiry date
Exercis
e Price
Number of
options/warrants
outstanding
2022 ‘000
Number of
options/warran
ts exercisable
2022 ‘000
15 January 2021
19 January 2021
19 April 2021
17 June 2021
25 July 2018
17 July 2019
5 February 2020
3 February 2021
24 June 2021
27 June 2021
1 July 2021
13 July 2021
22 September 2021
23 November 2021
17 December 2021
19 May 2022
27 June 2022
31 March 2022
31 July 2022
31 August 2022
31 September 2022
31 October 2022
31 November 2022
31 December 2022
15 January 2031
18 January 2026
19 March 2024
19 March 2024
25 July 2024
16 July 2025
4 February 2030
2 February 2031
23 June 2031
26 June 2031
30 June 2031
12 July 2031
22 September 2031
23 November 2031
16 December 2031
19 May 2032
27 June 2032
31 March 2027
31 July 2027
31 August 2027
31 September 2027
31 October 2027
31 November 2027
31 December 2027
£1.25
£0.90
£1.35
£1.50
£0.16
£0.16
£0.07
£0.94
£1.26
£1.35
£1.16
£1.00
£1.57
£1.30
£0.86
£0.51
£0.34
£0.94
£1.00
£1.04
£1.12
£1.05
£1.02
£1.01
Options/
Warrants
Warrants
Warrants
Warrants
Warrants
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Options
Warrants
Warrants
Warrants
Warrants
Warrants
Warrants
Warrants
At 1 January 2022
Granted
Exercised
Lapsed
240
110
224
22
1,000
537
4,362
159
1,000
500
500
1,000
4,150
500
675
3,350
250
60
10
10
10
10
10
10
18,698
240
110
224
22
1,000
537
4,362
151
500
250
250
500
1,758
184
234
861
42
60
10
10
10
10
10
10
11,345
Number of
options and
warrants ‘000
17,689
5,220
(1,593)
(2,618)
Weighted
average exercise
price £
0.81
0.50
0.07
0.89
Exercisable at 31 December 2022
11,345
0.61
102
ARGO BLOCKCHAIN PLC
At 1 January 2021
Granted
Exercised
Lapsed
Outstanding at 31 December 2021
Exercisable at 31 December 2021
Number of
options and
warrants ‘000
42,202
10,698
(34,351)
(860)
17,689
7,596
Weighted
average exercise
price £
0.13
1.63
0.12
0.95
0.81
0.26
The weighted average remaining contractual life of options and warrants as at 31 December 2022 is 93 months (2021
-102 months). If the exercisable shares had been exercised on 31 December 2022 this would have represented 61%
(2021 – 2%) of the enlarged share capital.
At the grant date, the fair value of the options and warrants prior to the listing date was the net asset value and post
listing determined using the Black-Scholes option pricing model. Volatility was calculated based on data from
comparable listed technology start-up companies, with an appropriate discount applied due to being an unlisted entity
at grant date. Risk free interest has been based on UK Government Gilt rates for an equivalent term.
Grant date
25 July 2018
17 July 2019
5 February 2020
3 February 2021
24 June 2021
27 June 2021
1 July 2021
13 July 2021
22 September 2021
23 November 2021
17 December 2021
19 May 2022
27 June 2022
Grant date
share price
Exercise
price
Volatility
Life
Risk Free
interest
rate %
Marketability
discount
0.08
0.09
0.07
0.94
1.26
1.35
1.23
1.00
1.57
1.30
0.86
0.51
0.34
0.16
40%
6 years
0.16
40%
6 years
0.07
40%
6 years
0.94
112%
10 years
1.26
112%
10 years
1.35
112%
10 years
1.16
112%
10 years
1.00
112%
10 years
1.57
112%
10 years
1.30
112%
10 years
0.86
0.51
0.34
112%
112%
112%
10 years
10 years
10 years
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
75%
90%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
103
ARGO BLOCKCHAIN PLC
23.
ORDINARY SHARES
Ordinary share capital
Issued and fully paid
468,082,335 Ordinary Shares of £0.001 each
Issued in the period
9,742,831 Ordinary Shares of £0.001 each
Fully paid not yet issued
Ordinary Shares of £0.001 each
477,825,166 Ordinary Shares of £0.001 each
Share premium
At beginning of the period
Cancelled during the period
Issued in the period
Issue costs
Fully paid not yet issued
At the end of period
24.
RESERVES
As at 31
December
2022
£’000
468
10
-
478
139,581
-
4,167
-
-
143,748
As at 31 December
2021
£’000
303
165
-
468
1,540
-
150,977
(12,936)
-
139,581
The following describes the nature and purpose of each reserve:
Reserve
Description
Ordinary Shares
Represents the nominal value of equity shares
Share Premium
Amount subscribed for share capital in excess of nominal value
Share based payment
reserve
Represents the fair value of options and warrants granted less amounts
transferred on exercise, lapse or expiry
Currency translation
reserve
Cumulative effects of translation of opening balances on non-monetary assets
between subsidiaries functional currencies (Canadian dollars and US Dollars) and
Group presentational currency (Sterling).
