Item 2.02Results of Operations and Financial Condition.
Announcement of Receipt of Quarterly Royalty Report from Cleveland-Cliffs Inc.
On January 30, 2023, Mesabi Trust received the quarterly royalty report of iron
ore shipments out of Silver Bay, Minnesota during the quarter ended December 31,
2022 (the "Quarterly Royalty Report") from Cleveland-Cliffs Inc. ("Cliffs"), the
parent company of Northshore Mining Company ("Northshore"). As further explained
below, the Quarterly Royalty Report indicated that, because of the current and
ongoing idling of Northshore operations, the Trust received no royalty payment
on January 30, 2023.
Item 7.01Regulation FD
Quarterly Royalty Report
On January 30, 2023, the Trustees of Mesabi Trust received the Quarterly Royalty
Report from Cliffs, the parent company of Northshore.
As reported to Mesabi Trust by Cliffs in the Quarterly Royalty Report, based on
shipments of iron ore products by Northshore during the three months ended
December 31, 2022, Mesabi Trust was credited with a base royalty of $0. Also
for the three months ended December 31, 2022, Mesabi Trust was credited with a
bonus royalty in the amount of $0. After applying a reduction of $789,080 as a
result of negative survey adjustments to base and bonus royalty calculations
related to changes in estimates of tons deemed shipped in prior quarters, Cliffs
paid Mesabi Trust $0 for shipments during the quarter ended December 31,
2022. In addition, a royalty payment of $0 was paid to the Mesabi Land
Trust. Accordingly, the total royalty payments received by Mesabi Trust on
January 31, 2023 from Cliffs was $0.
The royalties paid to Mesabi Trust are based on the volume of iron ore pellets
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 shipments from Mesabi
Trust lands rather than from non-Mesabi Trust lands. In the fourth calendar
quarter of 2022, Cliffs credited Mesabi Trust with negative (54,026) tons
shipped during the quarter based on inventory surveys conducted during the
quarter, as compared to 1,085,427 tons shipped during the fourth calendar
quarter of 2021.
The volume of iron ore pellets (and other iron ore products) produced and
shipped by Northshore varies from quarter to quarter and year to year based on a
number of factors, including, among others, Cliffs' decisions to idle Northshore
operations (which is the current situation), the requested delivery schedules of
customers, general economic conditions in the iron ore industry, production
schedules and weather conditions on the Great Lakes. 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. 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.
As previously announced by Cliffs on July 22, 2022, the current idling of
Northshore operations was extended until at least April 2023 and maybe beyond.
Cliffs' Quarterly Royalty Report stated that the reported royalty calculations
and volume shipment amounts were based on estimated iron ore prices that 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.
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Forward-looking Statements
This report contains certain forward-looking statements based on Cliffs'
publicly announced plans with respect to Northshore in the future, which
statements are intended to be made under the safe harbor protections of the
Private Securities Litigation Reform Act of 1995, as amended. The length of the
idling of Northshore operations 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, recession, potential future impacts 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 of
production lines or entire plants, announcements and implementation of trade
tariffs, 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, and other factors. Cliffs' implementation of, or changes
to, these plans are beyond Mesabi Trust's control. As such, 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 and Quarterly Reports on Form 10-Q for the quarters
ended April 30, 2022, July 31, 2022 and October 31, 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.
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