ASX News Live | ASX Up 1%; New Hope and Fortescue Feature

The S&P/ASX 200 was up Tuesday, gaining 1.22%.

9 out of 11 sectors ended higher.

Materials rallied 2.60%.

New Hope (ASX:NHC), Brickworks (ASX:BKW), and Coronado Global (ASX:CRN) all rose over 5%.

 

Fortescue (ASX:FMG) thinks its US$6.2 billion decarbonisation capital investment over the next decade will lead to operational savings, environmental benefits … and a higher P/E multiple.

In its presentation, FMG said its planned US$6.2 cash splash will lead to better access to capital and “supports higher price to earnings ratios.”

$FMG will splash US$6.2B to eliminate fossil fuels from its supply chain. #Fortescue thinks the investment will 'support higher price to earnings ratios', mitigating from being 'excluded from capital providers.'

Will $FMG's green pivot lead to higher P/E ratio? #ausbiz

— Fat Tail Daily (@FatTailDaily) September 20, 2022

Fortescue (ASX:FMG) has announced a strategy to become a ‘world leader’ in decarbonisation, phasing out fossil fuel use and hitting net zero carbon emissions for its entire iron ore operations by 2030.

In chasing this goal, FMG will invest US$6.2 billion.

The goal isn’t purely altruistic.

Fortescue thinks the investments can reduce operating costs by US$818 million per annum from 2030.

Ceteris paribus, the investment could then pay for itself in 7.5 years through cost savings.

Fortescue itself thinks it will achieve payback capital by 2034 with cumulative operating cost savings of US$3 billion by 2030.

According to Fortescue, the cost savings stem from the elimination of diesel and natural from its supply chain, displacing about 700 million litres of diesel and 15 million GJ of gas.

What will the US$6.2 billion be spent on?

In Fortescue’s words:

“This investment includes the deployment of an additional 2-3 GW of renewable energy generation and battery storage and the estimated incremental costs associated with a green mining fleet and locomotives. The capital expenditure to purchase the fleet will be aligned with the scheduled asset replacement life cycle and included in Fortescue’s sustaining capital expenditure. Studies are underway to optimise the localised wind and solar resources.”

Do stocks outperform government bonds?

The answer seems obvious. Given the equity risk premium and the earnings growth potential, stocks clearly outperform.

How could they not?

But as a highly cited finance paper showed a few years ago, most stocks don’t.

While the stock market can outperform safe assets like Treasuries, not every individual stock is destined to do the same.

In fact, the majority of stocks are duds.

Do stocks outperform Treasury bills?

It’s not often that a paper in the Journal of Financial Economics gets widespread media coverage and causes a stir in the professional investment community.

But that’s exactly what happened to a paper written by Arizona State University finance professor Hendrik Bessembinder.

Bessembinder’s 2017 paper ‘Do Stocks Outperform Treasury Bills?’ looked at 26,000 companies listed between 1926 and 2016 and tracked their performance.

Bessembinder’s findings were stark.

Just 86 stocks accounted for US$16 trillion in wealth creation — half of the stock market total — over the past 90 or so years.

It gets even starker.

All the wealth creation can be attributed to the 1,000 top-performing stocks, while the remaining 96% of stocks collectively only managed to match one-month T-bills.

https://www.moneymorning.com.au/20220920/moonshot-investing-the-magic-4-stocks.html

ASX lithium stocks are rising on Tuesday, helping the All Ords gain 1.15% by 1pm.

• Piedmont Lithium (ASX:PLL), up 8.8%
• Ecograf (ASX:EGR), up 8.3%
• Mineral Resources (ASX:MIN), up 5.7%
• IGO (ASX:IGO), up 5.5%
• Liontown Resources (ASX:LTR), up 4%
• Allkem (ASX:AKE), up 3.5%

 

Graphite developer Talga Group (ASX:TLG) announced drill results from exploration at its Swedish Vittangi Graphite project.

Assay results from 23 drill holes showed “further zones of high grade graphite mineralisation over substantial downhole widths.”

Talga has started an update to its Vittangi graphite resource estimate. TLG hopes to complete it in Q4 2022.

Talga Managing Director, Mark Thompson, commented:

“Mineral resource growth through exploration is a key part of our strategy, and our successful Vittangi graphite drilling continues to deliver world-class results. With the green transition of mobility gathering speed, secure supplies of critical battery materials have never been more important. Talga’s growth of its Swedish natural graphite resources supports our plans of long-life anode production to supply clean materials to European battery and EV manufacturers.”

Talga reported significant downhole intercepts at:

o 25m @ 28.4% Cg (from 39m) NIS22007 incl. 6m @ 45.5% Cg
o 85m @ 23.0% Cg (from 87m) NIS22020 incl. 46m @ 30.4% Cg
o 15m @ 31.7% Cg (from 2m) NIS22033 incl. 7m @ 42.0% Cg (from bedrock surface)

Aussie graphite developer Renascor Resources (ASX:RNU) announced on Tuesday it secured a site for its Battery Anode Material Manufacturing Facility from a state owned utility SA Water.

RNU signed an option-to-lease agreement with South Australian government-owned utility, giving it initial lease options for 40 years.

Commenting on the agreement, Renascor Managing Director David Christensen said:
“We are delighted to have executed the option-to-lease with SA Water for the site for our proposed Battery Anode Material Manufacturing. It provides certainty over a key component of our plans to become a leading producer of Purified Spherical Graphite for the growing lithium-ion battery sector. In securing the strategically positioned and scalable Bolivar site, Renascor will be able to leverage off the high quality of the Siviour Resource by vertically integrating the mine and concentrator with a state-of-the-art Battery Anode Material Manufacturing facility to supply responsibly produced, 100% Australian-made Purified Spherical Graphite for the lithium-ion battery industry. We look forward to working with SA Water and the South Australian Government as we bring a major new industry to the State.”

RNU shares were flat on the news but have gained 55% over the past 12 months.

The S&P/ASX 200 is up 0.96% at midday Tuesday trade.

The best performers:

• Coal producer New Hope (ASX:NHC), up 7%, following the release of strong FY22 results
• NHC major shareholder Brickworks (ASX:BKW), up 6.3%
• Ramelius Resources (ASX:RMS), up 4.6%
• IGO (ASX:IGO), up 4.7%
• Mineral Resources (ASX:MIN), up 4.3%

The worst performers at midday were women’s apparel retailer City Chic Collective (ASX:CCX), down 3%, and biopharma stock Clinuvel Pharmaceuticals (ASX:CUV), down 2.5%.