Fair value reserve
Cumulative net gains on the fair value of intangible assets
Other comprehensive
income of equity accounted
associates
Accumulated surplus
The other comprehensive income of any associates is recognised in this reserve
Cumulative net gains and losses and other transactions with equity holders not
recognised elsewhere.
104
ARGO BLOCKCHAIN PLC
25.
TRADE AND OTHER PAYABLES
Trade payables
Accruals and other payables
Other taxation and social security
Total trade and other creditors
Group
2022
Company
2022
Group
2021
Company
2021
£’000
£’000
£’000
2,754
5,042
514
8,310
1,791
2,845
-
4,636
10,259
4,986
-
15,245
£’000
8,023
141
-
8,164
Within trade payables is £nil (2021: £7,194,000) for amounts due for mining equipment not yet received.
The directors consider that the carrying value of trade and other payables is equal to their fair value.
Contingent consideration
As part of the acquisition of DPN LLC up to a further £8.6m of shares being payable if certain contractual milestones
related to the facility are fulfilled (see note 19).
The amount payable as contingent consideration is payable in shares and as such is revalued as at the balance sheet
date and any gain or loss is recognised in profit or loss, which for the year ended 31 December 2021 amounted to
£236k.
In June 2022, the Company issued 8,147,831 Ordinary Shares to settle £4m in contingent consideration. The
remaining contingent consideration of £4m was not earned and as a result was reversed into profit or loss.
26.
LOANS AND BORROWINGS
Non-current liabilities
Issued debt – bond (a)
Galaxy loan (b)
Mortgages – Quebec facilities (c)
Lease liability
Total
Current liabilities
Galaxy loan (b)
As at 31 December
2022
As at 31 December
2021
£’000
£’000
31,356
19,183
2,309
448
53,296
26,908
-
3,391
370
30,669
8,819
22,239
105
ARGO BLOCKCHAIN PLC
Mortgages- Quebec facilities (c)
Lease liability
Total
(a) Unsecured Bonds:
805
4
9,628
1,152
7
23,398
In November 2021, the Group issued an unsecured 5-year bond with an interest rate of 8.75%. The bonds mature
on 30 November 2026. The bonds may be redeemed for cash in whole or in part at any time at the Group’s
option (i) on or after 30 November 2023 and prior to 30 November 2024, at a price equal to 102% of their principal
amount, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after 30 November
30 and prior to 30 November 2025, at a price equal to 101% of their principal amount, plus accrued and unpaid
interest to, but excluding, the date of redemption, and (iii) on or after November 30, 2025 and prior to maturity, at
a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of
redemption. The Group may redeem the bonds, in whole, but not in part, at any time at its option, at a redemption
price equal to 100.5% of the principal amount plus accrued and unpaid interest to, but not including, the date of
redemption, upon the occurrence of certain change of control events. The bonds are listed on the Nasdaq Global
Select Market under the symbol ARBKL.
(b) Galaxy and related loans
On 23 December 2021 the Group entered into a loan agreement with Galaxy Digital LP for a loan of USD$30
million (£22.2m). The proceeds of the loan were used, in conjunction with funds raised previously, to continue the
build-out the Texas data centre, Helios. The short-term loan was a Bitcoin collateralised loan with an interest rate
of 8% per annum. This loan was repaid during the 2022 as part of the Galaxy transaction.
In March 2022, the Group entered into loan agreements with NYDIG ABL LLC for loans in the amounts of USD$97
million for the purchase of mining machines and Helios infrastructure, respectively. The loan was repaid during
the year as part of the Galaxy transaction.
In May 2022, the Group entered into a loan agreement with Liberty Commercial Finance for a loan of USD$1.2
million (£1.0m) to purchase equipment. The loan is repayable over a period of 36 months with an interest rate of
11.9%. In June 2022, the loan was assigned to North Mill Equipment Finance LLC (“New Mill”). The loan was
repaid during the year as part of the Galaxy transaction.
In December 2022, the Group sold Galaxy Power LLC (see note 14) and entered into a loan agreement with
Galaxy Digital LLC for USD$35 million (£29m). Proceeds were used to pay off the Galaxy Digital LP, New Mill
and NYDIG loans and working capital. The Galaxy Digital LLC loan is payable monthly based on an amortization
schedule over 32 months with an interest rate of the secured overnight financing rate by the Federal Reserve
Bank of New York plus 11%. The loan is secured by the Group’s property, plant and equipment.
(c) Mortgages – Quebec Facilities
The mortgages are secured against the two buildings at Mirabal and Baie-Comeau and are repayable over
periods from 3 months to 48 months at interest rates between 6.95% and 9.45% respectively.
106
ARGO BLOCKCHAIN PLC
27.
