Item 2.02Results of Operations and Financial Condition.
Announcement of Receipt of Quarterly Royalty Report from Cleveland-Cliffs Inc.
On April 28, 2023, Mesabi Trust received the quarterly royalty report of iron
ore shipments out of Silver Bay, Minnesota during the quarter ended March 31,
2023 (the "Quarterly Royalty Report") from Cleveland-Cliffs Inc. ("Cliffs"), the
parent company of Northshore Mining Company ("Northshore"). As further explained
under Item 7.01 below, the Quarterly Royalty Report indicated that the Mesabi
Trust received no royalty payments on April 28, 2023.
Item 4.01. Changes in Registrant's Certifying Accountant.
(a) Notice Not to Stand for Reappointment as Independent Registered Public
Accounting Firm
On May 1, 2023, Baker Tilly US, LLP ("Baker Tilly") notified the Trustees of
Mesabi Trust that it will not stand for re-appointment as the independent
registered public accounting firm of Mesabi Trust.
The audit reports of Baker Tilly on Mesabi Trust's financial statements as of
and for each of the fiscal years ended January 31, 2023 and January 31, 2022,
and the interim financial statements, did not contain an adverse opinion or a
disclaimer of opinion, and such reports were not qualified or modified as to
uncertainty, audit scope or accounting principles.
From February 1, 2021 through the date of the notice not to stand for
reappointment as independent registered public accounting firm to Mesabi Trust,
there were no disagreements with Baker Tilly on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures, which disagreements, if not resolved to the satisfaction of Baker
Tilly, would have caused Baker Tilly to make reference to the subject matter of
the disagreement in connection with its reports. From February 1, 2023 through
the date of the notice not to stand for re-appointment, there were no reportable
events as defined in Item 304(a)(1)(v) of Regulation S-K.
Mesabi Trust has provided Baker Tilly a copy of the disclosures in this Form 8-K
and an opportunity to furnish Mesabi Trust with a letter addressed to the
Securities and Exchange Commission ("SEC") containing any new information,
clarification of the expression of Mesabi Trust's views, or the respects in
which it does not agree with the statements made by Mesabi Trust herein. Baker
Tilly has advised Mesabi Trust that it has reviewed this filing and agrees with
the responses. Baker Tilly has provided a letter addressed to the SEC in
response to Item 304(a)(3) of Regulation S-K annexed hereto as Exhibit 16.1 to
this Current Report on Form 8-K.
Item 7.01Regulation FD.
Quarterly Royalty Report
On April 28, 2023, the Trustees of Mesabi Trust received the Quarterly Royalty
Report from Cliffs, the parent company of Northshore.
As reported to Mesabi Trust by Cliffs in the Quarterly Royalty Report, based on
production and shipments of iron ore products by Northshore during the three
months ended March 31, 2023, Mesabi Trust was credited with a base royalty of
$0. Also for the three months ended March 31, 2023, Mesabi Trust was
credited with a bonus royalty in the amount of $0. After applying reductions
totaling $2,298,119 as a result of negative adjustments related to changes in
estimates from prior quarters, Cliffs paid Mesabi Trust no royalty ($0) during
the quarter ended March 31, 2023. Cliffs also invoiced Mesabi Trust $2,022,996
related to these negative adjustments, reflecting negative adjustments net of
the Advance Royalties due for the quarter ended March 31, 2023. In addition, a
royalty payment of $0 was paid to the Mesabi Land Trust. Accordingly, the total
royalty payments received by Mesabi Trust on April 28, 2023 from Cliffs was $0.
Paragraph 9 of the royalty agreement requires Northshore to pay advance
royalties in equal quarterly installments regardless of any reduction or
suspension of operations by Northshore or any other reason. Cliffs did not pay
Mesabi Trust the Advance Royalties for the first quarter 2023. Cliffs provided
no justification under the Royalty Agreement for not paying Advance Royalties
due for the first quarter of 2023.
