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billfunk

Argo Blockchain #ARB

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Argo Blockchain are one of only a handful of publicly listed Blockchain Mining companies. The only others I am aware of are BitFarms (BITF) Canada, Hut 8 (HUT) Canada, Hive (HIVE) Canada, and Northern Bitcoin AG (NB2) Germany. They are currently valued at £25 million and mined 163 bitcoins in July for a revenue of around $1.5m. They have recently acquired new ASIC miners and paid them off in half time. They have also agreed to expand their hydro-electric supply agreement from 16MW to 64MW over the next 3 years with the option to extend another 2.

Key for me is that ARB claim to achieve over twice the efficiency of their rivals - 21.94 PH per MW compared to 8.5 PH per MW for BITF and HUT. I have written to the CEO, Mike Edwards, asking him to throw some more light on this. If ARB genuinely can achieve twice the efficiency of their competitors then, in my mind, this would make them a very strong candidate for multibagging.

Worth noting that their old CEO Jonathan Bixby was recently outed and it appears that he has dumped 10 million shares on the market. I would expect the share price to dip early next week then pick up later in the week when ARB report their August 19 mining figures.

@Loki Added you here as I feel like I was sidetracking DurhamBorn's excellent thread.

https://argoblockchain.com/

Edited by billfunk

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Letter to Mike Edwards:

Hi Mike,

 I am interested in investing in listed cryptocurrency mining stocks. I have read through your website and those of your competitors, HUT, HIVE and BITF. I note the subdued share performance of your rivals with HIVE in particular appearing to be uninvestable currently.

 As you have, understandably, yet to release meaningful financial results I am hoping you could provide me with some estimates. I would be particularly interested in anything that shows a clear differentiation between you and HUT and BITF.

 For Q2 2019 BITF and HUT reported gross margins of 46.1% and 46.5% respectively. BITF mined 974 B at a power cost of $2259 per Bitcoin with efficiency of 8.6 PH per MW whilst HUT mined 2816 Bitcoin at a power cost of $2757 with efficiency of 8.5 PH per MW. So aside from their size these companies appear to fairly similar in quality. I would be very interested to know your estimates for the above metrics for ARB going forward.

 Your webpage states you currently have 15MW of clean energy capacity and generate 126 PH. This would suggest that your efficiency is 8.4 not too dissimilar to BITF or HUT. Yet further down the page the first chart claims that ARB efficiency is 21.94. I feel like I may have misinterpreted the data here and would welcome clarification. If your efficiency is really more than twice that of your competitors it would be a clear sign to me of market leadership potential. I am struggling to understand how you achieve such efficiency given that you will appear to be using similar mining computers as everyone else.

 In terms of growth, could you outline your vision of how large you see ARB in one year, 2 years, 5 years? I note that you have recently boosted your energy supply to 64MW yet you are currently using 15MW. How long until you have the computing power to take up the whole 64MW and how many PH do you foresee generating at this time? What are the possibilities for expanding this further? I note BITF claim 36MW with a pipeline to 160MW, whilst HUT claim 95MW.

Whatever BITF and HUT are doing is not liked by the market, at least to date. Please let me know of anything that will convince me that ARB will not suffer the same fate. Indeed I would welcome your roadmap showing ARB from £25m to £2.5b

Kind Regards

Billfunk

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I've been keeping an eye on this one also. Obviously if the efficiency they've talked about is real then they would also be a good hedge against drops in BTC prices as their break even point would be much lower. I.e. most miners are loss making at BTC prices <$2000. Although  I don't expect we will see that kind of pricing for a long time, it's never say never for me in the crypto space.

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1 hour ago, Hardhat said:

I've been keeping an eye on this one also. Obviously if the efficiency they've talked about is real then they would also be a good hedge against drops in BTC prices as their break even point would be much lower. I.e. most miners are loss making at BTC prices <$2000. Although  I don't expect we will see that kind of pricing for a long time, it's never say never for me in the crypto space.

