**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

** **

**FORM 10-Q**

** **

**(Mark One)**

** **

**x****  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

** **

**For the quarterly period ended April 30, 2009**

** **

**or**

** **

**o****  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

** **

**For the transition period from                to                  **

 

**Commission File Number:  1-4488**

 

**MESABI TRUST**

(Exact name of registrant as specified in itscharter)

 

| **New York**                                                                                                                                                    | ** ** | **13-6022277**                       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of                                                                                                                                 | ** ** | (I.R.S. Employer Identification No.) |
| incorporation or organization)                                                                                                                                  | ** ** | ** **                           |
| ** **                                                                                                                                                      | ** ** | ** **                           |
| **c/o Deutsche Bank Trust Company  Americas**

**Trust & Securities  Services – GDS**

**60 Wall Street**

**27th Floor**

**New York, New York** | ** ** | **10005**                            |
| (Address of principal executive offices)                                                                                                                        | ** ** | (Zip code)                           |

 

**(615)835-2749**

(Registrant’s telephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  Yes  x  No  o

 

Indicate by check markwhether the Registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the Registrantwas required to submit and post such files). Yes  o  No  o*

 

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* The registrant has not yet been phased into theinteractive data requirements.

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act:

 

| Large accelerated filero |   | Accelerated filerx         |
|--------------------------|--------|----------------------------|
|                     |   |                       |
| Non-accelerated filero   |   | Smaller reporting companyo |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes  o  No  x

 

As of June 4, 2009,there were 13,120,010 Units of Beneficial Interest in Mesabi Trust outstanding.

 

 

 

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** **

**PART I - FINANCIAL INFORMATION**

** **

**Item 1. Financial Statements. (Note 1)**

 

Mesabi Trust

CondensedStatements of Income

Three MonthsEnded April 30, 2009 and 2008

 
| ** ** | ** **                               | ** ** | **Three  Months Ended** | ** ** |
|------------|------------------------------------------|------------|-------------------------|------------|
| ** ** | ** **                               | ** ** | **April 30,**      | ** ** |
| ** ** | ** **                               | ** ** | **2009**                | ** ** | **2008** | ** ** |
| ** ** | ** **                               | ** ** | **(unaudited)**         | ** ** | **(unaudited)** | ** ** |
| **A.**     | **Condensed Statements of Income**       | ** ** | ** **              | ** ** | ** ** | ** ** |
|       |                                     |       |                    |       |   |   |
|       | Revenues                                 |       |                    |       |   |   |
|       | Royalty  income                          |       | $                       | 1,021,712  |   | $ | 3,847,710 |   |
|       | Interest  income                         |       | 3,169                   |       | 14,097 |   |
|       |                                     |       | 1,024,881               |       | 3,861,807 |   |
|       |                                     |       |                    |       |   |   |
|       | Expenses                                 |       | 223,835                 |       | 222,154 |   |
|       |                                     |       |                    |       |   |   |
|       | Net income                               |       | $                       | 801,046    |   | $ | 3,639,653 |   |
|       |                                     |       |                    |       |   |   |
|       | Number of units outstanding              |       | 13,120,010              |       | 13,120,010 |   |
|       |                                     |       |                    |       |   |   |
|       | Net income per unit (Note 2)             |       | $                       | 0.0611     |   | $ | 0.2774 |   |
|       |                                     |       |                    |       |   |   |
|       | Distributions declared per unit (Note 3) |       | $                       | 0.3800     |   | $ | 0.1200 |   |

 

See Notes to Condensed Financial Statements.

 

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Mesabi Trust

CondensedBalance Sheets

April 30,2009 and January 31, 2009

 
| ** ** | ** **                                                                 | ** ** | **April 30,  2009** | ** **      | **January 31,  2009** | ** ** |
|------------|----------------------------------------------------------------------------|------------|--------------------------|-----------------|----------------------------|------------|
| ** ** | ** **                                                                 | ** ** | **(unaudited)**          | ** **      | ** **                 | ** ** |
| **B.**     | **Condensed  Balance Sheets**                                              | ** ** | ** **               | ** **      | ** **                 | ** ** |
|       |                                                                       |       |                     |            |                       |       |
| ** ** | **Assets**                                                                 | ** ** | ** **               | ** **      | ** **                 | ** ** |
|       |                                                                       |       |                     |            |                       |       |
|       | Cash  and cash equivalents                                                 |       | $                        | 5,240,591       |                       | $          | 2,254,107 |   |
|       |                                                                       |       |                     |            |                       |       |
|       | U.S.  Government securities, at amortized cost (which approximates market) |       | 1,058,206                |            | 340,421                    |       |
|       |                                                                       |       |                     |            |                       |       |
|       | Accrued  income receivable                                                 |       | 790,780                  |            | 2,721,978                  |       |
|       | Prepaid  expenses                                                          |       | 39,820                   |            | 30,423                     |       |
|       |                                                                       |       | 7,129,397                |            | 5,346,929                  |       |
|       |                                                                       |       |                     |            |                       |       |
|       | Fixed  property, including intangibles, at nominal values                  |       |                     |            |                       |       |
|       |                                                                       |       |                     |            |                       |       |
|       | Amended  Assignment of Peters Lease                                        |       | 1                        |            | 1                          |       |
|       |                                                                       |       |                     |            |                       |       |
|       | Assignment  of Cloquet Lease                                               |       | 1                        |            | 1                          |       |
|       |                                                                       |       |                     |            |                       |       |
|       | Certificate  of beneficial interest for 13,120,010 units of land trust     |       | 1                        |            | 1                          |       |
|       |                                                                       |       | 3                        |            | 3                          |       |
|       |                                                                       |       |                     |            |                       |       |
|       |                                                                       |       | $                        |  7,129,400 |                       | $          | 5,346,932 |   |
|       |                                                                       |       |                     |            |                       |       |
| ** ** | **Liabilities,  Unallocated Reserve and Trust Corpus**                     | ** ** | ** **               | ** **      | ** **                 | ** ** |
|       |                                                                       |       |                     |            |                       |       |
|       | Liabilities                                                                |       |                     |            |                       |       |
|       | Distribution  payable                                                      |       | $                        | 4,985,604       |                       | $          | 1,443,201 |   |
|       | Accrued  expenses                                                          |       | 166,170                  |            | 111,547                    |       |
|       | Deferred  royalty revenue (Note 4)                                         |       | 2,370,000                |            | —                     |       |
|       |                                                                       |       | 7,521,774                |            | 1,554,748                  |       |
|       |                                                                       |       |                     |            |                       |       |
|       | Unallocated  Reserve (Deficit) (Note 5)                                    |       | (392,377                 | )               | 3,792,181                  |       |
|       | Trust  Corpus                                                              |       | 3                        |            | 3                          |       |
|       |                                                                       |       |                     |            |                       |       |
|       |                                                                       |       | $                        |  7,129,400 |                       | $          | 5,346,932 |   |

 

See Notes to Condensed Financial Statements.

