Argo sets the tone for green crypto mining and an important update on Meggit
15th September 2022 |
US President Joe Biden isn’t hanging about.
His plans for a greener, more sustainable United States are being put into practice.
Last month, Biden announced a landmark $370 billion Inflation Reduction Act, that will decarbonise transport and energy systems. However, his green agenda is now targeting other industries, one of which is cryptocurrency mining.
Crypto mining is the process by which new cryptocurrency tokens are obtained.
During mining, nodes (or network computers) solve complex algorithmic puzzles which validate and process crypto transactions on a particular blockchain. As a result, miners are rewarded with tokens, which are then put into circulation.
Crypto mining expends vast amounts of energy. It currently accounts for around 0.3% of the world’s greenhouse gas emissions, producing about 140 million metric tonnes of carbon dioxide a year. So, it’s unsurprising that crypto mining is becoming a focus area of policymakers seeking to reduce emissions.
On 8 September, President Biden’s administration issued a new report calling for the development of new, “greener” cryptocurrency mining standards. In particular, it will assess the impact of crypto mining on the environment and assess how different cryptocurrencies vary in their energy needs.
Factors such as pollution and energy intensity will also be investigated. Biden even stated that failure to create a greener crypto-mining industry could lead to a crypto-mining ban in the United States.
To be clear, we don’t think this will happen.
The United States is the largest crypto-mining hub in the world, accounting for 38% of mining output. It has simply become too valuable to the US economy and crypto world. The United States mines around 342 bitcoins daily, which, at current market prices (as of 15/09/2022), equates to $6.8million per day. Per year, that’s around $2.5 billion.
And, thanks to mining companies such as Argo Blockchain (LSE: ARB), the US mining industry is getting greener.
The company is part of the Crypto Climate Accord, a private initiative which seeks to eliminate carbon emissions from the crypto industry by 2030. What’s more, Argo operates a facility in Quebec, Canada, that runs using 100% hydro and wind energy.
Given the possibility of tighter, more eco-friendly mining restrictions, we think Argo will thrive, whilst others will fail.
Argo continues to mine bitcoin at an impressive rate. During August, the company mined 235 bitcoin, up from 219 in July.
It attributes this performance to the large mining capacity at its new Texas facility, opened in May this year. The facility consists of around 50,000 mining machines and sources mainly solar and wind energy for its operation.
Argo now has a total of 1,098 bitcoin holdings.
Although its share price has plummeted, in line with the rest of the crypto market, we like to focus on its projections. If our bitcoin price prediction of $1,000,000 per bitcoin holds, Argo’s bitcoin holdings will easily surpass $1 billion.
Given the company’s market cap of £227 million (at the time of writing), and its proclivity for green crypto mining, Argo undoubtedly has the potential to deliver value to shareholders down the line.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Buy list update
Meggitt (LSE: MGGT)
Back in September 2021, American engineering giant Parker Hannifin announced plans to takeover Meggitt in a £6.3 billion deal.
In the deal, Parker Hannafin offered to buy all outstanding Meggitt stock for 800GBp share. This was approved by Meggitt shareholders on 21 September 2021.
On 19 July this year, then UK Business Secretary Kwasi Kwarteng approved the takeover. The takeover also received approval from a UK court on 9 September.
As a result, the deal has now completed. Meggitt shares will de-list from the main market of the London Stock Exchange from 7.30am on 14 September 2022.
For any outstanding Meggitt shares you have, you’ll be credited with the 800GBp per share value outlined in the terms of the transaction. How you receive your consideration will depend on how you hold your shares.
According to Meggitt, share payments should now take around two weeks from the time of writing to complete. Please see the FAQs outlined by Meggitt here for further information.
Our position in Meggitt has now ceased, and it will be removed from the buy list.
From our entry point of 634.4GBp, the 800GBp per share offer leaves us with a 26.1% gain.
Trackwise Designs (LSE: TWD)
Trackwise Designs is a manufacturer of printed circuit boards (PCBs), an essential component in many electronic products.
The company has had a difficult year. In part, reduced demand from major electric vehicle (EV) customers has impacted its revenues, with revenues dropping from £4.1 million in the first half of 2021 (H1 2021) to £3.8 million in H1 2022.
On 14 September 2022, Trackwise announced it is in “advanced discussions” with a major EV manufacturer over a new contractual agreement. This is after the EV customer announced it is expecting lower production volumes in 2022.
According to Trackwise, this has had an adverse effect on the availability of funding, which it was hoping to invest in capital at its Stonehouse facility. As a result, this has increased Trackwise’s cash requirements, and it is currently exploring other funding options.
The market reacted negatively to the news, with Trackwise’s share price falling around 40% between 14 and 15 September 2022. At the time of writing, its share price is 10GBp.
Trackwise attributes its current challenges to “inflation, supply chain dislocation and Brexit-related customs issues.” More importantly, it doesn’t seem like the share price decline is due to a structural issue within the company.
Trackwise also reassured shareholders that its pipeline of contracts remains “significant”.
We’re confident that Trackwise can negotiate these turbulent macroeconomic conditions, as it brings its new Stonehouse facility to full-scale commercial production.
We reiterate our HOLD recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. These include power cables, fibre optics and charging plugs. It might sound a little basic, but these are critical mechanisms that are powering some of the key technologies of the modern day. These technologies comprise electric vehicles (EVs), artificial intelligence (AI) and big data networks. Volex has huge credibility behind it, particularly as it does business with some of most widely recognised companies in the world, including Tesla. You can find the original recommendation here.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games containing some of the most popular of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the nineties gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a megatrend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the ease of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
Pod Point Group (LSE: PODP) – The UK’s inadequate (for now) electric vehicle (EV) charging network is threatening to bring the EV transition to a halt. By 2032, the shortfall of EV charge points in the UK is estimated to reach 250,000. However, Pod Point’s innovative range of EV charging solutions could go a long way in ensuring this deficit is reduced. The company’s charging technology is fit for homes, public charging bays, lamp posts and commercial buildings, and can ensure that the EV transition reaches all areas of the UK. In our view, Pod Point can unlock the potential of the UK’s EV charging network. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Analyst, Frontier Tech Investor
