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Mesabi Trust Declares Distribution
01/14/2008 - Trustees of Mesabi Trust have declared a distribution of fifty-one and one-half cents per Unit of Beneficial Interest payable on February 20, 2008, a twenty cents per Unit increase compared to the year-ago quarter.
Trustees of Mesabi Trust have declared a distribution of fifty-one and one-half cents ($0.515) per Unit of Beneficial Interest payable on February 20, 2008 to Mesabi Trust Unitholders of record at the close of business on January 30, 2008.
The current distribution compares to a distribution of thirty-one and one-half cents ($0.315) per Unit for the same period last year. The twenty cents ($0.20) per Unit increase (as compared to the year-ago quarter) is attributed to significantly higher shipments of iron ore pellets during the fourth calendar quarter of 2007.
The Trust receives royalties based on iron ore pellet shipment volumes and selling prices as shipped by Northshore Mining Co., the lessee/operator of the Mesabi Trust lands. Although prices realized by Northshore for pellets shipped from Mesabi Trust lands were, on average, approximately 3.7% lower as compared to the fourth quarter of 2006, the total shipments of iron ore pellets credited to the Trust increased 74% over the same period, from 764,807 gross tons in the fourth quarter of 2006 to 1,330,068 gross tons in the fourth quarter of 2007. The current distribution also reflects certain negative adjustments to royalties paid to the Trust in the second and third calendar quarters of 2007.
Mesabi Trust expects to receive a total royalty payment of $6,926,765 on January 31, 2008; this payment includes the fee royalty expected to be received by the Mesabi Land Trust. For iron ore shipments during the fourth calendar quarter of 2007, Mesabi Trust was credited with a base royalty of $4,414,438 and a bonus royalty of $2,471,020. These base royalty and bonus royalty amounts were decreased by an aggregate of $93,401 (representing negative adjustments of $47,204 and $46,197, respectively) to base royalty and bonus royalty amounts credited to the Trust during the second and third calendar quarters of 2007. These adjustments resulted primarily from changes in the prices of iron ore pellets shipped under supply agreements between Northshore, Northshore’s parent Cleveland-Cliffs Inc and certain of their customers as part of the “CCI Pellet Agreements”.
Prices under the CCI Pellet Agreements are subject to interim and final pricing adjustments, which depend in part on multiple price and inflation-index factors that are not known until after the end of a contract year. These adjustments can result in significant and frequent variations in royalties (and in turn the resulting amount available for distribution to Unitholders by the Trust). Cliffs has not provided the Mesabi Trustees with any projections about possible pricing (and resulting royalty) adjustments that might impact future distributions.
The volume of shipments of iron ore pellets by Northshore varies based on a number of factors, including weather conditions on the Great Lakes, the requested delivery schedules of customers, and general economic conditions in the iron ore industry. The royalties paid to the Trust are dependent on the volume of shipments of iron ore pellets for the quarter and the year-to-date, the pricing of the iron ore product sales, and the percentage of iron ore pellet shipments from Mesabi Trust lands rather than from other lands. The volume of actual shipments of iron ore products in any particular quarter is 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 2008.
