Mesabi Trust Press Release
February 01 2016 - 4:15PM
Business Wire
On January 29, 2016, the Trustees of Mesabi Trust (NYSE:MSB)
received the quarterly royalty report of iron ore product shipments
from Silver Bay, Minnesota during the quarter ended December 31,
2015 from Cliffs Natural Resources Inc. (“Cliffs”), the parent
company of Northshore Mining Company (“Northshore”). As previously
reported, on January 15, 2016, the Trustees declared a distribution
of five cents ($0.05) per Unit of Beneficial Interest payable on
February 20, 2016 to Mesabi Trust Unitholders of record at the
close of business on January 30, 2016.
As reported by Cliffs, based on shipments of iron ore products
by Northshore during the three months ended December 31, 2015,
Mesabi Trust was credited with a base royalty of $2,860,570. Mesabi
Trust also was credited with a bonus royalty in the amount of
$271,153, based on the average sales price per ton of iron ore
pellets and the volume of shipments by Northshore during the fourth
calendar quarter of 2015. Royalties paid to Mesabi Trust, however,
reflected a reduction of $797,170 as a result of negative pricing
adjustments to base and bonus royalty calculations related to
changes in price estimates made in the previous calendar quarters
of 2015. Accordingly, the total royalty payments received on
January 29, 2016 by Mesabi Trust from Northshore were $2,423,257
(which includes a royalty payment of $88,704 paid to the Mesabi
Land Trust).
The royalties paid to Mesabi Trust are based on the volume of
shipments of iron ore pellets for 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 2015,
Northshore credited Mesabi Trust with 981,102 tons of iron ore, as
compared to 1,244,364 tons during the fourth 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 under the term contracts between Northshore, Cliffs, and
certain of their customers (the “Cliffs Pellet Agreements”), to
which Mesabi Trust is not a party, 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. These multiple factors can result in significant
variations in royalties received by Mesabi Trust (and in turn the
resulting funds available for distribution to Unit holders 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. Royalty payments received in
fiscal 2016 and prior years continue to reflect pricing estimates
for shipments of iron ore products that were subject to negative
pricing adjustments pursuant to the Cliffs Pellet Agreements. Based
on the above factors and as indicated by the Trust’s historical
distribution payments, the royalties received by the Trust, and the
distributions paid to Unit holders, 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 for a full year.
With respect to the remainder of calendar year 2016, Northshore
has not advised Mesabi Trust of its expected 2016 shipments of iron
ore products or what percentage of 2016 shipments will be from
Mesabi Trust iron ore. Cliffs indicated 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 quarter, or at year end,
thereby potentially reducing cash available for distribution to
Mesabi Trust’s Unit holders in future 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 2016, 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 and uncertainties such as
general adverse business and industry economic trends,
uncertainties arising from war, terrorist events and other global
events, higher or lower customer demand for steel and iron ore,
decisions by mine operators regarding curtailments or idling
production lines or entire plants, environmental compliance
uncertainties, difficulties in obtaining and renewing necessary
operating permits, 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
the 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 made herein to reflect event or
circumstances after the date hereof.
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Mesabi Trust SHR UnitDeutsche Bank Trust Company Americas(904)
271-2520
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