Mesabi Trust Declares Distribution
October 14 2014 - 5:21PM
Business Wire
The Trustees of Mesabi Trust (NYSE:MSB) declared a distribution
of eighty-eight cents ($0.88) per Unit of Beneficial Interest
payable on November 20, 2014 to Mesabi Trust’s unitholders
(hereinafter referred to as “Unitholders”) of record at the close of business
on October 30, 2014. This compares to a distribution of fifty-one
cents ($0.51) per Unit for the same period last year.
The increase in the current distribution of thirty-seven cents
($0.37) per Unit, as compared to the same quarter last year, is
attributable to a significant increase in the volume of shipments
for the third calendar quarter of 2014 and, to a lesser extent, an
increase in the average sales price per ton of iron ore pellets.
The base and bonus royalties payable to Mesabi Trust (before the
application of pricing adjustments by Northshore Mining Company
(hereinafter referred to as “Northshore”)) increased from approximately $7.22
million in the third calendar quarter of 2013 to approximately
$11.74 million for the third calendar quarter of 2014.
Based on shipments of iron ore pellets during the third calendar
quarter of 2014 reported by Northshore, Mesabi Trust expects to be
credited with a base royalty of $7,071,100 during the third
calendar quarter of 2014. Mesabi Trust also expects to be credited
with a bonus royalty in the amount of $4,668,825 based on the
average sales price per ton of iron ore pellets and the volume of
shipments during the third calendar quarter of 2014. Mesabi Trust
is, however, expecting a decrease in base and bonus royalty payment
of $59,030 as a result of negative pricing adjustments to shipments
and royalty payments made in the first and second calendar quarters
of 2014. Accordingly, the total royalty payment expected to be
received on October 30, 2014 by Mesabi Trust from Northshore is
$11,845,256 (which includes a royalty payment of $164,360 payable
to the Mesabi Land Trust).
The royalties paid to Mesabi Trust are based on the volume of
shipments of iron ore pellets for the particular quarter and 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 third calendar quarter of 2014,
Northshore was credited with 2,115,189 tons of iron ore pellets
while Northshore shipped 1,361,841 tons of iron ore pellets during
the third calendar quarter of 2013. The volume of shipments of iron
ore pellets (and other iron ore products) by Northshore varies from
quarter to quarter and year to year based on a number of factors,
including the requested delivery schedules of customers, general
economic conditions in the iron ore industry, and weather
conditions on the Great Lakes. Further, the prices determined under
contracts among Northshore, Cliffs Natural Resources Inc.
(Northshore’s parent entity, hereinafter referred to as
“Cliffs”) and certain of their
customers (such contracts referred to as 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 under the Cliffs Pellet Agreements. These
multiple factors can result in significant variations in the amount
of royalties received by Mesabi Trust (and in turn the resulting
amount available for distribution to Unitholders by Mesabi Trust)
from quarter to quarter and year to year. These variations, which
can be positive or negative, cannot be predicted by the Trustees of
Mesabi Trust. Royalty payments received in 2014 and prior years
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. Based on all of
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, in any particular quarter
are not necessarily indicative of royalties that will be received,
or distributions that will be paid, in any subsequent fiscal
quarter or for a full fiscal year.
With respect to the remainder of calendar year 2014, Northshore
has not advised Mesabi Trust of its expected total 2014 shipments
of iron ore products or what percentage of 2014 shipments will be
from Mesabi Trust lands. Cliffs has not provided Mesabi Trust 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 the Cliffs Pellet
Agreements, which 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 fiscal quarter, or at fiscal year
end, thereby potentially reducing cash available for distribution
to Unitholders in future fiscal quarters.
This press release contains certain forward-looking statements
with respect to iron ore pellet production, iron ore pricing and
adjustments to pricing, shipments by Northshore in 2014, royalty
(including bonus royalty) amounts, and other matters, which
statements are intended to be made under the safe harbor
protections of the Private Securities Litigation Reform Act of
1995, as amended. Actual production, prices, price adjustments, and
shipments of iron ore pellets, as well as actual royalty payments
(including bonus royalties) could differ materially from current
expectations due to inherent risks such as general and industry
economic trends, uncertainties arising from war, terrorist events
and other global events, higher or lower customer demand for steel
and iron ore, environmental compliance uncertainties, higher
imports of steel and iron ore substitutes, processing difficulties,
consolidation and restructuring in the domestic steel market,
indexing features in Cliffs Pellet Agreements resulting in
adjustments to royalties payable to Mesabi Trust and other factors.
Further, substantial portions of royalties earned by Mesabi Trust
are based on estimated prices that are subject to interim and final
adjustments, which can be positive or negative, and are dependent
in part on multiple price and inflation index factors under
agreements to which Mesabi Trust is not a party and that are not
known until after the end of a contract year thereunder. Although
the Mesabi Trustees believe that any such forward-looking
statements are based on reasonable assumptions, such statements are
subject to risks and uncertainties, which could cause actual
results to differ materially. Additional information concerning
these and other risks and uncertainties is contained in Mesabi
Trust’s filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K. Mesabi Trust undertakes
no obligation to publicly update or revise any of the
forward-looking statements that may be in this press release.
Mesabi Trust SHR UnitDeutsche Bank Trust Company
Americas904-271-2520
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