TABLE OF CONTENTS


	Page
	~~Page~~

PART I – FINANCIAL INFORMATION	3
Item 1. Financial Statements. (Note 1)	3
Condensed Statements of Operations Three and ~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019	3
Condensed Balance Sheets ~~October~~July 31, ~~2019~~2020 and January 31, ~~2019~~2020	4
Condensed Statements of Cash Flows ~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019	5
Notes to Condensed Financial Statements	6
Item 2. Trustees’ Discussion and Analysis of Financial Condition and Results of Operations.	9 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	17 18
Item 4. Controls and Procedures.	17 18

PART II - OTHER INFORMATION	18
Item 1. Legal Proceedings	18
Item 1A. Risk Factors	18 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18 20
Item 3. Defaults upon Senior Securities	18 20
Item 4. Mine Safety Disclosures	18 20
Item 5. Other Information	18
~~Item 6. Exhibits.~~	19
	20
~~SIGNATURES~~Item 6. Exhibits.	20 21

SIGNATURES	22

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.~~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 Pellet Agreements (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.~~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 1214 of Mesabi Trust’s Annual Report ~~on Form 10-K~~ for the year ended January 31, ~~2019,~~2020, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q. ~~The~~These risks and uncertainties described in this report, including the risk factor involving the Trust’s pursuit of arbitration claims to resolve disputes with Cleveland-Cliffs Inc. and Northshore Mining Company as described in Part I, Item 1A, “Risk Factors” of this report, 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 ~~SEC.~~Securities and Exchange Commission.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements. (Note 1)

Mesabi Trust

Condensed Statements of Operations

Three and ~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

Three Months Ended

Nine Months Ended

October 31,

October 31,


2019

2018

2019

2018

(unaudited)

(unaudited)

(unaudited)

(unaudited)

A.  Condensed Statements of Operations

Revenues

Royalty income

$
6,488,299

$
13,891,273

$
26,151,926

$
39,663,012

Interest

72,542

82,570

220,011

146,830

Total revenues

6,560,841

13,973,843

26,371,937

39,809,842

Expenses

410,645

388,781

1,399,766

1,037,477

Net income

$
6,150,196

$
13,585,062

$
24,972,171

$
38,772,365

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)

$
0.4688

$
1.0354

$
1.9034

$
2.9552

Distributions declared per unit (Note 3)

$
0.8700

$
0.9400

$
1.9700

$
1.6100


	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2020		2019		2020		2019
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
A. Condensed Statements of Operations

Revenues
Royalty income	$	7,218,361	$	14,301,838	$	9,353,855	$	19,663,627
Interest		24		42,386		33,293		147,469
Total revenues		7,218,385		14,344,224		9,387,148		19,811,096

Expenses		542,382		432,537		1,099,524		989,121

Net income	$	6,676,003	$	13,911,687	$	8,287,624	$	18,821,975

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)	$	0.5088	$	1.0603	$	0.6317	$	1.4346

Distributions declared per unit (Note 3)	$	0.0500	$	0.2100	$	0.6100	$	1.1000

See Notes to Condensed Financial Statements.

Mesabi Trust

Condensed Balance Sheets

~~October~~July 31, ~~2019~~2020 and January 31, ~~2019~~2020

October 31, 2019

January 31, 2019

(unaudited)

B.  Condensed Balance Sheets

Assets

Cash and cash equivalents

$
375,053

$
881,810

U.S. Government securities, at amortized cost (which approximates fair value)

25,561,507

32,122,312

Accrued income receivable

2,408,279

2,339,060

Contract asset

—

56,357

Prepaid expenses

116,288

54,472

Current assets

28,461,127

35,454,011

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

$
28,461,130

$
35,454,014

Liabilities, Unallocated Reserve And Trust Corpus

Liabilities

Distribution payable

$
11,414,408

$
18,236,814

Accrued expenses

177,149

411,508

Contract liability

938,129

—

Total liabilities

12,529,686

18,648,322

Unallocated reserve

15,931,441

16,805,689

Trust corpus

3

3

Total liabilities, unallocated reserve and trust corpus

$
28,461,130

$
35,454,014


	July 31, 2020		January 31, 2020
	(unaudited)
B. Condensed Balance Sheets

Assets

Cash and cash equivalents	$	458,957	$	10,177,655

U.S. Government securities, at amortized cost (which approximates fair value)		10,141,648		13,332,474

Accrued income receivable		1,048,727		69,588
Contract asset		1,059,624		—
Prepaid expenses		229,187		67,654
Current assets		12,938,143		23,647,371

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	$	12,938,146	$	23,647,374

Liabilities, Unallocated Reserve And Trust Corpus

Liabilities
Distribution payable	$	656,001	$	9,184,007
Accrued expenses		166,711		120,630
Contract liability		—		2,511,720
Total liabilities		822,712		11,816,357

Unallocated reserve		12,115,431		11,831,014

Trust corpus		3		3

Total liabilities, unallocated reserve and trust corpus	$	12,938,146	$	23,647,374

See Notes to Condensed Financial Statements.

Mesabi Trust

Condensed Statements of Cash Flows

~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

Nine Months Ended


October 31,


2019

2018

(unaudited)

(unaudited)

C.  Condensed Statements of Cash Flows

Operating activities

Royalties received

$
27,121,064

$
34,316,372

Interest received

176,140

74,962

Expenses paid

(1,695,941)

(1,054,741)

Net cash from operating activities

25,601,263

33,336,593

Investing activities

Maturities of U.S. Government securities

37,034,247

28,893,900

Sales of U.S. Government securities

—

99,740

Purchases of U.S. Government securities

(30,473,442)

(37,767,613)

Net cash from (used for) investing activities

6,560,805

(8,773,973)

Financing activity

Distributions to unitholders

(32,668,825)

(24,272,019)

Net change in cash and cash equivalents

(506,757)

290,601

Cash and cash equivalents, beginning of period

881,810

314,835

Cash and cash equivalents, end of period

$
375,053

$
605,436

Reconciliation of net income to net cash from operating activities

Net income

$
24,972,171

$
38,772,365

Increase in accrued income receivable

(69,219)

(4,154,875)

Decrease (increase) in contract asset

56,357

(1,263,633)

Increase in prepaid expense

(61,816)

(40,703)

Increase (decrease) in accrued expenses

(234,359)