This is the puzzle I am trying to work out - their Bitcoin breakeven price is a touch above $1000 I believe. Currently, if I believe their figures then their efficiency must come from a sweetheart energy deal they signed and recently extended. i can't see how else they can operate at double the efficiency of the market leaders. Newer machines must be worth a few percent of efficiency, no depreciation yet is worth maybe 10%. All these companies must use the same calculations for their hardware purchasing so they end up with similar rigs so there is no competitive advantage there. They all work out of Canada and I am presuming use the same Hydro-electricity so no advantage there either. Maybe ARB are organisationally more efficient, but to a factor of 2!? I find it hard to believe.

Just what is it exactly that makes ARB special?

In other news I have done a quick and roughly estimated valuation of miners using EV/Hashrate:

ARB - 0.07 (and when they have 505PH this will be an astonishing 0.017)

HUT8 - 0.17 (market leader)

BITF - 0.26 (estimated EV as = MCAP)

NB2 - 0.79

HIVE - 1.98

So a really good value play on its own. NB2 and HIVE are to be avoided at all costs. They are clearly not investable. ARB worth £60m today and £300m by December.

 

Edited by billfunk

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Justin has a new podcast. I have asked him to try and get Mike Edwards on to ask him about the efficiency puzzle. Skip to about 2:30 in.

 

 

Edited by billfunk

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Do you have a complete list of crypto stocks? There’s prob more upside in these than the actual coins during a bubble

id be wary of any company claims like that, especially in crypto

Edited by Bakez

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3 hours ago, goldbug9999 said:

<double checks its not 1st april>

Investing in crypto mining WTF ?

https://www.blockchain.com/en/charts/hash-rate?timespan=all

There is more upside than buying Bitcoin

1) The price will undoubtedly be correlated somewhat with Bitcoin

2) Presumably one day they will be looking to pay a dividend - or maybe they just do the modern thing and pump their own stock

3) Noone knows or has considered investing in these

4) To stay afloat they will have to have preparation plans to move to other coins outside of Bitcoin

5) It satisfies boomers and pension funds

The problem is that crypto is filled with scammers and whether you can trust anything these companies say about their figures remains to be seen. Also find it a bit strange they don't list their company on blockchain, but then again there are already some of these and they seem to be 100% scams.

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On 01/09/2019 at 14:01, billfunk said:

This is the puzzle I am trying to work out - their Bitcoin breakeven price is a touch above $1000 I believe. Currently, if I believe their figures then their efficiency must come from a sweetheart energy deal they signed and recently extended. i can't see how else they can operate at double the efficiency of the market leaders. Newer machines must be worth a few percent of efficiency, no depreciation yet is worth maybe 10%. All these companies must use the same calculations for their hardware purchasing so they end up with similar rigs so there is no competitive advantage there. They all work out of Canada and I am presuming use the same Hydro-electricity so no advantage there either. Maybe ARB are organisationally more efficient, but to a factor of 2!? I find it hard to believe.

Just what is it exactly that makes ARB special?

In other news I have done a quick and roughly estimated valuation of miners using EV/Hashrate:

ARB - 0.07 (and when they have 505PH this will be an astonishing 0.017)

HUT8 - 0.17 (market leader)

BITF - 0.26 (estimated EV as = MCAP)

NB2 - 0.79

HIVE - 1.98

So a really good value play on its own. NB2 and HIVE are to be avoided at all costs. They are clearly not investable. ARB worth £60m today and £300m by December.

 

HIVE work out of scandinavia, apparently

I also think ARB they might have added their SH256 hash and Equihash on their homepage together, and then divided it by MW. The number comes out close to what they say on the graph

Edited by Bakez

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7 hours ago, AQUAMAN said:

There is more upside than buying Bitcoin

1) The price will undoubtedly be correlated somewhat with Bitcoin

2) Presumably one day they will be looking to pay a dividend - or maybe they just do the modern thing and pump their own stock

3) Noone knows or has considered investing in these

4) To stay afloat they will have to have preparation plans to move to other coins outside of Bitcoin

5) It satisfies boomers and pension funds

The problem is that crypto is filled with scammers and whether you can trust anything these companies say about their figures remains to be seen. Also find it a bit strange they don't list their company on blockchain, but then again there are already some of these and they seem to be 100% scams.

