ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

9 Months Ended

Oct. 31, 2023

ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

ROYALTY AGREEMENT, UNALLOCATED RESERVE AND DISTRIBUTIONS

Note 4.  On October 13, 2023, the Trustees declared a distribution of $0.35 per Unit of Beneficial Interest payable on November 20, 2023 to Mesabi Trust Unitholders of record at the close of business on October 30, 2023. The declared distribution of $4,592,003 is recorded as a distribution payable on the Consolidated Balance Sheet for the quarter ended October 31, 2023 (unaudited) as compared to no distribution per Unit of Beneficial Interest for the quarter ended October 31, 2022.

On October 30, 2023, the Trustees received the quarterly royalty report of iron ore production and shipment during the calendar quarter ended September 30, 2023 from Cliffs.

Each quarter, as authorized by the Agreement of Trust dated July 18, 1961, as amended (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 Cliffs 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 October 31, 2023 and January 31, 2023, the unallocated cash and cash equivalents portion of the Trust’s Unallocated Reserve was comprised of the following components. Cash equivalents consists of U.S. government securities with original maturities of 3 months or less.

	October 31, 2023		January 31, 2023
Cash and cash equivalents	$	22,912,715	$	13,966,500
Distribution payable		(4,592,003)		—
Unallocated cash and cash equivalents	$	18,320,712	$	13,966,500

A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the three and nine months ended October 31, 2023 and 2022 is as follows:

		Unallocated		Trust
		Reserve		Corpus		Total
Balances as of January 31, 2023	$	11,438,214	$	3	$	11,438,217
Net income		14,292,545		—		14,292,545
Distributions declared - $0.3500 per unit		(4,592,003)		—		(4,592,003)
Balances as of October 31, 2023	$	21,138,756	$	3	$	21,138,759

		Unallocated		Trust
		Reserve		Corpus		Total
Balances as of July 31, 2023	$	21,644,693	$	3	$	21,644,696
Net income		4,086,066		—		4,086,066
Distributions declared - $0.3500 per unit		(4,592,003)		—		(4,592,003)
Balances as of October 31, 2023	$	21,138,756	$	3	$	21,138,759

		Unallocated		Trust
		Reserve		Corpus		Total
Balances as of January 31, 2022	$	30,794,749	$	3	$	30,794,752
Net income		8,324,122		—		8,324,122
Distributions declared - $1.8800 per unit		(24,665,620)		—		(24,665,620)
Balances as of October 31, 2022	$	14,453,251	$	3	$	14,453,254

		Unallocated		Trust
		Reserve		Corpus		Total
Balances as of July 31, 2022	$	14,866,943	$	3	$	14,866,946
Net loss		(413,692)		—		(413,692)
Distributions declared - $0.00 per unit		—		—		—
Balances as of October 31, 2022	$	14,453,251	$	3	$	14,453,254