 

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Mesabi Trust

CondensedStatements of Cash Flows

**Three MonthsEnded April 30, 2009 and 2008**

** **
| ** ** | ** **                                                                     | ** ** | **Three Months Ended** | ** ** |
|------------|--------------------------------------------------------------------------------|------------|------------------------|------------|
| ** ** | ** **                                                                     | ** ** | **April 30,**     | ** ** |
| ** ** | ** **                                                                     | ** ** | **2009**               | ** ** | **2008** | ** ** |
| ** ** | ** **                                                                     | ** ** | **(unaudited)**        | ** ** | **(unaudited)** | ** ** |
| **C.**     | **Condensed  Statements of Cash Flows**                                        | ** ** | ** **             | ** ** | ** ** | ** ** |
|       |                                                                           |       |                   |       |   |   |
|       | Cash flows from operating  activities                                          | ** ** | ** **             | ** ** | ** ** | ** ** |
|       | Royalties received                                                             |       | $                      | 5,320,949  |   | $ | 1,665,665 |   |
|       | Interest received                                                              |       | 3,100                  |       | 15,463 |   |
|       | Expenses paid                                                                  |       | (176,579               | )          | (161,789 | ) |
|       |                                                                           |       |                   |       |   |   |
|       | Net cash provided by operating activities                                      |       | 5,147,470              |       | 1,519,339 |   |
|       |                                                                           |       |                   |       |   |   |
|       | Cash flows from investing  activities                                          |       |                   |       |   |   |
|       | Maturities of U.S. Government Securities                                       |       | —                 |       | 100,000 |   |
|       | Purchases of U.S. Government Securities                                        |       | (717,785               | )          | (49,765 | ) |
|       |                                                                           |       |                   |       |   |   |
|       | Net cash (used for) provided by investing  activities                          |       | (717,785               | )          | 50,235 |   |
|       |                                                                           |       |                   |       |   |   |
|       | Cash flow used for  financing activity                                         |       |                   |       |   |   |
|       | Distributions to Unitholders                                                   |       | (1,443,201             | )          | (6,756,805 | ) |
|       |                                                                           |       |                   |       |   |   |
|       | Net change in cash and  cash equivalents                                       |       | 2,986,484              |       | (5,187,231 | ) |
|       |                                                                           |       |                   |       |   |   |
|       | Cash and cash  equivalents, beginning of year                                  |       | 2,254,107              |       | 6,959,701 |   |
|       |                                                                           |       |                   |       |   |   |
|       | Cash and cash  equivalents, end of quarter                                     |       | $                      | 5,240,591  |   | $ | 1,772,470 |   |
|       |                                                                           |       |                   |       |   |   |
| ** ** | **Reconciliation  of net income to net cash provided by operating activities** |       |                   |       |   |   |
|       |                                                                           |       |                   |       |   |   |
|       | Net income                                                                     |       | $                      | 801,046    |   | $ | 3,639,653 |   |
|       | Decrease (increase) in  accrued income receivable                              |       | 1,931,198              |       | (2,180,678 | ) |
|       | Increase in prepaid  expenses                                                  |       | (9,397                 | )          | (9,227 | ) |
|       | Increase in accrued  expenses                                                  |       | 54,623                 |       | 69,591 |   |
|       | Increase in deferred  royalty revenue                                          |       | 2,370,000              |       | — |   |
|       |                                                                           |       |                   |       |   |   |
|       | Net cash provided by operating activities                                      |       | $                      | 5,147,470  |   | $ | 1,519,339 |   |

 

SeeNotes to Condensed Financial Statements.

 

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** **

**MESABI TRUST**

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

**April 30,2009 (Unaudited)**

 

Note 1.         The financialstatements included herein have been prepared without audit (except for thebalance sheet at January 31, 2009) in accordance with the instructions to Form 10-Qpursuant to the rules and regulations of the Securities and ExchangeCommission.  Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Stateshave been condensed or omitted pursuant to such rules andregulations.  In the opinion of theTrustees, all adjustments, consisting only of normal recurring adjustments,necessary for a fair statement of (a) the results of operations for thethree months ended April 30, 2009 and 2008, (b) the financialposition at April 30, 2009, and (c) the cash flows for the threemonths ended April 30, 2009 and 2008, have been made.  For further information, refer to thefinancial statements and footnotes included in Mesabi Trust’s Annual Report on Form 10-Kfor the year ended January 31, 2009.

 

Note 2.         Net income perunit includes accrued income receivable. For the three months ended April 30, 2009, the Trust recorded$790,780 of accrued income receivable as reflected on the Condensed BalanceSheet as of April 30, 2009 (unaudited). Accrued income receivable is accounted for and reported for the Trust’sfirst fiscal quarter based on shipments during the month of April eventhough such accrued income receivable is not available for distribution toUnitholders until it is actually received by the Trust at the end of July 2009.  Net income per unit is based on 13,120,010units outstanding during the period.

 

Note 3.         The Trustdeclares distributions each year in April, July, October and January.  Distributions are declared after receivingnotification from Northshore Mining Company (“Northshore”) as to the amount ofroyalty that is expected to be paid to the Trust based on shipments through theend of each calendar quarter.  The Trust’sfinancial statements are prepared on an accrual basis and present the Trust’sresults of operations based on each fiscal quarter which ends one month afterthe close of each calendar quarter. Because distributions are declared based on the royalty payment that ispayable as of the end of each calendar quarter and the Trust’s Net Income iscalculated as of the end of each fiscal quarter, the distributions declared bythe Trust are not equivalent to the Trust’s Net Income during the periodsreported in this quarterly report on Form 10-Q.

 

Note 4.          In April 2009,the Trust received its quarterly distribution payment from Northshore ofapproximately $5,200,000. In accordance with the Trust’s revenue recognitionpolicy, the Trust recognized revenue related to tons of iron ore that wereshipped by Northshore, but for which Northshore has indicated that finalpricing is not yet known.  As a result ofdecreases in estimated pellet pricing subsequent to January 31, 2009, thecash proceeds received by the Trust in April 2009 exceeded the royaltyrevenue recognized by the Trust for the quarter ended April 30, 2009.  Accordingly, the Trust has estimated a$2,370,000 liability in the form of deferred royalty revenue based on currentpricing estimates provided by Northshore. Deferred royalty revenue will beadjusted on a quarterly basis as updated pricing information is received, andit is possible that deferred royalty revenue may reduce future royalty paymentsto be received from Northshore beginning in the first quarter of 2010 whenpricing related to these tons of iron ore that were previously shipped byNorthshore is expected to be finalized.

 

Note 5.         The Trusteeshave determined that the unallocated cash and U.S. Government securitiesportion of Unallocated Reserve should be maintained at a prudent level, usuallywithin the range of $500,000 to $1,000,000, to meet present or futureliabilities of the Trust.  Accordingly,although the actual amount of the Unallocated Reserve will fluctuate from time 

 

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to time, and may increase ordecrease from its current level, it is currently intended that futuredistributions will be highly dependent upon royalty payments received quarterlyand the level of Trust expenses that the Trustees anticipate occurring insubsequent quarters.

 

As of April 30, 2009, theUnallocated Reserve (Deficit) of ($392,377) consisted of $1,186,843 inunallocated cash and U.S. Government securities, $790,780 of accrued revenueprimarily representing royalties not yet received by the Trust but anticipatedto be received in July 2009, less estimated deferred royalty revenue of$2,370,000.  Pursuant to the Agreement ofTrust, the Trust makes cash distributions to Unitholders based on the royaltypayments it receives from Northshore when received, rather than as royaltyincome is recorded in accordance with the Trust’s revenue recognitionpolicy.  Refer to Note 4 for furtherinformation.

