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Revenue came in lower then even I had estimated, dont really get how it could be this low.
Cash likely lasts til late q3, a couple of months left.
The Q1 accounts indicated that the direct cash costs of mining would be close to the revenue generated post-halving and therefore to it being uneconomic to mine i.e. they would possibly be financially better off by shutting down rather than mining.
This, together with the phrase used of "optimization of the Company's fleet's efficiency settings" suggests to me perhaps that they have actually reached this point and are shutting down the machines at times when the revenue generated is not even covering the direct costs of running them (let alone all the other costs).
So it is possible the drop in revenue below that expected is due to switching off machines at times when they are better off doing so. Or it could just be weather induced or simply random variation (they are only around a couple of blocks below expectations).
If they are shutting down periodically though to save money it means the cash burn is lower than the numbers would at first suggest.
Marginally lower costs Hexam, it would still mean ~$2.9m cash burn this month rather than $3.5m.
It's pretty dire either way.
I'm sure Spitfire adds this morning. x;)
Unless btc quickly doubles, these boys are gone q3
Yes, marginally lower HC. Agree the situation is dire and is worse than expected - just not quite as bad as the numbers at first suggest perhaps.
We can't know what the exact cash burn is (as info is out of date and we can't be sure of the full reasons behind the drop - beyond halving of course) but hard to imagine they have more than a few months left without new funds.
Yeah of course it's all educated guesswork for now but it certainly points to somewhere between 2 and 6 months cash left from today, with my guess being on the lower end of the range.
It will be interesting to see if traders still going chasing after it following any BTC rises over the coming weeks and months.
I think they can underclock for a lower J/T, but it means the EH reduces to achieve this. So it could be this - or powering off in peak times, or a combination.
30% margin means a cash take of 870k, but the G&A is around 1 mil, and the interest payments around 770k. So to me a cash loss of around £1mil for the month.
Looks about right CB but did you mean $1m?
The 30% certainly suggests a lot of 'optimization' going on in whatever form this takes as this figure is a lot better than the Q1 financials point to it being.
Yes sorry, dollars. They did mention lower electricity costs so might just be seasonal.
I find that very tough to conclude when you look at Q1 results with just shy of $17m revenue for the quarter.
HC, cash basis only. Accounting wise you've got depreciation and stock based compensation which will make it look worse, but the reality is the cash balance is what matters here which allows them to keep the lights on.
I know, I just think it’s highly unlikely cash break even was as low as $3.9m for the month of May. Wouldn’t shock me if there’s a bit of creative accounting to come up with that ‘approximate’ margin, after all monthly operations updates are not audited.
$7m revs to $2.9m in a couple of months will not leave them with close to 12 months cash runway, I’m fairly confident of that. Well it wouldn’t anyway because of one off debt maturity falling within that timeframe but you know what I mean.
HC - I think the bit you may be 'missing' is the drop in direct costs - basically electricity/hosting fees. These were around $3.5m per month in Q1 but in May were only $2m. So that's a $1.5m improvement and so whilst revenue has dropped a huge amount the costs have also tumbled.
As CB suggests a lot of this may just be seasonal pricing alongside the (smaller) impact of switching off machines temporarily and any other 'optimization'.
So cash burn is a lot better than the Q1 financials suggest it ought to be.
The $1m CB came up with certainly won't be far off as we know the revenue and (from the margin) the direct costs and it's unlikely the fixed overheads will have gone up much whilst the interest should be a little lower if anything. The only big unknown is any one-off costs they may have been hit with in the month.
Thanks and fair enough, that’s a huge drop in electricity/hosting costs even if it turns out to be a bit of a one off for whatever reason.
I’m always amazed with how Argo just crawls along delaying the inevitable!
Note 8 on the annual report shows the breakdown of G&A expenses for 2023.
We can see from Q1's that G&A has reduced to a lower level of 3.152mil. It includes non cash cost of property depreciation.
Some costs will be down with the property sale also.
