10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2021

or

☐ 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: 1-4488

MESABI TRUST

(Exact name of registrant as specified in its charter)

New York	13-6022277
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

c/o Deutsche Bank Trust Company Americas Trust & Agency Services 60 Wall Street 24th Floor New York, New York	10005
(Address of principal executive offices)	(Zip Code)

(904) 271-2520

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Units of Beneficial Interest, no par value	MSB	New York Stock Exchange

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer    ☐	Accelerated Filer                       ☐
Non-accelerated Filer      ☒	Smaller Reporting Company     ☒
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of September 9, 2021, there were 13,120,010 Units of Beneficial Interest in Mesabi Trust outstanding.

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION	3
Item 1. Financial Statements. (Note 1)	3
Condensed Statements of Operations Three and Six Months Ended July 31, 2021 and 2020	3
Condensed Balance Sheets July 31, 2021 and January 31, 2021	4
Condensed Statements of Cash Flows Six Months Ended July 31, 2021 and 2020	5
Notes to Condensed Financial Statements	6
Item 2. Trustees’ Discussion and Analysis of Financial Condition and Results of Operations.	10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	18
Item 4. Controls and Procedures.	18
PART II - OTHER INFORMATION	18
Item 1. Legal Proceedings	18
Item 1A. Risk Factors	19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3. Defaults upon Senior Securities	19
Item 4. Mine Safety Disclosures	19
Item 5. Other Information	19
Item 6. Exhibits.	20
SIGNATURES	21

Forward-Looking Statements

Certain information included in this Quarterly Report on Form 10-Q contains, or incorporates by reference, not only historical information, but also “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. All such forward-looking statements, including those statements regarding estimation of iron ore pellet production, shipments, pricing, royalties and other matters, are based on information from the lessee/operator (and its parent corporation) of the mine located on the lands owned and held in trust for the benefit of the holders of units of beneficial interest of Mesabi Trust (“Mesabi Trust” or the “Trust”). These statements may be identified by the use of forward-looking words, such as “may,” “will,” “could,” “project,” “predict,” “intend,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “should,” “assume,” “forecast” and other similar words. Such forward-looking statements are inherently subject to known and unknown risks and uncertainties. Actual results and future developments could differ materially from the results or developments expressed in or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, volatility of iron ore and steel prices, market supply and demand, competition, environmental hazards, health and safety conditions, regulation or government action, litigation, uncertainties about estimates of reserves, general adverse business and industry economic trends, uncertainties arising from war, terrorist events 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’ Customer Contracts (as defined below) resulting in future adjustments to royalties payable to Mesabi Trust, the impact of the recent coronavirus (COVID-19) pandemic 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. It is possible that future negative price adjustments could partially or even completely offset royalties or royalty income that would otherwise be payable to the Trust in any particular quarter, or at year-end, thereby potentially reducing cash available for distribution to the Trust’s Unitholders (as defined below) in future quarters.

For a discussion of the factors, including without limitation, those that could materially and adversely affect Mesabi Trust’s actual results and performance, see “Risk Factors” set forth on pages 3 through 14 of Mesabi Trust’s Annual Report for the year ended January 31, 2021, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q. These risks and uncertainties are not exclusive and further information concerning the Trust, including factors that potentially could materially affect our operating results, financial condition or the market price of the Units, may emerge from time to time. Mesabi Trust undertakes no obligation, other than that imposed by law, to make any revisions to the forward-looking statements contained in this filing or to update them to reflect circumstances occurring after the date of this filing. We advise you, however, to consult any further disclosures we make on related subjects in our future Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K that we file with or furnish to the Securities and Exchange Commission.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements. (Note 1)

Mesabi Trust

Condensed Statements of Operations

Three and Six Months Ended July 31, 2021 and 2020

	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2021		2020		2021		2020
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
A. Condensed Statements of Operations
Revenues
Royalty income	$	27,744,036	$	7,218,361	$	37,146,203	$	9,353,855
Interest		179		24		663		33,293
Total revenues		27,744,215		7,218,385		37,146,866		9,387,148
Expenses		988,185		542,382		1,816,966		1,099,524
Net income	$	26,756,030	$	6,676,003	$	35,329,900	$	8,287,624
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING
Number of units outstanding		13,120,010		13,120,010		13,120,010		13,120,010
Net income per unit (Note 2)	$	2.0393	$	0.5088	$	2.6928	$	0.6317
Distributions declared per unit (Note 3)	$	0.0900	$	0.0500	$	0.9800	$	0.6100

See Notes to Condensed Financial Statements.

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Mesabi Trust

Condensed Balance Sheets

July 31, 2021 and January 31, 2021

	July 31, 2021		January 31, 2021
	(unaudited)
B. Condensed Balance Sheets
Assets
Cash and cash equivalents	$	28,310,067	$	12,500,941
U.S. Government securities, at amortized cost (which approximates fair value)		—		9,906,669
Accrued income receivable		12,634,653		249,477
Contract asset		—		177,251
Prepaid expenses		288,336		94,585
Current assets		41,233,056		22,928,923
Fixed property, including intangibles, at nominal values
Assignments of leased property
Amended assignment of Peters Lease		1		1
Assignment of Cloquet Leases		1		1
Certificate of beneficial interest for 13,120,010 units of Land Trust		1		1
		3		3
Total assets	$	41,233,059	$	22,928,926
Liabilities, Unallocated Reserve And Trust Corpus
Liabilities
Distribution payable	$	1,180,801	$	6,035,205
Accrued expenses		205,988		416,672
Contract liability		896,931		—
Total liabilities		2,283,720		6,451,877
Unallocated reserve		38,949,336		16,477,046
Trust corpus		3		3
Total liabilities, unallocated reserve and trust corpus	$	41,233,059	$	22,928,926

See Notes to Condensed Financial Statements.

4

Mesabi Trust

Condensed Statements of Cash Flows

Six Months Ended July 31, 2021 and 2020

	Six Months Ended
	July 31,
	2021		2020
		(unaudited)		(unaudited)
C. Condensed Statements of Cash Flows
Operating activities
Royalties received	$	25,835,075	$	4,799,327
Interest received		797		37,338
Expenses paid		(2,221,401)		(1,214,976)
Net cash from operating activities		23,614,471		3,621,689
Investing activities
Maturities of U.S. Government securities		50,942,392		26,899,691
Purchases of U.S. Government securities		(41,035,723)		(23,708,865)
Net cash from investing activities		9,906,669		3,190,826
Financing activity
Distributions to unitholders		(17,712,014)		(16,531,213)
Net change in cash and cash equivalents		15,809,126		(9,718,698)
Cash and cash equivalents, beginning of period		12,500,941		10,177,655
Cash and cash equivalents, end of period	$	28,310,067	$	458,957
Reconciliation of net income to net cash from operating activities
Net income	$	35,329,900	$	8,287,624
Increase in accrued income receivable		(12,385,176)		(979,139)
Decrease (increase) in contract asset		177,251		(1,059,624)
Increase in prepaid expense		(193,751)		(161,533)
Increase (decrease) in accrued expenses		(210,684)		46,081
Increase (decrease) in contract liability		896,931		(2,511,720)
Net cash from operating activities	$	23,614,471	$	3,621,689
Non cash financing activity
Distributions declared and payable	$	1,180,801	$	656,001

See Notes to Condensed Financial Statements.

5

Mesabi Trust

Notes to Condensed Financial Statements

July 31, 2021 (Unaudited)

Note 1.  The financial statements and notes to financial statements included herein have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Trustees, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the results of operations for the three and six months ended July 31, 2021 and 2020, (b) the financial position at July 31, 2021 and (c) the cash flows for the six months ended July 31, 2021 and 2020, have been made. For further information, refer to the financial statements and footnotes included in Mesabi Trust’s Annual Report on Form 10-K for the year ended January 31, 2021.

The Trust’s royalties have been, and may in the future be, adversely affected by the coronavirus (COVID-19) pandemic. During the second quarter of 2020, the spread of COVID-19 led to the disruption of the business operations of Cleveland-Cliffs Inc. (“Cliffs”) and its wholly-owned subsidiary, Northshore Mining Company (“Northshore”), upon which we are dependent for our royalties. Although steel and iron ore production have been considered “essential” by the states in which Cliffs operates, certain of its facilities and construction activities were temporarily idled during the second quarter of 2020. Nearly all of these temporarily idled facilities were restarted as of June 30, 2020, with the exception of the Dearborn hot-end operations and Mansfield operations, which were restarted in July 2020, and the Northshore mine, which was restarted in August 2020. In its most recent quarterly report on Form 10-Q (filed July 28, 2021), Cliffs disclosed that the fundamentals for its business have rebounded strongly since the COVID-19 disruption that occurred during 2020. Mesabi Trust cannot predict whether Northshore’s operations will experience additional disruptions in the future, or whether Cliffs will experience supply chain disruptions or operational issues with its vendors, suppliers and contractors if faced with similar pandemic challenges in the future.

On December 9, 2019, Mesabi Trust initiated arbitration against Northshore, the lessee/operator of the leased lands, and its parent, Cliffs. The arbitration proceeding was commenced with the American Arbitration Association. The Trust asserts claims concerning the calculation of royalties related to the production, shipment and sale of iron ore, including DR-grade pellets. Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief. During 2020, the parties appointed a three-member arbitration panel and engaged in discovery. The arbitration hearing took place in May 2021. Post-hearing briefs and oral arguments were presented in July 2021.

Note 2.  Net income per unit is based on 13,120,010 units outstanding during the period.

The Trust accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is recognized as the performance obligations are satisfied.

Disaggregation of Revenues

The following tables represent a disaggregation of revenue for the three and six months ended July 31, 2021 and July 31, 2020.

