Argo – the clean, green crypto miner
17th March 2022 |
A hot topic around financial markets at the moment is “green” energy.
Here at Frontier Tech Investor, we’ve made no secret of our excitement at the world’s green energy transition, which is being spurred by the COP26 climate summit talks and, of course, soaring fossil fuel prices.
Several industries – including transport, energy, and even packaging – are getting greener by the day, and all are covered in our buy list.
Yet one segment that often gets overlooked when it comes to energy consumption is cryptocurrencies, in particular crypto mining, which is the process by which new crypto tokens are obtained.
For example, with bitcoin, miners verify and add transactions to the cryptocurrency’s blockchain. To do this, computing systems acting as validators to the bitcoin network must solve a complex algorithm, which simultaneously secures and validates the network. In return, miners are rewarded with bitcoin in what is known as a “proof-of-work (PoW)” consensus mechanism. However, solving the algorithm expends massive amounts of energy.
In fact, it is estimated that crypto mining consumes 91 terawatt hours of electricity annually. To provide some perspective, that’s more than the entire annual electricity consumption of Finland, a country of 5.5 million people.
It therefore comes as no surprise that the same policymakers who were instrumental in the COP26 talks are also seeking ways to tackle the sustainability problem in crypto mining. In fact, delegates of the European Union met on 14 March to discuss proposals to potentially ban the mining of PoW cryptocurrencies such as bitcoin. But after a vote of 31 to 4 (with 23 abstentions), the European Parliament’s Economic and Monetary Affairs Committee elected not to proceed with a ban.
The Committee also laid down draft rules for sustainability, which included adding crypto mining to the EU taxonomy by 2025 in order to boost transparency on energy consumption.
Another proposal was to explore ways to switch to a “proof-of-stake” (PoS) consensus mechanism, whereby validators of crypto transactions on the network are selected in proportion to their crypto holdings of that token. This cuts out the computational costs of PoW consensus mechanisms.
But what does this all mean?
Firstly, the decision of the EU not to ban crypto mining in the jurisdiction is a positive for the crypto market as a whole. An EU mining ban would likely have compounded already depressed sentiment in the market, perhaps leading to further regulatory scrutiny.
Secondly, and more importantly, the European Parliament talks underscore the need for sustainable crypto mining processes.
This can be achieved through PoS consensus mechanisms, and we’re seeing some crypto networks make the adjustment to PoS (Ethereum, for example). But it’s easier said than done, requiring a huge overhaul of network protocols.
A more feasible solution could be to conduct mining processes using electricity from renewable energy sources, and this is precisely what Argo Blockchain (LSE: ARB) does.
Argo is a miner of cryptocurrencies such as bitcoin, but it stands out from a run-of-the-mill crypto miner because it mines using renewable energy. Its Quebec mining facility uses 100% hydro and wind power, and it is part of the “Crypto Climate Accord” which seeks to power mining rigs using only renewable energy sources by 2025.
Argo is very clearly a step ahead of other crypto miners and is setting the tone for sustainability in the industry.
Its share price has fallen in line with the drop in valuations of crypto assets over the past six months or so. A waning appetite for risk among investors, along with more favourably priced safer assets, such as government bonds, has contributed to an enduring crypto bear market.
We nonetheless consider Argo to be significantly undervalued, at GBp60.10, given that it owns 2,685 bitcoin (worth in excess of $100 million) and crypto’s overall long-term potential.
We reiterate our buy recommendation on the stock. You can find our original recommendation here.
Buy list update
EQTEC (LSE: EQT)
EQTEC is a green technology company that converts waste into syngas, which is then used to power green energy appliances.
The company is in the process of commercialising its gasification technology and has several projects in operation across Europe, including Croatia, Greece and Spain, where it converts local biomass into energy sources.
EQTEC’s commercial expansion has now reached France.
On 14 March, EQTEC announced that it has launched its own, France-based subsidiary, EQTEC France SAS.
Here, EQTEC is seeking to capitalise on France’s switch to “net zero” carbon emissions. Currently, France has ambitions to eliminate greenhouse gas emissions by 2050.
EQTEC is bidding for three commercial projects in France, one waste-to-power project and two waste-to-biofuels projects.
Also, to strengthen its commercial presence in France at this early stage, EQTEC has announced a collaboration agreement with SEPS SAS, a company which specialises in the management of industrial waste and recycling.
The deal will combine the expertise of both parties to manage local pipelines of waste, and convert it into energy alternatives such as electricity and heat.
Expansion into France is a huge statement of intent from EQTEC, reflecting its desire to establish itself as an international green energy producer at a time where the world is seeking to meet stringent carbon emissions targets laid out by COP26 climate summit delegates.
Unsurprisingly, news of expansion into France was met with great excitement by investors.
EQTECs share price jumped 16.6% from its 11 March close of GBp0.904 to GBp1.054 on 14 March.
We share the market’s optimism, and look forward to seeing further commercial developments from EQTEC.
We reiterate our buy recommendation on the stock. You can find our 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.
MPAC Group (LSE: MPAC) – MPAC is a leading provider of packaging solutions. The company is helping to deliver efficiency gains to customers through its automated processes that harness some of the most powerful technologies of the modern day. This includes augmented reality (AR) and the use of “smart” machinery. With MPAC, it’s the machines telling the human what to do, rather than the other way around, with the result that human error is eradicated and that manufacturing lines are smoother than ever before. You can find the original recommendation here.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. This includes power cables, fibre optics and charging plugs. It might sound a little basic, but these are critical mechanisms which are powering some of the key technologies of the modern day. These technologies include 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 which contains some of the most popular games of the gaming world. One of which 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.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