 

In summary, as of April 30,2009 and January 31, 2009, the Trust’s Unallocated Reserve (Deficit) wascomprised of the following components:

 
| ** **                           | ** ** | **April 30,  2009** | ** ** | **January 31,  2009** | ** ** |
|--------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                           | ** ** | **(unaudited)**          | ** ** | ** **                 | ** ** |
| Cash  and U.S. Government securities |       | $                        | 1,186,843  |                       | $          | 1,070,203 |   |
| Accrued  income receivable           |       | 790,780                  |       | 2,721,978                  |       |
| Deferred  royalty revenue            |       | (2,370,000               | )          | -0-                        |       |
|                                 |       |                     |       |                       |       |
| Unallocated Reserve (Deficit)        |       | $                        | (392,377   | )                          | $          | 3,792,181 |   |

 

A reconciliation of theTrust’s Unallocated Reserve (Deficit) from January 31, 2009 to April 30,2009 is as follows:

 
| Unallocated  Reserve, January 31, 2009        |   | $          | 3,792,181 |   |
|----------------------------------------------------|--------|------------|-----------|--------|
|                                               |   |       |      |
| Net  income                                        |   | 801,046    |      |
| Distributions  declared                            |   | (4,985,604 | )         |
|                                               |   |       |      |
| Unallocated  Reserve (Deficit),April 30, 2009 |   | $          | (392,377  | )      |

 

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

 

**Forward-Looking Statements**

 

Certain information includedin this Quarterly Report on Form 10-Q contains “forward-looking statements”within the meaning of Section 21E of the Securities Exchange Act of 1934,and Section 27A of the Securities Act of 1933.  All such forward-looking statements,including those statements estimating iron ore pellet production or shipments,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 theholders of units of beneficial interest of Mesabi Trust.  These statements may be identified by the useof 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 areinherently subject to known and unknown risks and uncertainties.  Actual results and future developments coulddiffer materially from the results or developments expressed in or implied bythese forward-looking statements.  Theserisks and uncertainties include volatility of iron ore 

 

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and steel prices, productsupply and demand, competition, regulation or government action, litigation anduncertainties about estimates of reserves. Further, substantial portions of royalties earned by Mesabi Trust arebased on estimated prices that are subject to interim and final adjustmentswhich can be positive or negative and are dependent in part on multiple priceand inflation index factors under agreements to which Mesabi Trust is not aparty and that are not known until after the end of a contract year.  It is possible that future negative priceadjustments could offset, or even eliminate, royalties or royalty income thatwould otherwise be payable to the Trust in any particular quarter, or at yearend, thereby potentially reducing cash available for distribution to the Trust’sUnitholders in future quarters.  For a discussion of the factors,including without limitation, those that could materially and adversely affectMesabi Trust’s actual results and performance, see “Risk Factors” in Part I— Item 1A of Mesabi Trust’s Annual Report on Form 10-K for the year-ended January 31,2009, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q..  Mesabi Trust undertakes no obligation, otherthan that imposed by law, to make any revisions to the forward-lookingstatements contained in this filing or to update them to reflect circumstancesoccurring after the date of this filing.

 

This discussion should beread in conjunction with the condensed financial statements and notes presentedin this Form 10-Q and the financial statements and notes in the last filedAnnual Report on Form 10-K filed for the period ending January 31,2009 for a full understanding of Mesabi Trust’s financial position and resultsof operations for the three month period ended April 30, 2009.

 

**Background**

 

Mesabi Trust (“Mesabi Trust”or the “Trust”), formed pursuant to an Agreement of Trust dated July 18,1961 (the “Agreement of Trust”), is a trust organized under the laws of theState of New York.  Mesabi Trust holdsall of the interests formerly owned by Mesabi Iron Company (“MIC”), includingall right, title and interest in the Amendment of Assignment, Assumption andFurther 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 AmendedAssignment of Peters Lease, the “Amended Assignment Agreements”), thebeneficial interest in the Mesabi Land Trust (as such term is defined below)and all other assets and property identified in the Agreement of Trust. TheAmended 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 (“DunkaRiver”) and Claude W. Peters (the “Peters Lease”) and the Amended Assignment ofCloquet Lease relates to an Indenture made May 1, 1916 between CloquetLumber Company and Claude W. Peters (the “Cloquet Lease”).

 

The Agreement of Trustspecifically prohibits the Trustees from entering into or engaging in anybusiness.  This prohibition applies evento business activities the Trustees may deem necessary or proper for thepreservation and protection of the Trust Estate.  Accordingly, the Trustees’ activities inconnection with the administration of Trust assets are limited to collectingincome, paying expenses and liabilities, distributing net income to the holdersof Certificates of Beneficial Interest in Mesabi Trust (“Unitholders”) afterthe payment of, or provision for, such expenses and liabilities, and protectingand conserving the assets held.

 

The Trustees do not intendto expand their responsibilities beyond those permitted or required by theAgreement 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 engagesindependent consultants to assist the Trustees in, among other things,monitoring the volume and sales prices of iron ore products shipped from SilverBay, Minnesota, based on information supplied to the Trustees by NorthshoreMining Company (“Northshore”), the lessee/operator of the Mesabi Trust lands,and its parent company Cliffs Natural Resources Inc (“Cliffs”).  References to Northshore in this quarterlyreport, unless the context requires otherwise, are applicable to Cliffs aswell.

 

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Leasehold royalty incomeconstitutes the principal source of the Trust’s revenue.  Royalty rates are determined in accordancewith the terms of Mesabi Trust’s leases and assignments of leases.  Three types of royalties, as well as royaltybonuses, comprise the Trust’s leasehold royalty income:

 

·              Base overridingroyalties.  Baseoverriding royalties have historically constituted the majority of Mesabi Trust’sroyalty income.  Base overridingroyalties are determined by both the volume and selling price of iron oreproducts shipped.  Northshore isobligated to pay Mesabi Trust base overriding royalties in varying amounts,based on the volume of iron ore products shipped.  Base overriding royalties are calculated as apercentage of the gross proceeds of iron ore products produced at Mesabi Trustlands (and to a limited extent other lands) and shipped from Silver Bay,Minnesota.  The percentage ranges from2-1/2% of the gross proceeds for the first one million tons of iron oreproducts so shipped annually to 6% of the gross proceeds for all iron oreproducts in excess of 4 million tons so shipped annually.  Base overriding royaltiesare subject to price adjustments under the Cliffs Pellet Agreements and, asdescribed elsewhere in this report, such adjustments may be positive ornegative.

