The Trustees of Mesabi Trust declared a distribution of $ 0.37 per Unit of Beneficial Interest payable on August 20, 2005 to Mesabi Trust unitholders of record at the close of business on July 30, 2005. This compares to $0.175 per Unit for the same period last year.

The distribution increase compared to the same quarter last year is due largely to increased iron ore pellet prices during the quarter by Northshore Mining Co., the lessee/operator. These increased prices resulted in increased base royalties and a royalty bonus payment for iron ore shipments from Silver Bay, Minn., sold at prices above a threshold price, despite an approximately 22% decrease in the volume of shipments of iron ore pellets during the quarter as compared to the same quarter last year, as well as certain downward adjustments to royalties paid in the previous quarter. These adjustments to last quarter's royalties resulted from pricing adjustments under term contracts between Northshore, Northshore's parent Cleveland-Cliffs Inc. and certain of their customers.

The total royalty payment expected to be received by Mesabi Trust on July 29, 2005 from Northshore is $5,136,934 (including the royalty received by the Mesabi Land Trust). With respect to shipments of iron ore during the second calendar quarter of 2005, Mesabi Trust received a base royalty of $2,603,859 (representing actual shipments of iron ore mined from Mesabi Trust lands of approximately 1,373,604 tons). Mesabi Trust also received a bonus royalty in the amount of $2,485,122 with respect to shipments during the second calendar quarter of 2005. The above base royalty and bonus royalty amounts were reduced by $45,498 representing downward adjustments of $20,681 and $24,817, respectively, to last quarter's base royalty and bonus royalty amounts.

Northshore’s volume of iron ore pellet shipments varies over time based on a number of factors, including weather conditions on the Great Lakes, customers’ requested delivery schedules, and general economic conditions in the iron ore industry. Resulting royalties paid to the Trust are dependent on the volume of iron ore pellet 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. Further, prices under the Cliffs Pellet Agreements are subject to interim and final pricing adjustments, dependent in part on multiple price and inflation index factors that are not known until after the end of a contract year. This can result in significant and frequent variations in royalties received by Mesabi Trust (and in turn the resulting amount available for distribution to Unitholders by the Trust) from quarter to quarter and on a comparative historical basis. Variations, which can be positive or negative, cannot be predicted by Mesabi Trust. Royalty payments received in 2004 and 2005 continue to reflect pricing estimates for shipments of iron ore products that may be subject to further adjustment (upward or downward) pursuant to the Cliffs Pellet Agreements.

Outlook—With respect to the balance of 2005, Northshore has not advised Mesabi Trust as to its expected 2005 shipments of iron ore products or what percentage of 2005 shipments will be from Mesabi Trust iron ore. Cliffs has indicated that currently scheduled 2005 pellet production at Northshore (using iron ore mined from both Mesabi Trust lands and from other than Mesabi Trust lands) will approximate 4.9 million tons.