Mesabi Trust Declares Distribution
04/17/2009 - Trustees of the Mesabi Trust declare a distribution of thirty-eight cents per Unit of Beneficial Interest, which compares to a distribution of twelve cents per Unit for the same period last year.
Trustees of the Mesabi Trust have declared a distribution of thirty-eight cents ($0.38) per Unit of Beneficial Interest payable on May 20, 2009 to Mesabi Trust Unitholders of record at the close of business on April 30, 2009. This compares to a distribution of twelve cents ($0.12) per Unit for the same period last year.
The total royalty payment expected to be received by Mesabi Trust on April 30, 2009 is $5,105,276 (which includes the fee royalty expected to be received by the Mesabi Land Trust). For shipments of iron ore during the first calendar quarter of 2009, Mesabi Trust received a minimum advance royalty payment of $202,044, representing one quarter of the 2009 annual minimum royalty payment of $808,177. Mesabi Trust received a minimum advance royalty because it was credited with shipments of less than 10,000 tons for the first calendar quarter of 2009. Shipments credited to the Trust during first calendar quarter decreased approximately 98% from 493,695 tons during the first calendar quarter of 2008.
The increase in the distribution, as compared to the same quarter last year, is primarily due to adjustments to the royalty payments received for past shipments of iron ore pellets by Northshore Mining Co. (lessee/operator of Mesabi Trust lands) during calendar years 2006, 2007 and 2008. The Trust receives royalties based on the volume of shipments and the selling prices of iron ore pellets shipped by Northshore. As part of the total royalty payment, Mesabi Trust will receive a payment of $663,118 representing pricing adjustments for shipments and sales of iron ore pellets by Northshore during calendar year 2006. With respect to shipments and sales by Northshore during calendar year 2007, Mesabi Trust will receive a negative adjustment of $382,067. Most significantly, Mesabi Trust will receive a payment of $4,622,181 representing adjustments for 2008 shipments and sales by Northshore based on estimated 2008 pricing. The net effect of the adjustment payments from Northshore with respect to calendar years 2006, 2007 and 2008 resulted in a total positive adjustment of $4,903,232, or 96% of the announced distribution.
Pricing adjustments were made in accordance with long-term sales contracts among Northshore, Cliffs Natural Resources Inc (Northshore’s parent) and certain of their customers. Prices under the pellet agreements are subject to interim and final pricing adjustments that depend in part on multiple price and inflation index factors, which can result in significant and frequent variations in royalties. The royalty payment attributable to the first calendar quarter of 2009 (and thus the distribution) was increased as the result of substantial positive adjustments to royalty payments previously received by Mesabi Trust due to changes in the estimated selling prices of iron ore pellets under the pellet agreements and Northshore’s previous pricing estimates on shipments attributed to Mesabi Trust. Royalty payments received by the Trust in 2007, 2008 and 2009 will continue to reflect estimated prices for shipments of iron ore products that may be subject to further adjustment. Cliffs has not provided the Mesabi Trustees with any projections about possible pricing (and resulting royalty) adjustments that might impact future distributions, although Cliffs did indicate that the reported royalty payments are based on estimated iron ore pellet prices that are subject to change in the future.
Shipment volumes vary from quarter to quarter and year to year based on a number of factors, including weather conditions on the Great Lakes, requested delivery schedules, and general economic conditions in the iron ore industry. Royalties paid to the Trust are dependent on shipment volumes, pricing of the iron ore product sales, and the percentage of iron ore pellet shipments from Mesabi Trust lands rather than from other lands. Actual shipment volumes are not necessarily indicative of the level of shipments in subsequent quarters. Northshore has not provided the Mesabi Trustees with a forecast of the volume of shipments of iron ore pellets in calendar 2009.