23,439

Increase in contract liability

938,129

—

Net cash from operating activities

$
25,601,263

$
33,336,593

Non cash financing activity

Distributions declared and payable

$
11,414,408

$
12,332,809


	Six Months Ended
	July 31,
	2020		2019
		(unaudited)		(unaudited)
C. Condensed Statements of Cash Flows

Operating activities
Royalties received	$	4,799,327	$	15,025,100
Interest received		37,338		137,704
Expenses paid		(1,214,976)		(1,315,916)

Net cash from operating activities		3,621,689		13,846,888

Investing activities
Maturities of U.S. Government securities		26,899,691		32,122,312
Purchases of U.S. Government securities		(23,708,865)		(16,484,759)

Net cash from investing activities		3,190,826		15,637,553

Financing activity
Distributions to unitholders		(16,531,213)		(29,913,623)

Net change in cash and cash equivalents		(9,718,698)		(429,182)

Cash and cash equivalents, beginning of period		10,177,655		881,810

Cash and cash equivalents, end of period	$	458,957	$	452,628

Reconciliation of net income to net cash from (used for) operating activities

Net income	$	8,287,624	$	18,821,975
Increase in accrued income receivable		(979,139)		(1,481,571)
Increase in contract asset		(1,059,624)		(3,166,721)
Increase in prepaid expense		(161,533)		(116,226)
Increase (decrease) in accrued expenses		46,081		(210,569)
Decrease in contract liability		(2,511,720)		—

Net cash from operating activities	$	3,621,689	$	13,846,888

Non cash financing activity

Distributions declared and payable	$	656,001	$	2,755,202

See Notes to Condensed Financial Statements.

Mesabi Trust

Notes to Condensed Financial Statements

~~October~~July 31, ~~2019~~2020 (Unaudited)

Note 1. The financial statements and notes to financial statements included herein have been prepared without audit (except for the balance sheet at January 31, ~~2019)~~2020) 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 ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 and ~~2018,~~2019, (b) the financial position at ~~October~~July 31, ~~2019~~2020 and (c) the cash flows for the ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 and ~~2018,~~2019, 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, ~~2019.~~2020.

The Trust’s royalties have been and may continue to 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, Cliffs also indicated that it cannot predict whether its operations will experience additional disruptions in the future, and that it may also continue to experience supply chain disruptions or operational issues with its vendors, suppliers and contractors who are facing similar COVID-19 pandemic challenges. Further, Cliffs indicated that because the impact of the COVID-19 pandemic continues to evolve, it could not predict the extent to which its business, results of operations, financial condition or liquidity will ultimately be impacted.

On December 9, 2019, the Trustees of Mesabi Trust announced that the 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. The arbitration is in its early stages.

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 ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 and ~~October~~July 31, ~~2018.~~2019.


	Three Months Ended July 31,
	2020		2019
Base overriding royalties	$	4,174,785	$	8,326,504
Bonus royalties		3,043,576		5,818,223
Fee royalties		—		157,111
Total royalty income	$	7,218,361	$	14,301,838


	Six Months Ended July 31,
	2020		2019
Base overriding royalties	$	5,356,796	$	11,394,522
Bonus royalties		3,823,288		7,925,180
Fee royalties		173,771		343,925
Total royalty income	$	9,353,855	$	19,663,627

Three Months Ended October 31,

2019

2018
Base overriding royalties

$
3,674,830

$
8,349,255
Bonus royalties

2,640,101

5,422,575
Fee royalties

173,368

119,443
Total royalty income

$
6,488,299

$
13,891,273

Nine Months Ended October 31,

2019

2018
Base overriding royalties

$
15,069,353

$
23,652,703
Bonus royalties

10,565,280

15,572,478
Fee royalties

517,293

437,831
Total royalty income

$
26,151,926

$
39,663,012

Base overriding royalties

The performance obligation for the base overriding royalty consists of providing Northshore ~~Mining Company (“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~~4 million tons shipped from Silver Bay during such year, 85% of the next ~~two~~2 million tons shipped during such year, and 25% of all tonnage shipped during such year in excess of ~~six~~6 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~~4 1-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 the Cliffs Pellet Agreements.

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 the Cliffs Pellet Agreements.

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 ~~$2,408,279~~$1,048,727 of accrued income receivable as reflected on the Condensed Balance Sheet as of ~~October~~July 31, ~~2019~~2020 (unaudited). As of January 31, ~~2019,~~2020, the Trust recorded accrued income receivable of $2,339,060. Accrued income receivable is accounted for and reported for the Trust’s fiscal quarter based on shipments during the month of October at estimated prices for iron ore products sold under the Cliffs Pellet Agreements, even though such accrued income receivable is not available for distribution to the holders of Certificates of Beneficial Interest in Mesabi Trust (“Unitholders”) until the applicable royalties are actually received by the Trust. Accrued income receivable also includes accruals for anticipated pricing adjustments, which can be positive or negative.$69,588.

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~~1 customer contract. A net contract ~~liability~~asset in the amount of ~~$938,129~~$1,059,624 is reflected on the Condensed Balance Sheet as of ~~October~~July 31, ~~2019~~2020 (unaudited). The net contract ~~liability~~asset is made up of a contract asset in the amount of ~~$1,294,821~~$1,964,472 and a contract liability in the amount of ~~$2,232,950.~~$904,848. As of January 31, ~~2019,~~2020 the Trust recorded a net contract ~~asset~~liability of ~~$56,357,~~$2,511,720, made up ~~entirely~~ of a contract ~~asset.~~asset in the amount of $192,059 and a contract liability in the amount of $2,703,779. The contract asset is based on the revenue recognized on the base overriding royalties, at the estimated prices for iron ore products sold under the Cliffs Pellet Agreements, 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 ~~October~~July 31, ~~2019~~2020 based on an initial estimated ~~price.~~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 the Cliffs Pellet Agreements 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 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 ~~October~~July 13, 2020, the Trustees declared a distribution of $0.05 per Unit of Beneficial Interest payable on August 20, 2020 to Mesabi Trust Unitholders of record at the close of business on July 30, ~~2019,~~2020.

On July 30, 2020, the Trustees received the quarterly royalty report of iron ore product shipments from Silver Bay, Minnesota during the calendar quarter ended ~~September~~June 30, ~~2019~~2020 from ~~Cleveland-Cliffs Inc., formerly known as~~ Cliffs, ~~Natural Resources Inc. (“Cliffs”),~~ the parent company of Northshore.

