Mesabi Trust Declares Distribution
April 12 2011 - 4:17PM
Business Wire
The Trustees of Mesabi Trust (NYSE: MSB) declared a distribution
of five cents ($0.05) per Unit of Beneficial Interest payable on
May 20, 2011 to Mesabi Trust unitholders of record at the close of
business on April 30, 2011. This compares to a distribution of
twelve and one-half cents ($0.125) per Unit for the same period
last year.
The decrease in the current distribution of seven and one-half
cents ($0.075) per Unit, as compared to the same quarter last year,
is due to three factors. First, the base and bonus royalties earned
by Mesabi Trust (before the application of negative pricing
adjustments by Northshore) decreased from approximately $1.9
million in the first calendar quarter of 2010 to approximately $1.3
million for the first calendar quarter of 2011, as a result of a
decrease in tons of iron ore pellets shipped from 463,093 tons in
the first calendar quarter of 2010 to 273,686 tons credited to the
Trust for the first calendar quarter of 2011. Second, Northshore’s
most recent quarterly royalty report reflected a $576,625 negative
price adjustment to royalties previously received by Mesabi Trust
for shipments by Northshore in prior years. Finally, unlike the
first calendar quarter of 2010, Mesabi Trust did not add to the
current distribution by using funds from the Trust’s cash reserves
because the Trust does not currently have excess funds available in
the cash reserve for distribution to Unitholders.
Based on the shipments of iron ore pellets during the first
calendar quarter of 2011 reported by Northshore, on April 29, 2011
Mesabi Trust expects to be credited with a base royalty of $533,561
(based on actual shipments of 273,686 tons of iron ore mined from
Mesabi Trust lands). Mesabi Trust also expects to be credited with
a bonus royalty in the amount of $640,273 based on the average
sales price per ton of iron ore pellets and the volume of shipments
during the first calendar quarter of 2011. As discussed above,
Northshore applied a $576,625 negative price adjustment to
royalties previously received by the Trust for shipments by
Northshore in 2009 and 2010, thereby reducing the total royalty
payment expected to be received on April 29, 2011 by Mesabi Trust
from Northshore to $742,086 (including a royalty payment of
$144,877 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
non-Trust lands. 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, 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 2011 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 and the negotiated
settlement between Cliffs and ArcelorMittal USA, Inc., announced by
Cliffs on April 8, 2011. 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 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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