01 - Combine the milk, water, and salt in a medium saucepan. Bring the mixture to a gentle simmer over medium heat.
02 - Slowly whisk the stone-ground grits into the simmering liquid. Ensure constant stirring to prevent any lumps from forming.
03 - Reduce the heat to low. Continue to cook the grits for 20 to 25 minutes, stirring frequently until they have thickened and become tender. Add additional water if the texture becomes too thick.
04 - Stir the heavy cream and unsalted butter into the cooked grits. Mix thoroughly until the fats are fully incorporated and the texture is smooth.
05 - Remove the saucepan from the heat. Fold in the shredded sharp cheddar cheese, stirring until it is completely melted and the mixture is uniform.
06 - Taste the grits and adjust the seasoning as necessary. Serve hot, garnished with chopped fresh chives and a sprinkle of freshly ground black pepper.