Argo Blockchain PLC Announces 2022 Full Year Results
*LONDON, UK / ACCESSWIRE / April 28, 2023 / *Argo Blockchain plc, a global leader in cryptocurrency mining (LSE:ARB)(NASDAQ:ARBK), is pleased to announce its audited results for the year ended 31 December 2022.
*Operating highlights*
· Increased hashrate capacity by 55% from 1.6 EH/s at the end of 2021 to 2.5 EH/s at the end of 2022
· Energized the Helios facility in Dickens County, Texas and commenced mining operations on 5 May 2022
· Executed an agreement with ePIC Blockchain Technologies ("ePIC"), as amended, to purchase BlockMiner machines for use with Intel's Blockscale ASIC chip (2,870 machines expected to be deployed in Q3 2023)
· Completed a swap agreement with Core Scientific ("Core") for S19J Pro machines representing approximately 970 PH/s, which ended the Group's hosting agreement with Core in place of self-mining operations at Helios
· Released the Group's 2021 Sustainability Report and maintained climate positive status by producing no Scope 1 emissions and offsetting all Scope 2 and Scope 3 emissions through renewable energy credits and verifiable emissions reductions
*Financial highlights*
· Total number of Bitcoin or Bitcoin Equivalent ("BTC") mined during 2022 was 2,156, a 5% increase compared to the BTC mined in 2021, despite an increase in global hashrate and network difficulty
· Revenues of £47.4 million ($58.6 million), a decrease of 36% from 2021, driven primarily by a significant decrease in Bitcoin price and an increase in the global hashrate and associated network difficulty level
· Adjusted EBITDA of £1.0 million ($1.2 million), down from Adjusted EBITDA of £55.0 million ($74.2 million) in 2021
· Mining margin of 54%, down from 84% in 2021. Similar to revenue, this decrease was largely attributable to the decrease in Bitcoin price and an increase in network difficulty, as well as significantly higher than expected power costs in Texas
· Net loss of £194.2 million ($240.2 million), driven primarily by the change in fair value of digital assets, impairment of assets, and losses associated with our divestitures
· Total number of BTC held at 31 December 2022 was 141, of which 116 were Bitcoin Equivalents
*Sale of Helios & Hosting Agreement with Galaxy*
· On 29 December 2022, theGroup completed a series of agreements with Galaxy Digital Holdings Ltd. (TSX: GLXY) ("Galaxy")
· As part of the agreements, Argo sold its Helios facility to Galaxy for £53 million ($65 million), Argo refinanced existing equipment financing loans with a new asset-backed loan from Galaxyfor an amount of £28 million ($35 million), and Galaxy agreed to host Argo's mining machines at Helios("the Transactions")
· TheTransactions improved the Group's balance sheet and liquidity by reducing total indebtedness by £33 million ($41 million) and improving its cash position. As of 31 December 2022, after accounting for theTransactions, the Group's total debt was approximately £63 million ($76 million), and debt, net of cash, was £46 million ($56 million)
· Argo maintained ownership of its entire fleet of mining machines, and Galaxy is now hosting the fleet ofapproximately 23,619 Bitmain S19J Pro machines at Helios under a two-year hosting agreement
· Under the hosting agreement, Argo has access to the electricity price that Galaxy obtains through its power purchase agreement, and Argo pays an incremental hosting fee based on its actual electricity usage
*Board and Senior Management Changes*
Subsequent to 31 December 2022:
· 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 8 February 2023, Sarah Gow resigned as non-executive director of the Company for health reasons; and
· 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, CFA, to serve as Interim CEO. The Group will provide an update on the CEO recruitment process in due course
*Q1 2023 Update (Preliminary and Unaudited)*
· Total number of Bitcoin or Bitcoin Equivalent ("BTC") mined during Q1 2023 was 491, or 5.5 BTC per day. This is a 5% increase in daily BTC compared to the same period in 2021, and it is a 8% decrease in BTC production compared to the prior quarter. The decrease compared to Q4 2022 is primarily due to an increase in the network difficulty
· Generated revenues of approximately £9 million ($11 million) with a mining margin in the range of 45% to 50%; mining margin increased from approximately 35% in Q4 2022 due to higher Bitcoin price and lower electricity prices in Texas
· Average direct cost per Bitcoin mined was approximately £10,000 ($12,000)
· Average all-in costs (power costs and hosting fees) at Helios was approximately $0.05 to $0.055 per kilowatt-hour
*Outlook for 2023*
Renewed Focus on Quebec
· Going forward, in the near term, Argo will be focusing on improving operational efficiency at its Quebec facilities by optimizing its mining fleet and utilizing excess capacity at these sites
· Both data centers have access to 99% renewable electricity generated from hydropower at competitive prices
Deployment of ePIC BlockMiners
· The Group is expecting the delivery of 2,870 units of ePIC "BlockMiner" machines beginning in early Q3 2023
· These new BlockMiner machines, representing an incremental 300 PH/s of hashrate capacity, will be deployed at the Group's Quebec facilities
Commenting on the results, Seif El-Bakly, Argo Blockchain Interim CEO, said, "Having navigated challenging market conditions in both the crypto sector and the global economy in the second half of 2022, Argo has emerged stronger and in a much more solid financial position.