On October 11, 2019, the Trustees declared a distribution of $0.87 per Unit of Beneficial Interest payable on November 20, 2019 to Mesabi Trust Unitholders of record at the close of business on October 30, 2019.

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 ~~October~~July 31, ~~2019~~2020 and January 31, ~~2019,~~2020, the unallocated cash and U.S. Government securities portion of the Trust’s Unallocated Reserve was comprised of the following components:


	October 31, 2019 (unaudited)		January 31, 2019

					July 31, 2020 (unaudited)		January 31, 2020
Cash and U.S. Government securities	$	25,936,560	$	33,004,122	$	10,600,605	$	23,510,129
Distribution payable		(11,414,408)		(18,236,814)		(656,001)		(9,184,007)


Unallocated cash and U.S. Government securities	$	14,522,152	$	14,767,308	$	9,944,604	$	14,326,122

A reconciliation of the Trust’s Unallocated Reserve and Trust Corpus for the ~~nine~~six and three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 is as follows:

Unallocated

Trust

Reserve

Corpus

Total

Balances at January 31, 2019

$
16,805,689

$
3

$
16,805,692

Net income

24,972,171

—

24,972,171

Distributions declared - $1.9700 per share

(25,846,419)

—

(25,846,419)

Balances at October 31, 2019

$
15,931,441

$
3

$
15,931,444


		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 share		(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 July 31, 2019

$
21,195,653

$
3

$
21,195,656

Net income

6,150,196

—

6,150,196
Distributions declared - $0.8700 per share

(11,414,408)

—

(11,414,408)

Balances at October 31, 2019

$
15,931,441

$
3

$
15,931,444

Unallocated

Trust

Reserve

Corpus

Total
Balances at January 31, 2018

$
10,606,675

$
3

$
10,606,678

Net income

38,772,365

—

38,772,365
Distributions declared - $1.6100 per share

(21,123,216)

—

(21,123,216)

Balances at October 31, 2018

$
28,255,824

$
3

$
28,255,827

Unallocated

Trust

Reserve

Corpus

Total
Balances at July 31, 2018

$
27,003,572

$
3

$
27,003,575

Net income

13,585,062

—

13,585,062
Distributions declared - $0.9400 per share

(12,332,810)

—

(12,332,810)

Balances at October 31, 2018

$
28,255,824

$
3

$
28,255,827


		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 share		(656,001)		—		(656,001)

Balances at July 31, 2020	$	12,115,431	$	3	$	12,115,434


		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2019	$	16,805,689	$	3	$	16,805,692

Net income		18,821,975		—		18,821,975
Distributions declared - $1.1000 per share		(14,432,011)		—		(14,432,011)

Balances at July 31, 2019	$	21,195,653	$	3	$	21,195,656


		Unallocated		Trust
		Reserve		Corpus		Total
Balances at April 30, 2019	$	10,039,168	$	3	$	10,039,171

Net income		13,911,687		—		13,911,687
Distributions declared - $0.2100 per share		(2,755,202)		—		(2,755,202)

Balances at July 31, 2019	$	21,195,653	$	3	$	21,195,656

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 filed for the year ended January 31, ~~2019~~2020 for a full understanding of Mesabi Trust’s financial position and results of operations for the three and ~~nine month period~~six months ended ~~October~~July 31, ~~2019.~~2020.

COVID-19 Update

~~Background~~Our royalties have been and may continue to 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, Cliffs also indicated that it cannot predict whether its operations will experience additional disruptions in the future, and that it may also continue to experience supply chain disruptions or operational issues with its vendors, suppliers and contractors who are facing similar COVID-19 pandemic challenges. Further, Cliffs indicated that because the impact of the COVID-19 pandemic continues to evolve, it could not predict the extent to which its business, results of operations, financial condition or liquidity will ultimately be impacted.

Background

Mesabi Trust, ~~(“Mesabi Trust” or the “Trust”),~~ formed pursuant to anthe Agreement of Trust, ~~dated July 18, 1961 (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 of four million tons so shipped annually. Base overriding royalties are subject to interim and final price adjustments under the term contracts between Northshore, Cliffs and their customers (the “Cliffs Pellet Agreements”) 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 ~~$55.74 per ton for calendar year 2018 and will be~~ $56.93 per ton for calendar year ~~2019.~~2019 and is $57.85 per ton for calendar year 2020. 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 the Cliffs Pellet Agreements 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 ~~$929,320 for calendar year 2018 and will be~~ $949,295 for calendar year ~~2019.~~2019 and is $964,659 for calendar year 2020. 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 iron ore products sold under the Cliffs Pellet Agreements. The Cliffs Pellet Agreements 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 Pellet Agreements, 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.

According to Cliffs’ Form 10-Q for its quarter ended ~~September~~June 30, ~~2019,~~2020, 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 and changes in specified Producer Price Index, including those for industrial commodities, fuel and steel.~~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.

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 ~~98.1%~~93.2% of all the iron ore products shipped from Silver Bay during calendar ~~2018~~2019 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 ~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~2020 and ~~October~~July 31, ~~2018~~2019

As shown in the table below, during the three months ended ~~October~~July 31, ~~2019,~~2020, production of iron ore pellets at Northshore from Mesabi Trust Lands totaled ~~1,220,216~~0 tons, and shipments over the same period totaled ~~1,227,819~~973,744 tons. By comparison, pellet production and shipments for the comparable period in ~~2018 was 941,005~~2019 were 1,101,669 ton and ~~1,557,770,~~1,596,113 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 decrease in production is attributable to the idling of the mine, likely resulting from anticipated future demand from Northshore’s customers as compared to the prior period. The decrease 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, 2020, approximately 99.4% 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, 2020	(22,898)	973,744
July 31, 2019	1,101,669	1,596,113

As shown in the table below, during the six months ended July 31, 2020, production of iron ore pellets at Northshore from Mesabi Trust Lands totaled 1,164,566 tons, and shipments over the same period totaled 1,532,378 tons. By comparison, pellet production and shipments for the comparable period in 2019 were 2,355,332 tons and 2,120,819 tons, respectively. The ~~increase~~decrease in production is attributable to the anticipated future demand from Northshore’s customers as compared to the prior period. The decrease in shipments is attributable to the anticipated current demand from Northshore’s customers as compared to the prior comparable period. For the ~~three~~six months ended ~~October~~July 31, ~~2019,~~2020, approximately ~~86.3%~~99.2% 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, 2020	1,164,566	1,532,378
July 31, 2019	2,355,332	2,120,819