	Three Months Ended July 31,
	2021		2020
Base overriding royalties	$	16,645,464	$	4,174,785
Bonus royalties		10,910,823		3,043,576
Fee royalties		187,749		—
Total royalty income	$	27,744,036	$	7,218,361

	Six Months Ended July 31,
	2021		2020
Base overriding royalties	$	22,284,617	$	5,356,796
Bonus royalties		14,483,164		3,823,288
Fee royalties		378,422		173,771
Total royalty income	$	37,146,203	$	9,353,855

6

Base overriding royalties

The performance obligation for the base overriding royalty consists of providing Northshore access to the Peters Lands, Cloquet Lands, and Mesabi Lands and the right to mine on these lands. The consideration to be received from this access relates to the volume of iron ore shipped by Northshore. Mesabi Trust receives royalties at the greater of (i) the aggregate quantity of iron ore products shipped that were mined from Mesabi Trust Lands, and (ii) a portion of the aggregate quantity of all iron ore products shipped from Silver Bay, Minnesota that were mined from any lands, such portion being 90% of the first four million tons shipped from Silver Bay during such year, 85% of the next two million tons shipped during such year, and 25% of all tonnage shipped during such year in excess of six million tons. The royalty percentage paid to the Trust increases as the aggregate tonnage of iron ore products shipped, attributable to the Trust, in any calendar year increases past each of the first four one-million ton volume thresholds. The base overriding royalties contain variable consideration, as the transaction price is based on a percentage that varies based on the total cumulative tons of iron ore shipped for the calendar year. The Trust estimates the variable consideration it expects to be entitled to receive over the contractual period associated with the royalty agreement. Under the royalty agreement, measuring the total cumulative volumes of iron ore shipped, and the applicable royalty percentages, are reset at the beginning of each calendar year. The Trust evaluates the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, the Trust includes the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. For the base overriding royalties, the Trust estimates the base overriding royalty percentage using the expected value method, which calculates the estimate based off the historical, current, and forecasted shipments. The Trust recognizes base overriding royalties on a quarterly basis based on the actual shipments for the fiscal quarter at the estimated royalty percentage as described above and based on the estimated prices for iron ore products sold under Cliffs’ Customer Contracts.

Bonus royalties

The performance obligation for the bonus royalties consists of providing Northshore access to the Peters Lands, Cloquet Lands, and Mesabi Lands and the right to mine on these lands and the consideration to be received from this access relates to the volume of iron ore shipped by Northshore. The Trust recognizes bonus royalties on a quarterly basis based on the actual shipments of the fiscal quarter at the actual royalty percentage for those shipments and based on the anticipated prices for iron ore products sold under Cliffs’ Customer Contracts.

Fee royalties

The performance obligation for the fee royalties consists of the volume of crude ore mined on a quarterly basis. The Trust recognizes fee royalties on a quarterly basis based on the actual crude ore mined during the fiscal quarter.

Accrued income receivable

The accrued income receivable is included in net income per unit. The Trust recorded $12,634,653 of accrued income receivable as reflected on the Condensed Balance Sheet as of July 31, 2021 (unaudited). As of January 31, 2021, the Trust recorded accrued income receivable of $249,477.

Contract asset and contract liability

The contract asset and contract liability are presented net in the accompanying condensed balance sheets as both the contract asset and contract liability are derived from one customer contract. A net contract liability in the amount of $896,931 is reflected on the Condensed Balance Sheet as of July 31, 2021 (unaudited). The net contract liability is made up of a contract asset in the amount of $5,069,251 and a contract liability in the amount of $5,966,182. As of January 31, 2021 the Trust recorded a net contract asset of $177,251, made up of a contract asset in the amount of $239,132 and a contract liability in the amount of $61,881. The contract asset is based on the revenue recognized on the base overriding royalties, at the estimated prices for iron ore products sold under Cliffs’ Customer Contracts that will be collected in subsequent quarters as the uncertainty associated with the variable consideration is resolved. The contract asset is not available for distribution to the Unitholders until the applicable royalties are actually received by the Trust. The Trust includes estimated future royalty rates on current contracted volumes within contract asset. The contract liability represents iron ore that has not been shipped by Northshore, but for which the Trust has received a royalty payment during the quarter ended July 31, 2021 based on an initial estimated price, or in certain instances, quarterly payment of minimum advance royalties. Revenue will be recognized in accordance with the Trust’s revenue recognition policy at the estimated prices for iron ore products sold under Cliffs’ Customer Contracts as shipments of these products are made.

Note 3.  The Trustees determine whether to declare a distribution each year in April, July, October and January. The Trust’s financial statements are prepared on an accrual basis and present the Trust’s results of operations based on each of the Trust’s fiscal quarters, which end one month after the close of each calendar quarter. Because (i) distributions, if any, are declared by the

7

Trustees based on, among other considerations, the amount of royalties actually paid to the Trust through the end of each calendar quarter prior to April, July, October and January of each year, the Trustees’ evaluation of known and projected Trust expenses in the current and future quarters, the then-current level of Unallocated Reserve and general economic conditions, and (ii) the Trust’s Net Income is calculated as of the end of each fiscal quarter, the distributions declared by the Trust are not equivalent to the Trust’s Net Income during the periods reported in this quarterly report on Form 10-Q.

Note 4.  On July 12, 2021, the Trustees declared a distribution of $0.09 per Unit of Beneficial Interest payable on August 20, 2021 to Mesabi Trust Unitholders of record at the close of business on July 30, 2021.

On July 30, 2021, the Trustees received the quarterly royalty report of iron ore product shipments from Silver Bay, Minnesota during the calendar quarter ended June 30, 2021 from Cliffs, the parent company of Northshore.

Each quarter, as authorized by the Agreement of Trust dated July 18, 1961 (the “Agreement of Trust”), the Trustees evaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether fixed or contingent) in determining the prudent level of unallocated reserve in light of the unpredictable nature of the iron ore industry and current economic conditions.

Pursuant to the Agreement of Trust, the Trustees make decisions about cash distributions to Unitholders based on the royalty payments it receives from Northshore when received, rather than as royalty income is recorded in accordance with the Trust’s revenue recognition policy. Refer to Note 3 for further information.

As of July 31, 2021 and January 31, 2021, the unallocated cash and U.S. Government securities portion of the Trust’s Unallocated Reserve was comprised of the following components:

	July 31, 2021		January 31, 2021
Cash and U.S. Government securities	$	28,310,067	$	22,407,610
Distribution payable		(1,180,801)		(6,035,205)
Unallocated cash and U.S. Government securities	$	27,129,266	$	16,372,405

A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the three and six months ended July 31, 2021 and 2020 is as follows:

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2021	$	16,477,046	$	3	$	16,477,049
Net income		35,329,900		—		35,329,900
Distributions declared - $0.9800 per unit		(12,857,610)		—		(12,857,610)
Balances at July 31, 2021	$	38,949,336	$	3	$	38,949,339

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2021	$	13,374,107	$	3	$	13,374,110
Net income		26,756,030		—		26,756,030
Distributions declared - $0.0900 per unit		(1,180,801)		—		(1,180,801)
Balances at July 31, 2021	$	38,949,336	$	3	$	38,949,339

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2020	$	11,831,014	$	3	$	11,831,017
Net income		8,287,624		—		8,287,624
Distributions declared - $0.6100 per unit		(8,003,207)		—		(8,003,207)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

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		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2020	$	6,095,429	$	3	$	6,095,432
Net income		6,676,003		—		6,676,003
Distributions declared - $0.0500 per unit		(656,001)		—		(656,001)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

placehold

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

This discussion should be read in conjunction with the condensed financial statements and notes presented in this Quarterly Report on Form 10-Q and the financial statements and notes in the last filed Annual Report on Form 10-K for the year ended January 31, 2021 (filed April 27, 2021) for a full understanding of Mesabi Trust’s financial position and results of operations for the three and six months ended July 31, 2021.

COVID-19 Update

Our royalties have been, and may in the future be, adversely affected by the coronavirus (COVID-19) pandemic. During the second quarter of 2020, the spread of COVID-19 led to the disruption of the business operations of Cliffs and its wholly-owned subsidiary, Northshore, upon which we are dependent for our royalties. Although steel and iron ore production have been considered “essential” by the states in which Cliffs operates, certain of its facilities and construction activities were temporarily idled during the second quarter of 2020. Nearly all of these temporarily idled facilities were restarted as of June 30, 2020, with the exception of the Dearborn hot-end operations and Mansfield operations, which were restarted in July 2020, and the Northshore mine, which was restarted in August 2020. In its most recent quarterly report on Form 10-Q (filed July 28, 2021), Cliffs disclosed that the fundamentals for its business have rebounded strongly since the COVID-19 disruption that occurred during 2020. Mesabi Trust cannot predict whether Northshore’s operations will experience additional disruptions in the future, or whether Cliffs will experience supply chain disruptions or operational issues with its vendors, suppliers and contractors if faced with similar pandemic challenges in the future.

Background

Mesabi Trust, formed pursuant to the Agreement of Trust, is a trust organized under the laws of the State of New York. Mesabi Trust holds all of the interests formerly owned by Mesabi Iron Company (“MIC”), including all right, title and interest in the Amendment of Assignment, Assumption and Further Assignment of Peters Lease (the “Amended Assignment of Peters Lease”), the Amendment of Assignment, Assumption and Further Assignment of Cloquet Lease (the “Amended Assignment of Cloquet Lease” and together with the Amended Assignment of Peters Lease, the “Amended Assignment Agreements”), the beneficial interest in a trust organized under the laws of the State of Minnesota to administer the Mesabi Fee Lands (as defined below) as the trust corpus in compliance with the laws of the State of Minnesota on July 18, 1961 (the “Mesabi Land Trust”) and all other assets and property identified in the Agreement of Trust. The Amended Assignment of Peters Lease relates to an Indenture made as of April 30, 1915 among East Mesaba Iron Company (“East Mesaba”), Dunka River Iron Company (“Dunka River”) and Claude W. Peters (the “Peters Lease”) and the Amended Assignment of Cloquet Lease relates to an Indenture made May 1, 1916 between Cloquet Lumber Company and Claude W. Peters (the “Cloquet Lease”).

