UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)



x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 - For the Period Ended June 30, 2006

Or



o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 -For the Transition Period From ______________ to ______________



Commission file number 1-701

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GREAT NORTHERN IRON ORE PROPERTIES

(Exact name of registrant as specified in its charter)



|Minnesota                                                                      | 41-0788355                             
|------------------------------------------------------------------------------ | ---------------------------------------
|(State or other jurisdiction of
incorporation or organization)                 | (I.R.S. Employer
Identification Number)
|                                                                               |                                        
|W-1290 First National Bank Building
332 Minnesota Street
Saint Paul, Minnesota | 55101-1361                             
|(Address of principal executive office)                                        | (Zip Code)                             





(651) 224-2385

(Registrants telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yesx
Noo



Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
Act).

|Large accelerated filer o | Accelerated filer x | Non-accelerated filer o
|------------------------- | ------------------- | -----------------------



Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). YesoNox



|Number of shares of beneficial interest outstanding on June 30, 2006: | 1,500,000
|--------------------------------------------------------------------- | ---------





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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
GREAT NORTHERN IRON ORE PROPERTIES

CONDENSED BALANCE SHEETS

|                                               | June 30
2006 |  | December 31
2005
|---------------------------------------------- | ------------ |  | ----------------
|                                               |              |  |                 
|
|ASSETS                                         |              |  |                 
|                                              
|CURRENT ASSETS                                 |              | 
|Cash and cash equivalents                      |              |  | $               
|United States Treasury securities              |              |  |                 
|Royalties receivable                           |              |  |                 
|Prepaid expenses                               |              |  |                 
|                                               |              |  |                 
|TOTAL CURRENT ASSETS                           |              |  |                 
|                                              
|NONCURRENT ASSETS                              |              | 
|United States Treasury securities              |              |  |                 
|Prepaid pension expense                        |              |  |                 
|                                               |              |  |                 
|                                               |              |  |                 
|                                              
|PROPERTIES                                     |              | 
|Mineral and surface lands                      |              |  |                 
|Less allowances for depletion and amortization |              |  |                 
|                                               |              |  |                 
|                                               |              |  |                 
|Building and equipmentat cost, less           |              | 
|allowances for accumulated depreciation        |              | 
|(6/30/06 - $211,359; 12/31/05 - $223,654)      |              |  |                 
|                                               |              |  |                 
|                                               |              |  |                 
|                                               |              |  |                 
|                                               |              |  | $               
|                                               |              |  |                 
|                                              
|LIABILITIES AND BENEFICIARIES EQUITY          |              | 
|                                              
|CURRENT LIABILITIES                            |              | 
|Accounts payable and accrued expenses          |              |  | $               
|Distributions                                  |              |  |                 
|                                               |              |  |                 
|TOTAL CURRENT LIABILITIES                      |              |  |                 
|                                              
|NONCURRENT LIABILITIES                         |              |  |                 
|                                              
|BENEFICIARIES EQUITY, including certificate   |              | 
|holders equity, represented by 1,500,000      |              | 
|shares of beneficial interest authorized       |              | 
|and outstanding, and reversionary interest     |              |  |                 
|                                               |              |  |                 
|                                               |              |  | $               
|                                               |              |  |                 

Note: The balance sheet at December
31, 2005, has been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

See notes to condensed financial
statements.

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GREAT NORTHERN IRON ORE PROPERTIES

CONDENSED STATEMENTS OF INCOME
(Unaudited)

|                                    | Three Months Ended
June 30 |  | Six Months Ended
June 30
|----------------------------------- | -------------------------- |  | ------------------------
|                                    |                            |  |                         
|
|                                    |                            |  |                         
|Revenues:                           |                            |  |                         
|Royalties                           |                            |  | $                       
|Interest and other income           |                            |  |                         
|                                    |                            |  |                         
|                                    |                            |  |                         
|Costs and expenses                  |                            |  |                         
|                                    |                            |  |                         
|                                   
|NET INCOME                          |                            |  | $                       
|                                    |                            |  |                         
|                                   
|Weighted-average shares outstanding |                            |  |                         
|                                   
|BASIC & DILUTED EARNINGS PER SHARE  |                            |  | $                       
|                                    |                            |  |                         
|                                   
|Distributions declared per share    |                            |  | $                       

|(1) | $2.20 | declared | 6/12/2006 |      |       |          |          
|--- | ----- | -------- | --------- | ---- | ----- | -------- | ---------
|    |       | payable  | 7/31/2006 |      |       |          |          
|    |       |          |           |      |       |          |          
|(2) | $2.40 | declared | 6/16/2005 |      |       |          |          
|    |       | paid     | 7/29/2005 |      |       |          |          
|    |       |          |           |      |       |          |          
|(3) | $2.00 | declared | 3/20/2006 | plus | $2.20 | declared | 6/12/2006
|    |       | paid     | 4/28/2006 |      |       | payable  | 7/31/2006
|    |       |          |           |      |       |          |          
|(4) | $2.20 | declared | 3/18/2005 | plus | $2.40 | declared | 6/16/2005
|    |       | paid     | 4/29/2005 |      |       | paid     | 7/29/2005

See notes to condensed financial
statements.