The royalties paid to Mesabi Trust are based on the volume of iron ore pellets
produced or shipped during the quarter and the year to date, the pricing of iron
ore product sales, and the percentage of iron ore pellet shipments from Mesabi
Trust lands rather than from non-Mesabi Trust lands. In the first calendar
quarter of 2023, Cliffs credited Mesabi Trust with zero (0) tons shipped or
produced during the quarter, as compared to 1,069,456 tons shipped or produced
during the first calendar quarter of 2022.
The volume of iron ore pellets (and other iron ore products) produced or shipped
by Northshore varies from quarter to quarter and year to year based on a number
of factors, including, among others, Cliffs' decisions to idle Northshore
operations (which was the situation between spring 2022 through March 2023), the
requested delivery schedules of customers (including affiliates), general
economic conditions in the iron ore industry, production schedules and weather
conditions on the Great Lakes. These multiple factors can result in significant
variations in royalties received by Mesabi Trust (and in turn, the resulting
funds available for distribution to Unitholders by Mesabi Trust) from quarter to
quarter and from year to year. These variations, which can be positive or
negative, cannot be predicted by the Trustees of Mesabi Trust. Based on the
above factors, and as indicated by Mesabi Trust's historical distribution
payments, the royalties received by Mesabi Trust, and the distributions paid to
Unitholders, if any, in any particular quarter are not necessarily indicative of
royalties that will be received, or distributions that will be paid, if any, in
any subsequent quarter or full year.
Cliffs' quarterly royalty reports normally present royalty calculations and
volume shipment or production amounts that are based on estimated iron ore
prices that are subject to change. It is possible that future negative price
adjustments could offset, or even eliminate, royalties or royalty income that
would otherwise be payable to Mesabi Trust in any particular quarter, or at year
end, thereby potentially reducing cash available for distribution to Mesabi
Trust's Unitholders in future quarters.
Cliffs' Announcement to Partially Restart Northshore Operations
As previously disclosed, on April 25, 2023, Cliffs announced that "higher levels
of steel production have led to the partial restart of some operations at …
[its] iron ore mining and pelletizing swing facility at Northshore earlier this
month. In addition, Cliffs announced that it …" will continue to treat that
facility as our swing operation. And at this time, we still do not expect to
operate Northshore in full any time this year." The Trustees have not been
provided with any additional information regarding the anticipated
volume of production, stockpiling or shipping of iron ore products at the
Northshore operations in Babbitt and Silver Bay, Minnesota.
Forward-looking Statements
This report contains certain forward-looking statements based on Cliffs'
publicly announced plans with respect to Northshore in the future, which
statements are intended to be made under the safe harbor protections of the
Private Securities Litigation Reform Act of 1995, as amended. The length of the
idling of Northshore operations could differ materially from current
expectations due to inherent risks and uncertainties such as general adverse
business and industry economic trends, uncertainties arising from war, terrorist
events, recession, potential future impacts of the coronavirus (COVID-19)
pandemic, and other global events, higher or lower customer demand for steel and
iron ore, decisions by mine operators regarding curtailments or idling of
production lines or entire plants, announcements and implementation of trade
tariffs, environmental compliance uncertainties, difficulties in obtaining and
renewing necessary operating permits, higher imports of steel and iron ore
substitutes, processing difficulties, consolidation and restructuring in the
domestic steel market, and other factors. Cliffs' implementation of, or changes
to, these plans are beyond Mesabi Trust's control. As such, such statements are
subject to risks and uncertainties, which could cause actual results to differ
materially. Additional information concerning these and other risks and
uncertainties is contained in Mesabi Trust's filings with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for the fiscal
year ended January 31, 2023 (filed on April 24, 2023). Mesabi Trust undertakes
no obligation to publicly update or revise any of the forward-looking statements
made herein to reflect events or circumstances after the date hereof.
Item 9.01Financial Statements and Exhibits.
(d)Exhibits.
Exhibit No. Description
16.1* Letter from Baker Tilly US, LLP, dated May 3, 2023
104 Cover Page Interactive Data File (formatted in Inline XBRL and
included as Exhibit 101)
* Filed herewith
In accordance with general instruction B.2 to Form 8-K, the information in this
Form 8-K shall not be deemed to be "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section.
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