The Agreement of Trust specifically prohibits the Trustees from entering into or engaging in any business. This prohibition applies even to business activities the Trustees may deem necessary or proper for the preservation and protection of the Trust Estate. Accordingly, the Trustees’ activities in connection with the administration of Trust assets are limited to collecting income, paying expenses and liabilities, distributing net income to the holders of Certificates of Beneficial Interest in Mesabi Trust (“Unitholders”) after the payment of, or provision for, such expenses and liabilities, and protecting and conserving the assets held by the Trust.

The Trustees do not intend to expand their responsibilities beyond those permitted or required by the Agreement of Trust, the Amendment to the Agreement of Trust dated October 25, 1982 (the “Amendment”), and those required under applicable law. Mesabi Trust has no employees, but it engages independent consultants to assist the Trustees in, among other things, monitoring the volume and sales prices of iron ore products shipped from Silver Bay, Minnesota, based on information supplied to the Trustees by Northshore, the lessee/operator of the lands leased under the Peters Lease and Cloquet Lease (the “Peters Lease Lands” and “Cloquet Lease Lands,” respectively) and the 20% fee interest of certain lands that are particularly described in, and subject to a mining lease under, the Peters Lease (the “Mesabi Fee Lands,” and together with the Peters Lease Lands and Cloquet Lease Lands, the “Mesabi Trust Lands”), and its parent company, Cliffs. References to Northshore in this quarterly report, unless the context requires otherwise, are applicable to Cliffs as well.

Leasehold royalty income constitutes the principal source of the Trust’s revenue. The income of the Trust is highly dependent upon the activities and operations of Northshore. Royalty rates and the resulting royalty payments received by the Trust are determined in accordance with the terms of the Trust’s leases and assignments of leases.

Three types of royalties, as well as royalty bonuses, comprise the Trust’s leasehold royalty income:

● Base overriding royalties. Base overriding royalties have historically constituted the majority of the Trust’s royalty income. Base overriding royalties are determined by both the volume and selling price of iron ore products shipped. Northshore is obligated to pay the Trust base overriding royalties in varying amounts, based on the volume of iron ore products shipped. Base overriding royalties are calculated as a percentage of the gross proceeds of iron ore products produced at Mesabi Trust Lands (and to a limited extent other lands) and shipped from Silver Bay, Minnesota. The percentage ranges from 2-1/2% of the gross proceeds for the first one million tons of iron ore products shipped annually to 6% of the gross proceeds for all iron ore products in excess

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of four million tons so shipped annually. Base overriding royalties are subject to interim and final price adjustments under some of the contracts among Northshore, Cliffs and certain of their customers (the “Cliffs’ Customer Contracts”) and, as described elsewhere in this report, such adjustments may be positive or negative.

● Royalty bonuses. The Trust earns royalty bonuses when iron ore products shipped from Silver Bay are sold at prices above a threshold price per ton. The royalty bonus is based on a percentage of the gross proceeds of product shipped from Silver Bay. The threshold price is adjusted (but not below $30.00 per ton) on an annual basis for inflation and deflation (the “Adjusted Threshold Price”). The Adjusted Threshold Price was $57.85 per ton for calendar year 2020 and is $58.58 per ton for calendar year 2021. The royalty bonus percentage ranges from 1/2 of 1% of the gross proceeds (on all tonnage shipped for sale at prices between the Adjusted Threshold Price and $2.00 above the Adjusted Threshold Price) to 3% of the gross proceeds (on all tonnage shipped for sale at prices $10.00 or more above the Adjusted Threshold Price). Royalty bonuses are subject to price adjustments under Cliffs’ Customer Contracts and, as described elsewhere in this report, such adjustments may be positive or negative.

● Fee royalties. Fee royalties have historically constituted a smaller component of the Trust’s total royalty income. Fee royalties are payable to the Mesabi Land Trust, a Minnesota land trust, which holds a 20% interest as fee owner in the Amended Assignment of Peters Lease. Mesabi Trust holds the entire beneficial interest in the Mesabi Land Trust for which U.S. Bank N.A. acts as the corporate trustee. Mesabi Trust receives the net income of the Mesabi Land Trust, which is generated from royalties on the amount of crude ore mined after the payment of expenses to U.S. Bank N.A. for its services as the corporate trustee. Crude ore is the source of iron oxides used to make iron ore pellets and other products. The fee royalty on crude ore is based on an agreed price per ton, subject to certain indexing.

● Minimum advance royalties. Northshore’s obligation to pay base overriding royalties and royalty bonuses with respect to the sale of iron ore products generally accrues upon the shipment of those products from Silver Bay. However, regardless of whether any shipment has occurred, Northshore is obligated to pay to Mesabi Trust a minimum advance royalty. Each year, the amount of the minimum advance royalty is adjusted (but not below $500,000 per annum) for inflation and deflation. The minimum advance royalty was $964,659 for calendar year 2020 and is $976,765 for calendar year 2021. Until overriding royalties (and royalty bonuses, if any) for a particular year equal or exceed the minimum advance royalty for the year, Northshore must make quarterly payments of up to 25% of the minimum advance royalty for the year. Because minimum advance royalties are essentially prepayments of base overriding royalties and royalty bonuses earned each year, any minimum advance royalties paid in a fiscal quarter are recouped by credits against base overriding royalties and royalty bonuses earned in later fiscal quarters during the year.

The current royalty rate schedule became effective on August 17, 1989 pursuant to the Amended Assignment Agreements, which the Trust entered into with Cyprus Northshore Mining Corporation (“Cyprus NMC”). Pursuant to the Amended Assignment Agreements, overriding royalties are determined by both the volume and selling price of iron ore products shipped. In 1994, Cyprus NMC was sold by its parent corporation to Cliffs and renamed Northshore Mining Company. Cliffs now operates Northshore as a wholly owned subsidiary.

Under the relevant agreements, Northshore has the right to mine and ship iron ore products from lands other than Mesabi Trust Lands. Northshore alone determines whether to conduct mining operations on Mesabi Trust Lands and/or such other lands based on its current mining and engineering plan. The Trustees do not exert any influence over mining operational decisions. To encourage the use of iron ore products from Mesabi Trust Lands, Mesabi Trust receives royalties on stated percentages of iron ore shipped from Silver Bay, whether or not the iron ore products are from Mesabi Trust Lands. Mesabi Trust receives royalties at the greater of (i) the aggregate quantity of iron ore products shipped that were mined from Mesabi Trust Lands, and (ii) a portion of the aggregate quantity of all iron ore products shipped from Silver Bay that were mined from any lands, such portion being 90% of the first four million tons shipped from Silver Bay during such year, 85% of the next two million tons shipped during such year, and 25% of all tonnage shipped during such year in excess of six million tons. The royalty percentage paid to the Trust increases as the aggregate tonnage of iron ore products shipped, attributable to the Trust, in any calendar year increases past each of the first four one-million ton volume thresholds. Assuming a consistent sales price per ton throughout a calendar year, shipments of iron ore product attributable to the Trust later in the year generate a higher royalty to the Trust, as total shipments for the year exceed increasing levels of royalty percentages and pass each of the first four one-million ton volume thresholds.

During the course of its fiscal year, some portion of royalties expected to be paid to Mesabi Trust is based in part on estimated prices for certain iron ore products sold under some of the Cliffs’ Customer Contracts. Some of the Cliffs’ Customer Contracts use estimated prices which are subject to interim and final pricing adjustments, which can be positive or negative, and which adjustments are dependent in part on multiple price and inflation index factors that are not known until after the end of a contract year. Even though Mesabi Trust is not a party to the Cliffs’ Customer Contracts, these adjustments can result in significant variations in royalties payable to Mesabi Trust (and, in turn, the resulting amount available for distribution to Unitholders by the Trust) from quarter to quarter and on a comparative historical basis, and these variations, which can be positive or negative, cannot be predicted by the Trust. In either case, these price adjustments will impact future royalties payable to the Trust and, in turn, will impact cash reserves that may become available for distribution to Unitholders.

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According to Cliffs’ recent SEC filings, certain of Cliffs’ supply agreements specify provisional price calculations, where the pricing mechanisms generally are based on market pricing, with the final revenue rate based on certain market inputs at a specified period in time in the future, per the terms of the supply agreements. Market inputs are tied to indexed price adjustment factors that are integral to the iron ore supply contracts and vary based on the agreement. The pricing mechanisms typically include adjustments based upon changes in the Platts 62% Price, Atlantic Basin pellet premiums and Platts international indexed freight rates. The pricing adjustments generally operate in the same manner, with each factor typically comprising a portion of the price adjustment, although the weighting of each factor varies based upon the specific terms of each agreement. The price adjustment factors have been evaluated to determine if they qualify as embedded derivatives. The price adjustment factors share the same economic characteristics and risks as the host sales contract and are integral to the host sales contract as inflation adjustments; accordingly, they have not been separately valued as derivative instruments.

A portion of royalties expected to be paid to the Trust each year is also based on “spot“ sales of iron ore products sold by Northshore and Cliffs, where pricing is basically set at a fixed rate.

As also described elsewhere in this report, the Trust receives a bonus royalty equal to a percentage of the gross proceeds of iron ore products (mined from Mesabi Trust lands) shipped from Silver Bay and sold at prices above the Adjusted Threshold Price. Although 96.8% of all the iron ore products shipped from Silver Bay during calendar 2020 was sold at prices higher than the Adjusted Threshold Price, the Trustees are unable to project whether Cliffs will continue to be able to sell iron ore products at prices above the applicable Adjusted Threshold Price, entitling the Trust to any future bonus royalty payments.

Deutsche Bank Trust Company Americas, the Corporate Trustee of Mesabi Trust, performs certain administrative functions for Mesabi Trust. The Trust maintains a website at www.mesabi-trust.com. The Trust makes available (free of charge) its annual, quarterly and current reports (and any amendments thereto) filed with the SEC through its website as soon as reasonably practicable after electronically filing or furnishing such material with or to the SEC.

