Mesabi Trust(MSB) - 2026 Q3 - Quarterly Report

Financial Performance - Royalty income for the three months ended October 31, 2025, was $3,390,609, a decrease of 53.8% compared to $7,348,366 in the same period of 2024[14] - Total revenues for the nine months ended October 31, 2025, were $13,931,747, down 84.8% from $91,742,322 in the same period of 2024[14] - Net income for the three months ended October 31, 2025, was $2,767,463, a decline of 96.4% compared to $78,325,525 in the same period of 2024[14] - Net income for the nine months ended October 31, 2025, was $11,142,554, down 87.3% from $87,207,203 in the prior year[75] - For the three months ended October 31, 2025, total royalty income decreased by $3,957,757 to $3,390,609 compared to the same period in 2024, primarily due to lower pricing and shipments of iron ore[67] - For the nine months ended October 31, 2025, total royalty income decreased by $6,456,708 to $13,156,985 compared to the same period in 2024, due to an extended maintenance shutdown and decreased pricing and shipments[69] Cash and Assets - Cash and cash equivalents decreased to $23,191,923 as of October 31, 2025, from $100,204,531 at the beginning of the period[16] - The unallocated cash and cash equivalents decreased from $100,204,531 on January 31, 2025, to $23,191,923 on October 31, 2025[43] - As of October 31, 2025, the net contract asset is $1,055,605, reflecting a significant increase from $240,642 recorded on January 31, 2025[37] - Total liabilities as of October 31, 2025, were $4,911,341, down from $78,400,735 as of January 31, 2025[16] - The Trust's unallocated reserve balance as of October 31, 2025, is $21,087,860, a decrease from $22,781,200 as of July 31, 2025[43] - Unallocated Reserve decreased by 77.9% to $21,087,860 as of October 31, 2025, compared to $95,324,736 as of October 31, 2024[79] - Accrued Income Receivable fell by 60.8% to $1,522,367 from $3,883,400 year-over-year[79] Distributions - Distributions declared per unit for the nine months ended October 31, 2025, were $1.0200, an increase from $0.9800 in the same period of 2024[14] - The Trust declared a distribution of $0.34 per Unit of Beneficial Interest, totaling $4,460,803, payable on November 20, 2025, compared to $0.39 per Unit for the same quarter in 2024[41] - The Trust declared a distribution of $0.34 per unit for the quarter ended October 31, 2025, down from $0.39 per unit in the same quarter of 2024[88] Royalty Income and Pricing - The Trust's royalty income for the nine months ended October 31, 2025, was $13,156,985, a decrease of 32.9% from $19,613,693 in the same period of 2024[14] - The Trust's royalty income is primarily derived from base overriding royalties, which are calculated as a percentage of gross proceeds from iron ore products shipped, ranging from 2.5% to 6% based on shipment volume[52] - The royalty bonus threshold price for 2025 is set at $69.41 per ton, up from $67.75 per ton in 2024[53] - The minimum advance royalty for calendar year 2025 is set at $1,157,261, an increase from $1,129,615 for 2024, adjusted for inflation[59] - Fee royalties increased by $54,092 to $224,670 for the three months ended October 31, 2025, attributed to a higher royalty rate[68] - The decrease in bonus royalties for the three months ended October 31, 2025 was due to lower prices of products shipped over the threshold price per ton[70] - Cliffs' acquisition of ArcelorMittal USA has led to a decrease in arms'-length sales, impacting the calculation of royalties owed to the Trust[62] - Variations in royalty payments to Mesabi Trust can occur due to interim and final pricing adjustments based on various price and inflation index factors[109] - The Trust's ability to project future sales prices remains uncertain, impacting potential royalty payments[126] - The Trust's bonus royalties could be reduced or eliminated in specific quarters or years due to market conditions[126] Operational Insights - Iron ore pellet production and shipments for the three months ended October 31, 2025 totaled 915,605 tons, down from 1,066,665 tons in the same period of 2024, attributed to lower customer demand[64] - Cliffs reported a total royalty payment of $4,005,142 to Mesabi Trust for the three months ended September 30, 2025[85] - Cliffs credited Mesabi Trust with 987,370 tons of iron ore shipped in Q3 2025, compared to 972,154 tons in Q3 2024, indicating a slight increase in shipments[86] - Cliffs has disclosed that marketing and selling iron ore pellets to third-party customers is no longer a core aspect of Northshore's business, affecting royalty calculations[108] Legal and Regulatory Matters - Mesabi Trust initiated arbitration against Northshore and Cliffs on September 26, 2025, seeking damages related to idling operations and underpayment of royalties[83] - Mesabi Trust initiated arbitration against Northshore and Cliffs seeking damages related to the idling of Northshore's operations from May 2022 to April 2023 and underpayment of royalties on intercompany shipments from 2023 to present[124] - The Minnesota Supreme Court denied petitions for review from Cliffs and the DNR, leaving the Court of Appeals' reversal decision in place[96] - WaterLegacy filed a civil complaint seeking to enjoin DNR and Northshore from proceeding with the Milepost 7 tailings basin project until an Environmental Impact Statement (EIS) is completed[98] - The court denied WaterLegacy's motion for a temporary injunction against DNR and Northshore on September 4, 2025, allowing the case to proceed with a trial set for September 2027[100] Governance and Compliance - The Trust's financial statements are prepared on an accrual basis, with distributions declared based on actual royalty payments received rather than recorded income[40] - The Trust is not taxable as a corporation and all net taxable income is attributed directly to Unitholders for tax purposes[115] - The Trustees concluded that the disclosure controls and procedures of Mesabi Trust are effective as of the end of the reporting period[120] - There were no changes in the Trust's internal control over financial reporting that materially affected its operations during the last fiscal quarter[121] - The Trust's financial reporting includes safety data as required by the Dodd-Frank Act[130] - No unregistered sales of equity securities or defaults upon senior securities were reported[127][128]