Argo Blockchain plc (ARBK) Earnings Call Transcript & Summary

Good afternoon, ladies and gentleman. Welcome to the Argo Blockchain plc townhall meeting. [Operator Instructions]. I'd now like to hand over to David Robinson, founder of [indiscernible].

Thanks, Mark. So good afternoon, everyone. Welcome to this virtual town hall meeting. I'll deal with some administrative matters first. Meeting is being recorded to ensure that complete record is kept. As Mark mentioned, if you wish to ask questions, please use the chat function on the video conference platform. It'll be helpful in your question, if you've identified yourself either as a holder of shares, ADSs or [indiscernible] in the company. So perhaps [indiscernible] your question with word of shares or ADRs, ADSs, all [indiscernible], and that will just help us identify which category you fall into. My name is David [indiscernible] partner Flaggate. We're solicitors to Argo, and we're providing English law advice regarding its proposed restructuring. I'm joined by my partner, Jeremy Whitson; my Argo CEO, Justin Nolan; and John York, the retail Advocate. Scott Beach, Argo's GC is also online. [indiscernible] acts as an independent representative of those shareholders and net holders, not professional institutional otherwise known as retail holders. The retail Advocates role is to act as an intermediary between Argo and retail holders not to provide from the legal advice. John will speak and try to summarize the restructuring plan. The purpose of this meeting is to provide you with information regarding the proposed plan and to give you an opportunity to raise questions on it. After we've spoken, we will try to answer your questions. Any questions which we're not able to answer during the meeting can also be addressed to John in his capacity to [indiscernible] using the e-mail address, which is in the [indiscernible] statement and on the planned website. If there's any inconsistency between what we say in the meeting and the information in the -- on the plan website and the recent documentation, particularly in the explanatory statement, that recent information prevails over what we've said. So just going to take you through the key points in the restructuring plan, explain the process and then open it up to some questions. So a restructuring plan is an English or procedure, which allows a company in a difficult financial position to restructure its capital to enable it to keep trading. Under this procedure, the company proposes a restructuring plan and if this receives the court's approval, [indiscernible] creditors and our shareholders including those who do not consent to or voted to approve the proposal. As regards to the process we're in, Argo asked the court for permission to call meetings where planned participants, which are shareholders, note holders and secure [indiscernible] to attend planned meetings to vote for or get the restructuring plan. This request was made to court hearing notices dealing here. That was on the 5th of November. At this hearing the court was asked -- was not asked to decide whether the plan is fair or whether it would approve it. The call simply considered whether Argo had met the legal requirements to call the meetings with the planned participants, which the court confirmed it had done so. Argo then sent the planned participants, detailed information regarding the restructuring plan and the effect it will have on their legal rights ahead of the planned meetings, which will be held on 2nd December. This detailed information, including details of how to vote is contained in the explanatory statement, which is on the plan website. Following the plan meetings, there will be a second court hearing on the 8th of December, where Argo will ask the court to approve the plan. The court will consider whether the plan is fair, especially considering the effect of the plan will have on plan participants in comparison to the relevant alternative. The relevant alternative is the most likely scenario to recur if the plan is not sanctioned. In this case, that would be an administration of Argo leading to an orderly wind or liquidation. The court will also consider that the sanction hearing whether the company has fairly allocated the benefits generated or preserved by the plan. I'll cover this in more detail shortly. As you know, Argo is a blockchain technology company focused on large scale mining of Bitcoin and other crypto currencies. Argo uses mining machines to solve complex cryptographic algorithms in the blockchain network. The exchange for verifying or solving such algorithms, Argo received rewards and fees denominated in cryptocurrency. In summary, Argo provides computing power to the blockchain network in exchange for cryptocurrency assets on a significant scale. Argo is a [indiscernible] listed on the London Stock Exchange and on the NASDAQ stock market. Argo required to continue to third-party funding since December 2022 following a sustained period of low crypto asset prices and higher costs arising from vest largely outside the group's control. In particular, [indiscernible] Argo operations is considerable, Following Russia's invasion of Ukraine February 22, global engine prices soared. This increase in energy cost has had a significant impact on Argo's business, and its power cost represents an average about 50% of our total cost in each of the last 3 years. From time to time, cryptocurrency [indiscernible] is known in the market is a crypto winter of a long period of low cryptocurrency prices, low crypto assets, negative market sentiment. Final crypto bubble in 2021, the market experienced a significant crush, with Bitcoin losing 30% of its value by the end of the year. This began a crypto winter, which lasted until 2024. Since August revenue comes from the sale of mine to Bitcoin and other cryptocurrencies, this extended period of low prices have a significant impact on our financial position. In April '24, [indiscernible] took place, which reduced the reward for Bitcoin minus by 50%. The group's mining margin fell from in $11.5 million being 39% margin in 2024 to $1.2 million in 2025, while costs continue to rise. During this period, to ensure the business is survival, Argo disposed of the Helios Bitcoin mining facility in Dickens County in Texas and its related to operations and in connection with that attention to a loan agreement with Galaxy. The Helios transaction secures the company's short-term future, but underlying issues remained, which the Board have been addressing ever since. Argo structured its investment bank to Stifel to undertake extensive marketing between September '23 and June '25 to find an interested party to invest in the business. Interest was far limited due to the various challenges, including the debt burden placed on the business. This process resulted in 4 proposals, including the proposal made by [indiscernible], which was ultimately pursued. There was also an extensive investigation into potential insolvency and restructuring procedures in October '24. Despite the extended marketing process mentioned, by June '25, Crown's proposal as the only viable option open to the company. Crown agreed to provide necessary funding to Argo in exchange for Argo's commitment to implement the restructuring plan. This was urgently necessary in circumstances where the group has started paying suit suppliers and creditors and it cash remaining. Without the Crown facility, Argo would have been unable to pay its debt, which would have likely have resulted in compulsorily proceedings. Crown confirmed that it will not provide further funding unless the restructuring plan is implemented. Accordingly, if the plan is not implemented, it is likely that Crown will demand [indiscernible] and