Argo Blockchain is a global leader in cryptocurrency mining, mining Bitcoin and Zcash with one of the largest and most efficient operations, powered by clean energy.
Bitcoin price surge sends shares to all time high
Since we last updated on Argo Blockchain on 26th November 2020, Bitcoin has surged through its previous all-time high of c.$20,000 to c.$60,000 as we write. As every $1 increase in the BTC price falls through to gross margins, Argo has seen record trading activity. Boosted by a recent US listing, the markets have sent the shares from 11.75p at the time of our last note to a high of 339.81p.
Fundraisings bring in a combined £49.2 million
In mid-January, Argo took advantage of its rising share price to raise a total of £22.4 million at a price of 80p per share via a private placement. The net proceeds are being used for working capital as well as for the expansion of mining capacity in Q1 and Q2 of 2021 through a purchase from two leading but un-named manufacturers. Then in March another £26.8 million was raised at 200p per share, with the funds to be used, amongst other things, for investments in crypto businesses and capital investment.
Increased cash flow allows investments in wider crypto market
Over the past few months Argo has used its increased cash flows to make investments in two crypto market businesses. In late December the company co-lead an investment in Luxor Technologies, a hashrate management platform, putting in $100,000. Then in early February Argo announced it had taken a 25% stake in crypto venture capital and technology company Pluto Digital Assets for c.£1 million, becoming its lead investor.
Texas land deal provides significant long-term upside
The big news on the infrastructure fund is that Argo has acquired 320 acres of land in West Texas with access of up to 800MW of electrical power. Argo intends to build a new 200MW mining facility over the next 12 months which will provide electricity at some of the lowest rates in the world, with the majority from renewable sources. Argo will also gain access to a pre-negotiated $100 million credit facility to fund the build out of the facility and further expand the mining fleet.
Valuation matrix suggests both upside and downside potential
We have put together a valuation matrix for Argo which covers a range of scenarios regarding BTC price growth and earnings multiples. The matrix suggests both upside and downside to the current share price, although we assume no contribution from the planned Texas facility whose long-term contribution could be massive. Our stance is Speculative Buy.
RISK WARNING & DISCLAIMER
Argo Blockchain is a research client of Align Research. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/
For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
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