MESABI TRUST

The Trust’s royalties have been and may continue to be adversely affected by the coronavirus (COVID-19) outbreak.  The spread of COVID-19 has led to the disruption of the business operations of Cliffs and its wholly-owned subsidiary, Northshore, upon which the Trust is dependent for royalties.  Cliffs has indicated that the COVID-19 pandemic will adversely impact its sales of steel and customized iron ore pellets.  In particular, the automotive industry, which Cliffs relies on for a significant amount of its sales, has been significantly disrupted.  As previously announced, Cliffs has 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.  Although the Northshore mine is idled, Cliffs has continued to ship limited amounts of stockpiled iron ore products from Northshore for which the Trust receives a royalty.  The Trust is unable to predict if and to what degree these shipments will continue.  In addition, although Cliffs has indicated that its expects its Northshore mine to restart in August 2020, it noted that it cannot predict when it will be able to restart construction of its HBI production plant, when its production facilities and/or mines will be able to resume operations or whether any other production facilities and/or mines will experience disruptions in the future.

Our royalties have been and may continue to be adversely affected by the coronavirus (COVID-19) outbreak.  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 has indicated that the COVID-19 pandemic will adversely impact its sales of steel and customized iron ore pellets.  In particular, the automotive industry, which Cliffs relies on for a significant amount of its sales, has been significantly disrupted.  As previously announced, Cliffs has 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.  Although the Northshore mine is idled, Cliffs has continued to ship limited amounts of stockpiled iron ore products from Northshore for which we receive a royalty.  We are unable to predict if and to what degree these shipments will continue.  In addition, although Cliffs has indicated that its expects its Northshore mine to restart in August 2020, it noted that it cannot predict when it will be able to restart construction of its HBI production plant, when its production facilities and/or mines will be able to resume operations or whether any other production facilities and/or mines will experience disruptions in the future. 

In its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, Cliffs disclosed that in response to the COVID-19 pandemic, Cliffs has made various operational changes to adjust to the demand for its products.  Although steel and iron ore are considered “essential” by the states in which Cliffs operates, certain of its facilities, including Dearborn Works, all Precision Partners facilities and approximately 65% of AK Tube production, have been temporarily idled until market conditions improve.  Cliffs also has temporarily shut down construction activities at the HBI production plant in Toledo, Ohio.  On April 13, 2020, Cliffs announced the temporary idling of two of its iron ore mining operations, Northshore in Minnesota and Tilden in Michigan, and Cliffs expects them to restart in August 2020 and July 2020, respectively.  Cliffs also indicated that it cannot predict when it will be able to restart construction of its HBI production plant, when its production facilities and/or mines will be able to resume operations or whether any other production facilities and/or mines will experience disruptions in the future.

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.  Based on shipments of iron ore products by Northshore during the three months ended March 31, 2020, the total royalty payments received by Mesabi Trust on April 30, 2020 from Cliffs were $449,496, while the royalty payments received for the comparable three-month period in 2019 totaled $3,149,582.  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.

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.  Once construction is able to resume, it is uncertain whether Cliffs would be able to complete the HBI production plant for the same cost and on a similar schedule as previously expected.  Depending on the duration of the temporary shutdown, there are also risks that project assets may be damaged or inadequately maintained, equipment warranties may expire and current contractors may no longer be available to work upon restart.  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.