Results of Operations

Comparison of Iron Ore Pellet Production and Shipments for the Three and Six Months Ended July 31, 2021 and July 31, 2020

As shown in the table below, during the three months ended July 31, 2021, production of iron ore pellets at Northshore from Mesabi Trust Lands totaled 1,157,588 tons, and shipments over the same period totaled 1,446,876 tons. By comparison, pellet production and shipments for the comparable period in 2020 were (22,898) tons and 973,744 tons, respectively. During the three months ended July 31, 2020, no pellet production occurred due to the idling of the plant at Northshore as discussed further in “Note 1” to the condensed financial statements. The figures below include a negative survey adjustment for previously produced iron ore pellets of 22,898 tons. The increase in production is attributable to the anticipated future demand from Northshore’s customers as compared to the prior period. The increase in shipments is attributable to the anticipated current demand from Northshore’s customers as compared to the prior comparable period. For the three months ended July 31, 2021, approximately 93.2% of shipments from Silver Bay, Minnesota originated from Trust lands.

	Pellets Produced from	Pellets Shipped from
	Trust Lands	Trust Lands
Three Months Ended	(Tons)	(Tons)
July 31, 2021	1,157,588	1,446,876
July 31, 2020	(22,898)	973,744

As shown in the table below, during the six months ended July 31, 2021, production of iron ore pellets at Northshore from Mesabi Trust Lands totaled 2,286,971 tons, and shipments over the same period totaled 1,994,580 tons. By comparison, pellet production and shipments for the comparable period in 2020 were 1,164,566 ton and 1,532,378 tons, respectively. The increase in production is attributable to the anticipated future demand from Northshore’s customers as compared to the prior period. The increase in shipments is attributable to the anticipated current demand from Northshore’s customers as compared to the prior comparable period. For the six months ended July 31, 2021, approximately 92.1% of shipments from Silver Bay, Minnesota originated from Trust lands.

	Pellets Produced from	Pellets Shipped from
	Trust Lands	Trust Lands
Six Months Ended	(Tons)	(Tons)
July 31, 2021	2,286,971	1,994,580
July 31, 2020	1,164,566	1,532,378

Comparison of Royalty Income for the Three and Six Months Ended July 31, 2021 and July 31, 2020

As reflected in the table below, the Trust’s total royalty income for the three months ended July 31, 2021 increased by $20,525,675 to $27,744,036 as compared to the three months ended July 31, 2020. The increase in total royalty income is due to an

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increase in pricing and shipments of iron ore during the three months ended July 31, 2021, as compared to the three months ended July 31, 2020.

The table below shows that the base overriding royalties increased $12,470,679 and the bonus royalties increased by $7,867,247 for the three months ended July 31, 2021, as compared to the three months ended July 31, 2020. Fee royalties increased by $187,749 over the same period. The increase in the base overriding royalties and bonus royalties is attributable to an increase in pricing of iron ore and shipments as compared to the prior comparable period. The increase in the fee royalty amount is due to an increase in the amount of iron ore mined under the Peters Lease in the current fiscal quarter as compared to the prior comparable period.

The table below summarizes the components of Mesabi Trust’s total royalty income for the three months ended July 31, 2021 and July 31, 2020, respectively:

	Three Months Ended July 31,
	2021		2020
Base overriding royalties	$	16,645,464	$	4,174,785
Bonus royalties		10,910,823		3,043,576
Fee royalties		187,749		—
Total royalty income	$	27,744,036	$	7,218,361

As reflected in the table below, the Trust’s total royalty income for the six months ended July 31, 2021 increased by $27,792,348 to $37,146,203 as compared to the six months ended July 31, 2020. The increase in total royalty income is due to an increase in pricing and shipments of iron ore during the six months ended July 31, 2021, as compared to the six months ended July 31, 2020.

The table below shows that the base overriding royalties increased $16,927,821 and the bonus royalties increased by $10,659,876 for the six months ended July 31, 2021, as compared to the six months ended July 31, 2020. Fee royalties increased by $204,651 over the same period. The increase in the base overriding royalties and bonus royalties is attributable to an increase in pricing of iron ore and shipments as compared to the prior comparable period. The increase in the fee royalty amount is due to an increase in the amount of iron ore mined under the Peters Lease in the current fiscal quarter as compared to the prior comparable period.

The table below summarizes the components of Mesabi Trust’s total royalty income for the six months ended July 31, 2021 and July 31, 2020, respectively:

	Six Months Ended July 31,
	2021		2020
Base overriding royalties	$	22,284,617	$	5,356,796
Bonus royalties		14,483,164		3,823,288
Fee royalties		378,422		173,771
Total royalty income	$	37,146,203	$	9,353,855

Comparison of Net Income, Expenses and Distributions for the Three and Six Months Ended July 31, 2021 and July 31, 2020

Net income for the three months ended July 31, 2021 was $26,756,030, an increase of $20,080,027 as compared to the three months ended July 31, 2020. The increase in net income for the three months ended July 31, 2021 was primarily the result of an increase in pricing of iron ore and amount of shipments, as compared to the three months ended July 31, 2020. The Trust’s expenses for the three months ended July 31, 2021 were $988,185, an increase of $445,803 compared to the expenses for the three months ended July 31, 2020. The increase in expenses was primarily attributable to an increase in legal fees and expenses related to the pending arbitration for the three months ended July 31, 2021, as compared to the three months ended July 31, 2020. See Part II, Item 1 “Legal Proceedings” in this Quarterly Report on Form 10-Q. The table below summarizes the Trust’s income and expenses for the three months ended July 31, 2021 and July 31, 2020, respectively.

	Three Months Ended July 31,
	2021		2020
Total royalty income	$	27,744,036	$	7,218,361
Interest income		179		24
Total revenues		27,744,215		7,218,385
Expenses		988,185		542,382
Net income	$	26,756,030	$	6,676,003

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Net income for the six months ended July 31, 2021 was $35,329,900, an increase of $27,042,276 as compared to the six months ended July 31, 2020. The increase in net income for the six months ended July 31, 2021 was primarily the result of an increase in pricing and shipments of iron ore, as compared to the six months ended July 31, 2020. The Trust’s expenses for the six months ended July 31, 2021 were $1,816,966, an increase of $717,442 compared to the expenses for the six months ended July 31, 2020. The increase in expenses was primarily attributable to an increase in legal fees and expenses related to the pending arbitration for the six months ended July 31, 2021, as compared to the six months ended July 31, 2020. See Part II, Item 1 “Legal Proceedings” in this Quarterly Report on Form 10-Q. The table below summarizes the Trust’s income and expenses for the six months ended July 31, 2021 and July 31, 2020, respectively.

	Six Months Ended July 31,
	2021		2020
Total royalty income	$	37,146,203	$	9,353,855
Interest income		663		33,293
Total revenues		37,146,866		9,387,148
Expenses		1,816,966		1,099,524
Net income	$	35,329,900	$	8,287,624

As presented on the “Trust’s Condensed Statements of Operations” on page 3 of this quarterly report, the Trust’s net income per unit increased $1.5305 per unit to $2.0393 per unit for the fiscal quarter ended July 31, 2021 as compared to the fiscal quarter ended July 31, 2020. On July 12, 2021, the Trust declared a distribution of $0.09 per unit payable on August 20, 2021 to Unitholders of record on July 30, 2021. Comparatively, the Trust declared a distribution of $0.05 per unit to Unitholders in July 2020. During the six months ended July 31, 2021 and July 31, 2020 the Trust had declared distributions of $0.98 and $0.61 per unit, respectively.

On a quarterly basis, the Trustees review a variety of financial and economic data and information impacting the Trust, and upon the Trustees’ determination, distributions may be declared approximately ten weeks after the Trustees receive a quarterly royalty report from Northshore and Cliffs and the Trust receives the actual royalty payment with respect to royalty income that is payable for iron ore shipments through the end of each prior calendar quarter. Royalty payments may include pricing adjustments with respect to shipments made during prior periods. The Trust accounts for and reports accrued income receivable based on shipments during the last month of each of the Trust’s fiscal quarters (April, July, October and January) and price adjustments under Cliffs’ Customer Contracts (which can be positive or negative and can result in significant variations in royalties received by Mesabi Trust and cash available for distribution to Unitholders) as reported to the Trust by Northshore. The Trust accounts for these amounts by using estimated prices and reports such amounts even though accrued income receivable is not available for distribution to Unitholders until it is received by the Trust. Accordingly, distributions declared by the Trust are not equivalent to the Trust’s net income during the periods reported in this quarterly report on Form 10-Q.

Comparison of Unallocated Reserve as of July 31, 2021, July 31, 2020 and January 31, 2021

As set forth in the tables below, Unallocated Reserve increased from $12,115,431 as of July 31, 2020 to $38,949,336 as of July 31, 2021. The increase in Unallocated Reserve as of July 31, 2021, as compared to July 31, 2020, is primarily the result of an increase in the unallocated cash and U.S. Government securities and accrued income receivable. The increase in the unallocated cash and U.S. Government securities is attributable to an increase in royalties received in the second quarter of 2021 as compared to the second quarter of 2020. The increase in the accrued income receivable portion of the Unallocated Reserve is attributable to an increase in shipments and related pricing for the month ended July 30, 2021 as compared to the prior comparable period. The increase in the contract liability is the result of the timing differences when iron ore that has not been shipped by Northshore, but for which the Trust has received a royalty payment, see “Note 2” for further discussion of the contract liability.

	July 31,				% increase
	2021		2020		(decrease)
Accrued Income Receivable	$	12,634,653	$	1,048,727	1,104.8%
Contract Asset		—		1,059,624	(100.0)%
Unallocated Cash and U.S. Government Securities		27,129,266		9,944,604	172.8%
Prepaid Expenses and (Accrued Expenses), net		82,348		62,476	31.8%
Contract Liability		(896,931)		—	100.0%
Unallocated Reserve	$	38,949,336	$	12,115,431	221.5%

It is possible that future negative price adjustments could offset, or even eliminate, future royalties or royalty income that would otherwise be payable to the Trust in any particular quarter, or at year end, thereby potentially reducing cash available for distribution to the Trust’s Unitholders in future quarters. See the discussion under the heading “Risk Factors” beginning on page 3 of the Trust’s Annual Report for the fiscal year ended January 31, 2021, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.