 

·              Royalty bonuses.  The Trust earns royalty bonuses when iron oreproducts shipped from Silver Bay are sold at prices above a threshold price perton.  The royalty bonus is based on apercentage of the gross proceeds of product shipped from Silver Bay and sold atprices above a threshold price.  Thethreshold price is adjusted (but not below $30.00 per ton) on an annual basisfor inflation and deflation (the “Adjusted Threshold Price”).  The Adjusted Threshold Price was $47.43 perton for calendar year 2008 and is $48.48 per ton for calendar year 2009.  The royalty bonus percentage ranges from 1/2of 1% of the gross proceeds (on all tonnage shipped for sale at prices betweenthe Adjusted Threshold Price and $2.00 above the Adjusted Threshold Price) to3% of the gross proceeds (on all tonnage shipped for sale at prices $10.00 ormore above the Adjusted Threshold Price). Royalty bonuses are subject to price adjustmentsunder 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 asmaller component of the Trust’s total royalty income.  Fee royalties are payable to the Mesabi LandTrust, a Minnesota land trust, which holds a 20% interest as fee owner in theAmended Assignment of Peters Lease. Mesabi Trust holds the entire beneficial interest in the Mesabi LandTrust for which U.S. Bank N.A. acts as the corporate trustee.  Mesabi Trust receives the net income of theMesabi Land Trust, which is generated from royalties on the amount of crude oremined after the payment of expenses to U.S. Bank N.A. for its services ascorporate trustee.  Crude ore is thesource of iron oxides used to make iron ore pellets and other products.  The fee royalty on crude ore is based on anagreed price per ton, subject to certain indexing.

 

·              Minimum advanceroyalties. Northshore’s obligation to pay base overriding royalties and royaltybonuses with respect to the sale of iron ore products generally accrues uponthe shipment of those products from Silver Bay. However, regardless of whether any shipment has occurred, under theterms of the Amended Assignment Agreements, Northshore is obligated to pay toMesabi Trust a minimum advance royalty. Each year, the amount of the minimum advance royalty is adjusted (butnot below $500,000 per annum) for inflation and deflation in accordance withthe Amended Assignment Agreements.  Theminimum advance royalty was $790,721 for calendar year 2008 and is $808,177 forcalendar year 2009.  Until overriding royalties(and royalty bonuses, if any) for a particular year equal or exceed the minimum

 

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advance royalty for theyear, Northshore must make quarterly payments of up to 25% of the minimumadvance royalty for the year.  Becauseminimum advance royalties are essentially prepayments of base overridingroyalties and royalty bonuses earned each year, any minimum advance royaltiespaid in a fiscal quarter are recouped by credits against base overridingroyalties and royalty bonuses earned in later fiscal quarters during the year.

 

Under the relevantdocuments, Northshore may mine and ship iron ore products from lands other thanMesabi Trust lands.  Northshore isobligated to make royalty payments in January, April, July and October ofeach year based on shipments of iron ore products from Silver Bay during eachcalendar quarter.  In the case of baseoverriding royalties and royalty bonuses, these quarterly royalty payments areto be made whether or not the related proceeds of sale have been received byNorthshore by the time such payments become due.  Northshore alone determines whether to mineoff Trust and/or such other lands, based on its current mining and engineeringplan.  The Trustees do not exert anyinfluence 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 fromSilver Bay, whether or not the iron ore products are from Mesabi Trust lands.  Mesabi Trust receives royalties at thegreater of (i) the aggregate quantity of iron ore products shipped thatwere from Mesabi Trust lands, and (ii) a portion of the aggregate quantityof all iron ore products shipped from Silver Bay that were mined from anylands, such portion being 90% of the first four million tons shipped fromSilver Bay during such year, 85% of the next two million tons shipped duringsuch year, and 25% of all tonnage shipped from Silver Bay during such year inexcess of six million tons.

 

Deutsche Bank Trust CompanyAmericas, the Corporate Trustee, performs certain administrative functions forMesabi Trust.  The Trust maintains awebsite at www.mesabi-trust.com. The Trust makes available (free of charge) itsannual, quarterly and current reports (and any amendments thereto) filed withthe Securities and Exchange Commission (the “SEC”) through its website as soonas reasonably practicable after electronically filing or furnishing suchmaterial with or to the SEC.

 

**Results of Operations**

 

**Comparison of Iron Ore Pellet Production andShipments for the Three Months Ended April 30, 2009 and April 30,2008**

 

As shown in the table below,production of iron ore pellets at Northshore from Mesabi Trust lands during thefiscal quarter ended April 30, 2009 totaled 681,178 tons, and actualshipments over the same period totaled 237,453 tons.  By comparison, actual pellet production andactual shipments for the comparable prior period were 1,216,101 tons and 1,040,114tons, respectively.  The decrease inproduction and shipments at Northshore is the result of a significant declinein orders from Cliffs’ customers and lower anticipated demand from Cliffs’customers as they continue to adjust their purchases based on anticipateddemand from their customers.

 
| **Fiscal Quarter Ended** | ** ** | **Pellets Produced from  Trust Lands (tons)** | ** ** | **Pellets Shipped from  Trust Lands (tons)** | ** ** |
|--------------------------|------------|-----------------------------------------------|------------|----------------------------------------------|------------|
| April 30, 2009      |       | 681,178                                       |       | 237,453                                      |       |
| April 30, 2008      |       | 1,216,101                                     |       | 1,040,114                                    |       |

 

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**Comparison of RoyaltyIncome for the Three Months Ended April 30, 2009 and April 30, 2008**

 

Total royaltyincome for the quarter decreased approximately 73.4% over the comparable priorperiod.  The decrease in total royaltyincome is due to lower sales prices per ton of iron ore pellets sold and adecrease in the total volume of iron ore pellets shipped during the threemonths ended April 30, 2009, each as compared to the three months ended April 30,2008.  The lower sales prices per ton andthe decrease in the volume of iron ore pellets shipped both contributed to adecrease in the base overriding royalty and the bonus royalty payments.

 

The table below shows thatthe base overriding royalties, the bonus royalties, and the fee royalties eachdecreased****by 67.5%, 80.4%, and 49.3%respectively, for the three months ended April 30, 2009.  The decreases in the base overridingroyalties and the bonus royalties are both attributable to the lower salesprices per ton of iron ore pellets and the decrease in the volume of tons shippedduring the three months ended April 30, 2009, each as compared to thethree months ended April 30, 2008.

 

The table below summarizesthe components of Mesabi Trust’s royalty income for the three months ended April 30,2009 and April 30, 2008, respectively:

 
| ** **                              | ** ** | **Three Months Ended April 30,** | ** ** |
|-----------------------------------------|------------|---------------------------------------|------------|
| ** **                              | ** ** | **2009**                              | ** ** | **2008** | ** ** |
| Base overriding royalties               |       | $                                     | 570,565    |   | $ | 1,756,171 |   |
| Bonus royalties                         |       | 383,761                               |       | 1,958,725 |   |
| Minimum advance royalty paid (recouped) |       | —                                |       | — |   |
| Fee royalties                           |       | 67,386                                |       | 132,814 |   |
| Total royalty income                    |       | $                                     | 1,021,712  |   | $ | 3,847,710 |   |

 

**Comparison of Income, Expenses and Distributionsfor the Three Months Ended April 30, 2009 and April 30, 2008**

 

Net income for the threemonths ended April 30, 2009 was $801,046, a decrease of approximately 78%compared to the three months ended April 30, 2008.  As with the decrease in total royalty income,the decrease in net income for the quarter ended April 30, 2009 is theresult of lower sales prices per ton of iron ore pellets shipped and a decreasein the volume of tons shipped.  The Trust’sexpenses of $223,835 for the three months ended April 30, 2009 wasconsistent with the Trust’s expenses for the three month period ended April 30,2008.  The table below summarizes theTrust’s income and expenses for the three months ended April 30, 2009 and April 30,2008, respectively.