Following the build of Helios and the strategic transaction with Galaxy, we have streamlined our operations to maximize efficiency and increase our hashrate while maintaining our mining capacity thanks to our Hosting Agreement. On the basis of these foundations, we continue to work diligently on the next stage of Argo's growth and development, with the goal of delivering long-term value to our shareholders."
*The tables below reconcile Bitcoin and Bitcoin Equivalent Mining Margin to gross margin, the most directly comparable IFRS measure, and Adjusted EBITDA to net income/(loss), the most directly comparable IFRS measure:
*Year ended*
*Year ended*
*31 December*
*31 December*
*2022*
*2021*
*£'000*
*£'000*
*Gross profit/(loss)* *(34,460)*
*53,646*
Depreciation of mining equipment 16,549
11,129
Change in fair value of digital currencies 113
(1,191)
Realised loss / (gain) on sale of digital currencies 43,526
(437)
Cryptocurrency management fees (96)
(3,789)
*Mining profit* *25,633*
*59,268*
*Bitcoin and Bitcoin Equivalent Mining Margin* *54%*
*84%*
*Year ended*
*Year ended*
*31 December*
*31 December*
*2022*
*2021*
*£'000*
*£'000*
*Net income/(loss)* *(194,231)*
*30,765*
Interest expense 18,321
2,142
Depreciation / amortisation 23,449
11,521
Income tax (credit) / expense (361)
8,506
*EBITDA* *(152,822)*
*52,934*
Change in fair value of digital currencies 113
(1,191)
Realised loss / (gain) on sale of digital currencies 43,526
(437)
Impairment of assets 45,143
-
Impairment of intangible assets 4,168
535
Loss on sale of subsidiary and investments 44,804
629
Loss on sale of fixed assets 18,779
-
Foreign exchange (17,250)
589
Legal and restructuring fees related to restructuring 9,590
-
Share based payment charge 4,928
1,938
*Adjusted EBITDA* *979*
*54,997*
*Inside Information and Forward-Looking Statements*
This announcement contains inside information and includes forward-looking statements which reflect the Company's current views, interpretations, beliefs or expectations with respect to the Company's financial performance, business strategy and plans and objectives of management for future operations. These statements include forward-looking statements both with respect to the Company and the sector and industry in which the Company operates. Statements which include the words "remains confident", "expects", "intends", "plans", "believes", "projects", "anticipates", "will", "targets", "aims", "may", "would", "could", "continue", "estimate", "future", "opportunity", "potential" or, in each case, their negatives, and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties because they relate to events that may or may not occur in the future, including the risk that the Company may receive the benefits contemplated by its transactions with Galaxy, the Company may be unable to secure sufficient additional financing to meet its operating needs, and the Company may not generate sufficient working capital to fund its operations for the next twelve months as contemplated. Forward-looking statements are not guarantees of future performance. Accordingly, there are or will be important factors that could cause the Company's actual results, prospects and performance to differ materially from those indicated in these statements. In addition, even if the Company's actual results, prospects and performance are consistent with the forward-looking statements contained in this document, those results may not be indicative of results in subsequent periods. These forward-looking statements speak only as of the date of this announcement. Subject to any obligations under the Prospectus Regulation Rules, the Market Abuse Regulation, the Listing Rules and the Disclosure and Transparency Rules and except as required by the FCA, the London Stock Exchange, the City Code or applicable law and regulations, the Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. For a more complete discussion of factors that could cause our actual results to differ from those described in this announcement, please refer to the filings that Company makes from time to time with the United States Securities and Exchange Commission and the United Kingdom Financial Conduct Authority, including the section entitled "Risk Factors" in the Company's Registration Statement on Form F-1.
