“You just have to make a few good decisions in a lifetime. But the important thing is that when you do find one where you really do know what you are doing, you must buy in quantity… I have made a dozen or so very big decisions relative to net worth, although not as big as they should have been. And in each of those, we’ve known that we were almost certain to be right going in.”

Warren Buffett

OUR PERFORMANCE

Fortescue (FMG)
Price $17.27, Yield 16.6.%.

The yield is based on the current high iron ore price.
Fortescue is fully priced on its iron ore, however it has enormous potential to produce hydrogen to replace fossil fuels.

Hydrogen produced from the electrolysis of water, with the electricity itself produced from solar, wind and hydro is the ultimate green “clean” energy. It generates zero carbon emissions in its manufacture, and its after use waste product is pure water.
Energy from water!

The Pilbara is the best place on Earth to produce solar and wind power; however, FMG plans to be a global hydrogen producer. It has signed an agreement with Papua New Guinea to undertake feasibility studies to develop up to 7 hydropower projects and 11 geothermal energy projects. Agreements are being negotiated in Argentina, Brazil, Congo, India, Indonesia, Japan, Jordan, New Zealand. Under a memorandum of understanding FMG will become the largest supplier of green hydrogen to the UK.

FMG is securing the best global renewable assets, locking in a global first mover advantage.

Solar and wind power have two challenges. They are intermittent and unreliable, and only work when the sun shines and the wind blows. The electricity generated cannot be stored on a large scale, because current battery technology is inadequate. Clean green hydrogen is stored energy and the ideal replacement for fossil fuels.

FMG is developing hydrogen to power its mining trucks, trains and ore ships. Diesel engines can be readily converted to run on ammonia, a compound of hydrogen.

FMG has entered into an agreement to facilitate hydrogen supply for jet aircraft engines.

An electric car can be powered by either a battery or hydrogen. A battery car takes several hours to recharge, while a hydrogen refill takes the same time as a petrol refill. Hydrogen is lighter than air, batteries are heavy and bulky. Disposing of used batteries is an environmental concern.

Dr Andrew ‘Twiggy’ Forrest – Boyer Lecture: “Elon Musk recently called hydrogen fuel cell cars ‘mind-bogglingly stupid’. He has every reason to fear them. His description is perhaps better suited to someone who peddles a battery technology as green – when it runs on fossil fuels.” FMG has a stock market value of US$38 billion and Tesla US$1,152 billion, 30 times larger.

An industrial revolution is underway replacing fossil fuels. Green hydrogen is the ultimate fuel. Zero carbon using hydrogen may be nearer than thought.

FMG is positioning itself as the key global hydrogen supply leader.

Freehill (FHS)
Price $0.027

FHS owns a very valuable high grade, low impurity, magnetite iron ore resource. High-grade, low impurity magnetite is less polluting in steel making. It is in short supply and high demand, commanding premium prices.

Highly respected Dean David Consulting has assessed three ore processing options: 68%+ Fe grade pellet feed, 63% Fe grade HG grade fines and 53% Fe grade LG fines.

An initial small scale magnetite plant, processing up to a 63% grade product will commence operation in early 2022. Actually producing a 63% magnetite concentrate is particularly significant.

Freehill has to date proved up 67 million tons of magnetite ore. Only two of several magnetic structures have been drilled, so there is massive upside potential to the size of the magnetite resource.

During the quarter I personally underwrote $800,000 of maturing share options, and now own 6.05% of Freehill’s shares.

Unibail-Rodamco-Westfield (URW)
Price $4.65, Prospective 2023 yield13.6%

I can’t think of a stronger business franchise anywhere in the world than URW. The company was formed in 2017 by the merger of Australia’s Westfield Corporation with the French based Unibail-Rodamco, to form the premier global operator and developer of flagship shopping centres. These centres would be hard or impossible to duplicate, and constitute an enduring competitive advantage in the most dynamic cities in Europe, the UK and the USA. URW centres attract over one billion visitors each year.

Tenant sales for Continental Europe reached 92% of pre-COVID levels in the September quarter and 89% including the UK, while the USA was even stronger at 102%.

URW stock traded at $12 in 2019, with a Net Asset Value of $15 per share. The dividend has been suspended until 2023. Post-COVID we expect the dividend and stock price to be restored.

CIMIC (CIM)
$18.21, Yield 6.3% is selling at a substantial discount to its intrinsic value. 

Harvey Norman (HVN)
$4.96, Yield 9.3% is also very attractively priced.

Wishing you a Merry Christmas and festive season, and a happy, safe and prosperous 2022.

Kind regards,

Gavin

DOWNLOAD CURRENT NEWSLETTER

Disclaimer: This report is for the exclusive use of the portfolio management clients of Gavin Ross & Co Pty Ltd. It should not be relied upon in any way by anyone else. Events can change quickly, and we can change our mind about the desirability of a particular stock. We own investments in the stocks mentioned in this report and are a substantial shareholder in Freehill Mining Limited.