enforce security over Argo's assets. At that point, Argo will have no choice to commence insolvency proceedings. The purpose of the plan is to restore the group to financial stability. If the plan is implemented in the quarter its terms, [indiscernible] will inject a further $3.5 million into the group. These funds will be utilized to meet the group's various costs payable to depress core unsecured creditors and other creditors to enable it to continue trading. If the plan is not implemented, Argo will see trading that because Argo will run out of cash. Under the plan, the ground facility will be converted into equity and the related security will be released. The claims of note holders under the secured senior [indiscernible] will be compromised and released in exchange for Argo equity. Grow will provide that $3.5 million by [indiscernible] will transfer for our mining assets in exchange for newly issued Argo equity. As a result of these steps, [indiscernible] 87.5% of the large share capital of go Argo, noteholders will fall to 10% and existing shareholders will fall at 2.5%. Under the plan, shareholders will keep the full enticement to their shares subject to dilution. Shareholders will retain all of the benefits attached to our shares, for example, entitlement to vote and to receive a dividend won't be declared. It's believed the dilution will not cause the economic value of the diluted shares to be less than the e-comic value in an administration or liquidation of Argo, which as I've mentioned before, is the relevant alternative. The effect of the plan on those shareholders holding equity interest through ADSs by Argo shares has half traded through NASDAQ will be as follows. The current ratio of the ABS to the ordinary shares is 1 to 10. However, the company has to maintain trading price of the ADSs of more than $1 for more than 10 consecutive business days prior to 14th of January '26, which is today set by NASDAQ in order to remain listed on NASDAQ. To facilitate that, fine remaining above the $1 threshold, we are planning to consolidate or change the ratio of ADSs so that 1 ADS will represent 1,160 ordinary shares. After the ratio change, ADS holders may be left with a fractional entitlement to a new ADS. If this happens, the depository JPMorgan Chase will aggregate and sell the fractional attachments and distribute sellers on a program basis. If an ADS holder receives no new ADSs and no distribution sale proceeds as a result of such exercise, then Argo will make available the dollar in our efforts to that ADS holder for all their interest in new ADSs following their recent request to Argo. Argo is not currently compliant with NASDAQ listing rules. It is taking active steps to remedy this [indiscernible] Argo's financial modeling shows that the change to the ADS ratio will increase the share price on NASDAQ such as [indiscernible] able to regain compliance with the NASDAQ listing rules. It's currently anticipated that Argo will be able to retain a system on NASDAQ following the course approval of the restructuring plan and to meet the minimum trading price requirement prior to 14 January '26. Following the [indiscernible] notice to the FCA in the U.K. and to top of the Stock Exchange of its intention to delist from the London Stock Exchange, subject to the sanction of the restructuring plan. So the [indiscernible] implementation, the London listing will be canceled. In order to protect the interest of shareholders, Argo matched bargain facility with JP Champions and maintain such facility for 6 months. This is a facility which connects winning by of Argo shares with willing sellers, creating and marketing those shares [indiscernible] shares not being listed on a traditional stock exchange. Shareholders are reminded that they also retain the ability to convert that ordinary share into AD assets, which can be traded on NASDAQ. Shareholders should contact their stock broker for further information how to achieve that. The senior unsecured notes or baby bonds as they collectively known will be fully equitized and current noteholders will receive equity interest in the company in the form of AD assets. In aggregate, note holders will hold 10% of the equity in the restructured company. Again, to the extent that no holders -- fractional entitlement to new ADSs as a result of the [indiscernible] process, the aggregate of all fractional titlement will be sold and the sale proceeds distributed on a porous basis to those noteholders with a factor entitlement subject to deduction of the possible transaction fees applicable. If a noteholder received no new ADSs, no distribution sale proceeds, the result of this exercise, Argo will make available some of $1 to that note holder for all their functional interest in ADSs following original request from the note holder to the company. [indiscernible] expansion statement for a detailed explanation of how [indiscernible] will be dealt with. Sanction hearing, the court will assess among other things, is the company's proposed allocation of the benefits that are preserved or generated by the plant is fair. This assessment of fares is complicated. And so I'll refer you to the analysis in Section 5 of Part 3 commencing on Page 51 fixed matter statement and to cross planned benefit reported appended 9 of the statement that supports the company's analysis. You can find these documents on our website. Again, those references are Section 5 of Part III committing on Page 51 and Appendix 9. In summary, as per paragraph 5.5% of Section 5, Part 3 of the explanatory statement. A calculation was made to compare the financial benefits created by the restructuring, namely the difference between the day 1 post restructuring value of the company and the value of the company and the relevant alternative of insolvency. This difference is the value preserved by the restructuring or plant benefits. Argo has then sought to allocate this benefit in the quarter with the contributions being made by client participants. The contribution is considered including the assets being contributed to the restructured company under the release of existing debt and other legal rights. The determination of the allocation of benefits preferable to those contributions was then made and will be considered by the court in detail of the sanction hearing. The allocations for the subject of the negotiation between Argo and Growler. Subsequent to that negotiation, [indiscernible] were engaged prepared plan benefits report. The planned benefits report includes a comprehensive analysis of the contributions and to advisory's conclusion regarding the fair allocation of the benefits of the plan between stakeholders. The company has considered this report in debt and has concluded that the offer being made to noteholders and shareholders in the plan adequately meet development criteria. The directors of Argo believes the proposed allocation of the benefits generated or preserved by the plan is fair and represents the best possible outcome for plan participants and other stakeholders with a genuine economic interest in the company. As part of the retail advocates role to cast a critical eye over the face of the plan, which I will talk to that. Although this summary has taken some time, it is just that for summary. Please do refer to the financial statement on the plane website, which sets out all the necessary information that you will need in order to make an informed assessment as to how to vote at the cloud meetings on 2nd December. And into the expansion sales the restructuring plan. It is an sanctioned by the court and/or around [indiscernible] sanctioned hearing by December. [indiscernible] legal rights will be affected. I'll now hand over to John York [indiscernible] to address you. John?