For further information please contact:
*Argo Blockchain*
*Investor Relations*
*ir@argoblockchain.com*
*finnCap Ltd*
Corporate Finance
*Jonny Franklin-Adams*
*Seamus Fricker*
Joint Corporate Broker
*Sunila de Silva*
*+44 207 220 0500*
*Tennyson Securities*
Joint Corporate Broker
*Peter Krens*
*+44 207 186 9030*
*Tancredi Intelligent Communication*
UK & Europe Media Relations
*Salamander Davoudi*
*Emma Valgimigli*
*Fabio Galloni-Roversi Monaco*
*Nasser Al-Sayed*
*argoblock@tancredigroup.com*
*About Argo:*
Argo Blockchain plc is a dual-listed (LSE: ARB; NASDAQ: ARBK) blockchain technology company focused on large-scale cryptocurrency mining. With mining facilities in Quebec, mining operations in Texas, and offices in the US, Canada, and the UK, Argo's global, sustainable operations are predominantly powered by renewable energy. In 2021, Argo became the first climate positive cryptocurrency mining company, and a signatory to the Crypto Climate Accord. For more information, visit www.argoblockchain.com.
*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, grow the business, and weather the crypto winter.
*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.
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 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.
*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
*Independent Auditor's Report*
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
*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.
*GROUP STATEMENT OF COMPREHENSIVE INCOME*
*Year ended December 2022*
*Year ended December 2021*
*Continuing operations* *Note*
*£'000*
*£'000*
Revenues *7*
47,363
74,204
Direct costs *8*
(38,183)
(22,186)
Change in fair value of digital currencies *21*
(43,640)
1,628
*Gross (loss)/profit* *(34,460)*
*53,646*
Operating costs and expenses *8*
(27,534)
(8,887)
Share based payment charge *22*
(4,928)
(1,938)
Gain on hedging *7*
1,695
-
*Operating (loss)/profit* *65,227*
*42,821*
Fair value revaluation of variable consideration *25*
4,038
236
Fair value (loss)/gain of investments *15*
(328)
183
Loss on sale of subsidiary and investment *14*
(44,804)
(629)
Loss on disposal of fixed assets *19*
(18,779)
-
Finance costs *8*
(18,321)
(2,142)
Other income *7*
3,012
-
Impairment of tangible fixed assets *19*
(45,143)
-
Impairment of intangible assets *18*
(4,168)
-
Equity accounted loss from associate *16*
(4,872)
(1,198)
*(Loss)/profit before taxation* *(194,592)*
*39,271*
Tax credit/(expense) *13*
361
(8,506)
*(Loss)/profit after taxation* *(194,231)*
*30,765*
*Other comprehensive income*
Items which may be subsequently reclassified to profit or loss:
- Currency translation reserve
1,735
(410)
- Equity accounted OCI from associate
*16*
(6,571)
6,571
- Fair value gains on intangible digital assets
*18*
(414)
414
*Total other comprehensive (loss)/income, net of tax* *(5,250)*
*6,575*
*Total comprehensive (loss)/income attributable to the equity holders of the Company* *(199,481)*
*37,340*
*Earnings per share attributable to equity owners (pence)*
Basic (loss)/earnings per share (40.98p)
7.7p
Diluted (loss)/ earnings per share (40.98p)
7.4p
The income statement has been prepared on the basis that all operations are continuing operations.
