10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 –

For the Period Ended March 31, 2006

Or

o Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 –

For the Transition Period From ______________ to ______________

Commission file number 1-701

GREAT NORTHERN IRON ORE PROPERTIES
(Exact name of registrant as specified in its charter)
Minnesota	41-0788355
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
W-1290 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota	55101-1361
(Address of principal executive office)	(Zip Code)
(651) 224-2385
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   Yes  x    No  o

Large accelerated filer    o            Accelerated filer    x            Non-accelerated filer    o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x

Number of shares of beneficial interest outstanding on March 31, 2006:       1,500,000    

PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements
GREAT NORTHERN IRON ORE PROPERTIES

CONDENSED BALANCE SHEETS

	March 31 2006		December 31 2005
	(Unaudited)		(Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	816,401	$	774,916
United States Treasury securities		5,778,639		6,209,745
Royalties receivable		3,374,029		3,881,737
Prepaid expenses		51,783		2,110
TOTAL CURRENT ASSETS		10,020,852		10,868,508
NONCURRENT ASSETS
United States Treasury securities		2,881,145		3,391,684
Prepaid pension expense		751,234		855,340
		3,632,379		4,247,024
PROPERTIES
Mineral and surface lands		38,691,707		38,691,707
Less allowances for depletion and amortization		34,554,310		34,499,185
		4,137,397		4,192,522
Building and equipment—at cost, less
allowances for accumulated depreciation
(3/31/06 – $201,996; 12/31/05 – $223,654)		161,511		147,465
		4,298,908		4,339,987
	$	17,952,139	$	19,455,519
LIABILITIES AND BENEFICIARIES’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	113,256	$	90,156
Distributions		3,000,000		4,500,000
TOTAL CURRENT LIABILITIES		3,113,256		4,590,156
NONCURRENT LIABILITIES		60,800		60,800
BENEFICIARIES’ EQUITY, including certificate
holders’ equity, represented by 1,500,000
shares of beneficial interest authorized
and outstanding, and reversionary interest		14,778,083		14,804,563
	$	17,952,139	$	19,455,519

Note:   The balance sheet at December 31, 2005, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

See notes to condensed financial statements.

-2-

GREAT NORTHERN IRON ORE PROPERTIES

CONDENSED STATEMENTS OF INCOME
(Unaudited)

	Three Months Ended March 31
	2006			2005
Revenues:
Royalties	$	3,592,604		$	4,295,723
Interest and other income		118,449			95,200
		3,711,053			4,390,923
Costs and expenses		737,533			645,752
NET INCOME	$	2,973,520		$	3,745,171
Weighted-average shares outstanding		1,500,000			1,500,000
BASIC AND DILUTED EARNINGS PER SHARE	$	1.98		$	2.50
Distributions declared per share	$	2.00	(1)	$	2.20	(3)
Distributions paid per share	$	3.00	(2)	$	2.40	(4)

(1	)	$2.00  declared	3/20/2006
		payable	4/28/2006
(2	)	$3.00  declared	12/16/2005
		paid	1/31/2006
(3	)	$2.20  declared	3/18/2005
		paid	4/29/2005
(4	)	$2.40  declared	12/20/2004
		paid	1/31/2005

See notes to condensed financial statements.

-3-

GREAT NORTHERN IRON ORE PROPERTIES

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended March 31
	2006		2005
Cash flows from operating activities:
Cash received from royalties and rents	$	4,139,876	$	3,216,790
Cash paid to suppliers and employees		-595,281		-588,538
Interest received		104,546		45,858
NET CASH PROVIDED BY OPERATING ACTIVITIES		3,649,141		2,674,110
Cash flows from investing activities:
United States Treasury securities purchased		-1,300,000		-1,800,000
United States Treasury securities matured		2,215,984		2,497,396
Net expenditures for building and equipment		-23,640		-800
NET CASH PROVIDED BY INVESTING ACTIVITIES		892,344		696,596
Cash flows from financing activities:
Distributions paid		-4,500,000		-3,600,000
NET CASH USED IN FINANCING ACTIVITIES		-4,500,000		-3,600,000
Net increase (decrease) in cash and cash equivalents		41,485		-229,294
Cash and cash equivalents at beginning of year		774,916		788,779
CASH AND CASH EQUIVALENTS AT MARCH 31	$	816,401	$	559,485

See notes to condensed financial statements.

-4-

GREAT NORTHERN IRON ORE PROPERTIES

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

Periods of Three Months ended March 31, 2006 and March 31, 2005

Note A – BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods stated above are not necessarily indicative of the results that may be expected for each respective full year. For further information, refer to the financial statements and footnotes included in the Great Northern Iron Ore Properties (“Trust”) Annual Report on Form 10-K for the year ended December 31, 2005.