Operating expenses $’000
Salary and other employee related costs 6,430
Restructuring and transaction related costs 4,969
Insurance 2,128
Depreciation and amortisation 1,473
Legal, professional and regulatory fees 1,431
Indirect taxes 994
Property tax 919
Consulting fees 533
Repairs and maintenance 455
Audit fees 341
Office general expenses 285
Public relations and associated activities 255
Travel 226
Carbon credits 129
Bank charges 34
Freight, postage and delivery 30
Foreign exchange loss -1,287
Total operating expenses 19,345
https://www.sec.gov/Archives/edgar/data/1841675/000110465924054859/arbk-20231231x20f.htm
From all that, I still am of the same opinion that the bull run will happen before they go bust and they'll get their chance to raise again.
I still see them getting kicked out of Helios near year end, and if this AI stuff continues I think Galaxy will sell Helios to an AI company and come out of the mining business. AI power demand is massive and miners with infrastructure are potential acquisition targets.
Argo will likely need to pivot as I don't think they can raise enough to buy sites/miners - but no idea what they would pivot to.
This AI stuff is a bit of godsend to US miners that own decent power. With that demand boost and there only being so many of these sites to go round, the value of them can only really go one way. Unlike bitcoin the AI stuff will have to be kept onshore too because of regs/security, so owners of decent sized infrastructure in the US are really laughing.
So yeah I think Galaxy will be able to name their price.
If so, assuming Argo can rinse shareholders enough, perhaps they'll try to keep the charade going a little longer by finding a different smaller scale 3rd party to host with. Won't be cheap though, and then they'd have to question would it really be worth going to the effort of installing a bunch of old machines elsewhere, only to continue bleeding cash? And that's before we get on to practicalities like how would they service debt during that downtime. Not looking good really.
Well I believe the Galaxy loan is called in at the end of the hosting agreement so that's $12.8m to find at the end of the year, is that right? If so you must mean you believe the bull run kicks off in the next five to six months.
I agree it's reasonable to think the cash they have lasts till then so in other words they have anything from 4-6 months to rescue something. Still, I think any share price rise would be sold into and so i'm unsure they'll be able to raise enough to even cover the Galaxy loan.
404 - Good point about the AI location/reg requirements - means that US infrastructure is key as you say. Need to review the miners with this new lens. HUT8/RIOT might be options, but the management of both is poor in my opinion and not sure I could bring myself to invest a lot in them.... AI not likely to be going away either, so it's very valid to review this.
HC - Yes expecting bull run shortly. If BTC hits 100k I'll be looking at exiting miners, depending how it plays out. However in that scenario, which could be a little like dot.com if the indexes move in step - Argo could move irrationally past any sane valuation (it's already there but seems stable at current valuation without demand) and get a few placings in.
Argo can't even afford 50p to put in their eleci meter haha
@CB could be worth looking at Applied Digital for the AI infrastructure play, their share price was hammered by those issues at that Mara site but reckon it's pretty much sorted now. Also small enough to be an easy acquisition for someone. To be honest Mara should just buy them. Riot and Hut I've warmed to, both improved a lot. Riot always have grand plans, whether they deliver on them and on time is the thing, and with Hut at least they got rid of that awful CEO.
Interesting re apld but they were loss making last quarter, seem to be issuing various shares/etc, and the issues they've had at Ellendale and how they've handled it for Mara, plus they are already valued over 500mil. Doesn't give me buying vibes. How do you see it?
HUT on the other hand I want to look at further. Most of their mcap can be accounted for by their HODL. This merger means they got infrastructure and the share price has been battered due to their dramas. Good to get rid of the last CEO who was clearly out of their depth. New one not convinced but need to have a proper look as I think they have a decent amount of MW.
RIOT they just keep taking too many bonuses and hiding stuff - don't trust them, but maybe they get in on the AI act as well.
Maybe Riot should stay as one to avoid, getting a bit wrecked on a short report (just glad it's not Mara) https://www.kerrisdalecap.com/wp-content/uploads/2024/06/RIOT-Kerrisdale.pdf
Lol - as if on cue. I'll take a look but I can guess half of it.
Why are all these miners so dodgy!!