Pellets Produced from

Pellets Shipped from

Trust Lands

Trust Lands

Three Months Ended

(Tons)

(Tons)

October 31, 2019

1,220,216

1,227,819

October 31, 2018

941,005

1,557,770

As shown in the table below, during the nine months ended October 31, 2019, production of iron ore pellets at Northshore from Mesabi Trust Lands totaled 3,575,548 tons, and shipments over the same period totaled 3,348,638 tons. By comparison, pellet production and shipments for the comparable period in 2018 was 3,740,115 and 4,185,417, respectively. The decrease in production and shipments is attributable to the anticipated demand from Northshore’s customers as compared to the prior comparable period. For the nine months ended October 31, 2019, approximately 90.0% of shipments from Silver Bay, Minnesota originated from Trust lands.

Pellets Produced from

Pellets Shipped from

Trust Lands

Trust Lands

Nine Months Ended

(Tons)

(Tons)

October 31, 2019

3,575,548

3,348,638

October 31, 2018

3,740,115

4,185,417

Comparison of Royalty Income for the Three and ~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~2020 and ~~October~~July 31, ~~2018~~2019

As reflected in the table below, the Trust’s total royalty income for the three months ended ~~October~~July 31, ~~2019~~2020 decreased by ~~$7,402,974~~$7,083,477 to ~~$6,488,299~~$7,218,361 as compared to the three months ended ~~October~~July 31, ~~2018.~~2019. The decrease in total royalty income is due to a decrease in ~~shipments and a decrease in pricing~~tons shipped during the three months ended ~~October~~July 31, ~~2019,~~2020, as compared to the three months ended ~~October~~July 31, ~~2018.~~2019.

The table below shows that the base overriding royalties decreased ~~$4,674,425~~$4,151,719 and the bonus royalties decreased by ~~$2,782,474~~$2,774,647 for the three months ended ~~October~~July 31, ~~2019,~~2020, as compared to the three months ended ~~October~~July 31, ~~2018.~~2019. Fee royalties ~~increased~~decreased by ~~$53,925~~$157,111 over the same period. The decrease in the base overriding royalties and bonus royalties is attributable to a decrease in ~~shipments and a decrease in pricing~~tons shipped in the current period as compared to the prior comparable period. The ~~increase~~decrease in the fee royalty amount is due to ~~an increase~~the idling of the mine in the current fiscal quarter which caused a decrease in the tons 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 ~~October~~July 31, 2020 and July 31, 2019, ~~and October 31, 2018,~~ respectively:


	Three Months Ended October 31,
	2019		2018

					Three Months Ended July 31,
					2020		2019
Base overriding royalties	$	3,674,830	$	8,349,255	$	4,174,785	$	8,326,504
Bonus royalties		2,640,101		5,422,575		3,043,576		5,818,223
Minimum advance royalty paid (recouped)		—		—		—		—
Fee royalties		173,368		119,443		—		157,111
Total royalty income	$	6,488,299	$	13,891,273	$	7,218,361	$	14,301,838

As reflected in the table below, the Trust’s total royalty income for the ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 decreased by ~~$13,511,086~~$10,309,772 to ~~$26,151,926~~$9,353,855 as compared to the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019. The decrease in total royalty income is due to ~~the~~a decrease in ~~shipments and related pricing~~tons shipped during the ~~nine~~six months ended ~~October~~July 31, ~~2019,~~2020, as compared to the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019.

The table below shows that the base overriding royalties decreased ~~$8,583,350~~$6,037,726 and the bonus royalties decreased by ~~$5,007,198~~$4,101,892 for the ~~nine~~six months ended ~~October~~July 31, ~~2019,~~2020, as compared to the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019. Fee royalties ~~increased~~decreased by ~~$79,462~~$170,154 over the same period. The decrease in the base overriding royalties and bonus royalties is attributable to a decrease in ~~shipments and related pricing~~tons shipped in the current period as compared to the prior comparable period. The ~~increase~~decrease in the fee royalty amount is due to ~~an increase~~the idling of the mine in the second fiscal quarter which caused a decrease in the tons of iron ore mined under the Peters Lease in the current ~~period~~fiscal year as compared to the prior comparable period.

The table below summarizes the components of Mesabi Trust’s total royalty income for the ~~nine~~six months ended ~~October~~July 31, 2020 and July 31, 2019, ~~and October 31, 2018,~~ respectively:


	Nine Months Ended October 31,
	2019		2018

					Six Months Ended July 31,
					2020		2019
Base overriding royalties	$	15,069,353	$	23,652,703	$	5,356,796	$	11,394,522
Bonus royalties		10,565,280		15,572,478		3,823,288		7,925,180
Minimum advance royalty paid (recouped)		—		—		—		—
Fee royalties		517,293		437,831		173,771		343,925
Total royalty income	$	26,151,926	$	39,663,012	$	9,353,855	$	19,663,627

Comparison of Net Income, Expenses and Distributions for the Three and ~~Nine~~Six Months Ended ~~October~~July 31, ~~2019~~2020 and ~~October~~July 31, ~~2018~~2019

Net income for the three months ended ~~October~~July 31, ~~2019~~2020 was ~~$6,150,196,~~$6,676,003, a decrease of ~~$7,434,866~~$7,235,684 as compared to the three months ended ~~October~~July 31, ~~2018.~~2019. The decrease in net income for the three months ended ~~October~~July 31, ~~2019~~2020 was primarily the result of a decrease in shipments ~~and related pricing~~ of iron ore pellets, as compared to the three months ended ~~October~~July 31, ~~2018.~~2019. The Trust’s expenses for the three months ended ~~October~~July 31, ~~2019~~2020 were ~~$410,645,~~$542,382, an increase of ~~$21,864~~$109,845 compared to the expenses for the three months ended ~~October~~July 31, ~~2018.~~2019. The increase in expenses was primarily attributable to an increase in legal fees and expenses for the three months

ended ~~October~~July 31, ~~2019,~~2020, as compared to the three months ended ~~October~~July 31, ~~2018.~~2019. The table below summarizes the Trust’s income and expenses for the three months ended ~~October~~July 31, 2020 and July 31, 2019, ~~and October 31, 2018,~~ respectively.