Note B – BENEFICIARIES’ EQUITY

Pursuant to the Court Order of November 29, 1982, the Trustees were directed to create and maintain an account designated as “Principal Charges.” This account constitutes a first and prior lien of certificate holders on any property transferable to the reversioner and reflects an allocation of beneficiaries’ equity between the certificate holders and the reversioner. This account is neither an asset nor a liability of the Trust. Rather, this account maintains and represents a balance which will be payable to the certificate holders of record from the reversioner at the end of the Trust. The balance in this account consists of attorneys’ fees and expenses of counsel for adverse parties pursuant to the Court Order in connection with litigation commenced in 1972 relating to the Trustees’ powers and duties under the Trust Agreement and the costs of homes and surface lands acquired in accordance with provisions of a lease with United States Steel Corporation, net of an allowance to amortize the cost of the land based on actual shipments of taconite and net of a credit for disposition of tangible assets. Following is an analysis of this account as of March 31, 2006:

Attorneys’ fees and expenses	$	1,024,834
Cost of surface lands		5,817,965
Cumulative shipment credits		-1,487,072
Asset disposition credits		-57,950
Principal Charges account	$	5,297,777

Upon termination of the Trust, the Trustees shall either sell tangible assets or obtain a loan with tangible assets as security to provide monies for distribution to the certificate holders in the amount of the Principal Charges account balance.

-5-

Note C – PENSION PLAN

A summary of the components of net periodic pension cost for the three months ended March 31 is as follows:

	2006		2005
Service cost	$	58,881	$	36,604
Interest cost		77,400		54,973
Expected return on assets		-78,095		-74,248
Net amortization		45,920		7,597
Net periodic pension cost	$	104,106	$	24,926

The Trust had previously disclosed in its Annual Report as of December 31, 2005, that the next contribution to the plan for 2006 is estimated to approximate $260,000, subject to the plan’s annual actuarial valuation performed as of the plan’s fiscal year-end, March 31. No additional updated information is available at this time.

Item  2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Periods of Three Months ended March 31, 2006 and March 31, 2005

The Trust owns interest in 12,033 acres on the Mesabi Iron Range Formation in northern Minnesota, most of which are under lease to major iron ore producing companies. Due to the Trustees’ election pursuant to Section 646 of the Tax Reform Act of 1986, as amended, commencing with year 1989 the Trust is not subject to federal and Minnesota corporate income taxes. The Trust is now a grantor trust. Shares of beneficial interest in the Trust are traded on the New York Stock Exchange under the ticker symbol “GNI” (CUSIP No. 391064102).

The terms of the Great Northern Iron Ore Properties Trust Agreement, created December 7, 1906, state that the Trust shall continue for twenty years after the death of the last surviving of eighteen persons named in the Trust Agreement. The last survivor of these eighteen named in the Trust Agreement died April 6, 1995. Accordingly, the Trust terminates twenty years from April 6, 1995.

At the end of the Trust, that being April 6, 2015, the certificates of beneficial interest (shares) in the Trust will cease to trade on the New York Stock Exchange and thereafter will represent only the right to receive certain distributions payable to the certificate holders of record at the time of the termination of the Trust. Upon termination, the Trust is obligated to distribute ratably to these certificate holders the net monies remaining in the hands of the Trustees (after paying and providing for all expenses and obligations of the Trust), plus the balance in the Principal Charges account (this account is explained in the Trust’s Annual Report sent to all certificate holders every year). All other Trust property (most notably the Trust’s mineral properties) must be conveyed and transferred to the reversioner under the terms of the Trust Agreement.

We have previously provided information in our various Securities and Exchange Commission filings, including our Annual Report, about the final distribution payable to the certificate holders upon the Trust’s termination. The exact final distribution, though not determinable at this time, will generally consist of the sum of the Trust’s net monies (essentially, total assets less liabilities and properties) and the balance in the Principal Charges account, less any and all expenses and obligations of the Trust upon termination. To offer a hypothetical example, without factoring in

-6-

any expenses and obligations of the Trust upon its termination, and using the financial statement values as of December 31, 2005, the net monies were approximately $10.5 million and the Principal Charges account balance was approximately $5.3 million, resulting in a final distribution payable of approximately $15.8 million, or about $10.53 per share. After payment of this final distribution, the certificates of beneficial interest (shares) would be cancelled and will have no further value. It is important to note, however, that the actual net monies on hand and the Principal Charges account balance will most likely fluctuate during the ensuing years and will not be “final” until after the termination and wind-down of the Trust. We offer this example to further inform investors about the conceptual nature of the final distribution and do not imply or guarantee a specific known final distribution amount.

Results of Operations:

Royalties decreased $703,119 during the three months ended March 31, 2006, as compared to the same period in 2005, due mainly to an overall lower average earned royalty rate, the result of which was caused by our lessees mining more from our partial fee interest lands.

Interest and other income increased $23,249 during the three months ended March 31, 2006, as compared to the same period in 2005, due mainly to an improved yield on the Trust’s investments.

Costs and expenses increased $91,781 during the three months ended March 31, 2006, as compared to the same period in 2005, due mainly to increased pension costs associated with funding the plan and expensing these costs by the Trust’s termination date.