*GROUP STATEMENT OF FINANCIAL POSITION*
*As at 31 December 2022*
*As at 31 December 2021*
*Note*
*£'000*
*£'000*
*ASSETS*
*Non-current assets*
Investments at fair value through profit or loss *15*
344
403
Investments accounted for using the equity method *16*
2,374
13,817
Intangible fixed assets *18*
1,744
5,604
Property, plant and equipment *19*
63,850
111,604
Right of use assets *19*
435
350
*Total non-current assets* *68,747*
*131,778*
*Current assets*
Trade and other receivables *20*
5,641
63,359
Digital assets *21*
368
80,759
Cash and cash equivalents 16,662
11,803
*Total current assets* *22,671*
*155,921*
*Total assets* *91,418*
*287,699*
*EQUITY AND LIABILITIES*
*Equity*
Share Capital *23*
478
468
Share Premium *23*
143,748
139,581
Share based payment reserve *24*
6,801
1,905
Fair value reserve *24*
-
414
Currency translation reserve *24*
1,768
33
Other comprehensive income of equity accounted associates *24*
-
6,571
Accumulated surplus/(loss) *24*
(141,393)
52,838
*Total equity* *11,402*
*201,810*
*Current liabilities*
Trade and other payables *25*
8,310
15,245
Contingent consideration *25*
-
8,071
Loans and borrowings *25*
9,624
23,391
Income tax *13*
-
7,679
Deferred tax *13*
2,196
286
Lease liability 4
7
*Total current liabilities* *20,134*
*54,679*
*Non-current liabilities*
Deferred tax *13*
6,586
541
Issued debt - bond *25*
31,356
26,908
Loans *26*
21,492
3,391
Lease liability *25*
448
370
*Total liabilities* *59,882*
*85,889*
*Total equity and liabilities* *91,418*
*287,699*
*COMPANY STATEMENT OF FINANCIAL POSITION*
*As at December 2022*
*As at December 2021*
*Note*
*£'000*
*£'000*
*ASSETS*
*Non-current assets*
Investment in subsidiaries *14*
53,495
12,181
Investments at fair value through profit or loss *15*
73
73
Investments accounted for using the equity method *16*
2,374
13,817
Tangible fixed assets *18*
1,821
-
*Total non-current assets* *57,763*
*26,071*
*Current assets*
Trade and other receivables *20*
456
8,598
Intercompany receivable, net *20*
8,572
175,859
Cash and cash equivalents 115
126
*Total current assets* *9,143*
*184,583*
*Total assets* *66,906*
*210,654*
*EQUITY AND LIABILITIES*
*Equity*
Share Capital *23*
478
468
Share Premium *23*
143,748
139,581
Share based payment reserve *24*
6,801
1,905
Other comprehensive income of equity accounted associates *24*
-
6,571
Accumulated (loss)/surplus *24*
(120,113)
18,986
*Total equity* *30,914*
*167,511*
*Current liabilities*
Trade and other payables *25*
4,636
8,164
Contingent consideration *25*
-
8,071
*Total current liabilities* *4,636*
*16,235*
*Non-current liabilities*
Loans and borrowings *26*
31,356
26,908
*Total liabilities* *31,356*
*43,143*
*Total equity and liabilities* *66,906*
*210,654*
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).
*GROUP STATEMENT OF CHANGES IN EQUITY*
*Share Capital*
*Share Premium*
*Currency translation reserve*
*Share based payment reserve*
*Fair Revaluation Reserve*
*Other comprehensive income of associates*
*Accumulated surplus/*
*(deficit)*
*Total*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*Balance at 1 January 2022* 468
139,581
33
1,905
414
6,571
-
52,838
201,810
*Total comprehensive income for the period:*
Profit for the period -
-
-
-
-
-
(194,231)
(194,231)
Other comprehensive income -
-
1,735
-
(414)
(6,571)
-
(5,250)
Total comprehensive income for the period -
-
1,735
-
(414)
(6,571)
(194,231)
(199,481)
*Transactions with equity owners:*
Share capital issued 10
4,167
-
-
-
-
-
4,177
Share based payment charge -
-
-
4,928
-
-
-
4,928
Share options/warrants exercised -
-
-
(32)
-
-
-
(32)
Total transactions with equity owners 10
4,167
-
4,896
-
-
-
9,073
*Balance at 31 December 2022* 478
143,748
1,768
6,801
-
-
(141,393)
11,402
*GROUP STATEMENT OF CHANGES IN EQUITY*
*Share Capital*
*Share Premium*
*Currency translation reserve*
*Share based payment reserve*
*Fair Revaluation Reserve*
*Other comprehensive income of associates*
*Accumulated surplus/*
