Argo Seeks $40M in Convertible Bonds to Tackle Bitcoin Mining Struggles

Argo Blockchain is turning to convertible bonds in its latest attempt to stay afloat as it faces mounting profitability challenges from using older-generation Bitcoin mining equipment.

In a release on Monday, Argo announced that it had entered into a non-binding term sheet with three institutional investors for senior convertible loans of up to $40 million, carrying an interest rate of approximately 8%.

The company’s chairman of the board stated that the team is working closely with the investors to complete due diligence and refine the business plan before finalizing a definitive agreement.

The proposed transaction includes an initial tranche of $15 million, with additional tranches of up to $25 million to be advanced over the next 18 months. The bonds will feature a 25% conversion premium based on Argo’s closing stock price prior to the signing of definitive agreements.

Under the terms of the deal, the investors will also gain three seats on Argo’s board once the definitive agreements are finalized and shareholder approval is obtained.

Argo plans to use the proceeds from the proposed funding to upgrade its mining fleet in Baie-Comeau, Quebec, strengthen its balance sheet and to explore potential mergers and acquisitions.

The company also emphasized that the convertible loans are critical to providing the necessary working capital for the next 12 months. If the transaction does not go through, Argo will need to explore alternative financing options. As of September 30, Argo’s working capital stood at -$5 million.

Argo previously operated approximately 29,000 Antminer S19j Pro units hosted at Galaxy Digital’s Helio facility in Texas. However, Galaxy terminated the colocation contract, and starting in January, Argo began relocating part of the fleet to its proprietary facility in Canada and to a new hosting partner, Merkle Standard.

With Bitcoin’s hashprice currently at $53/PH/s following its rebound on Sunday, each S19j Pro generates $0.075 per kilowatt-hour approximately and is facing increasing profitability pressure as newer-generation equipment is deployed to drive up mining difficulty.