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The Trust’s Unallocated Reserve as of July 31, 2021 increased by $22,472,290 to $38,949,336, as compared to the fiscal year ended January 31, 2021. The decrease in Unallocated Reserve as of July 31, 2021, as compared to January 31, 2021, is primarily the result of an increase in the unallocated cash and U.S. Government securities and accrued income receivable. The increase in the unallocated cash and U.S. Government securities is attributable to an increase in royalties received in the second quarter of 2021 as compared to the fourth quarter of 2020. The increase in the accrued income receivable portion of the Unallocated Reserve is attributable to an increase in shipments and related pricing for the month ended July 30, 2021 as compared to the month ended January 31, 2021.

	July 31, 2021		January 31, 2021		(decrease)
Accrued Income Receivable	$	12,634,653	$	249,477	4,964.5%
Contract Asset		—		177,251	(100.0)%
Unallocated Cash and U.S. Government Securities		27,129,266		16,372,405	65.7%
Prepaid Expenses and (Accrued Expenses), net		82,348		(322,087)	(125.6)%
Contract Liability		(896,931)		—	100.0%
Unallocated Reserve	$	38,949,336	$	16,477,046	136.4%

Each quarter, as authorized by the Agreement of Trust, the Trustees will reevaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether fixed or contingent) in determining a prudent level of unallocated reserve in light of the unpredictable nature of the iron ore industry, current and projected future mining operations and current economic conditions. Although the actual amount of the Unallocated Reserve will fluctuate from time to time and may increase or decrease from its current level, it is currently anticipated that future distributions will be highly dependent upon royalty income as it is received and the level of Trust expenses. The amount of future royalty income available for distribution will be subject to the volume of iron ore product shipments and the dollar level of sales by Northshore. Shipping activity is greatly reduced during the winter months. Economic conditions, particularly those affecting the iron ore and steel industry arising from the COVID-19 pandemic, may adversely affect the amount and timing of such future shipments and sales. The Trustees will continue to monitor the economic and other circumstances of the Trust to strike a responsible balance between distributions to Unitholders and the need to maintain adequate reserves at a prudent level, given the unpredictable nature of the iron ore and steel industry, the Trust’s dependence on the actions of the lessee/operator, and the fact that the Trust essentially has no other liquid assets.

Recent Developments

Receipt of Quarterly Royalty Report and Royalty Payment

On July 30, 2021, the Trustees of Mesabi Trust received the quarterly royalty report of iron ore shipments out of Silver Bay, Minnesota during the quarter ended June 30, 2021 (the “Royalty Report”) from Cliffs, the parent company of Northshore, and the Trust received royalty payments as summarized below.

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 June 30, 2021, Mesabi Trust was credited with a base royalty of $10,388,332. For the three months ended June 30, 2021, Mesabi Trust was also credited with a bonus royalty in the amount of $8,163,090. The royalty also included a positive adjustment of $747,261 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 $196,357 was paid to the Mesabi Land Trust. The total royalty payments received by Mesabi Trust on July 30, 2021 from Cliffs were $19,495,040.

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 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 second calendar quarter of 2021, Cliffs credited Mesabi Trust with 1,393,902 tons of iron ore shipped, as compared to 1,073,446 tons shipped during the second calendar quarter of 2020.

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 of some iron ore products sold under some of the contracts among Northshore, Cliffs and certain of their customers (the “Cliffs’ Customer Contracts”), 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’ Customer Contracts. 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

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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 2021, Northshore has not advised Mesabi Trust of its expected shipments of iron ore products, or what percentage of 2021 shipments will be from Mesabi Trust iron ore. In the Cliffs’ Royalty Report, Cliffs stated that the reported royalty payments were based on estimated iron ore pellet prices under the Cliffs’ Customer Contracts, 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

Mesabi Trust Distribution Announcement

As previously reported by Mesabi Trust on July 12, 2021, the Trustees declared a distribution of nine cents ($0.09) per Unit of Beneficial Interest payable on August 20, 2021 to Mesabi Trust Unitholders of record at the close of business on July 30, 2021. This distribution was paid as announced.

Arbitration Pending Against Cliffs and Northshore

On December 9, 2019, Mesabi Trust initiated arbitration against Northshore, the lessee/operator of the leased lands, and its parent, Cliffs. The arbitration proceeding was commenced with the American Arbitration Association. The Trust asserts claims concerning the calculation of royalties related to the production, shipment and sale of iron ore, including DR-grade pellets. More particularly, the claims involve the Trust’s allegations that Northshore and Cliffs have improperly calculated royalty amounts with respect to DR-grade pellets by planning isolated sale transactions of low silica iron ore into international markets at prices significantly below standard pellet pricing. The allegations include failure by Northshore and Cliffs to provide timely and contract-based access to information and individuals necessary to evaluate compliance with the royalty agreement. Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief. During 2020, the parties appointed a three-member arbitration panel and engaged in discovery. The arbitration hearing took place in May 2021. Post-hearing briefs and oral arguments were presented in July 2021.

Other Recent Developments Disclosed by Cliffs

In its most recently filed Form 10-Q (filed July 28, 2021), Cleveland-Cliffs disclosed that it is the largest flat-rolled steel producer in North America. Founded in 1847 as a mine operator, Cliffs disclosed that it is also the largest producer of iron ore pellets in North America. In 2020, Cliffs acquired two major steelmakers, AK Steel and ArcelorMittal USA, vertically integrating its legacy iron ore business with quality-focused steel production and emphasis on the automotive end market.

Important Factors Affecting Mesabi Trust

The Agreement of Trust specifically prohibits the Trustees from entering into or engaging in any business. This prohibition seemingly applies even to business activities the Trustees deem necessary or proper for the preservation and protection of the Trust’s assets. Accordingly, the Trustees’ activities in connection with the administration of Trust assets are limited to collecting income, paying expenses and liabilities, distributing net income to Mesabi Trust’s Unitholders after the payment of, or provision for, such expenses and liabilities, monitoring royalties and protecting and conserving the held assets.

Neither Mesabi Trust nor the Trustees have any control over the operations and activities of Northshore, except within the framework of the Amended Assignment Agreements. Cliffs alone controls (i) historical operating data, including iron ore production volumes, marketing of iron ore products, operating and capital expenditures as they relate to Northshore, environmental and other liabilities and the effects of regulatory changes; (ii) plans for Northshore’s future operating and capital expenditures; (iii) geological data relating to ore reserves; (iv) projected production of iron ore products; (v) contracts between Cliffs and Northshore with their customers; and (vi) the decision to mine off Mesabi Trust and/or state lands, based on Cliffs’ current mining and engineering plan. The Trustees do not exert any influence over mining operational decisions at Northshore, nor do the Trustees provide any input regarding the ore reserve estimated at Northshore as reported by Cliffs. While the Trustees request relevant information from Cliffs and Northshore in accordance with the royalty agreement for use in periodic reports as part of their evaluation of Mesabi Trust’s disclosure controls and procedures, the Trustees do not control this information and they rely on the information in Cliffs’ periodic and current filings with the SEC to provide accurate and timely information in Mesabi Trust’s reports filed with the SEC.

In accordance with the Agreement of Trust and the Amendment, the Trustees are entitled to, and in fact do, rely upon certain experts in good faith, including (i) the independent consultants with respect to monthly production and shipment reports, which include figures on crude ore production and iron ore pellet shipments, and discussions concerning the condition and accuracy of the scales and plans regarding the development of Mesabi Trust’s mining property; and (ii) the accounting firm they have contracted with for non-audit services, including reviews of financial data related to shipping and sales reports provided by Northshore and a review of the schedule of leasehold royalties payable to Mesabi Trust.

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For a discussion of additional factors, including but not limited to those that could adversely affect Mesabi Trust’s actual results and performance, see “Risk Factors” set forth on pages 3 through 14 of the Mesabi Trust’s Annual Report on Form 10-K for the fiscal year-ended January 31, 2021 (filed April 27, 2021).

Iron Ore Pricing and Contract Adjustments

During the course of its fiscal year some portion of the royalties paid to Mesabi Trust is based in part on estimated prices for certain iron ore products sold under some of the Cliffs’ Customer Contracts. Mesabi Trust is not a party to any of the Cliffs’ Customer Contracts. These prices are subject to interim and final pricing adjustments, which can be positive or negative, and which adjustments are dependent in part on a variety of price and inflation index factors, including but not limited to various benchmark pellet prices, hot band steel prices and various Producer Price Indexes. Although Northshore makes interim adjustments to the royalty payments on a quarterly basis, these price adjustments cannot be finalized until after the end of a contract year. This may result in significant and frequent variations in royalties received by Mesabi Trust (and in turn the resulting amount of funds available for distribution to Unitholders by the Trust) from quarter to quarter and on a comparative historical basis. These variations, which can be positive or negative, cannot be predicted by Mesabi Trust. It is possible that future negative price adjustments could partially or even completely offset royalties or royalty income that would otherwise be payable to the Trust in any particular quarter, or at year-end, thereby potentially reducing cash available for distribution to the Trust’s Unitholders in future quarters.

Effects of Securities Regulation

The Trust is a publicly traded, pass-through royalty trust with its Trust Certificates listed on the New York Stock Exchange (“NYSE”) and is therefore subject to extensive regulation under, among others, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), each as amended, and the rules and regulations of the NYSE. Issuers failing to comply with such authorities risk serious consequences, including criminal as well as civil and administrative penalties. In most instances, these laws, rules and regulations do not specifically address their applicability to a publicly-traded pass-through royalty trust such as Mesabi Trust. In particular, Sarbanes-Oxley mandated the adoption by the SEC and NYSE of certain rules and regulations that are impossible for the Trust to literally satisfy because of its nature as a pass-through royalty trust. Pursuant to NYSE rules, as a pass-through royalty trust, the Trust is exempt from many of the corporate governance requirements that apply to other publicly traded corporations. The Trust does not have, nor does the Agreement of Trust provide for, a board of directors, an audit committee, a corporate governance committee, a compensation committee or executive officers. The Trust has no employees. The Trustees closely monitor the SEC’s and NYSE’s rulemaking activities and will comply with their rules and regulations to the extent applicable.

