Argo Blockchain (LSE:ARB), the cryptocurrency mining business, has secured a new $25m (£18m) loan from Galaxy Digital LP. This further expands the existing relationship between the two parties as Argo Blockchain has previously negotiated a $20m (£14.4m) credit facility. In total, the firm now has access to $45m (£32.4m) of capital, using mined Bitcoin as collateral.
Seeing rising debt levels can be a sign of trouble. However, the management team intends to use this debt as fuel for operational expansion. In July, it announced that the construction of its new Texas mining facility had begun. This data centre is equipped to support up to 1,000MW of mining capacity, with 200MW expected to be operational by mid-2022.
The newly secured capital is being deployed to continue funding the development of this project. Any excess is being used to cover operating cash flow requirements.
How does this impact the ARB share price?
On the day of the announcement, the ARB share price didn’t move much. Why? Because from a long-term point of view, this new line of credit could be both good or bad news depending on external factors.
Relying on debt allows Argo Blockchain to raise additional capital without having to sell any Bitcoin reserves. So, if the price of the cryptocurrency climbs higher in the future, the firm will be in a much stronger position. However, if the price falls, the new debt and interest payments could add considerable pressure to profit margins.
The post Argo Blockchain (ARB) secures £18m loan for Bitcoin mining appeared first on The Motley Fool UK.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.