Thank you, David. Good afternoon. My name is John York, and I'm acting as retail advocate in relation to the proposed restructuring plan. I'm [indiscernible] 39 years standing. And since 1997, I worked extensively on schemes of arrangement, which will be for runners to restructuring plans such as this one. I've actually is a retail advocate on 6 other schemes of arrangement or restructuring plans involving retail investors or creditors. I've been engaged by the company to act as an independent retail advocate in order to raise we have and put forward the views of noteholders and shareholders at the moment of the public and may not understand the implementation of a restructuring plan as well as institutional investors or notables and shareholders, who are in a position to take legal advice. I must make it clear that whilst I've been engaged by and being paid by the company, I am independent of it. My contract is available on the plan website and specifically provides for my independence that I have no duty to the company and as I may draw conclusions as are adverse to the interest of the company when preparing my reports. I've set up an e-mail address at jy@abavocate.co.uK, which is available on planned documents. And I have or will be responding to any e-mail sent me by note holders, shareholders or their advisers. I'm happy to deal with questions at this town hall meeting and by e-mail if any retail investors or their advisers want to raise anything with me after the meeting. As part of my role, I'm obliged to attend the meeting of note holders and shareholders to be held on the 2nd of December, and to prepare 2 reports setting out the views of the retail investors together with any issues they raise that are relevant to the matters being considered by the court. The first of these was prepared for the convening hearing on the 5th of November and is available on the plane website. I will be preparing a further report setting out any issues of fairness and any other matters that the court will consider the sanctioned hearing on the 8th of December. I will include any matters raised at this meeting that are relevant to the sanction hearing in my report, together with an e-mail that I received after the meeting already received. Thank you, David.