*(deficit)*
*Total*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*Balance at 1 January 2021* 304
1,540
443
75
-
-
21,965
24,327
*Total comprehensive income for the period:*
Profit for the period -
-
-
-
-
30,765
30,765
Other comprehensive income -
-
(410)
-
414
6,571
-
6,575
Total comprehensive income for the period -
-
(410)
-
414
6,571
30,765
37,340
*Transactions with equity owners:*
Share capital issued 164
150,977
-
-
-
-
-
151,141
Issue costs of share capital -
(12,936)
-
-
-
-
-
(12,936)
Share based payment charge -
-
-
1,938
-
-
-
1,938
Share options/warrants exercised -
-
-
(108)
-
-
108
-
Total transactions with equity owners 164
138,041
-
1,830
-
-
108
140,143
*Balance at 31 December 2021* 468
139,581
33
1,905
414
6,571
52,838
201,810
*COMPANY STATEMENT OF CHANGES IN EQUITY*
*Share Capital*
*Share Premium*
*Share based payment reserve*
*Other comprehensive income of associates*
*Accumulated surplus/*
*(deficit)*
*Total*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*Balance at 1 January 2022* 468
139,581
1,905
6,571
18,986
167,511
*Total comprehensive income for the period:*
Loss for the period -
-
-
-
(139,098)
(139,098)
Other comprehensive income -
-
-
(6,571)
-
(6,571)
Total comprehensive income for the period -
-
-
(6,571)
(139,098)
(146,830)
*Transactions with equity owners:*
Share capital issued 10
4,167
-
-
-
4,177
Share based payments charge -
-
4,928
-
-
4,928
Share options/warrants exercised -
-
-
-
Total transactions with equity owners 10
4,167
4,896
-
-
9,073
*Balance at 31 December 2022* *478*
*143,748*
*6,801*
*-*
*(120,112)*
*30,915*
*Share Capital*
*Share Premium*
*Share based payment reserve*
*Other comprehensive income of associates*
*Accumulated surplus/*
*(deficit)*
*Total*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*£'000*
*Balance at 1 January 2021* 304
1,540
75
-
22,429
24,348
*Total comprehensive income for the period:*
Loss for the period -
-
-
-
(3,551)
(3,551)
Other comprehensive income -
-
-
6,571
-
6,571
Total comprehensive income for the period -
-
-
6,571
(3,551)
3,020
*Transactions with equity owners:*
Share capital issued 164
150,977
-
-
-
151,141
Issue costs of share capital -
(12,936)
(12,936)
Share based payments charge -
-
1,938
-
-
1,938
Share options/warrants exercised -
-
(108)
-
108
-
Total transactions with equity owners 164
138,041
1,830
-
108
140,143
*Balance at 31 December 2021* *468*
*139,581*
*1,905*
*6,571*
*18,986*
*167,511*
*GROUP STATEMENT OF CASH FLOWS*
*Year ended December 2022*
*Year ended December 2021*
*Note* *£'000*
*£'000*
*Cash flows from operating activities*
Loss/(profit) before tax (194,592)
39,271
*Adjustments for:*
Depreciation/Amortisation *8*
23,449
11,511
Foreign exchange movements (17,250)
589
Loss on disposal of tangible assets 18,779
-
Finance cost 18,321
2,142
Loss on sale of subsidiary and investment 44,804
629
Fair value change in digital assets through profit or loss *21*
43,640
(1,628)
Impairment of intangible digital assets *18*
4,168
535
Impairment of property, plant and equipment 45,143
-
Investment fair value movement *15*
328
(183)
Share of loss from associate 4,872
1,198
Non-cash settlement of management fees *8*
-
(1,561)
Revaluation of contingent consideration *26*
(4,038)
(236)
Derecognition of contingent consideration -
(352)
Hedging gain (1,695)
-
Share based payment expense *23*
4,928
1,938
*Working capital changes:*
(Increase)/decrease in trade and other receivables *20*
(15,250)
(13,628)
Increase/(decrease) in trade and other payables *26*
(83,021)
12,289
(Increase) in digital assets *21*
36,751
(80,331)
*Net cash used in operating activities* *(70,663)*
*(27,817)*
*Investing activities*
Investment at fair value through profit or loss *15*
-
(220)
Acquisition of subsidiaries, net of cash acquired *17*
-
(664)
Cash disposed of on disposal of subsidiary *19*
(1,357)
-
Investment in associate *16*
-
(7,353)
Proceeds from sale of investment *15*