At their meeting held on March 20, 2006, the Trustees declared a distribution of $2.00 per share, amounting to $3,000,000 payable April 28, 2006, to certificate holders of record at the close of business on March 31, 2006. At their meeting held on March 18, 2005, the Trustees declared a distribution of $2.20 per share, amounting to $3,300,000 paid on April 29, 2005, to certificate holders of record at the close of business on March 31, 2005. The Trustees intend to continue quarterly distributions and set the record date as of the last business day of each quarter. The next distribution will be paid in late July 2006 to certificate holders of record on June 30, 2006.

A mining agreement dated January 1, 1959, with United States Steel Corporation provides that one-half of annual earned royalty income, after satisfaction of minimum royalty payments, shall be applied to reimburse the lessee for a portion of its cost of acquisition of surface lands overlying the leased mineral deposits, which surface lands are then conveyed to the Trustees. There are surface lands yet to be purchased, the costs of which are yet unknown and will not be known until the actual purchases are made.

Liquidity:

In the interest of preservation of principal of Court-approved reserves and guided by the restrictive provisions of Section 646 of the Tax Reform Act of 1986, as amended, monies are invested primarily in U.S. Treasury securities with maturity dates not to exceed three years and, along with cash flows from operations, are deemed adequate to meet currently foreseeable liquidity needs.

-7-

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

        – None

Item 4.   Controls and Procedures

As of the end of the period covered by this report, the Trust conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the Trust’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Trust’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Trust in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. There was no change in the Trust’s internal control over financial reporting during the Trust’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

PART II.   OTHER INFORMATION

Item 1.   Legal Proceedings

        – None

Item 1A.   Risk Factors

There are no material changes from the risk factors previously disclosed in the Trust’s December 31, 2005 Annual Report on Form 10-K.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

        – None

Item 3.   Defaults Upon Senior Securities

        – None

Item 4.   Submission of Matters to a Vote of Certificate Holders

        – None

Item 5.   Other Information

        – None

Item 6.   Exhibits

        – Exhibit 31.1 –    Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
        – Exhibit 31.2 –    Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
        – Exhibit 32 –       Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
                                       (Furnished but not filed)

-8-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			GREAT NORTHERN IRON ORE PROPERTIES
			(Registrant)
Date	April 25, 2006	By		/s/   Joseph S. Micallef
			Joseph S. Micallef, President of the Trustees and     Chief Executive Officer
Date	April 25, 2006	By		/s/   Thomas A. Janochoski
			Thomas A. Janochoski, Vice President &     Secretary and Chief Financial Officer

-9-

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Joseph S. Micallef, President of the Trustees and Chief Executive Officer of Great Northern Iron Ore Properties, certify that:

        1.        I have reviewed this quarterly report on Form 10-Q of Great Northern Iron Ore Properties;

        2.        Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

        3.        Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

        4.        The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15(f)) for the registrant and have:

                     a)        designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and

                     b)        designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

                     c)        evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

                     d)        disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

        5.        The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors [or persons performing the equivalent functions]:

                     a)        all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

                     b)        any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By	/s/   Joseph S. Micallef	Date	April 25, 2006
	Joseph S. Micallef President of the Trustees and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas A. Janochoski, Vice President & Secretary and Chief Financial Officer of Great Northern Iron Ore Properties, certify that:

        1.        I have reviewed this quarterly report on Form 10-Q of Great Northern Iron Ore Properties;

        2.        Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

        3.        Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

        4.        The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15(f)) for the registrant and have:

                     a)        designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and

                     b)        designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

                     c)        evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

                     d)        disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

        5.        The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors [or persons performing the equivalent functions]:

                     a)        all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

                     b)        any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By	/s/   Thomas A. Janochoski	Date	April 25, 2006
	Thomas A. Janochoski Vice President & Secretary and Chief Financial Officer

EX-32

Exhibit 32

Certifications of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (Furnished but not filed)

In connection with this quarterly report of Great Northern Iron Ore Properties on Form 10-Q filed with the Securities and Exchange Commission, I, Joseph S. Micallef, President of the Trustees and Chief Executive Officer of Great Northern Iron Ore Properties, certify that:

        1.        This quarterly report fully complies with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934; and

        2.        The information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of Great Northern Iron Ore Properties.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Great Northern Iron Ore Properties and will be retained by Great Northern Iron Ore Properties and furnished to the Securities and Exchange Commission or its staff upon request.

Date	April 25, 2006	By		/s/   Joseph S. Micallef
			Joseph S. Micallef, President of the Trustees and     Chief Executive Officer

In connection with this quarterly report of Great Northern Iron Ore Properties on Form 10-Q filed with the Securities and Exchange Commission, I, Thomas A. Janochoski, Vice President & Secretary and Chief Financial Officer of Great Northern Iron Ore Properties, certify that:

        1.        This quarterly report fully complies with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934; and

        2.        The information contained in this quarterly report fairly presents, in all material respects, the financial condition and results of operations of Great Northern Iron Ore Properties.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Great Northern Iron Ore Properties and will be retained by Great Northern Iron Ore Properties and furnished to the Securities and Exchange Commission or its staff upon request.

Date	April 25, 2006	By		/s/   Thomas A. Janochoski
			Thomas A. Janochoski, Vice President &     Secretary and Chief Financial Officer