Mesabi Trust Declares Distribution
October 16 2008 - 5:08PM
Business Wire
The Trustees of Mesabi Trust (NYSE: MSB) declared a distribution of
one dollar and twenty-five cents ($1.25) per Unit of Beneficial
Interest payable on November 20, 2008 to Mesabi Trust unitholders
of record at the close of business on October 30, 2008. This
compares to a distribution of forty-eight cents ($0.48) per Unit
for the same period last year. The seventy-seven cents ($0.77) per
Unit increase in the current distribution, as compared to the
distribution for the same quarter last year, is attributable to a
significant increase in the average sales price per ton of iron ore
pellets, and a substantial increase in the volume of shipments of
iron ore pellets during the most recent quarter as reported by
Northshore Mining Company (�Northshore�), the lessee/operator of
the mine on Mesabi Trust lands. The substantial increase in the
volume of shipments from Silver Bay, Minnesota resulted in the
shipment of additional tons at higher royalty rates, as compared to
the same quarter last year, thereby adding to the amount of the
base royalty payment. The increase in the volume of shipments from
Silver Bay, Minnesota, together with the higher average sales price
per ton of iron ore pellets, contributed to the increase in the
bonus royalty payment. Based on the shipments of iron ore during
the third calendar quarter of 2008, Mesabi Trust is expecting to
receive a base royalty of $10,853,554 (representing royalties on
actual shipments of iron ore mined from Mesabi Trust lands of
2,194,801 tons). Mesabi Trust is also expecting to receive a bonus
royalty in the amount of $5,567,719 with respect to shipments
during the third calendar quarter of 2008. The base royalty and
bonus royalty amounts were increased by $124,924 representing
positive adjustments of $70,541 and $54,383, respectively, to base
royalty and bonus royalty amounts credited to the Trust during the
second quarter of 2008. The total royalty payment expected to be
received by Mesabi Trust on October 31, 2008 from Northshore is
$16,683,010 (including a royalty payment of $136,813 payable to the
Mesabi Land Trust). The volume of shipments of iron ore pellets by
Northshore varies from quarter to quarter and year to year based on
a number of factors, including weather conditions on the Great
Lakes, the requested delivery schedules of customers and general
economic conditions in the iron ore industry. The resulting
royalties paid to Mesabi Trust are dependent on the volume of
shipments of iron ore pellets for the quarter and the year to date,
the 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, the prices under term contracts between
Northshore, Northshore�s parent Cliffs Natural Resources Inc.
(�Cliffs�) and certain of their customers (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 possibly significant variations in royalties received by
Mesabi Trust (and in turn the resulting amount available for
distribution to Unitholders by Mesabi Trust) from quarter to
quarter and on a comparative historical basis. These variations,
which can be positive or negative, cannot be predicted by the
Trustees of Mesabi Trust. Royalty payments received in 2007 and
2008 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. With respect to
the balance of 2008, Northshore has not advised Mesabi Trust as to
its expected 2008 shipments of iron ore products or what percentage
of 2008 shipments will be from Mesabi Trust iron ore. Cliffs has
previously reported that it estimates scheduled 2008 pellet
production at Northshore (using iron ore mined from both Mesabi
Trust lands and from other than Mesabi Trust lands) will be
approximately 5.7 million tons. 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. In
addition, because�there are price adjustment provisions under the
Cliffs Pellet Agreements, the average sales prices�received
by�Mesabi Trust may not match international iron ore pellet prices.
This press release contains certain forward-looking statements with
respect to iron ore pellet production, iron ore pricing, shipments
from Northshore in 2008 and royalty (including bonus royalty)
amounts, 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 (and adjustments
thereto) and shipments of iron ore pellets, as well as actual
royalty levels (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 demand for steel
and iron ore, higher imports of steel and iron ore substitutes,
processing difficulties, consolidation and restructuring in the
domestic steel market or other factors. The volume of shipments of
iron ore pellets 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.
Furthermore, 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 that 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 that may be in this
press release.
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