Blog: MESABI TRUST : Results of Operations and Financial Condition, Regulation FD Disclosure, Financial Statements and Exhibits (form 8-K) –

Item 2.02Results of Operations and Financial Condition.

Announcement of Receipt of Quarterly Royalty Report and Royalty Payment

On May 3, 2022, Mesabi Trust issued a press release announcing that on April 29,
2022, Mesabi Trust received the quarterly royalty report of iron ore shipments
out of Silver Bay, Minnesota during the quarter ended March 31, 2022 (the
“Royalty Report”) from Cleveland-Cliffs Inc. (“Cliffs”), the parent company of
Northshore Mining Company (“Northshore”), and that the Trust received a royalty
payment as summarized below.

A copy of the press release is being furnished as Exhibit 99.1 to this Current
Report on Form 8-K.

Item 7.01Regulation FD.

Receipt of Quarterly Royalty Report and Royalty Payment

On April 29, 2022, the Trustees of Mesabi Trust received the Royalty Report from
Cliffs, the parent company of Northshore.

As reported to Mesabi Trust by Cliffs in the Royalty Report, based on shipments
of iron ore products by Northshore during the three months ended March 31, 2022,
Mesabi Trust was credited with a base royalty of $6,032,086. For the three
months ended March 31, 2022, Mesabi Trust was also credited with a bonus royalty
in the amount of $7,055,223. The royalty payment received today also included an
increase of $176,283 as a result of positive pricing adjustments to base and
bonus royalty calculations related to changes in price estimates made in prior
quarters. In addition, a royalty payment of $278,850 was paid to the Mesabi
Land Trust. Accordingly, the total royalty payments received by Mesabi Trust on
April 29, 2022 from Cliffs were $13,542,442.

The royalties paid to Mesabi Trust are based on the volume of iron ore pellets
and other products produced or shipped during the quarter and the year to date,
the pricing of iron ore product sales, and the percentage of iron ore pellet
production and shipments from Mesabi Trust lands rather than from non-Mesabi
Trust lands. In the first calendar quarter of 2022, Cliffs credited Mesabi
Trust with 1,069,456 tons of iron ore shipped, as compared to 919,457 tons
shipped during the first calendar quarter of 2021.

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 among 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,
some of which are not known until after the end of a contract year. The factors
that could result in price adjustments under Cliffs’ customer contracts include
changes in the Platts Prices, hot-rolled coil steel price, the Atlantic Basin
pellet premium, published Platts international indexed freight rates and changes
in specified producer price indices, including those for industrial commodities,
fuel and steel. These multiple factors can result in significant variations in
royalties received by Mesabi Trust (and in turn, the resulting funds available
for distribution to Unitholders 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 anticipated to
be received during the current year will continue to reflect pricing estimates
for shipments of iron ore products that will be subject to positive or negative
pricing adjustments pursuant to the Cliffs Pellet Agreements. Based on the
above factors, and as


indicated by Mesabi Trust’s historical distribution payments, the royalties
received by Mesabi Trust, and the distributions paid to Unitholders, 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 full year.

With respect to calendar year 2022, neither Northshore nor Cliffs has advised
Mesabi Trust of its expected production or shipments of iron ore products, or
what percentage of 2022 shipments will be from Mesabi Trust iron ore. In the
Cliffs’ Royalty Report, Cliffs stated that the royalty payments being reported
today were 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.

Commencement of Idling at Northshore Mining Company

As previously projected by Cliffs, on May 1, 2022 Cliffs commenced the idling of
Northshore Mining Company at its operations in Babbitt and Silver Bay,
Minnesota. Cliffs’ previous disclosures announced the idling would be for
approximately four months, until at least fall 2022, and maybe beyond.

References in this Current Report

All references in this discussion and in this Current Report on Form 8-K to iron
ore products “shipped” shall include iron ore products that are actually shipped
from Silver Bay, Minnesota and/or “deemed shipped” as referenced by the parties
to, and in accordance with, the Amended Assignment of Peters Lease. Similarly,
all references in this Current Report on Form 8-K to “shipments” shall include
actual shipments and/or deemed shipments of iron ore products, as referenced by
the parties to, and in accordance with, the Amended Assignment of Peters Lease.
After the outcome of the AAA arbitration (announced in October 8, 2021) and
consistent with Cliffs’ practices, the Trust is entitled to payment upon
production of pellets to be sold for internal use by facilities owned by Cliffs
or its subsidiaries. As a result, the Trust recognizes revenue for Cliffs’
internal use pellets upon production of those pellets, which are deemed to be
shipped under the Amended Assignment of Peters Lease, regardless of pellet
grade. Pellets that are not designated for internal use by Cliffs, or its
subsidiaries, continue to be recognized as revenue upon shipment from Silver
Bay, Minnesota.

Forward-looking Statements

This report contains certain forward-looking statements with respect to iron ore
pellet production, iron ore pricing and adjustments to pricing, shipments by
Northshore in 2021 and 2022, royalty (including bonus royalty) amounts, and the
timing and duration of Cliffs’ idling of Northshore Mining Company at its
operations in Babbitt and Silver Bay, Minnesota, 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, the impact of the coronavirus (COVID-19) pandemic 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, market inputs tied to indexed price adjustment factors
found in Cliffs Pellet Agreements resulting in future 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. In addition, the
Trust is unable to predict the duration of the current idling of Northshore, or
the frequency and duration of future Northshore idling actions that Cliffs may
implement. Future production curtailments or idling of Northshore operations,
about which the Trust may have little or no prior notice, could materially
adversely affect the royalty income of the Trust, as well as the resulting cash
available for distribution by the Trust to Unitholders. Further, such
developments could have a material adverse impact on the market price of the
Trust’s Units. 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 for the fiscal
year ended January 31, 2022 (filed April 27, 2022). Mesabi Trust undertakes no
obligation to publicly update or revise any of the forward-looking statements
made herein to reflect events or circumstances after the date hereof.

In accordance with general instruction B.2 to Form 8-K, the information in this
Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section.

Item 9.01Financial Statements and Exhibits.


Exhibit No. Description
99.1          Press Release dated May 3, 2022
104         Cover Page Interactive Data File (formatted in Inline XBRL and
            included as Exhibit 101)


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