The Trust’s website is located at www.mesabi-trust.com.

Critical Accounting Policies and Estimates

This “Trustees’ Discussion and Analysis of Financial Condition and Results of Operations” is based upon the Trust’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Trustees to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Trustees base their estimates and judgments on historical experience and on various other assumptions that the Trustees believe are reasonable under the circumstances. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Critical accounting policies are those that have meaningful impact on the reporting of the Trust’s financial condition and results of operations, and that require significant judgment and estimates.

There have been no material changes in the Trust’s critical accounting policies or significant accounting estimates during the three months ended July 31, 2021. For a complete description of the Trust’s significant accounting policies, please see Note 2 to the financial statements included in the Trust’s Annual Report on Form 10-K for the year ended January 31, 2021 (filed April 27, 2021).

Certain Tax Information

The Trust is not taxable as a corporation for federal or state income tax purposes and is instead qualified as a nontaxable grantor trust. Since the Trust’s inception, all net taxable income is annually attributable directly to Unitholders for tax purposes regardless of whether the income is distributed or retained by the Trust in its reserve account. As such, in lieu of the Trust paying income taxes, Unitholders report their pro rata share of the various items of Trust income and deductions on their income tax returns. This reporting is required whether or not the earnings of the Trust are distributed as to Unitholders. During calendar year 2020, any funds retained to increase the Trust’s unallocated reserve, which were derived from reportable royalty income, will nonetheless become taxable as reportable income to Unitholders, depending on each individual’s personal tax situation. Information regarding the background on the changes in the Trust’s unallocated reserve is described above under “Results of Operations — Comparison of

17

Unallocated Reserve as of July 31, 2021, July 31, 2020 and January 31, 2021” on page 14. Unitholders are encouraged to consult with their own tax advisors to plan for any financial impact related to this and to review their personal tax situations related to investing in, holding or selling units of beneficial interest in Mesabi Trust.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. The Trust maintains a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Trust in the reports that it furnishes or files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and regulations of the SEC. Due to the pass-through nature of the Trust, the Trust’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Trust is received from Cliffs and its wholly-owned subsidiary, Northshore. In order to help ensure the accuracy and completeness of the information required to be disclosed in the Trust’s periodic and current reports, the Trust employs certified public accountants, geological consultants, and attorneys. These professionals hired by the Trust advise the Trust in its review and compilation of the information in this Form 10-Q and the other periodic reports filed by the Trust with the SEC.

As part of their evaluation of Mesabi Trust’s disclosure controls and procedures, the Trustees rely on quarterly shipment and royalty calculations provided by Northshore and Cliffs. Because Northshore has declined to provide a written certification attesting to whether Northshore has established disclosure controls and procedures and internal controls sufficient to enable it to verify that the information furnished to the Trustees is accurate and complete, the Trustees also rely on (a) an annual certification from Northshore and Cliffs, certifying as to the accuracy of the royalty calculations, and (b) the related due diligence review performed by the Trust’s accountants. In addition, Mesabi Trust’s consultants review the schedule of leasehold royalties payable, and shipping and sales reports provided by Northshore against production and shipment reports prepared by Eveleth Fee Office, Inc., an independent consultant to Mesabi Trust (“Eveleth Fee Office”). Eveleth Fee Office performs inspections of the Northshore mine and its pelletizing operations, observes production and shipping activities, gathers production and shipping information from Northshore and prepares monthly production and shipment reports for the Trustees. Furthermore, as part of its engagement by Mesabi Trust, Eveleth Fee Office also attends Northshore’s calibration and testing of its crude ore scales and boat loader scales which are conducted on a periodic basis.

As of the end of the period covered by this report, the Trustees carried out an evaluation of Mesabi Trust’s disclosure controls and procedures. Based on this evaluation, the Trustees have concluded that such disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting. To the knowledge of the Trustees, there were no changes in the Trust’s internal control over financial reporting that occurred during the Trust’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting. The Trustees note for purposes of clarification that they have no authority over, and make no statement concerning, the internal controls of Northshore or Cliffs.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On December 9, 2019, Mesabi Trust initiated arbitration against Northshore, the lessee/operator of the leased lands, and its parent, Cliffs. The arbitration proceeding was commenced with the American Arbitration Association. The Trust asserts claims concerning the calculation of royalties related to the production, shipment and sale of iron ore, including DR-grade pellets. More particularly, the claims involve the Trust’s allegations that Northshore and Cliffs have improperly calculated royalty amounts with respect to DR-grade pellets by planning isolated sale transactions of low silica iron ore into international markets at prices significantly below standard pellet pricing. The allegations include failure by Northshore and Cliffs to provide timely and contract-based access to information and individuals necessary to evaluate compliance with the royalty agreement. Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief. During 2020, the parties appointed a three-member arbitration panel and engaged in discovery. The arbitration hearing took place in May 2021. Post-hearing briefs and oral arguments were presented in July 2021.

18

Item 1A. Risk Factors

There have been no material changes in the Trust’s risk factors as described in “Risk Factors” set forth on pages 3 through 14 of Mesabi Trust’s Annual Report on Form 10-K for the year-ended January 31, 2021 (filed April 27, 2021).

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

Mine Safety and Health Administration Safety Data. Pursuant to §1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Cliffs started reporting information related to certain mine safety results at Northshore. This information is available in Part II, Item 4 of Cliffs’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed with the SEC on July 28, 2021.

19

Item 6. Exhibits.

(a)Exhibits

The following exhibits are being filed or furnished with this Quarterly Report on Form 10-Q:

Exhibit No.	Exhibit	Filing Method
31	Certification of Corporate Trustee of Mesabi Trust pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32	Certification of Corporate Trustee of Mesabi Trust pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
99.1	Report of Baker Tilly US, LLP, dated September 13, 2021 regarding its review of the unaudited interim financial statements of Mesabi Trust as of and for the three and six months ended July 31, 2021	Filed herewith
101	Inline XBRL Instance Document	Filed herewith
104	Cover Page Interactive Data File	Embedded within the Inline XBRL document and contained in Exhibit 101

20

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.

	MESABI TRUST
	(Registrant)
	By:	DEUTSCHE BANK TRUST COMPANY AMERICAS
		Corporate Trustee
	Principal Administrative Officer and duly authorized signatory:*
September 13, 2021		By:	/s/ Jeffrey Schoenfeld
		Name: Jeffrey Schoenfeld*
		Title: Vice President

* There are no principal executive officers or principal financial officers of the registrant.

21

EX-31

Exhibit 31

CERTIFICATION

I, Jeffrey Schoenfeld, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mesabi Trust, for which Deutsche Bank Trust Company Americas acts as Corporate Trustee;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, distributable income and changes in trust corpus of the registrant as of, and for, the periods presented in this report;

4. I am 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-15(f) and 15d-15(f)), or for causing such controls and procedures and internal control over financial reporting to be established and maintained, for the registrant and have:

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

b)           designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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;

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

d)           disclosed in this 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 fiscal 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; and

5.           I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors:

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 persons who have a significant role in the registrant’s internal control over financial reporting.

In giving the foregoing certifications in paragraphs 4 and 5, I have relied to the extent I consider reasonable on information provided to me by Northshore Mining Company/Cleveland-Cliffs Inc. and Eveleth Fee Office, Inc.

Date: September 13, 2021	By:	/s/ Jeffrey Schoenfeld
		Jeffrey Schoenfeld *
		Vice President
		Deutsche Bank Trust Company Americas
		Corporate Trustee

* There are no principal executive officers or principal financial officers of the registrant.

1

EX-32

Exhibit 32

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, the Corporate Trustee of Mesabi Trust, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report of Mesabi Trust on Form 10-Q for the quarter ended July 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Mesabi Trust.

/s/ Jeffrey Schoenfeld	September 13, 2021
Jeffrey Schoenfeld *
Vice President
Deutsche Bank Trust Company Americas
Corporate Trustee

* There are no principal executive officers or principal financial officers of the registrant.

1

EX-99.1

Exhibit 99.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Unitholders and Trustees

Mesabi Trust

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed balance sheet of Mesabi Trust (the “Trust”) as of July 31, 2021, the related condensed statements of operations for the three and six month periods ended July 31, 2021 and 2020, the condensed statements of cash flows for the six month periods ended July 31, 2021 and 2020 and the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the balance sheet of the Trust as of January 31, 2021, and the related statements of operations, unallocated reserve and trust corpus, and cash flows for the year then ended (not presented herein); and in our report dated April 27, 2021, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of January 31, 2021, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

Basis for Review Results

These condensed interim financial statements are the responsibility of the Trust's Trustees. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Baker Tilly US, LLP

Minneapolis, Minnesota

September 13, 2021

1

XML

Document and Entity Information - shares	6 Months Ended
	Jul. 31, 2021	Sep. 09, 2021
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jul. 31, 2021
Entity File Number	1-4488
Entity Registrant Name	MESABI TRUST
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	13-6022277
Entity Address, Address Line One	60 Wall Street
Entity Address, Address Line Two	24th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10005
City Area Code	904
Local Phone Number	271-2520
Title of 12(b) Security	Units of Beneficial Interest, no par value
Trading Symbol	MSB
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		13,120,010
Current Fiscal Year End Date	--01-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000065172
Amendment Flag	false