We've had a few presubmitted questions. I will address those first. The first 2 relates to number of new shares to be exchanged for each Argo bond? Note holders will have 10% of the enlarged equity, which is roughly 2.8 billion shares in the enlarged entity. The face value of the note is $40 million. So ignoring accrued interest for this purpose. On basis of $40 million worth of notes in issue. It means that each $1 of notes would receive roughly 32 ordinary shares. [indiscernible]. So roughly 72 shares per $1 of net. That's the first 2 questions. The next question was about the delisting from the -- on the stock exchange and would be providing a purchase itself to the shareholders or are your shares now virtually worth is now you're close to going into administration? So as I mentioned, the company will be writing a facility through JP Jenkins for 6 months post delisting. So that there is a trading facility available. Shareholders also have the ability to convert their ordinary shares into assets. And the company will shortly be publishing further information have to do that, but we'll publish regulatory new service announcement through the London Stock Exchange about that. But in short, your stock rates should be able to facilitate the conversion into ADSs. The second part of the question are our shares now virtually growth as well. The company's financial position is severe. And if the plan doesn't go ahead, as I've said, the most likely on a certain outcome is that the company needs to go into administration and liquidation. And in that scenario, the lighting outcome is that the secured creditor would take what value is there you think nothing left for the unsecured creditors such as shareholders and net holders. So on a -- if the plan not go ahead, the shares would be worthless. If the plan goes ahead, the expectations will be value because growers putting money into the company so that it can survive and can grow and there is a business there with a new balance sheet and the hope is that the company will be able to then trade out and recover value for stakeholders. The next question was about what's going to happen to shares of retail investors [indiscernible]. Next question is [indiscernible] seeing nonenergized assets. Can you define what that means? Do you have a [indiscernible] list of what this entails? There is an optimized list in the transfer agreement, which is appended to the back of the explanatory statement. The stat is there. So you kind of see that there, you look at the plant website. Justin, you've seen the assets. So perhaps you that would be helpful?

Sure. SP1 The assets are transformers, switch gears and mining machine boxes for bitcoin mining machines.

The next question is, how is the company or advisers conducted any formal analysis to determine whether the 722 Helios itself to Galaxy constituted an undervalue transfer under applicable softer. If so, what were the conclusions of that analysis and what is planning to be made available to [indiscernible]? So I'll be the first, there's a second, as a follow-up, I'll do with the first bit first. There has not been a formal analysis of that sale as an undervalued. At the time of the sale was conducted, the company was in a potentially insolvent position. And therefore, the company was very aligned to the issues that arise when conducting a transaction when potentially in solved. So yes, an analysis was done as to whether things were being done at an undervalue or whether anyone you've given a preference under [indiscernible]. And more particularly, the company did have an independent valuation done by [indiscernible] at the time. So the Board was comfortable that the value that you got from Helios at the time was the appropriate value. With plain sight, that value may look lower than one might expect because since the sale, the value of [indiscernible] has skyrocketed. At the time the transaction was done with all the surrounding circumstances, the Board were comfortable, but it is the right transaction to do and was entered into on the correct basis. Second part of that question is given the transaction falls within the relevant look-back period for avoidable transfer plans has the company considered you seeing any recovery claims against Galaxy? If recovery trends have been considered what's the estimated range of potential recoveries? Well, for the reasons given in the first part of the answer, no, they haven't been considered because we don't consider that the transaction was at an undervalue. Next question, what's the making model and [indiscernible] 5 minus being contributed? What's electricity power cost in the [indiscernible] data sector. That information should be in the schedule of the assets in the transfer agreement. But Justin, are you able to speak to that?

There's 2 different sites. One has power costs about $0.05 and the other is closer %[ 6 ]. And at those 2 sites, we have 60s and SK 19. So those are the making model.

Next question is what's the options for holders of Argo bitcoin shares in an ISA as you might know, when suspension takes effect in December, one cannot hold the shares in ISA, would argue we're floating back auction soon. Can U.K. shareholders be assigned to Argo shares in U.S. perhaps you'll be trading? The question is right. Once the shares are delisted, usually they can't then be held in ISA and they have to be transferred out. There is no current intention to buy back shares. The money that [indiscernible] putting into the company are going to be used to enhance the business rather than returning funds to shareholders. As I said earlier, that is the option to convert into ADSs and for some shareholders that would be a possibility. Otherwise, we've bought the JP Jenkins facility as a -- for back for U.K. holders. Next question, has Argo for launching totals or point to raise capital as a form of equity reserves? I think it's fair to say that Argo has considered all sorts of different options to reshape its balance sheet. That's just been a process going on for the last 2 years plus. And I think every option under the sun is being considered. Nearly every option that the company considers founded on the same problem, which is the debt burden being [indiscernible] company. The company had a number of interested parties in progress -- discussions with that. And almost without fail, the problem became how are we going to repay $40 million of debt in November '26. That has been the second point. So whilst there are all sorts of options that look attractive superficially, that debt burden has been the [indiscernible] company's net, which has prevented other deals happening. I don't know whether Justin whether you want to add anything to that? Or is that just [indiscernible].

