HIVE and Argo Blockchain Enter Strategic Partnership

On Monday (May 13), HIVE Blockchain (TSXV:HIVE) announced that it is entering a strategic partnership with UK-based Argo Blockchain (LSE:ARB).

Argo, with headquarters in London, operates cryptocurrency mining facilities in Quebec, Canada. Founded in 2017, its principal goal is to allow individuals to mine cryptocurrencies from home through its subscription model.

As part of the deal, HIVE and Argo will aim to build business-to-business (B2B) mining-as-a-service (MaaS) infrastructure. This new solution will be targeted towards institutional clients, and the companies plan to make it the foremost B2B MaaS service provider in the world.

Together, HIVE and Argo bring complementary mining capabilities. HIVE’s mining capacity stands at 45 megawatts and Argo has a capacity of 10.5 megawatts. Institutional partners will be able to utilize the combined capacities of HIVE and Argo to produce a host of cryptocurrencies.

Between the two, the companies operate facilities in Quebec, Norway, Iceland and Sweden. HIVE mines a number of different cryptocurrencies, including Ethereum, Zcash and Monero.

“The alliance is transformational for Argo and will deliver long-term and sustainable fiat-based revenue streams, ” said Jonathan Bixby, executive chairman of Argo, in a press release.

As outlined in the strategic partnership, HIVE and Argo will undergo a share swap agreement, where 5 percent of HIVE’s outstanding shares will be exchanged for 15 percent of Argo’s outstanding shares.

“We are excited about this strategic partnership and our analysis indicates that Argo is significantly undervalued,” said HIVE Interim Executive CEO Frank Holmes.

Argo’s 2018 year-end financial statements show that the company added over 10,000 subscribers, with year-end cash balances at 16 million pounds. Argo experienced a pre-tax loss of over 4 million pounds.

According to a press release, on May 8 Argo invested US$2.2 million in mining equipment via the purchase of 1,000 Bitmain Z11 miners. Bitmain is one of the largest mining equipment manufacturers worldwide.

A projected 400 new Bitcoins are anticipated to be mined through the use of Argo’s new Bitmain Z11 equipment. This was equivalent to US$3.1 million in Bitcoin prices as of 3:23 EDT Monday.

Since January 2019, the cryptocurrency environment has moved in a more favorable direction. Bitcoin has surged almost 150 percent since its yearly 2018 low of US$3,112. On Monday, Bitcoin prices surpassed US$7,900 at one point to reach a nine month high.

In line with this, other crypto assets have seen positive price movements, with Ethereum rising 7 percent over 24 hours and Binance Coin rising over 16 percent over the same time period.

In April, HIVE experienced a hostile takeover attempt from its largest shareholder, Genesis Mining. After HIVE accused Genesis Mining of breaching a material services agreement valued at an estimated C$50 million, Genesis Mining attempted to remove all directors of HIVE that were not part of Genesis Mining. HIVE announced on Friday (May 10) that its work with Genesis Mining has come to an end.

Shares of HIVE opened Monday’s trading session at C$0.61 and closed at C$0.64, which is a 3.28 percent increase. Meanwhile, Argo opened at GBP 4.88 and closed at GBP 4.75 for a 2.66 percent decline.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.