FINANCIAL INSTRUMENTS
Carrying amount of financial assets
Measured at amortised cost
- Mining equipment prepayments
-
Trade and other receivables
- Cash and cash equivalents
Measured at fair value through profit or loss
Total carrying amount of financial assets
Carrying amount of financial liabilities
Measured at amortised cost
Trade and other payables
-
- Short term loans
Long term loans
-
Issued debt – bonds
-
Lease liabilities
-
Measured at fair value
Group
2022
£’000
Company
2022
£’000
Group
2021
£’000
Company
2021
£’000
4,958
-
16,662
344
21,964
8,310
9,624
21,492
31,356
452
456
-
115
73
644
3,675
-
-
31,356
-
47,426
13,194
11,803
403
72,826
10,259
23,391
3,391
26,908
377
8,071
72,397
-
183,867
126
73
184,066
8,163
-
-
26,908
-
8,071
43,142
-
Fair value of contingent consideration
-
-
Total carrying amount of financial
liabilities
Fair Value Estimation
71,234
35,031
Fair value measurements are disclosed according to the following fair value measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)
-
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (that is, as prices), or indirectly (that is, derived from prices) (Level 2)
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
(Level 3). This is the case for unlisted equity securities.
-
The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2022
and 31 December 2021.
Assets
Financial assets at fair value
through profit or loss
- Equity holdings
- Digital assets
Total at 31 December 2022
Liabilities
Level 1
Level 2
Level 3
£’000
£’000
£’000
21
-
21
-
368
2,112
73
-
73
Total
£’000
95
2,272
2,367
107
ARGO BLOCKCHAIN PLC
Financial liabilities at fair
value through profit or loss
- Deferred contingent
consideration
Total at 31 December 2022
Assets
Financial assets at fair value
through profit or loss
- Equity holdings
- Digital assets
Total at 31 December 2021
Liabilities
Financial liabilities at fair
value through profit or loss
- Deferred contingent
consideration
Total at 31 December 2021
-
-
-
-
-
-
Level 1
Level 2
Level 3
£’000
£’000
£’000
-
-
Total
£’000
329
-
329
-
80,759
80,759
73
-
73
402
80,759
81,161
-
-
-
-
8,071
8,071
8,071
8,071
All financial assets are in listed and unlisted securities and digital assets.
There were no transfers between levels during the period.
The Group recognises the fair value of financial assets at fair value through profit or loss relating to unlisted
investments at the cost of investment unless:
-
-
-
-
There has been a specific change in the circumstances which, in the Group’s opinion, has permanently
impaired the value of the financial asset. The asset will be written down to the impaired value;
There has been a significant change in the performance of the investee compared with budgets, plans or
milestones;
There has been a change in expectation that the investee’s technical product milestones will be achieved or
a change in the economic environment in which the investee operates;
There has been an equity transaction, subsequent to the Group’s investment, which crystallises a valuation
for the financial asset which is different to the valuation at which the Group invested. The asset’s value will
be adjusted to reflect this revised valuation; or
- An independently prepared valuation report exists for the investee within close proximity to the reporting date.
The deferred consideration has been fair valued to the yearend date as the amount is to be paid in Argo
-
shares.
108
ARGO BLOCKCHAIN PLC
28.
COMMITMENTS AND CONTINGENCIES
The Group’s material contractual commitments relate to the hosting services agreement with Galaxy Digital Qualified
Opportunity Zone Business LLC, which provides hosting, power and support services at the Helios facility. Whilst
management do not envisage terminating agreements in the immediate future, it is impracticable to determine monthly
commitments due to large fluctuations in power usage and variations on foreign exchange rates, and as such a
commitment over the contract life has not been determined. The agreement is for services with no identifiable assets,
therefore, there is no right of use asset associated with the agreement.
The Group has entered into an agreement for the purchase of mining machines to be delivered in 2023. A deposit of
USD$3.3M (£2.7m) is on account. Payments of USD$438k (£363k) and USD$424k (£352k) will be made prior to
delivery of the machines.
As the company disclosed on February 8, 2023, it is currently subject to a class action lawsuit. The case, Murphy vs
Argo Blockchain plc et al, was filed in the Eastern District of New York on 26 January 2023. The company refutes all
of the allegations and believes that this class action lawsuit is without merit. The company is vigorously defending
itself against the action. We are not currently subject to any other material pending legal proceedings or claims.
29.
RELATED PARTY TRANSACTIONS
Key management compensation
Key management includes Directors (executive and non-executive) and senior management. The compensation paid
to related parties in respect of key management for employee services during the period was made from Argo
Innovation Labs Inc., amounting to: £118,030 (2021 - £36,769) paid to POMA Enterprises Limited in respect of fees
of Matthew Shaw (Non-executive director); £182,759 (2021 - £566,591) due to Vernon Blockchain Inc in respect of
fees of Peter Wall (CEO). Maria Perrella and Raghav Chopra (Non-executive directors) were paid £121,391 and
£105,492 as at year end respectively.
From Argo Blockchain PLC, Alex Appleton (CFO) through Appleton Business Advisors Limited was paid £378,161
(2021 - £308,359).
30.
CONTROLLING PARTY
There is no controlling party of the Group.
31.
POST BALANCE SHEET EVENTS
In January 2023, Alex Appleton resigned from his position as Chief Financial Officer, Executive Director and
Secretary of the Group.
In February 2023, Peter Wall resigned from his position as Chief Executive Officer and Interim Chairman, Sarah
Gow resigned from her position as non-executive director on the Board.
In April 2023, Jim MacCallum was appointed Chief Financial Officer of the Group.
109