Three Months Ended October 31,

2019

2018

Total royalty income

$
6,488,299

$
13,891,273

Interest income

72,542

82,570

Total revenues

6,560,841

13,973,843

Expenses

410,645

388,781

Net income

$
6,150,196

$
13,585,062


	Three Months Ended July 31,
	2020		2019
Total royalty income	$	7,218,361	$	14,301,838
Interest income		24		42,386
Total revenues		7,218,385		14,344,224
Expenses		542,382		432,537
Net income	$	6,676,003	$	13,911,687

Net income for the ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 was ~~$24,972,171,~~$8,287,624, a decrease of ~~$13,800,194~~$10,534,351 as compared to the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019. The decrease in net income for the ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 was primarily the result of a decrease in shipments ~~and related pricing~~ of iron ore pellets, as compared to the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019. The Trust’s expenses for the ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 were ~~$1,399,766,~~$1,099,524, an increase of ~~$362,289~~$110,403 compared to the expenses for the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019. The increase in expenses was primarily attributable to an increase in legal fees and expenses ~~as well as increased consulting fees and expenses~~ for the ~~nine~~six months ended ~~October~~July 31, ~~2019,~~2020, as compared to the ~~nine~~six months ended ~~October~~July 31, ~~2018.~~2019. The table below summarizes the Trust’s income and expenses for the ~~nine~~six months ended ~~October~~July 31, 2020 and July 31, 2019, ~~and October 31, 2018,~~ respectively.


	Nine Months Ended October 31,
	2019		2018

					Six Months Ended July 31,
					2020		2019
Total royalty income	$	26,151,926	$	39,663,012	$	9,353,855	$	19,663,627
Interest income		220,011		146,830		33,293		147,469
Total revenues		26,371,937		39,809,842		9,387,148		19,811,096
Expenses		1,399,766		1,037,477		1,099,524		989,121
Net income	$	24,972,171	$	38,772,365	$	8,287,624	$	18,821,975

As presented on the “Trust’s Condensed Statements of Operations” on page 3 of this quarterly report, the Trust’s net income per unit decreased ~~$0.5667~~$0.5515 per unit to ~~$0.4688~~$0.5088 per unit for the fiscal quarter ended ~~October~~July 31, ~~2019~~2020 as compared to the fiscal quarter ended ~~October~~July 31, ~~2018.~~2019. For the ~~nine~~six months ended ~~October~~July 31, ~~2019,~~2020, the Trust’s net income per unit decreased ~~$1.0518~~$0.8029 per unit to ~~$1.9034~~$0.6317 per unit, as compared to the prior period. On ~~October 11, 2019,~~July 13, 2020, the Trust declared a distribution of ~~$0.87~~$0.05 per unit payable on ~~November~~August 20, ~~2019~~2020 to Unitholders of record on ~~October~~July 30, ~~2019.~~2020. Comparatively, the Trust declared a distribution of ~~$0.94~~$0.21 per unit to Unitholders in ~~October 2018.~~ July 2019. During the ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020 and ~~October~~July 31, ~~2018~~2019 the Trust had declared distributions of ~~$1.97~~$0.61 and ~~$1.61,~~$1.10, 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 the Cliffs Pellet Agreements (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 ~~October~~July 31, ~~2019, October~~2020, July 31, ~~2018~~2019 and January 31, ~~2019~~2020

As set forth in the tables below, Unallocated Reserve ~~which is comprised of accrued income receivable, contract asset, unallocated cash and U.S. Government securities, contract liability, prepaid expenses and accrued expenses~~ decreased from ~~$27,003,572~~$21,195,653 as of ~~October~~July 31, ~~2018~~2019 to ~~$15,931,441~~$12,115,431 as of ~~October~~July 31, ~~2019.~~2020. The decrease in Unallocated Reserve as of ~~October~~July 31, ~~2019,~~2020, as compared to ~~October~~July 31, ~~2018,~~2019, is primarily the result of a decrease in the unallocated cash and U.S. Government securities, accrued income receivable and contract ~~asset and an increase~~asset. The decrease in the ~~contract liability.~~unallocated cash and U.S. Government securities is attributable to a decrease in royalties received in the second quarter of 2020 as compared to the second quarter of 2019. The decrease in the accrued income receivable portion of the Unallocated Reserve is attributable to a decrease in shipments and related pricing for the month ended ~~October~~July 31, ~~2019~~2020 as compared to the prior comparable period. The decrease in the contract asset is the result of revenue recognized on the base overriding royalties as the uncertainty associated with the variable consideration is resolved over the course of the calendar year. ~~The increase in the contract liability is the result of when royalties are received compared to when royalties are recognized, which is discussed further in “Note 2” on page 7.~~

Nine months ended October 31,


2019

2018

Accrued Income Receivable

$
2,408,279

$
8,776,515

Contract Asset

—

3,006,907

Unallocated Cash and U.S. Government Securities

14,522,152

15,212,397

Prepaid Expenses and (Accrued Expenses), net

(60,861)

7,753

Contract Liability

(938,129)

—

Unallocated Reserve

$
15,931,441

$
27,003,572


	July 31,
	2020		2019
Accrued Income Receivable	$	1,048,727	$	3,820,631
Contract Asset		1,059,624		3,223,078
Unallocated Cash and U.S. Government Securities		9,944,604		14,182,185
Prepaid Expenses and (Accrued Expenses), net		62,476		(30,241)
Unallocated Reserve	$	12,115,431	$	21,195,653

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 ~~on Form 10-K~~ for the fiscal year ended January 31, ~~2019.~~2020, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.

The Trust’s Unallocated Reserve as of ~~October~~July 31, ~~2019 decreased~~2020 increased by ~~$874,248~~$284,417 to ~~$15,931,441,~~$12,115,431, as compared to the fiscal year ended January 31, ~~2019.~~2020. The ~~decrease~~increase in Unallocated Reserve as of ~~October~~July 31, ~~2019,~~2020, as compared to January 31, ~~2019,~~2020, is primarily the result of a decrease in the contract liability and an increase in the contract asset and accrued income receivable. The decrease 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. The increase in the contract ~~liability~~asset and accrued income receivable is the result of when royalties are received compared to when royalties are recognized, which is discussed further in “Note 2” on page 7. As of October 31, 2019, the Trust’s Unallocated Reserve consisted of $14,522,152 of unallocated cash and U.S. Government securities and $2,408,279 of accrued income receivable. At January 31, 2019, the Trust’s Unallocated Reserve consisted of $14,767,308 in unallocated cash and U.S. Government securities and $2,339,060 of accrued income receivable.