 
| ** **           | ** ** | **Three Months Ended April 30,** | ** ** |
|----------------------|------------|---------------------------------------|------------|
| ** **           | ** ** | **2009**                              | ** ** | **2008** | ** ** |
| Total royalty income |       | $                                     | 1,021,712  |   | $ | 3,847,710 |   |
| Interest income      |       | 3,169                                 |       | 14,097 |   |
| Gross income         |       | 1,024,881                             |       | 3,861,807 |   |
| Expenses             |       | 223,835                               |       | 222,154 |   |
| Net income           |       | $                                     | 801,046    |   | $ | 3,639,653 |   |

 

As presented on the Trust’s CondensedStatements of Income on page 2 of this quarterly report, the Trust’s netincome per unit decreased $0.2163 to $0.0611 for the three months ended April 30,2009, as compared to the three months ended April 30, 2008.  At the same time, distributions declared perunit increased $0.2600 from $0.1200 for the three months ended April 30,2008 to $0.3800 for the three months ended April 30, 2009.  Distributions are declared after receivingnotification from Northshore Mining Company as to the amount of royalty incomethat is expected to be paid to the Trust based on 

 

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shipments through the end ofeach calendar quarter and such royalty payments may include pricing adjustmentswith respect to shipments during prior periods. The Trust accounts for and reports accrued income receivable based onshipments during the last month of the Trust’s fiscal quarter (April, July, October andJanuary) and price adjustments under the Cliffs Pellet Agreements (which can bepositive or negative and can result in significant variations in royaltiesreceived by Mesabi Trust and cash available for distribution toUnitholders).  The Trust accounts forthese amounts by using estimated prices and reports such amounts even thoughaccrued income receivable is not available for distribution to Unitholdersuntil it is received by the Trust. Accordingly, distributions declared by the Trust are not equivalent tothe Trust’s Net Income during the periods reported in this quarterly report on Form 10-Q.

 

**Comparison of UnallocatedReserve as of April 30, 2009, April 30, 2008 and January 31,2009**

 

The Unallocated Reserve(Deficit), which is comprised of accrued income receivable, cash reserve forpotential fixed or contingent future liabilities, and, with respect to thethree months ended April 30, 2009, deferred royalty revenue, decreasedfrom $3,725,099 as of April 30, 2008 to ($392,377)****as of April 30, 2009. The deficit in the Trust’s Unallocated Reserve is primarily the resultof an estimated $2,370,000 liability, which is represented on the Trust’sbalance sheet as deferred royalty revenue. Because of declines in the estimated pricing of iron ore pelletssubsequent to January 31, 2009, the royalty payment received by the Trustin April includes approximately $2,370,000 of cash proceeds that werereceived by the Trust, but has not been recognized as revenue in accordancewith the Trust’s revenue recognition policy. The $2,370,000 deferred royalty revenue may, depending on futureadjustments to iron ore pellet pricing, if any, cause a cumulative negativeprice adjustment related to shipments of pellets during prior periods, whichcould be offset against future royalty income to be received by the Trust.

 

Notwithstanding the deficitin the Trust’s Unallocated Reserve as described above, the Trust’s cash reservefor potential fixed or contingent future liabilities, represented on the Trust’sbalance sheet by unallocated cash and U.S. Government securities, increased103% to $1,186,843 as of April 30, 2009 from $584,496 as of April 30, 2008. The increase in the cash reserve for potential fixed or contingentfuture liabilities is due to the Trustee’s decision to supplement theUnallocated Reserve because of uncertainty surrounding the volatile globaleconomic climate and the global financial, liquidity and credit crisis thatunfolded during the second half of 2008. At the same time, the accrued income receivable portion of theUnallocated Reserve decreased****from$3,140,603 as of April 30, 2008 to $790,780 as of April 30,2009.  The decrease in the accrued incomereceivable portion of the Unallocated Reserve is the result of significantlylower shipments during the month of April 2009, together with generallylower prices on pellets shipped by Northshore, both as compared to April 2008.

 

The Trust’s UnallocatedReserve as of April 30, 2009 decreased by approximately $4,185,000 ascompared to the fiscal year ended January 31, 2009.  The decrease in the Unallocated Reserve isdue to the Trust’s accrual of $2,370,000 in deferred royalty revenue and thesubstantial reduction in accrued income receivable due to the reduced shipmentsfrom Northshore during the month of April 2009 and the absence of positiveprice adjustments which were present as of January 31, 2009.  As a result of the price adjustmentmechanisms under the Cliffs Pellet Agreements, the Trust received positiveadjustments to the royalty income which is reflected in the royalty income forthe year ended January 31, 2009. Those adjustments were attributable to shipments of iron ore pellets byNorthshore/Cliffs to its customers from Silver Bay, Minnesota during calendaryears 2006, 2007 and 2008.  In theaggregate, the pricing adjustments increased the accrued income receivablereflected on the Trust’s balance sheet as of January 31, 2009.  At January 31, 2009, approximately 72%of the Unallocated Reserve or $2,721,978 was represented by accrued incomereceivable while 28% or $1,070,203 was represented by unallocated cash andU.S. Government securities.

 

The Trustees have determinedthat a portion of the Unallocated Reserve, usually within the range of $500,000to $1,000,000 or such other amount as the Trustees may deem prudent, should bemaintained as a reserve for potential fixed or contingent futureliabilities.  Although the actual amountof the 

 

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Unallocated Reserve willfluctuate from time to time and may increase or decrease from its currentlevel, it is currently intended that future distributions will be highlydependent upon royalty income as it is received and the level of Trustexpenses.  The amount of future royaltyincome available for distribution will be subject to the volume of iron oreproduct shipments and the dollar level of sales by Northshore.  Shipping activity is greatly reduced duringthe winter months and economic conditions, particularly those affecting thesteel industry, may adversely affect the amount and timing of such futureshipments and sales.  It is possible thatfuture negative price adjustments could offset, or even eliminate, royalties orroyalty income that would otherwise be payable to the Trust in any particularquarter, or at year end, thereby potentially reducing cash available fordistribution to the Trust’s Unitholders in future quarters.  See discussion under the heading “RiskFactors” beginning on page 3 of the Trust’s Annual Report on Form 10-Kfor the fiscal year ended January 31, 2009, as updated by Part II,Item 1A of this Quarterly Report on Form 10-Q.

 

The Trustees will continueto monitor the economic circumstances of the Trust to strike a responsiblebalance between distributions to Unitholders and the need to maintain adequatereserves at a prudent level, given the unpredictable nature of the iron oreindustry, the Trust’s dependence on the actions of the lessee/operator, and thefact that the Trust essentially has no other liquid assets.

