Mesabi Trust Declares Distribution
January 16 2015 - 4:20PM
Business Wire
The Trustees of Mesabi Trust (NYSE:MSB) declared a distribution
of sixty-four cents ($0.64) per Unit of Beneficial Interest
(“Unit”) payable on February 20, 2015
to Mesabi Trust’s unitholders (“Unitholders”) of record at the close of business
on January 30, 2015. This compares to a distribution of fifty-seven
cents ($0.57) per Unit for the same period last year.
The seven cents ($0.07) per Unit increase in the current
distribution for the fourth calendar quarter of 2014, as compared
to the same quarter of 2013, is mostly attributable to a slight
increase in the average sales price per ton of iron ore pellets for
the fourth calendar quarter of 2014 and a significant increase in
the volume of iron ore pellet shipments that was credited to Mesabi
Trust for the same period, as compared to the fourth calendar
quarter of 2013, respectively. The positive pricing adjustments
resulting from changes in pricing estimates by Northshore Mining
Company (“Northshore”) during the first three calendar quarters of
2014 were relatively smaller than those during the same periods in
2013. The base and bonus royalties payable to Mesabi Trust (before
the application of pricing adjustments by Northshore) increased
from approximately $5.67 million in the fourth calendar quarter of
2013 to approximately $8.25 million for the fourth calendar quarter
of 2014.
Based on shipments of iron ore pellets during the fourth
calendar quarter of 2014 reported by Northshore, Mesabi Trust
expects to be credited with a base royalty of $5,411,041 during the
fourth calendar quarter of 2014. Mesabi Trust also expects to be
credited with a bonus royalty in the amount of $2,838,660 based on
the average sales price per ton of iron ore pellets and the volume
of shipments during the fourth calendar quarter of 2014. Mesabi
Trust is expecting an increase in base and bonus royalty payment of
$245,129 as a result of positive pricing adjustments due to changes
in pricing estimates made in the first, second and third calendar
quarters of 2014. Accordingly, the total royalty payment expected
to be received on January 30, 2015 for the fourth calendar quarter
of 2014 by Mesabi Trust is $8,681,715 (which includes a royalty
payment of $186,886 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 pellet sales, and the percentage
of iron ore pellet shipments attributable to iron ore excavated
from Mesabi Trust lands rather than from non-Mesabi Trust lands. In
the fourth calendar quarter of 2014, Northshore credited Mesabi
Trust with 1,244,364 tons of iron ore pellets, as compared to
891,209 tons during the fourth calendar quarter of 2013, although
the actual shipments of iron ore pellets attributable to iron ore
excavated from Mesabi Trust lands during the fourth calendar
quarter of 2014 equaled 1,309,865 tons. Mesabi Trust was credited
with shipments of only 1,244,364 tons of iron ore pellets during
that period because Northshore credited Mesabi Trust with higher
volumes of iron ore pellet shipments than those attributable to
iron ore actually excavated from Mesabi Trust lands during the
third calendar quarter of 2014. In the royalty report received by
Mesabi Trust for the fourth quarter of 2014, Northshore reduced the
shipments of iron ore products attributable to iron ore actually
excavated from Mesabi Trust lands by 65,501 tons to offset such
extra volumes of iron ore pellet shipments previously credited to
Mesabi Trust for the third calendar quarter of 2014.
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, “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 potential pricing adjustments and the other factors as
described above and the current volatility in the iron ore and
steel industries, and as indicated by Mesabi Trust’s historical
distribution payments, 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 calendar year 2015, Northshore has not advised
Mesabi Trust of its expected total 2015 shipments of iron ore
products or what percentage of 2015 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 2015, 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 macro economic and
industry 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. 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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