I think you have it very well.

Next question, what were the terms amounts of the ground of funding that has really taken place [indiscernible]? Well, the ongoing company not have any debt. So [indiscernible] provided a term loan of $7.5 million. That is almost all been draw down now. It's interest bearing. It will convert into equity if the plan is approved or sanctioned by court. As regards to ongoing debt, yes, the company will have some ongoing debt because it's got the [indiscernible] facility in Canada, which this plan does not [indiscernible] is a factor by this plan. But is as a much [indiscernible] going forward. There's a further question about ICS, which we've already covered. Will Well Argo swap shares with NASDAQ profit shares or should we hold an anticipation for relisting on -- is the listing completely fetched? As I said, there will be -- and there is the ability to convert into ADS. That can be done now where it can be done fast transaction, and we will push out an announcement on that to explain how it works and the cost associated with it, surely, the reason for not having done that to date is we're just trying to agree the cost of that with the deposit rate. Should you hold an anticipation of a realistic -- that has not has not been discussed. I don't think it's on anyone's radar. So I think we can firmly say that, that is not likely to happen. Next question is the willingness to increase savings to note holders into your warrant, how we'll grow the [indiscernible] to be organized for the tax obligations being appealed also time line. So 3 questions that -- willingness to increase net note holders. As you may have seen from the expansive statement, Gran's initial proposal to the company was much more aggressive than the one Justin presented to you, we now have a 7.5% to 10%, 2.5% split. The original proposal was much tougher on both noteholders and to shareholders. I think the oldest [indiscernible]? Yes, it's something. It's in the exponential statement anyway. The company rejected that proposal and in a renegotiation with Graeme are now. I think every group would like to see its allocation increased. If we increase noteholders, we reduce the grade of shareholders. If we increase shareholders, we reduce net orders or rather now essentially happy. The altercations we have ended off with have been based on a, negotiation; and b, following the guidelines set by [ Castorin ] the U.K. as to how reallocate the benefits as I said earlier, -- and that's been the subject of -- negotiation, but also a detailed report from cross on the terms of the -- and the allocation. And that [indiscernible] report is available to you on the planned website. Next question from the same person is how we'll grow our market management seems to be organized? Justin, do you want to talk to that?

Sorry, David, I'm having a little bit of technical difficulty. What was the question?

We can hear you and we can see you. So how will [indiscernible] Argo management teams be organized?

So Growler is contributing assets only. There are going to be no management coming over from Gallar. So Argo's management will continue to run the business.

And there may be a ground representative on the Argo board, but no exact capacity. Tax obligations being appealed, what's the time life decision. Scott, maybe that's one for you. This relates to Canada.

Yes. So the data allocations, the main ones being in Canada with the CRA and revenue Quebec. Those are still underway in disputes, and we don't have any firm expectation of when this will be fully resolved, but we're appealing those with the systems of Ernst & Young.

Next question is are we just -- and it's quite long. The storage of investing in senior debt is that it has a higher packing order in restructuring and equity. In this restructuring, equity holders are receiving 2.5% of the new company and debt holders 10%. Do debt holders are expected to receive an estimated very low recovery of 7.5% or $1. Equity holders should receive 0 in most circumstances, not very fair with a senior debt obligation when compared to equity. We propose that an additional 2% stake to the 12% of U.K. be allocated to debt holders and [indiscernible] reduced to 1.5% will receive warrants. That seems to be fair. As I said, there was going to be happy with the allocations. We try to make it as far as we can, and we've got independent -- independent report on Pro regarding that fares. Sean, could I perhaps ask you to just talk a bit about that in terms of allocations furnace?

Yes, sure. I mean, the court is the ultimate arbitrator of what is fair. And it will be its decision on the expert evidence that's been put forward. Certainly, I can represent your views to the court that there should be a different allocation. But it very much -- there's very little avenues. I've seen this in a number of cases before where there's always some unhappiness with the allocation of the assets. And the court will look at the expert evidence of stock before it or the evidence put before it and make a decision. I will certainly bring to the court's attention those representations that are made in relation to the allocations. And the court will make a decision at the end of the day.