 

**RecentDevelopments**

 

***Production and Shipments***.  In its Form 10-Q filed May 1, 2009,Cliffs reported that production at Northshore for the three months ended March 31,2009 was 0.9 million tons.   Comparatively, production of iron ore pellets at Northshore for thethree months ended March 31, 2008 was 1.3 million tons.  Northshore has not provided the Trustees withan estimate of total expected shipments of iron ore pellets for calendar year2009.  During calendar years 2008, 2007,2006 and 2005, the percentage of shipments of iron ore products from MesabiTrust lands was approximately 90.2%, 88.2%, 90.9% and 90.1%, respectively, oftotal shipments.  In its current reporton Form 8-K filed May 5, 2009, Cliffs estimated total production of3.2 million tons of iron ore pellets at Northshore during calendar year 2009(which assumes that production at Northshore will resume in early July 2009).   Northshore has not advised the Trustees asto the percentage of iron ore products from Mesabi Trust lands it anticipatesshipping in calendar year 2009.   However, based on information from the Trust’s consultants, shipments ofiron ore products from Mesabi Trust lands totaled only 24,900 tons in May 2009.  See the description of the uncertainty ofmarket conditions in the iron ore and steel industry under “Important Factors AffectingMesabi Trust” below and the information under the heading “Risk Factors” in Part I— Item 1A of the Trust’s Annual Report on Form 10-K for the year-ended January 31,2009, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.

 

***Extension of Production Shutdownat Northshore***.  As reported in a current report on Form 8-Kfiled by the Trust on May 6, 2009, Cliffs filed a current report on Form 8-Kon May 5, 2009 in which Cliffs announced an extension of the shutdown ofproduction at Northshore.  Instead ofrestarting production in May, Cliffs announced an extension of the productionshutdown, which is now scheduled to continue into early July 2009.  Cliffs also reported that the extension ofthe production shutdown will reduce total production at Northshore toapproximately 3.2 million tons for calendar 2009 (which assumes that production atNorthshore will resume in early July 2009).  This number represents a 13.5% decrease fromthe 3.7 million tons of production previously estimated by Cliffs.  Cliffs has not informed the Trustees as towhether the decrease in production will result in a decrease in shipments ofiron ore pellets from Silver Bay, Minnesota. Accordingly, the Trustees are unable to make any projections regardingthe extent to which the temporary production shutdown at Northshore may impactfuture royalties payable to Mesabi Trust.

 

***NorthshoreAdministrative Permit Amendment***.   As reported in the Trust’s Form 10-Kfiled April 16, 2009, according to Cliffs’ Form 10-K filed February 26,2009, on December 16, 2006, Cliffs submitted an administrative permitamendment application to the MPCA with respect to Northshore’s Title Voperating permit.  Cliffs reported thatNorthshore requested an amendment to its permit to delete a 30 year old “controlcity” monitoring requirement but the MPCA denied Northshore’s application on February 23,2007.   In its Form 10-K, Cliffsfurther reported that it had appealed the denial of its 

 

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application to the Minnesota Court of Appeals andthat subsequent to the filing of the appeal, the MPCA advised Northshore thatthe MPCA considered Northshore to be in violation of the control city standard.Cliffs also reported that it was in discussions with the MPCA with respect tothe terms of a compliance schedule in which it would agree to take certainactions in settlement of the alleged violation. According to Cliffs’ Form 10-K, the Minnesota Center forEnvironmental Advocacy had since filed a motion with the Court of Appeals tointervene in Northshore’s appeal of the denial of an administrative amendmentto Northshore’s Title V operating permit.

 

On May 20, 2008, theMinnesota Court of Appeals issued a ruling on Northshore’s appeal and held thatthe MPCA did not err in concluding that Northshore proceeded under the wrongpermit modification procedures when it applied to amend its permit to eliminatethe “control city” standard from its Title V operating permit.  The Court ruled that Northshore’s administrativeamendment application should have been dealt with through the major permitamendment process rather than through the administrative permit amendmentprocess, which is used to address insignificant amendments.  Cliffs also reported that on August 28, 2008it filed a major permit amendment to remove the control city requirement fromits permit and that this permit amendment is currently pending. Cliffs alsoreported that on November 25, 2008, in response to the proposed amendment,the MPCA issued an order declaring that Northshore’s request to remove thecontrol city standard from its permit constitutes a “project” for which anEnvironmental Assessment Worksheet, or EAW, must be completed.  According to Cliffs’ Form 10-K, the MPCAalso stated that it was ceasing all other work on the permit, including its ownefforts to create a replacement standard, until the environmental reviewprocess was complete.  Cliffs alsoreported that Northshore has filed an action to challenge the MPCA’srequirement for an EAW in Minnesota State District Court, which is currentlypending.  The Trustees are unable topredict what impact the administrative hearings discussed above will have onNorthshore’s compliance with its Title V operating permit or future royaltiespayable to the Trust.

 

**Important FactorsAffecting Mesabi Trust**

 

The Agreement ofTrust specifically prohibits the Trustees from entering into or engaging in anybusiness.  This prohibition seeminglyapplies even to business activities the Trustees deem necessary or proper forthe preservation and protection of the Trust Estate (as such term is definedbelow).  Accordingly, the Trustees’activities in connection with the administration of Trust assets are limited tocollecting income, paying expenses and liabilities, distributing net income toMesabi Trust’s Unitholders after the payment of, or provision for, suchexpenses and liabilities, and protecting and conserving the assets held.  Consequently, the income of Mesabi Trust ishighly dependent upon the activities and operations of Northshore, and theterms and conditions of the leases and assignments of leases between MesabiTrust and Northshore.

 

Neither Mesabi Trust nor theTrustees have any control over the operations and activities of Northshore,except within the framework of the Amended Assignment Agreements.  Cliffs alone controls (i) historicaloperating data, including iron ore production volumes, marketing of iron oreproducts, operating and capital expenditures as they relate to Northshore,environmental and other liabilities and the effects of regulatory changes; (ii) plansfor Northshore’s future operating and capital expenditures; (iii) geologicaldata relating to ore reserves (iv) projected production of iron oreproducts; (v) contracts between Cliffs and Northshore with theircustomers; and (vi) the decision to mine off Mesabi Trust and/or statelands based on Cliffs’ current mining and engineering plan.  The Trustees do not exert any influence overmining operational decisions at Northshore, nor do the Trustees provide anyinput regarding the ore reserve estimated at Northshore as reported by Cliffs.  While the Trustees request materialinformation for use in periodic reports as part of their evaluation of MesabiTrust’s disclosure controls and procedures, the Trustees do not control thisinformation and they rely on the information in Cliffs’ periodic and currentfilings with the SEC to provide accurate and timely information in Mesabi Trust’sreports filed with the SEC.

 

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In accordance with theAgreement of Trust and the Amendment, the Trustees are entitled to, and in factdo, rely upon certain experts in good faith, including (i) the independentconsultants with respect to monthly production and shipment reports, which includefigures on crude ore production and iron ore pellet shipments, and discussionsconcerning the condition and accuracy of the scales and plans regarding thedevelopment of Mesabi Trust’s mining property; and (ii) the accountingfirm they have contracted with for non-audit services, including reviews offinancial data related to shipping and sales reports provided by Northshore anda 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’sactual results and performance, see “Risk Factors” in Part I — Item 1A ofMesabi Trust’s Annual Report on Form 10-K for the year-ended January 31,2009.

