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Mesabi Trust Declares Distribution
10/16/2007 - Trustees of Mesabi Trust declare a distribution of forty-eight cents per Unit of Beneficial Interest, which compares to a distribution of fifty-eight and one-half cents per Unit for the same period last year.
Trustees of Mesabi Trust have declared a distribution of forty-eight cents ($0.48) per Unit of Beneficial Interest payable on November 20, 2007 to Mesabi Trust unitholders of record at the close of business on October 30, 2007. This compares to a distribution of fifty-eight and one-half cents ($0.585) per Unit for the same period last year.
The Trust attributes the $0.105 per Unit decrease (compared to the same quarter last year) primarily to a lower volume of shipments and lower iron ore pellet prices as reported by Northshore Mining Co., the lessee/operator of the mine on Mesabi Trust lands. The lower prices and shipments resulted in decreased base royalties and a lower bonus royalty payment for iron ore shipments from Silver Bay, Minn.
Based on third-quarter iron ore shipments, Mesabi Trust expects to receive a base royalty of $3,719,336 (representing royalties on actual shipments of iron ore mined from Mesabi Trust lands of 1,432,714 tons), and a bonus royalty of $2,592,736. The total royalty payment expected to be received by Mesabi Trust on October 31, 2007 from Northshore is $6,487,846 (including a royalty payment of $137,570 payable to the Mesabi Land Trust).
Northshore’s iron ore shipment volumes vary based on a number of factors, including weather conditions on the Great Lakes, customer requests for delivery schedules, and general economic conditions in the iron ore industry. The resulting royalties paid to Mesabi Trust depend on the volume of iron ore shipments for the quarter and year-to-date, pricing of the iron ore product sales, and the percentage of iron ore pellet shipments from Mesabi Trust lands rather than from other lands. Prices under term contracts between Northshore, Northshore’s parent Cleveland-Cliffs Inc, and certain customers (the CCI Pellet Agreements) are subject to interim and final pricing adjustments, depending in part on multiple price and inflation index factors. These factors can result in possibly significant but unpredictable variations in royalties received by Mesabi Trust.
Regarding the balance of 2007, Northshore has not advised Mesabi Trust as to its expected 2007 shipments of iron ore products or what percentage of 2007 shipments will be from Mesabi Trust iron ore. Cleveland Cliffs has previously reported that it estimates scheduled 2007 pellet production at Northshore (using iron ore mined from both Mesabi Trust lands and from other than Mesabi Trust lands) will be approximately 5.1 million tons. Cleveland 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 royalty payments being reported today are based on estimated iron ore pellet prices under CCI Pellet Agreements that are subject to change.