XML

Statements of Income - USD ($)	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
REVENUES
Royalty income	$ 27,744,036	$ 7,218,361	$ 37,146,203	$ 9,353,855
Interest	179	24	663	33,293
Total revenues	27,744,215	7,218,385	37,146,866	9,387,148
EXPENSES
Expenses	988,185	542,382	1,816,966	1,099,524
Net income	$ 26,756,030	$ 6,676,003	$ 35,329,900	$ 8,287,624
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING	13,120,010	13,120,010	13,120,010	13,120,010
Net income per unit (Note 2) (in dollars per unit)	$ 2.0393	$ 0.5088	$ 2.6928	$ 0.6317
Distribution declared per unit (Note 3) (in dollars per unit)	$ 0.0900	$ 0.0500	$ 0.9800	$ 0.6100

XML

Balance Sheets - USD ($)	Jul. 31, 2021	Jan. 31, 2021
ASSETS
Cash and cash equivalents	$ 28,310,067	$ 12,500,941
U.S. Government securities, at amortized cost (which approximates fair value)		9,906,669
Accrued income receivable	12,634,653	249,477
Net contract asset		177,251
Prepaid expenses	288,336	94,585
Current assets	41,233,056	22,928,923
Assignments of leased property
Amended assignment of Peters Lease	1	1
Assignment of Cloquet Leases	1	1
Certificate of beneficial interest for 13,120,010 units of Land Trust	1	1
Total fixed property	3	3
Total assets	41,233,059	22,928,926
LIABILITIES, UNALLOCATED RESERVE AND TRUST CORPUS
Distribution payable	1,180,801	6,035,205
Accrued expenses	205,988	416,672
Net contract liability	896,931
Total liabilities	2,283,720	6,451,877
Unallocated reserve	38,949,336	16,477,046
Trust corpus	3	3
Total liabilities, unallocated reserve and trust corpus	$ 41,233,059	$ 22,928,926

XML

Balance Sheets (Parenthetical) - shares	Jul. 31, 2021	Jan. 31, 2021
Balance Sheets
Certificate of beneficial interest of Land Trust, units	13,120,010	13,120,010

XML

Statements of Cash Flows - USD ($)	6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020
Operating activities
Royalties received	$ 25,835,075	$ 4,799,327
Interest received	797	37,338
Expenses paid	(2,221,401)	(1,214,976)
Net cash from operating activities	23,614,471	3,621,689
Investing activities
Maturities of U.S. Government securities	50,942,392	26,899,691
Purchases of U.S. Government securities	(41,035,723)	(23,708,865)
Net cash from investing activities	9,906,669	3,190,826
Financing activity
Distributions to unitholders	(17,712,014)	(16,531,213)
Net change in cash and cash equivalents	15,809,126	(9,718,698)
Cash and cash equivalents, beginning of period	12,500,941	10,177,655
Cash and cash equivalents, end of period	28,310,067	458,957
Reconciliation of net income to net cash from operating activities
Net income	35,329,900	8,287,624
Increase in accrued income receivable	(12,385,176)	(979,139)
Decrease (increase) in contract asset	177,251	(1,059,624)
Increase in prepaid expense	(193,751)	(161,533)
Increase (decrease) in accrued expenses	(210,684)	46,081
Increase (decrease) in contract liability	896,931	(2,511,720)
Net cash from operating activities	23,614,471	3,621,689
Non cash financing activity
Distributions declared and payable	$ 1,180,801	$ 656,001

XML

NATURE OF BUSINESS AND ORGANIZATION

6 Months Ended

Jul. 31, 2021

NATURE OF BUSINESS AND ORGANIZATION

NATURE OF BUSINESS AND ORGANIZATION

Note 1.  The financial statements and notes to financial statements included herein have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Trustees, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of (a) the results of operations for the three and six months ended July 31, 2021 and 2020, (b) the financial position at July 31, 2021 and (c) the cash flows for the six months ended July 31, 2021 and 2020, have been made. For further information, refer to the financial statements and footnotes included in Mesabi Trust’s Annual Report on Form 10-K for the year ended January 31, 2021.

The Trust’s royalties have been, and may in the future be, adversely affected by the coronavirus (COVID-19) pandemic. During the second quarter of 2020, the spread of COVID-19 led to the disruption of the business operations of Cleveland-Cliffs Inc. (“Cliffs”) and its wholly-owned subsidiary, Northshore Mining Company (“Northshore”), upon which we are dependent for our royalties. Although steel and iron ore production have been considered “essential” by the states in which Cliffs operates, certain of its facilities and construction activities were temporarily idled during the second quarter of 2020. Nearly all of these temporarily idled facilities were restarted as of June 30, 2020, with the exception of the Dearborn hot-end operations and Mansfield operations, which were restarted in July 2020, and the Northshore mine, which was restarted in August 2020. In its most recent quarterly report on Form 10-Q (filed July 28, 2021), Cliffs disclosed that the fundamentals for its business have rebounded strongly since the COVID-19 disruption that occurred during 2020. Mesabi Trust cannot predict whether Northshore’s operations will experience additional disruptions in the future, or whether Cliffs will experience supply chain disruptions or operational issues with its vendors, suppliers and contractors if faced with similar pandemic challenges in the future.

On December 9, 2019, Mesabi Trust initiated arbitration against Northshore, the lessee/operator of the leased lands, and its parent, Cliffs. The arbitration proceeding was commenced with the American Arbitration Association. The Trust asserts claims concerning the calculation of royalties related to the production, shipment and sale of iron ore, including DR-grade pellets. Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief. During 2020, the parties appointed a three-member arbitration panel and engaged in discovery. The arbitration hearing took place in May 2021. Post-hearing briefs and oral arguments were presented in July 2021.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jul. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 2.  Net income per unit is based on 13,120,010 units outstanding during the period.

The Trust accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is recognized as the performance obligations are satisfied.

Disaggregation of Revenues

The following tables represent a disaggregation of revenue for the three and six months ended July 31, 2021 and July 31, 2020.

	Three Months Ended July 31,
	2021		2020
Base overriding royalties	$	16,645,464	$	4,174,785
Bonus royalties		10,910,823		3,043,576
Fee royalties		187,749		—
Total royalty income	$	27,744,036	$	7,218,361

	Six Months Ended July 31,
	2021		2020
Base overriding royalties	$	22,284,617	$	5,356,796
Bonus royalties		14,483,164		3,823,288
Fee royalties		378,422		173,771
Total royalty income	$	37,146,203	$	9,353,855

Base overriding royalties

The performance obligation for the base overriding royalty consists of providing Northshore access to the Peters Lands, Cloquet Lands, and Mesabi Lands and the right to mine on these lands. The consideration to be received from this access relates to the volume of iron ore shipped by Northshore. Mesabi Trust receives royalties at the greater of (i) the aggregate quantity of iron ore products shipped that were mined from Mesabi Trust Lands, and (ii) a portion of the aggregate quantity of all iron ore products shipped from Silver Bay, Minnesota that were mined from any lands, such portion being 90% of the first four million tons shipped from Silver Bay during such year, 85% of the next two million tons shipped during such year, and 25% of all tonnage shipped during such year in excess of six million tons. The royalty percentage paid to the Trust increases as the aggregate tonnage of iron ore products shipped, attributable to the Trust, in any calendar year increases past each of the first four one-million ton volume thresholds. The base overriding royalties contain variable consideration, as the transaction price is based on a percentage that varies based on the total cumulative tons of iron ore shipped for the calendar year. The Trust estimates the variable consideration it expects to be entitled to receive over the contractual period associated with the royalty agreement. Under the royalty agreement, measuring the total cumulative volumes of iron ore shipped, and the applicable royalty percentages, are reset at the beginning of each calendar year. The Trust evaluates the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, the Trust includes the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. For the base overriding royalties, the Trust estimates the base overriding royalty percentage using the expected value method, which calculates the estimate based off the historical, current, and forecasted shipments. The Trust recognizes base overriding royalties on a quarterly basis based on the actual shipments for the fiscal quarter at the estimated royalty percentage as described above and based on the estimated prices for iron ore products sold under Cliffs’ Customer Contracts.

Bonus royalties

The performance obligation for the bonus royalties consists of providing Northshore access to the Peters Lands, Cloquet Lands, and Mesabi Lands and the right to mine on these lands and the consideration to be received from this access relates to the volume of iron ore shipped by Northshore. The Trust recognizes bonus royalties on a quarterly basis based on the actual shipments of the fiscal quarter at the actual royalty percentage for those shipments and based on the anticipated prices for iron ore products sold under Cliffs’ Customer Contracts.

Fee royalties

The performance obligation for the fee royalties consists of the volume of crude ore mined on a quarterly basis. The Trust recognizes fee royalties on a quarterly basis based on the actual crude ore mined during the fiscal quarter.

Accrued income receivable

The accrued income receivable is included in net income per unit. The Trust recorded $12,634,653 of accrued income receivable as reflected on the Condensed Balance Sheet as of July 31, 2021 (unaudited). As of January 31, 2021, the Trust recorded accrued income receivable of $249,477.

Contract asset and contract liability

The contract asset and contract liability are presented net in the accompanying condensed balance sheets as both the contract asset and contract liability are derived from one customer contract. A net contract liability in the amount of $896,931 is reflected on the Condensed Balance Sheet as of July 31, 2021 (unaudited). The net contract liability is made up of a contract asset in the amount of $5,069,251 and a contract liability in the amount of $5,966,182. As of January 31, 2021 the Trust recorded a net contract asset of $177,251, made up of a contract asset in the amount of $239,132 and a contract liability in the amount of $61,881. The contract asset is based on the revenue recognized on the base overriding royalties, at the estimated prices for iron ore products sold under Cliffs’ Customer Contracts that will be collected in subsequent quarters as the uncertainty associated with the variable consideration is resolved. The contract asset is not available for distribution to the Unitholders until the applicable royalties are actually received by the Trust. The Trust includes estimated future royalty rates on current contracted volumes within contract asset. The contract liability represents iron ore that has not been shipped by Northshore, but for which the Trust has received a royalty payment during the quarter ended July 31, 2021 based on an initial estimated price, or in certain instances, quarterly payment of minimum advance royalties. Revenue will be recognized in accordance with the Trust’s revenue recognition policy at the estimated prices for iron ore products sold under Cliffs’ Customer Contracts as shipments of these products are made.