90% of cryptos will die.  Think .com.  However I would be a lot more confident in a better ROI in £10k of bitcoin than £10K of shares.  Would just take one company to release a game changing GPU and these mining companies would disappear overnight.

 

NOTE: This is not investment advice.

Edited by montecristo

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On 01/09/2019 at 14:01, billfunk said:

This is the puzzle I am trying to work out - their Bitcoin breakeven price is a touch above $1000 I believe. Currently, if I believe their figures then their efficiency must come from a sweetheart energy deal they signed and recently extended. i can't see how else they can operate at double the efficiency of the market leaders. Newer machines must be worth a few percent of efficiency, no depreciation yet is worth maybe 10%. All these companies must use the same calculations for their hardware purchasing so they end up with similar rigs so there is no competitive advantage there. They all work out of Canada and I am presuming use the same Hydro-electricity so no advantage there either. Maybe ARB are organisationally more efficient, but to a factor of 2!? I find it hard to believe.

Just what is it exactly that makes ARB special?

In other news I have done a quick and roughly estimated valuation of miners using EV/Hashrate:

ARB - 0.07 (and when they have 505PH this will be an astonishing 0.017)

HUT8 - 0.17 (market leader)

BITF - 0.26 (estimated EV as = MCAP)

NB2 - 0.79

HIVE - 1.98

So a really good value play on its own. NB2 and HIVE are to be avoided at all costs. They are clearly not investable. ARB worth £60m today and £300m by December.

 

I've worked this out

ARB have bought Antminer S17. The others are using different ASICs.

This makes them more efficient per MW but they are by far the most expensive chips, so after everything is taken into account their margins might not look so good.

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"The Company generated 163 Bitcoins (BTC), or £1.36m of cryptoassets, in July based on a BTC price of US$10,122 as of 31 July 2019. The assets were mined at a mining margin of roughly 80%"

So it costs them about $2k in electricity to mine each bitcoin

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15 hours ago, AQUAMAN said:

"The Company generated 163 Bitcoins (BTC), or £1.36m of cryptoassets, in July based on a BTC price of US$10,122 as of 31 July 2019. The assets were mined at a mining margin of roughly 80%"

So it costs them about $2k in electricity to mine each bitcoin

Less I think. Breakeven is closer to $1k than $2k though it is hard to know exactly as we have no figures currently and Mike Edwards, very surprisingly, did not respond to my email.

In other news, whilst i was at work yesterday, ARB announced that they have broken their ties with HIVE. This is good news as HIVE are loss making and ARB were wasting their money partnering with them. If ARB really do operate at twice the efficiency of their competition they would be far better served leveraging that advantage rather than tying themselves to weaker models.

 

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9 minutes ago, billfunk said:

Less I think. Breakeven is closer to $1k than $2k though it is hard to know exactly as we have no figures currently and Mike Edwards, very surprisingly, did not respond to my email.

In other news, whilst i was at work yesterday, ARB announced that they have broken their ties with HIVE. This is good news as HIVE are loss making and ARB were wasting their money partnering with them. If ARB really do operate at twice the efficiency of their competition they would be far better served leveraging that advantage rather than tying themselves to weaker models.

 

We don't know how we calculate their margin. Whether they just include electricity or other running costs. I'm just assuming it's worse case scenario.

Interestingly Bitfarms have the S17 listed on page 12 on their financial results: https://www.bitfarms.io/app/uploads/2019/08/190829-Q2-2019-Financial-Results-Final.pdf

They show the same approx. 80% margin on that and then 66% on S9 which fits with both company results.

Also Bitfarms claim to be expanding to at least 2000PH over the next year. They don't say what miners they will be buying other than it will be a mix. They also have $20m debt to pay in 2 years.

I think there will be a lot of lead and lag in this. One year one company will have an advantage, then their machines get old, lose their advantage, upgrade, repeat cycle. It's a difficult calculation to make in the long term whether it's better to buy the most expensive miner and suffer the depreciation/extra cost vs. buying mid range.