	July 31, 2020		January 31, 2020
Accrued Income Receivable	$	1,048,727	$	69,588
Contract Asset		1,059,624		—
Unallocated Cash and U.S. Government Securities		9,944,604		14,326,122
Prepaid Expenses and (Accrued Expenses), net		62,476		(52,976)
Contract Liability		—		(2,511,720)
Unallocated Reserve	$	12,115,431	$	11,831,014

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

Quarterly Royalty Report and Royalty Payment

On ~~October~~July 30, ~~2019,~~2020, the Trustees of Mesabi Trust received ~~from Cliffs~~ the quarterly royalty report of iron ore shipments ~~from~~out of Silver Bay, Minnesota during the quarter ended ~~September~~June 30, ~~2019 (the “Royalty~~2020 (“Royalty Report”) from Cliffs, the parent company of ~~Northshore.~~Northshore, as well as the royalty payment from Cliffs, as summarized below.

As reported to ~~the~~Mesabi Trust by Cliffs in the Royalty Report, based on shipments of iron ore products by Northshore during the three months ended ~~September~~June 30, ~~2019,~~2020, Mesabi Trust was credited with a base royalty of ~~$8,354,828.~~$2,792,731. Also for the three months ended ~~September~~June 30, ~~2019,~~2020, Mesabi Trust was credited with a bonus royalty in the amount of ~~$5,089,002. Royalties paid to Mesabi Trust reflected the~~$2,932,348. After applying a reduction of ~~$1,514,371 as a result of~~$1,477,192 resulting from negative pricing adjustments carried over from the first quarter 2020 and netted against positive pricing adjustments of $71,957 to base and bonus royalty calculations related to changes in price estimates made in prior ~~quarters.~~quarters, Cliffs paid Mesabi Trust a royalty of $4,319,844 for shipments during the quarter ended June 30, 2020. In addition, a royalty payment of ~~$166,505~~$29,986 was paid to the Mesabi Land Trust. Accordingly, the total royalty payments received by Mesabi Trust on ~~October~~July 30, ~~2019~~2020 from Cliffs were ~~$12,095,964.~~$4,349,830.

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 ~~third~~second calendar quarter of ~~2019,~~2020, Cliffs credited Mesabi Trust with ~~1,697,627~~1,073,446 tons of iron ore shipped, as compared to ~~1,898,984~~1,545,242 tons shipped during the ~~third~~second calendar quarter of ~~2018.~~2019.

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 under the term contracts among Northshore, Cliffs, and certain of their customers (the “Cliffs Pellet ~~Agreements,~~Agreements”), 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 62% Price, 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 ~~Unit holders~~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 fiscal ~~2020~~2021 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 Pellet Agreements. Based on the above factors, and as indicated by ~~the~~Mesabi Trust’s historical distribution payments, the royalties received by ~~the~~Mesabi Trust, and the distributions paid to ~~Unit holders,~~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.

With respect to calendar year ~~2019,~~2020, Northshore has not advised Mesabi Trust of its expected shipments of iron ore products ~~(except as noted below with regard to DR-grade pellets)~~ or what percentage of ~~2019~~2020 shipments will be from Mesabi Trust iron ore. In

the Cliffs’ Royalty Report, Cliffs stated that the royalty payments being reported ~~today~~ were based on estimated iron ore pellet prices under the Cliffs Pellet Agreements, 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 ~~Unit holders~~Unitholders in future quarters.

~~Cliffs and AK Steel Holding Corporation Announce Merger~~

On December 3, 2019, Cliffs and AK Steel Holding Corporation (“AK Steel”) announced that they have entered into a definitive merger agreement pursuant to which Cliffs will acquire all of the issued and outstanding shares of AK Steel common stock. Lourenco Goncalves, Chairman of the Board, President and CEO of Cliffs, will lead the expanded organization.

Three existing members of AK Steel’s Board of Directors will join the Cliffs Board, and two existing Cliffs Board members will step down, bringing the Cliffs Board to 12 members in total. AK Steel will become a direct, wholly-owned subsidiary of Cliffs and will retain its branding and corporate identity.

According to Cliffs’ December 3, 2019 press release, “The pro forma Cliffs will be a vertically integrated steel company that is expected to drive improved profitability for existing Cliffs and AK Steel shareholders and is well-positioned to serve both the blast furnace and electric arc furnace segments. In addition, Cliffs’ existing strong balance sheet and self-sufficiency in pellets for the combined company provide flexibility to pursue additional growth opportunities, including the potential future utilization of the blast furnace in Ashland to produce merchant pig iron, an opportunity neither company could pursue on a standalone basis.”

Cliffs will continue to be listed on the NYSE with its headquarters in Cleveland, Ohio. The transaction is expected to close in the first half of 2020, subject to approval by the shareholders of both companies, receipt of regulatory approvals and satisfaction of other customary closing conditions. Cliffs has obtained an approximately $2 billion financing commitment from Credit Suisse in connection with a new Asset Backed Loan and the refinancing of AK Steel’s 2023 senior secured notes.

Other Recent Developments

In its Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2019,~~2020 (filed July 30, 2020), Cliffs disclosed that in response to the COVID-19 pandemic, it ~~is continuing construction~~made various operational changes to adjust to the demand for its products. Although steel and iron ore production have been considered “essential” by the states in which Cliffs operates, certain of its ~~HBI plant~~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 ~~Toledo, Ohio,~~July 2020, and ~~it expects to complete construction and begin commercial production ahead of schedule,~~the Northshore mine, which was restarted in ~~the first half of~~August 2020.

In its October 23, 2019 earnings call, Cliffs further disclosed that, during its third quarter, its company sales to the Toledo HBI plant were 346,000 tons, and that intercompany sales were lower than Cliffs had previously guided, as it diverted a portion of DR-grade pellet tonnage to the seaborne market.