XML

DIVIDEND AND DISTRIBUTION

6 Months Ended

Jul. 31, 2021

DIVIDEND AND DISTRIBUTION

DIVIDEND AND DISTRIBUTION

Note 3.  The Trustees determine whether to declare a distribution each year in April, July, October and January. The Trust’s financial statements are prepared on an accrual basis and present the Trust’s results of operations based on each of the Trust’s fiscal quarters, which end one month after the close of each calendar quarter. Because (i) distributions, if any, are declared by the

Trustees based on, among other considerations, the amount of royalties actually paid to the Trust through the end of each calendar quarter prior to April, July, October and January of each year, the Trustees’ evaluation of known and projected Trust expenses in the current and future quarters, the then-current level of Unallocated Reserve and general economic conditions, and (ii) the Trust’s Net Income is calculated as of the end of each fiscal quarter, the distributions declared by the Trust are not equivalent to the Trust’s Net Income during the periods reported in this quarterly report on Form 10-Q.

XML

ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

6 Months Ended

Jul. 31, 2021

UNALLOCATED RESERVE AND DISTRIBUTIONS

ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

Note 4.  On July 12, 2021, the Trustees declared a distribution of $0.09 per Unit of Beneficial Interest payable on August 20, 2021 to Mesabi Trust Unitholders of record at the close of business on July 30, 2021.

On July 30, 2021, the Trustees received the quarterly royalty report of iron ore product shipments from Silver Bay, Minnesota during the calendar quarter ended June 30, 2021 from Cliffs, the parent company of Northshore.

Each quarter, as authorized by the Agreement of Trust dated July 18, 1961 (the “Agreement of Trust”), the Trustees evaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether fixed or contingent) in determining the prudent level of unallocated reserve in light of the unpredictable nature of the iron ore industry and current economic conditions.

Pursuant to the Agreement of Trust, the Trustees make decisions about cash distributions to Unitholders based on the royalty payments it receives from Northshore when received, rather than as royalty income is recorded in accordance with the Trust’s revenue recognition policy. Refer to Note 3 for further information.

As of July 31, 2021 and January 31, 2021, the unallocated cash and U.S. Government securities portion of the Trust’s Unallocated Reserve was comprised of the following components:

	July 31, 2021		January 31, 2021
Cash and U.S. Government securities	$	28,310,067	$	22,407,610
Distribution payable		(1,180,801)		(6,035,205)
Unallocated cash and U.S. Government securities	$	27,129,266	$	16,372,405

A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the three and six months ended July 31, 2021 and 2020 is as follows:

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2021	$	16,477,046	$	3	$	16,477,049
Net income		35,329,900		—		35,329,900
Distributions declared - $0.9800 per unit		(12,857,610)		—		(12,857,610)
Balances at July 31, 2021	$	38,949,336	$	3	$	38,949,339

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2021	$	13,374,107	$	3	$	13,374,110
Net income		26,756,030		—		26,756,030
Distributions declared - $0.0900 per unit		(1,180,801)		—		(1,180,801)
Balances at July 31, 2021	$	38,949,336	$	3	$	38,949,339

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2020	$	11,831,014	$	3	$	11,831,017
Net income		8,287,624		—		8,287,624
Distributions declared - $0.6100 per unit		(8,003,207)		—		(8,003,207)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2020	$	6,095,429	$	3	$	6,095,432
Net income		6,676,003		—		6,676,003
Distributions declared - $0.0500 per unit		(656,001)		—		(656,001)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

placehold

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jul. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

The Trust accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is recognized as the performance obligations are satisfied.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jul. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of disaggregation of revenue

	Three Months Ended July 31,
	2021		2020
Base overriding royalties	$	16,645,464	$	4,174,785
Bonus royalties		10,910,823		3,043,576
Fee royalties		187,749		—
Total royalty income	$	27,744,036	$	7,218,361

	Six Months Ended July 31,
	2021		2020
Base overriding royalties	$	22,284,617	$	5,356,796
Bonus royalties		14,483,164		3,823,288
Fee royalties		378,422		173,771
Total royalty income	$	37,146,203	$	9,353,855

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UNALLOCATED RESERVE AND DISTRIBUTIONS (Tables)

6 Months Ended

Jul. 31, 2021

UNALLOCATED RESERVE AND DISTRIBUTIONS

Schedule of unallocated cash and U.S. Government securities portion of the Trust's Unallocated Reserve

	July 31, 2021		January 31, 2021
Cash and U.S. Government securities	$	28,310,067	$	22,407,610
Distribution payable		(1,180,801)		(6,035,205)
Unallocated cash and U.S. Government securities	$	27,129,266	$	16,372,405

Schedule of reconciliation of Trust's Unallocated Reserve

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2021	$	16,477,046	$	3	$	16,477,049
Net income		35,329,900		—		35,329,900
Distributions declared - $0.9800 per unit		(12,857,610)		—		(12,857,610)
Balances at July 31, 2021	$	38,949,336	$	3	$	38,949,339

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2021	$	13,374,107	$	3	$	13,374,110
Net income		26,756,030		—		26,756,030
Distributions declared - $0.0900 per unit		(1,180,801)		—		(1,180,801)
Balances at July 31, 2021	$	38,949,336	$	3	$	38,949,339

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2020	$	11,831,014	$	3	$	11,831,017
Net income		8,287,624		—		8,287,624
Distributions declared - $0.6100 per unit		(8,003,207)		—		(8,003,207)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2020	$	6,095,429	$	3	$	6,095,432
Net income		6,676,003		—		6,676,003
Distributions declared - $0.0500 per unit		(656,001)		—		(656,001)
Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434

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NATURE OF BUSINESS AND ORGANIZATION (Details)	6 Months Ended
	Jul. 31, 2021 item
NATURE OF BUSINESS AND ORGANIZATION
Number of members on panel for arbitration	3

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares	3 Months Ended		6 Months Ended
	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Number of units outstanding	13,120,010	13,120,010	13,120,010	13,120,010

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue (Details)		3 Months Ended		6 Months Ended
	Jul. 12, 2021 $ / shares	Jul. 31, 2021 USD ($) $ / shares	Jul. 31, 2020 USD ($) $ / shares	Jul. 31, 2021 USD ($) contract item MT $ / shares	Jul. 31, 2020 USD ($) $ / shares	Jan. 31, 2021 USD ($)
Revenue from Contract with Customer [Abstract]
Royalty Revenue		$ 27,744,036	$ 7,218,361	$ 37,146,203	$ 9,353,855
Base overriding royalties, first tier portion percentage				90.00%
Base overriding royalties, first tier shipment ceiling (in million tons) | MT				4
Base overriding royalties, second tier portion percentage				85.00%
Base overriding royalties, second tier shipment ceiling (in million tons) | MT				2
Base overriding royalties, third tier portion percentage				25.00%
Base overriding royalties, third tier shipment threshold (in million tons) | MT				6
Base overriding royalties, number of volume thresholds for transaction price | item				4
Base overriding royalties, volume threshold for transaction price | MT				1
Accrued income receivable		12,634,653		$ 12,634,653		$ 249,477
Number of customer contracts | contract				1
Net contract asset						177,251
Net contract liability		896,931		$ 896,931
Contract asset		5,069,251		5,069,251		239,132
Contract liability		$ 5,966,182		$ 5,966,182		$ 61,881
Distributions declared per unit (in dollars per unit) | $ / shares	$ 0.09	$ 0.0900	$ 0.0500	$ 0.9800	$ 0.6100
Base Overriding Royalties
Revenue from Contract with Customer [Abstract]
Royalty Revenue		$ 16,645,464	$ 4,174,785	$ 22,284,617	$ 5,356,796
Bonus Royalties
Revenue from Contract with Customer [Abstract]
Royalty Revenue		10,910,823	$ 3,043,576	14,483,164	3,823,288
Fee Royalties
Revenue from Contract with Customer [Abstract]
Royalty Revenue		$ 187,749		$ 378,422	$ 173,771

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DIVIDEND AND DISTRIBUTION (Details)	6 Months Ended
	Jul. 31, 2021
DIVIDEND AND DISTRIBUTION
Period after the close of each calendar quarter when the fiscal quarter ends	1 month

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ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS (Details) - USD ($)		3 Months Ended		6 Months Ended
	Jul. 12, 2021	Jul. 31, 2021	Jul. 31, 2020	Jul. 31, 2021	Jul. 31, 2020	Jan. 31, 2021
Unallocated Cash and Securities portion of Unallocated Reserve
Cash and U.S. Government securities		$ 28,310,067		$ 28,310,067		$ 22,407,610
Distribution payable		(1,180,801)		(1,180,801)		(6,035,205)
Unallocated cash and U.S. Government securities		27,129,266		27,129,266		$ 16,372,405
Reconciliation of Trust's Unallocated Reserve
Beginning Balance		13,374,110	$ 6,095,432	16,477,049	$ 11,831,017
Net income		26,756,030	6,676,003	35,329,900	8,287,624
Distributions declared		(1,180,801)	(656,001)	(12,857,610)	(8,003,207)
Ending Balance		$ 38,949,339	$ 12,115,434	$ 38,949,339	$ 12,115,434
Distributions declared per unit (in dollars per unit)	$ 0.09	$ 0.0900	$ 0.0500	$ 0.9800	$ 0.6100
Distribution declared per unit		$ 0.0900	$ 0.0500
Unallocated Reserve member
Reconciliation of Trust's Unallocated Reserve
Beginning Balance		$ 13,374,107	$ 6,095,429	$ 16,477,046	$ 11,831,014
Net income		26,756,030	6,676,003	35,329,900	8,287,624
Distributions declared		(1,180,801)	(656,001)	(12,857,610)	(8,003,207)
Ending Balance		38,949,336	12,115,431	38,949,336	12,115,431
Trust Corpus
Reconciliation of Trust's Unallocated Reserve
Beginning Balance		3	3	3	3
Ending Balance		$ 3	$ 3	$ 3	$ 3