Item 7.01Regulation FD
Quarterly Royalty Report
On January 30, 2023, the Trustees of Mesabi Trust received the Quarterly Royalty Report from Cliffs, the parent company of Northshore.
As reported to Mesabi Trust by Cliffs in the Quarterly Royalty Report, based on shipments of iron ore products by Northshore during the three months ended December 31, 2022, Mesabi Trust was credited with a base royalty of $0. Also for the three months ended December 31, 2022, Mesabi Trust was credited with a bonus royalty in the amount of $0. After applying a reduction of $789,080 as a result of negative survey adjustments to base and bonus royalty calculations related to changes in estimates of tons deemed shipped in prior quarters, Cliffs paid Mesabi Trust $0 for shipments during the quarter ended December 31, 2022. In addition, a royalty payment of $0 was paid to the Mesabi Land Trust. Accordingly, the total royalty payments received by Mesabi Trust on January 31, 2023 from Cliffs was $0.
The royalties paid to Mesabi Trust are based on the volume of iron ore pellets produced or shipped during the quarter and the year to date, the pricing of iron ore product sales, and the percentage of iron ore pellet shipments from Mesabi Trust lands rather than from non-Mesabi Trust lands. In the fourth calendar quarter of 2022, Cliffs credited Mesabi Trust with negative (54,026) tons shipped during the quarter based on inventory surveys conducted during the quarter, as compared to 1,085,427 tons shipped during the fourth calendar quarter of 2021.
The volume of iron ore pellets (and other iron ore products) produced and shipped by Northshore varies from quarter to quarter and year to year based on a number of factors, including, among others, Cliffs’ decisions to idle Northshore operations (which is the current situation), the requested delivery schedules of customers, general economic conditions in the iron ore industry, production schedules and weather conditions on the Great Lakes. These multiple factors can result in significant variations in royalties received by Mesabi Trust (and in turn, the resulting funds available for distribution to Unitholders by Mesabi Trust) from quarter to quarter and from year to year. These variations, which can be positive or negative, cannot be predicted by the Trustees of Mesabi Trust. Based on the above factors, and as indicated by Mesabi Trust’s historical distribution payments, the royalties received by Mesabi Trust, and the distributions paid to Unitholders, if any, in any particular quarter are not necessarily indicative of royalties that will be received, or distributions that will be paid, if any, in any subsequent quarter or full year.
As previously announced by Cliffs on July 22, 2022, the current idling of Northshore operations was extended until at least April 2023 and maybe beyond.
Cliffs’ Quarterly Royalty Report stated that the reported royalty calculations and volume shipment amounts were based on estimated iron ore prices that are subject to change. It is possible that future negative price adjustments could offset, or even eliminate, royalties or royalty income that would otherwise be payable to Mesabi Trust in any particular quarter, or at year end, thereby potentially reducing cash available for distribution to Mesabi Trust’s Unitholders in future quarters.