Mesabi Trust Distribution Announcement

As previously reported by Mesabi Trust on ~~October 11, 2019,~~July 13, 2020, the Trustees declared a distribution of ~~eighty-seven~~five cents ($~~0.87)~~0.05) per Unit of Beneficial Interest payable on ~~November~~August 20, ~~2019~~2020 to Mesabi Trust Unitholders of record at the close of business on ~~October~~July 30, ~~2019.~~2020. This distribution was paid as announced.

Arbitration with Cliffs and Northshore

On December 9, 2019, the Trustees of Mesabi Trust announced that the Trust ~~has~~ initiated arbitration against Northshore, ~~and its parent, Cliffs (jointly, the “Operator”),~~ the lessee/operator of the leased ~~lands.~~lands, and its parent, Cliffs. The arbitration proceeding ~~has been~~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 the Operator has failed to properly record and calculate royalty amounts during the second and third quarters of 2019.~~ Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief.

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, 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 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.

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 1214 of Mesabi Trust’s Annual Report ~~on Form 10-K~~ for the year-ended January 31, ~~2019,~~2020, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.

Iron Ore Pricing and Contract Adjustments

During the course of its fiscal year some portion of the royalties paid to Mesabi Trust are based on estimated prices for iron ore products sold under the Cliffs Pellet Agreements. Mesabi Trust is not a party to any of the Cliffs Pellet Agreements. 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 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 ~~October~~July 31, ~~2019.~~2020. 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, ~~2019.~~2020.

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 ~~2019,~~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 Unallocated Reserve as of ~~October~~July 31, ~~2019, October~~2020, July 31, ~~2018~~2019 and January 31, ~~2019”~~2020” on page ~~13.~~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. ~~The~~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

including DR-grade pellets. ~~More particularly, the claims involve the Trust’s allegations that the Operator has failed to properly record and calculate royalty amounts during the second and third quarters of 2019.~~ Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief.

Item 1A. Risk Factors

The following risk ~~factor~~factors supplements the Trust’s risk factors as described in “Risk Factors” set forth on pages 3 through 1214 of Mesabi Trust’s Annual Report ~~on Form 10-K~~ for the year-ended January 31, ~~2019.~~2020 and Item 1A of Part II of Mesabi’s Form 10-Q for the quarter-ended April 30, 2020.

WeOur royalties have been and may continue to be adversely affected by the coronavirus (COVID-19) pandemic.

Our royalties have been and may continue to be adversely affected by the coronavirus (COVID-19) pandemic. The spread of COVID-19 has led to the disruption of the business operations of Cliffs and its wholly-owned subsidiary, Northshore, upon which we are ~~subject to disputes from time to time that could result~~dependent for our royalties. Cliffs temporarily shut down construction activities at its hot-briquetted (“HBI”) production plant in ~~litigation, arbitration or other administrative proceedings that could adversely affect our operating results, financial condition~~March 2020, temporarily idled certain steel facilities in March and April 2020 and idled its Northshore mine in mid-April 2020. Although 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 ~~market value of Mesabi Trust Units.~~

~~We may become involved~~Northshore mine, which was restarted in litigation, arbitration or other administrative proceedings from time to time. These proceedings can be costly, and the results of such proceedings are often difficult to predict. We may not have adequate insurance coverage or contractual protection to cover costs and liabilityAugust 2020, Cliffs indicated that it cannot predict whether its operations will experience disruptions in the ~~event we are sued, and to the~~future.

The extent we resort to litigation, arbitration or other administrative proceedings to enforce our rights, we may incur significant costs and ultimately be unsuccessful or unable to recover amounts we believe are owed to us or unable to resolve the matter on favorable terms.

More specifically on December 9, 2019, the Trustees of Mesabi Trust announced that the Trust initiated arbitration against Northshore and its parent, Cliffs (jointly, the “Operator”), the lessee/operator of the leased lands. 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 the Operator has failed to properly record and calculate royalty amounts during the second and third quarters of 2019. Based on information currently available to the Trust, the Trust seeks an award of damages, along with specific performance and declaratory relief.

~~Any arbitration, legal or administrative proceedings~~ to which the ~~Mesabi Trust~~COVID-19 pandemic will continue to impact the HBI project or Cliffs and Northshore’s business operations is ~~subject could require~~uncertain and will depend on future developments, which are highly uncertain and cannot be predicted, including new information concerning the ~~significant involvement~~severity of ~~Trustees~~the coronavirus and the ~~professional advisors and consultants~~actions taken to contain the Trust, and may divert attention from the Trustees’ other roles and responsibilities. In addition, it is difficult to foresee the results of legal actions, arbitration matters and other proceedings currently involving the Mesabi Trustcoronavirus or ~~of those which may arise in the future, and an adverse result in these matters~~treat its impact, among others. These events could have a material adverse effect on the ~~market value~~business operations of Cliffs and Northshore, which in turn, could have a material adverse effect on future royalties payable to the Trust.

Royalties received by the Trust, and distributions paid to Unitholders, in any particular quarter or year are not necessarily indicative of royalties or distributions that will be paid in any subsequent quarter or in any full year.

The spread of COVID-19 has led to the disruption of the business operations of Cliffs and its wholly-owned subsidiary, Northshore, upon which we are dependent for our royalties. Cliffs temporarily shut down construction activities at its HBI production plant in Toledo, Ohio in March 2020, temporarily idled certain steel facilities in March and April 2020 and idled its Northshore mine in mid-April 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. Based on shipments of iron ore products by Northshore during the three months ended June 30, 2020, the total royalty payments received by Mesabi Trust ~~units~~on July 30, 2020 from Cliffs were $4,349,830, while the royalty payments received for the comparable three-month period in 2019 totaled $11,875,518. The extent to which the coronavirus will continue to impact Cliffs’ and Northshore’s other business operations – and resulting royalties paid to the trust – is uncertain.

Royalties received by the Trust can fluctuate significantly from quarter to quarter and year to year based upon market prices for iron ore products, the level of orders for iron ore products from Cliffs’ customers, the sales and marketing efforts of Cliffs, the consumption of inventory by Cliffs’ customers, and production decisions made by Northshore. Moreover, because some of the royalties paid to the Trust in any particular quarter include payments made with respect to pellets shipped and sold at estimated prices that are subject to future interim and final multi-year adjustments in accordance with the supply agreements between Cliffs and its customers, a downward trend in demand and market prices for iron and steel products could result in negative adjustments to royalties in future quarters, some of which may be significant. These negative price adjustments could have a material adverse effect on ~~Mesabi~~the Trust’s ~~asset value, results~~royalty income, which in time could result in lower quarterly distributions paid by the Trust to Unitholders, and possibly reduce or even eliminate funds available for distribution in any quarter and in some quarters may completely offset royalties otherwise payable to the Trust.