 

**Iron Ore Pricing and Contract Adjustments**

 

During the course of its fiscal year someportion of the royalties paid to Mesabi Trust are based on estimated prices foriron ore products sold under term contracts between Cliffs and its subsidiariesand certain of their customers (the “Cliffs Pellet Agreements”). Mesabi Trustis not a party to any of the Cliffs Pellet Agreements. These prices are subjectto interim and final pricing adjustments, which can be positive or negative,and which adjustments are dependent in part on a variety of price and inflationindex factors, including but not limited to the international benchmark pelletprice, hot band steel prices and various Producer Price Indexes. AlthoughNorthshore makes interim adjustments to the royalty payments on a quarterlybasis, these price adjustments cannot be finalized until after the end of acontract year. This may result in significant and frequent variations inroyalties received by Mesabi Trust (and in turn the resulting amount of fundsavailable for distribution to Unitholders by the Trust) from quarter to quarterand on a comparative historical basis, and these variations, which can bepositive or negative, cannot be predicted by Mesabi Trust.  It is possible that future negative price adjustmentscould offset, or even eliminate, royalties or royalty income that wouldotherwise be payable to the Trust in any particular quarter, or at year end,thereby potentially reducing cash available for distribution to the Trust’sUnitholders in future quarters.

 

**Effectsof Securities Regulation**

 

The Trust is apublicly-traded trust listed on the New York Stock Exchange (“NYSE”) and istherefore subject to extensive regulation under, among others, the SecuritiesAct of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of2002 (“Sarbanes-Oxley”) and the rules and regulations of the NYSE.  Issuers failing to comply with suchauthorities risk serious consequences, including criminal as well as civil andadministrative penalties.  In mostinstances, these laws, rules and regulations do not specifically addresstheir applicability to publicly-traded trusts such as Mesabi Trust.  In particular, Sarbanes-Oxley mandated theadoption by the Securities and Exchange Commission (the “SEC”) and NYSE ofcertain rules and regulations that are impossible for the Trust toliterally satisfy because of its nature as a pass-through trust.  Pursuant to NYSE rules the Trust isexempt from many of the corporate governance requirements that apply topublicly traded corporations.  The Trustdoes not have, nor does the Agreement of Trust provide for, a board ofdirectors, an audit committee, a corporate governance committee or acompensation committee.  The Trusteesintend to closely monitor the SEC’s and the NYSE’s rulemaking activity and willattempt to comply with such rules and regulations where applicable.

 

InMay 2008, the Trust established a website in response to the NYSE’sinterpretation of Rule 203.01 of the NYSE Listed Company Manual.  The Trust’s website islocated at www.mesabi-trust.com.

 

**Critical Accounting Policies and Estimates**

 

This “Trustees’ Discussionand Analysis of Financial Condition and Results of Operations” is based uponthe Trust’s financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States.  The preparation of these financial statementsrequires the Trustees to make estimates and judgments that affect the reportedamounts of assets, liabilities, 

 

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revenues andexpenses, and related disclosure of contingent assets and liabilities.  Critical accounting policies are those thathave meaningful impact on the reporting of the Trust’s financial condition andresults, and that require significant judgment and estimates.  During the preparation of financialstatements, the Trust makes estimates, assumptions and judgments that affectreported amounts. These estimates, assumptions and judgments include thoserelated to revenue recognition and accrued expenses. The Trust bases itsestimates on various assumptions and historical experience, which are believedto be reasonable; however, due to the inherent nature of estimates, actualresults may differ significantly due to changed conditions or assumptions. On aregular basis, the Trust reviews the accounting policies, assumptions,estimates and judgments to ensure that the financial statements are fairlypresented in accordance with accounting principles generally accepted in theUnited States. However, because future events and their effects cannot bedetermined with certainty, actual results could differ from assumptions andestimates, and such differences could be material.

 

The Trust did not have anychanges in critical accounting policies or in significant accounting estimatesduring the three months ended April 30, 2009.  For a complete description of the Trust’ssignificant accounting policies, please see Note 2 to the financial statementsincluded in the Trust’s Annual Report on Form 10-K for the year ended January 31,2009.

 

**Item3.  Quantitative and QualitativeDisclosures About Market Risk.**

 

Not applicable.

 

**Item4.  Controls and Procedures.**

 

***Evaluation of Disclosure Controlsand Procedures***.  The Trustees maintain disclosure controls andprocedures designed to ensure that information required to be disclosed by theTrust in the reports that it files or submits under the Securities Exchange Actof 1934, as amended, is recorded, processed, summarized and reported within thetime periods specified in the rules and regulations of the Securities andExchange Commission.  Disclosure controlsand procedures include controls and procedures designed to ensure thatinformation required to be disclosed by the Trust is accumulated and communicatedby Northshore, and consultants to the Trustees as appropriate, to allow timelydecisions regarding required disclosure.

 

As part of their evaluationof the Trust’s disclosure controls and procedures, the Trustees rely onquarterly shipment and royalty calculations provided by Northshore.  Because Northshore has declined to supportthis information with a written certification attesting to whether Northshorehas established disclosure controls and procedures and internal controlssufficient to enable it to verify that the information furnished to theTrustees is accurate and complete, the Trustees also rely on (a) an annualcertification from Northshore and Northshore’s parent, Cliffs, certifying as tothe accuracy of the royalty calculations, and (b) the related duediligence review performed by the Trust’s external accountants.** **In addition, theTrust’s consultants review the schedule of leasehold royalties payable andshipping and sales reports provided by Northshore against production andshipment reports prepared by the Eveleth Fee Office, Inc., an independentconsultant to the Trust (“Eveleth Fee Office”). The Eveleth Fee Office gathersproduction and shipping information from Northshore and prepares monthlyproduction and shipment reports for the Trustees. Furthermore, as part of itsengagement by the Trust, the Eveleth Fee Office also attends Northshore’scalibration and testing of its crude ore scales and boat loader scales whichare conducted on a periodic basis.

 

As of the end of the periodcovered by this report, the Trustees carried out an evaluation of the Trust’sdisclosure controls and procedures.  TheTrustees have concluded that such disclosure controls and procedures areeffective.

 

***Changes in Internal Control Over Financial Reporting***.  To the knowledge of the Trustees, there hasbeen no change in the Trust’s internal control over financial reporting thatoccurred during the 

 

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Trust’s lastfiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the Trust’s internal control over financial reporting.  The Trustees note for purposes ofclarification that they have no authority over, and make no statementconcerning, the internal control over financial reporting of Northshore orCliffs.

 

**PART II- OTHER INFORMATION**

 

**Item 1A.         RiskFactors**

 

The information presented below amends, updates and should be read inconjunction with the risk factors and information disclosed here and in theTrust’s Annual Report on Form 10-K for the fiscal year ended January 31,2009. The risk factors disclosed here and in the Trust’s Annual Report on Form 10-Kfor the fiscal year ended January 31, 2009, in addition to the otherinformation set forth in this quarterly report, could have a material adverseeffect on the royalties received by Mesabi Trust. You should carefully considersuch risks in addition to other information contained in this report beforeengaging in any transaction involving units of beneficial interest of MesabiTrust. Additional risks and uncertainties not currently known to the Trust orthat have been deemed to be immaterial as of the filing of this QuarterlyReport could also materially adversely affect the Trust’s results ofoperations.

