Mesabi Trust Declares Distribution
January 14 2011 - 5:06PM
Business Wire
The Trustees of Mesabi Trust (NYSE: MSB) declared a distribution
of sixty-five cents ($0.65) per Unit of Beneficial Interest payable
on February 20, 2011 to Mesabi Trust unitholders of record at the
close of business on January 30, 2011. This compares to a
distribution of fifty-five cents ($0.55) per Unit for the same
period last year.
The ten cents ($0.10) per Unit increase in the current
distribution, as compared to the same quarter last year, is due to
three factors. First, due to a significantly higher volume of
shipments from Silver Bay, Minnesota, during calendar year 2010, as
reported by Northshore Mining Company (“Northshore”), the
lessee/operator of the mine on Mesabi Trust lands, all tons shipped
during the fourth calendar quarter 2010 were paid at the Trust’s
highest royalty rate of six percent (6.0%). Second, the average
price per ton credited to the Trust on all shipments during the
fourth calendar quarter of 2010 was higher than the average price
per ton credited to the Trust during the fourth calendar quarter of
2009. Third, the combination of the increased volume of shipments
and the higher average price per ton during calendar year 2010, as
compared to calendar year 2009, resulted in the offset of all of
the Trust’s deferred revenue royalty earlier during calendar year
2010. Therefore, in contrast to a year ago when the Trust received
the royalty payment for the fourth calendar quarter of 2009, the
Trust had no deferred royalty revenue on its unaudited balance
sheet as of October 31, 2010 and does not believe it is
necessary to retain a portion of the anticipated royalty payment to
cover present and future potential liabilities.
Based on the shipments of iron ore reported by Northshore during
the fourth calendar quarter of 2010, on January 31, 2011 Mesabi
Trust is expecting to receive a base royalty of $4,981,766 (based
on actual shipments of 1,092,152 tons of iron ore mined from Mesabi
Trust lands). Mesabi Trust is also expecting to receive a bonus
royalty in the amount of $2,472,327 based on the average sales
price per ton of iron ore pellets and the volume of shipments
during the fourth calendar quarter of 2010. In addition to the base
and bonus royalty payments, Mesabi Trust is also expecting to
receive $1,081,856 as a result of positive pricing adjustments to
shipments and royalty payments made during the third calendar
quarter of 2010. Accordingly, the total royalty payment expected to
be received by Mesabi Trust from Northshore is $8,638,760
(including a royalty payment of $102,811 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 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. 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. Further, the prices
under the 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 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 2010 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 the Trust’s historical distribution payments, the
royalties received by the 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 quarter or for a full
year.
With respect to calendar year 2011, Northshore has not advised
Mesabi Trust of its expected 2011 shipments of iron ore products or
what percentage of 2011 shipments will be from Mesabi Trust iron
ore. 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 quarter, or at year end, thereby
potentially reducing cash available for distribution to Mesabi
Trust’s Unitholders in future quarters. In addition, because the
Cliffs Pellet Agreements contain various pricing formulas and price
adjustment provisions, 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 and
adjustments to pricing, shipments by Northshore in 2010 and 2011,
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. 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 that may be in this
press release.
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