Due to Cliffs’ and Northshore’s operational disruptions and other factors described above, cash available for distribution to Unitholders in future quarters could materially decrease, and in some cases, such decrease could result in no cash being available for distribution to Unitholders. As a result, distributions that may be declared and paid to Unitholders, in any particular quarter, are not necessarily indicative of ~~operations~~royalties that will be received, or distributions that will be paid, in any subsequent quarter or in any full year. Based on the foregoing and ~~financial condition.~~the current uncertainty in the economic environment as a result of COVID-19, the Trust cannot ensure that there will be adequate cash available to make a distribution to Unitholders in any particular quarter.

Cliffs has disclosed that its HBI project will require the commitment of substantial resources. Any unanticipated costs or delays associated with Cliffs’ HBI project could negatively impact production and shipments of iron ore products by Northshore, which in turn could have a material adverse effect on future royalties payable to the Trust.

In Cliffs’ Annual Report, Cliffs has disclosed that its ongoing efforts with respect to the HBI project require the commitment of substantial capital expenditures. Cliffs disclosed that it currently expects to incur capital expenditures through 2020 of

approximately $1 billion on the development of the HBI production plant in Toledo, Ohio, of which approximately $894.3 million was paid as of June 30, 2020. Cliffs indicated that estimated expenses may increase as personnel and equipment associated with advancing development and commercial production are added. Further, Cliffs disclosed that the timely completion and successful commercial startup of the HBI project will depend in part on the following:

(i)

maintaining required federal, state and local permits;

(ii)

completing construction work, commissioning and integration of all of the systems comprising the HBI production plant;

(iii)

negotiating sales contracts for its planned production; and

(iv)

other factors, many of which are beyond Cliffs’ control.

Any unanticipated costs or delays associated with Cliffs’ HBI project could have a material effect on shipments of iron ore products from Silver Bay, which in turn could materially impact the Trust’s royalty revenue, and thereby impact the cash available for distribution by the Trust. Further, the Trustees are not able to predict the impact on the Trust’s future potential royalties of either: (i) Northshore’s future anticipated production and shipments of DR-grade pellets from Silver Bay, or (ii) Cliffs’ HBI project.

On March 19, 2020, Cliffs announced it is temporarily shutting down construction activities at its HBI project site in Toledo, Ohio, in accordance with guidelines from the Governor of the State of Ohio regarding the COVID-19 pandemic. Although Cliffs restarted construction of the HBI production plant in June 2020 and has indicated that the construction is expected to be completed during the fourth quarter of 2020, the extent to which the coronavirus may impact or delay the HBI project is uncertain and will depend on future developments, which are highly uncertain and cannot be predicted, including new information concerning the severity of the coronavirus and the actions taken to contain the coronavirus or treat its impact, among others.

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.~~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 ~~September~~June 30, ~~2019,~~2020, filed with the SEC on ~~October 23, 2019.~~July 30, 2020.

1820

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
~~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 ~~Virchow Krause,~~US, LLP, dated ~~December 10, 2019~~September 8, 2020 regarding its review of the unaudited interim financial statements of Mesabi Trust as of and for the three and ~~nine~~six months ended ~~October~~July 31, ~~2019~~2020	Filed herewith

~~99.2~~101	~~Press Release dated December 9, 2019~~Inline XBRL Instance Document	Filed herewith

~~101~~104	~~XBRL Instance Document~~Cover Page Interactive Data File	~~Filed herewith~~Embedded within the Inline XBRL document and contained in Exhibit 101

SIGNATURES

~~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, as
		Corporate Trustee
	Principal Administrative Officer and duly authorized signatory:*



~~December 10, 2019~~September 8, 2020		By:	/s/ Jeffrey Schoenfeld
		Name: Jeffrey Schoenfeld*
		Title: Vice President

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

2022


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

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


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


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


	Three Months Ended				Nine Months Ended
	October 31,				October 31,
	2019		2018		2019		2018
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
A. Condensed Statements of Operations

Revenues
Royalty income	$	6,488,299	$	13,891,273	$	26,151,926	$	39,663,012
Interest		72,542		82,570		220,011		146,830
Total revenues		6,560,841		13,973,843		26,371,937		39,809,842

Expenses		410,645		388,781		1,399,766		1,037,477

Net income	$	6,150,196	$	13,585,062	$	24,972,171	$	38,772,365

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)	$	0.4688	$	1.0354	$	1.9034	$	2.9552

Distributions declared per unit (Note 3)	$	0.8700	$	0.9400	$	1.9700	$	1.6100


	October 31, 2019		January 31, 2019
	(unaudited)
B. Condensed Balance Sheets

Assets

Cash and cash equivalents	$	375,053	$	881,810

U.S. Government securities, at amortized cost (which approximates fair value)		25,561,507		32,122,312

Accrued income receivable		2,408,279		2,339,060
Contract asset		—		56,357
Prepaid expenses		116,288		54,472
Current assets		28,461,127		35,454,011

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	$	28,461,130	$	35,454,014

Liabilities, Unallocated Reserve And Trust Corpus

Liabilities
Distribution payable	$	11,414,408	$	18,236,814
Accrued expenses		177,149		411,508
Contract liability		938,129		—
Total liabilities		12,529,686		18,648,322

Unallocated reserve		15,931,441		16,805,689

Trust corpus		3		3

Total liabilities, unallocated reserve and trust corpus	$	28,461,130	$	35,454,014


		Unallocated		Trust
		Reserve		Corpus		Total
Balances at January 31, 2019	$	16,805,689	$	3	$	16,805,692

Net income		24,972,171		—		24,972,171
Distributions declared - $1.9700 per share		(25,846,419)		—		(25,846,419)

Balances at October 31, 2019	$	15,931,441	$	3	$	15,931,444


	Pellets Produced from	Pellets Shipped from
	Trust Lands	Trust Lands
Three Months Ended	(Tons)	(Tons)
October 31, 2019	1,220,216	1,227,819
October 31, 2018	941,005	1,557,770