 

The Trust’s risk factors are hereby updated as follows:

 

***Theglobal economic climate and the current disruption in the financial and creditmarkets have created uncertainty and a prolonged downturn in global economicconditions could adversely affect the royalties received by the Trust***.

 

The volatile global economic climate and the current global financial andcredit crisis could have a material adverse effect on the royalties received bythe Trust.  Financial markets in theUnited States and elsewhere have been experiencing extreme disruption in recentmonths, including, among other things, extreme volatility in security prices,severely diminished liquidity and credit availability, ratings downgrades ofcertain investments and declining values of others. The global economy hasentered a recession.  Cliffs previouslyannounced production curtailments, workforce reductions and a one-month,temporary idling of production at Northshore in April 2009.  On May 5, 2009, Cliffs announcedadditional workforce reductions and an extension of the shutdown of productionat Northshore through early July 2009. According to Cliffs, some of its customers have announced curtailmentsof production, which could adversely affect the demand for iron ore andtherefore shipments from lands owned by the Trust.  Continuation or worsening of the currenteconomic conditions, a prolonged global, national or regional economicrecession or other events could produce major changes in demand patterns andmay have a material adverse effect on sales prices of iron ore products shippedby Northshore which would adversely affect the royalties received by theTrust.  Moreover, such conditions couldimpact the international benchmark pellet price, hot band steel prices andvarious Producer Price Indexes all of which affect the royalties payable to theTrust.  The Trustees are not able topredict the impact the volatile global economic climate and the current globalfinancial and credit crisis will have on future royalties payable to the Trust.

 

***Theroyalties paid to the Trust may be adversely affected by softening demand andreductions in the market prices for iron ore and steel products both of whichare subject to market forces beyond the Trust’s control.***

 

The world priceof iron ore and steel are strongly influenced by international demand andglobal market conditions which are uncertain. Domestic demand for iron ore and steel products, which is influenced byinternational markets, is also uncertain. In recent years, many major iron ore suppliers increased their capacityto meet the increased demand for iron ore and steel products, particularly fromChina.  With the current global economiccrisis, the market is presently characterized by a significant decline in steeldemand and limited global demand for iron ore. Reduced demand for iron ore willlikely 

 

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result in decreased sales ofproducts to Cliffs’ customers and decreasing prices, all of which wouldadversely affect royalties received by the Trust in 2009.  In its Form 10-Q filed May 1, 2009,Cliffs reported that there is significant uncertainty in the current economicenvironment which may continue to impact Cliffs’ total sales volume.  Since the Trust is not party to any specificcustomer contracts that Cliffs has with its customers and because these macroeconomicforces are difficult to forecast, the Trustees are not able to predict theextent to which the reduced demand and lower prices for iron ore products willadversely affect royalties payable to the Trust.

 

***Riskfactors affecting Cliffs, and the operations of Northshore, could have amaterial adverse effect on the royalties of the Trust.***

 

Because substantially all of the Trust’s revenue is derived from iron oreproducts shipped by Northshore from Silver Bay, Northshore’s iron ore pelletprocessing and shipping activities directly impact the Trust’s revenues in eachquarter and for each year.  A number offactors affect Cliffs’ operations, including Northshore’s production andshipment volume.  These factors which aredescribed in Cliffs’ Form 10-K filed February 26, 2009, as updated byCliffs’ Form 10-Q filed May 1, 2009, include, among others, theglobal economic climate and financial market conditions, economic conditions inthe iron ore industry, extensive governmental regulation relating to environmentalmatters and the costs and risks related thereto, availability of substitutematerials, pricing by domestic and international competitors, long-termcustomer contracts or arrangements by Northshore or its competitors, priceadjustment provisions in Cliffs’ North American term supply agreements (whichtake into account various price indexes), availability of ore boats, productionat Northshore’s mining operations, natural disasters, shipping conditions inthe Great Lakes and production at Northshore’s pelletizing/processingfacility.  The decision by Cliffs toshutdown Northshore’s pelletizing lines through early July 2009 is likelyto have a material adverse effect on the royalties paid to the Trust.Additionally, there is no assurance that production at Northshore will infactre-commence on the start-up date planned by Northshore.  The Trust cannotpredict the extent to which this production shutdown will impact the Trust’sroyalty income as the royalties payable to the Trust are generated based on shipmentsof iron ore products not production.

 

***Royaltiesreceived by the Trust, and distributions paid to Unitholders, in any particularquarter are not necessarily indicative of royalties or distributions that willbe paid in any subsequent quarter or for a full year, and depending on theextent of estimated price adjustments, and demand for and market prices of ironore, there may not be sufficient cash available to make a distribution in aparticular quarter.***

 

Royalties received by the Trust can fluctuate significantly from quarterto quarter and year to year based upon market prices for iron ore products, thelevel of orders for iron ore products from Cliffs’ customers, the consumptionof inventory by Cliffs’ customers, and production decisions made by Northshore.  Moreover, because the royalties paid to theTrust in any particular quarter include payments made with respect to pelletsshipped and sold at estimated prices that are subject to future interim andfinal multi-year adjustments in accordance with Cliff’s Customer Agreements,the current downward trends in demand and market prices for iron and steelproducts could result in negative adjustments to royalties in future quarters,some of which may be significant.  Thesenegative price adjustments could have a material adverse effect on the Trust’sroyalty income, which in turn could result in lower quarterly distributions,and possibly could reduce funds available for distribution in any quarter andin some quarters may offset royalties otherwise payable to the Trust.  Because of this, cash available fordistribution to Unitholders in future quarters could be reduced, potentiallymaterially.  As a result, the royaltiesreceived by the Trust, and the distributions paid to Unitholders, in anyparticular quarter are not necessarily indicative of royalties that will bereceived, or distributions that will be paid, in any subsequent quarter or fora full year.  Based on the foregoing andthe current uncertainty in the economic environment, the Trust cannot ensurethat there will be adequate cash available to make a distribution toUnitholders in any particular quarter.

 

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**Item 6.****                    ****Exhibits.**

 
| 31     |   | Certification of Corporate  Trustee of Mesabi Trust pursuant to Rule 13a-14(a) of the  Securities Exchange Act of 1934, as adopted pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                          |
| 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.                                      |
|   |   |                                                                                                                                                                                                          |
| 99.1   |   | Report of Wipfli LLP, dated June 3, 2009  regarding its review of the un-audited interim financial statements of Mesabi  Trust as of and for the quarter ended April 30, 2009.                      |

 

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**SIGNATURES**

** **

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
|                    | MESABI TRUST                                                      |
|-------------------------|-------------------------------------------------------------------|
|                    | (Registrant)                                                      |
|                    |                                                              |
|                    | By:                                                               | DEUTSCHE BANK TRUST COMPANY AMERICAS |
|                    |                                                              | Corporate Trustee |
|                    | Principal Administrative Officer and duly  authorized signatory:* |
|                    |                                                              |
|                    | By:                                                               | Deutsche Bank National Trust Company |
|                    |                                                              |   |
| Date: June 8, 2009 |                                                              | By: | /s/ Kenneth R. Ring |
|                    |                                                              | Name: Kenneth R. Ring |
|                    |                                                              | Title: Vice President |

 

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*              Thereare no principal executive officers or principal financial officers of theregistrant.

 

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