-
772
Purchase of tangible fixed assets *19*
(87,353)
(78,972)
Proceeds from disposal of tangible fixed assets 10,028
-
Purchase of digital assets *22*
-
(15,009)
Proceeds from sale of digital assets *22*
84,225
11,308
Mining equipment prepayment -
(47,426)
*Net cash used in investing activities* *5,543*
*(137,564)*
*Financing activities*
Proceeds from new loan issuance *27*
78,418
22,239
Proceeds from issue of loan in conjunction with the disposal of subsidiary *19*
8,033
-
Lease payments *26*
75
(7,379)
Loan repayments *26*
-
(1,196)
Interest paid (18,321)
(122)
Proceeds from debt issue - net of issue costs *26*
-
26,908
Proceeds from shares issued - net of issue costs *23*
-
134,684
*Net cash generated from financing activities* *68,055*
*175,133*
*Net increase in cash and cash equivalents* *2,935*
*9,752*
Effect of foreign exchange on cash and cash equivalents 1,924
Cash and cash equivalents at beginning of period 11,803
2,051
Cash and cash equivalents at end of period *16,662*
*11,803*
*Material non-cash movements:*
● The Group sold its Helios facility during the year, in exchange for paying down existing debt amounting to £70,764,000 and the issuance of £25,356,000 of the new loan. 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* *Year ended*
*31 December 2022*
*Year ended*
*31 December 2021*
*£'000*
*£'000*
Current loans and borrowings *26*
(9,624)
(23,391)
Current lease liability (4)
(7)
Non-current issued debt - bonds *26*
(31,356)
(26,908)
Non-current loans and borrowings *26*
(21,492)
(3,391)
Non-current liability - lease (448)
(370)
Cash and cash equivalents 16,662
11,803
*Total net debt* *(46,262)*
*(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).
*COMPANY STATEMENT OF CASH FLOWS*
*Year ended December 2022*
*Year ended December 2021*
*Note* *£'000*
*£'000*
*Cash flows from operating activities*
Loss before tax (138,633)
(3,551)
*Adjustments for:*
Share of loss from associate 4,872
1,198
Fair value adjustment on contingent consideration (4,038)
-
Foreign exchange movements (6,158)
(409)
Share based payment expense 4,928
1,938
Loss on disposal of investment in subsidiary 104,252
Impairment of assets 15,120
*Working capital changes:*
(Increase)/decrease in trade and other receivables *20*
8,142
(8,411)
Increase/(decrease) in trade and other payables *25*
(3,328)
7,741
*Net cash used in operating activities* *(14,843)*
*(1,494)*
*Investing activities*
Purchase of investments -
(7,353)
(Increase)/decrease in loan to subsidiary 14,832
(154,075)
*Net cash (used in(/generated from investing activities* *14,832*
*(161,428)*
*Financing activities*
Proceeds from debt issue - net of issue costs -
26,908
Proceeds from shares issued - net of issue costs -
134,684
*Net cash generated from financing activities* *-*
*161,592*
*Net (decrease)/increase in cash and cash equivalents* *(11)*
*(1,330)*
Cash and cash equivalents at beginning of period 126
1,456
Cash and cash equivalents at end of period *115*
*126*
*Company - net debt reconciliation* *Year ended*
*31 December 2022*
*Year ended*
*31 December 2021*
*£'000*
*£'000*
Non-current loans and borrowings *26*
(31,356)
(26,908)
Cash and cash equivalents 115
126
*Total net (debt) / asset* *(31,241)*
*(26,782)*
*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 ordinary shares of the Company are listed under the trading symbol ARB on the London Stock Exchange. The American Depositary Receipts of the Company are listed under the trading symbol ARBK on Nasdaq. The Company 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).
*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 April 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.
*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, Argo Holdings US Inc., 9366-5230 and 9377-2556.
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.
*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.
*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 cryp