 

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13 hours ago, billfunk said:

Miton and Hadron sold 5% of the float today and the share was still up over 2%. That's a strong bull signal right there.

This could be like buying Gold miners in the 80s. An absolutely huge return but when you look at the charts you don't see all the ones that went bust and everyone lost money on along the way.

There's still a huge risk because we don't know what will happen when the block reward goes to 6 next year, and then 3, etc. Will other coins come to dominance in the strategy, will the transaction fees go so high that Bitcoin is useless, will overall hash power drop huge amounts, maybe Bitcoin increases in price and it doesn't matter.

I think for sure next year some of these publicly listed miners will go bust during a sustained crash in BTC. I don't think they can just 'turn off the miners' since their electricity contracts probably stipulate that they have to buy X amount over X years.

Edited by AQUAMAN

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1 hour ago, AQUAMAN said:

This could be like buying Gold miners in the 80s. An absolutely huge return but when you look at the charts you don't see all the ones that went bust and everyone lost money on along the way.

There's still a huge risk because we don't know what will happen when the block reward goes to 6 next year, and then 3, etc. Will other coins come to dominance in the strategy, will the transaction fees go so high that Bitcoin is useless, will overall hash power drop huge amounts, maybe Bitcoin increases in price and it doesn't matter.

I think for sure next year some of these publicly listed miners will go bust during a sustained crash in BTC. I don't think they can just 'turn off the miners' since their electricity contracts probably stipulate that they have to buy X amount over X years.

There is a risk but it isn't huge. For a start, I very much doubt BTC will drop below £2k ever again. If it does drop then it will put more pressure on ARB's competition than ARB due to their lower cost model. If other coins come into dominance then ARB can switch to mining them. BTC is inherently deflationary so one expects that as the difficulty increases so does the price - that has been the story of BTC since its inception.

ARB have a strategic investment in GPU.one, a low cost data centre provider which should ameliorate the risk of losing power supply.

I am sure some of these miners will go bust. Prime candidates are currently HIVE and and NB2. ARB is the best bet at the moment. A £30m company pulling >£1m out of the ether every month at 80% margin with 300% growth expected in 4 months. That isn't a huge risk in my book.

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54 minutes ago, billfunk said:

There is a risk but it isn't huge. For a start, I very much doubt BTC will drop below £2k ever again. If it does drop then it will put more pressure on ARB's competition than ARB due to their lower cost model. If other coins come into dominance then ARB can switch to mining them. BTC is inherently deflationary so one expects that as the difficulty increases so does the price - that has been the story of BTC since its inception.

ARB have a strategic investment in GPU.one, a low cost data centre provider which should ameliorate the risk of losing power supply.

I am sure some of these miners will go bust. Prime candidates are currently HIVE and and NB2. ARB is the best bet at the moment. A £30m company pulling >£1m out of the ether every month at 80% margin with 300% growth expected in 4 months. That isn't a huge risk in my book.

Seems like ARB and BITF are the better out of the bunch

There's also the dependency on Bitmain hardware. Bitmain are probably selling the miners for 3-4x manufacturing cost to the external companies which automatically gives their own farms a huge advantage, especially in any crash.

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Total revenue paid to miners per day: approx. $20m

https://www.blockchain.com/charts/miners-revenue?timespan=2years&daysAverageString=7

If it actually stays that way and ARB manage to achieve and maintain 1% of the hash power, they should be generating approx. $200k a day. Straight after the last halving, the total paid to miners per day dropped about 30%.

Not sure if it looks so good now. It depends how much they have to invest to maintain at least 1% of the hash power. Hash rate may well have doubled between June-Dec this year so even the expansions are not really expansions but just really to maintain their position

Edited by AQUAMAN

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Did mentionthis stock earlier. Keep up with the informative bear points, which will keep my feet on the ground. I think like myself, aren't too au fait with the inner workings of blockchain tech. I suspect 90% of the punters are the same - but that own't matter during a bull run. All the good news comes to the fore!

Edited by 201p

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