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GREAT NORTHERN IRON ORE PROPERTIES

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                     | Six Months Ended
June 30
|---------------------------------------------------- | ------------------------
|                                                     |                         
|
|                                                     |                         
|Cash flows from operating activities:                |                         
|Cash received from royalties and rents               |                         
|Cash paid to suppliers and employees                 |                         
|Interest received                                    |                         
|                                                     |                         
|NET CASH PROVIDED BY OPERATING ACTIVITIES            |                         
|                                                    
|Cash flows from investing activities:                |                         
|U.S. Treasury securities purchased                   |                         
|U.S. Treasury securities matured                     |                         
|Net expenditures for equipment                       |                         
|                                                     |                         
|NET CASH PROVIDED BY INVESTING ACTIVITIES            |                         
|                                                    
|Cash flows from financing activities:                |                         
|Distributions paid                                   |                         
|                                                     |                         
|NET CASH USED IN FINANCING ACTIVITIES                |                         
|                                                     |                         
|                                                    
|Net increase (decrease) in cash and cash equivalents |                         
|                                                    
|Cash and cash equivalents at beginning of year       |                         
|                                                     |                         
|                                                    
|CASH AND CASH EQUIVALENTS AT JUNE 30                 |                         
|                                                     |                         

See notes to condensed financial
statements.

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GREAT NORTHERN IRON ORE PROPERTIES



NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)



Periods of Three and Six Months ended June 30, 2006 and June 30, 2005



Note A  BASIS OF PRESENTATION



The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the periods stated above are not necessarily indicative of the results that may be expected for each respective full year. For further information, refer to the financial statements and footnotes included in the Great Northern Iron Ore Properties (Trust) Annual Report on Form 10-K for the year ended December 31, 2005.



Note B  BENEFICIARIES EQUITY



Pursuant to the Court Order of November 29, 1982, the Trustees were directed to create and maintain an account designated as Principal Charges.  This account constitutes a first and prior lien of certificate holders on any property transferable to the reversioner and reflects an allocation of beneficiaries equity between the certificate holders and the reversioner. This account is neither an asset nor a liability of the Trust. Rather, this account maintains and represents a balance which will be payable to the certificate holders of record from the reversioner at the end of the Trust. The balance in this account consists of attorneys fees and expenses of counsel for adverse parties pursuant to the Court Order in connection with litigation commenced in 1972 relating to the Trustees powers and duties under the Trust Agreement and the costs of homes and surface lands acquired in
accordance with provisions of a lease with United States Steel Corporation, net of an allowance to amortize the cost of the land based on actual shipments of taconite and net of a credit for disposition of tangible assets. Following is an analysis of this account as of June 30, 2006:



|Attorneys fees and expenses | $ | 1,024,834 
|---------------------------- | - | ----------
|Cost of surface lands        |   | 5,817,965 
|Cumulative shipment credits  |   | 1,514,474
|Asset disposition credits    |   | 57,950   
|                             |   |           
|Principal Charges account    | $ | 5,270,375 



Upon termination of the Trust, the Trustees shall either sell tangible assets or obtain a loan with tangible assets as security to provide monies for distribution to the certificate holders in the amount of the Principal Charges account balance.

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Note C  PENSION PLAN



A summary of the components of net periodic pension cost is as follows:



|                          |   | Three Months Ended
June 30 |  |   | Six Months Ended
June 30 | 
|------------------------- | - | -------------------------- |  | - | ------------------------ | 
|                          |   | 2006                       |  |   | 2005                     | 
|Service cost              | $ | 58,882                     |  | $ | 59,174                   | 
|Interest cost             |   | 77,400                     |  |   | 75,918                   | 
|Expected return on assets |   | 78,095                    |  |   | 75,480                  | 
|Net amortization          |   | 45,919                     |  |   | 46,643                   | 
|Net periodic pension cost | $ | 104,106                    |  | $ | 106,255                  | 



The plans annual actuarial valuation was performed as of the plans fiscal year-end March 31. The recommended contribution to the plan for 2006 is $290,024, which contribution is scheduled to be made in August, 2006.



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Periods of Three and Six Months ended June 30, 2006 and June 30, 2005



The Trust owns interest in 12,033 acres on the Mesabi Iron Range Formation in northern Minnesota, most of which are under lease to major iron ore producing companies. Due to the Trustees election pursuant to Section 646 of the Tax Reform Act of 1986, as amended, commencing with year 1989 the Trust is not subject to federal and Minnesota corporate income taxes. The Trust is now a grantor trust. Shares of beneficial interest in the Trust are traded on the New York Stock Exchange under the ticker symbol GNI (CUSIP No. 391064102).



The terms of the Great Northern Iron Ore Properties Trust Agreement, created December 7, 1906, state that the Trust shall continue for twenty years after the death of the last surviving of eighteen persons named in the Trust Agreement. The last survivor of these eighteen named in the Trust Agreement died April 6, 1995. Accordingly, the Trust terminates twenty years from April 6, 1995.



At the end of the Trust, that being April 6, 2015, the certificates of beneficial interest (shares) in the Trust will cease to trade on the New York Stock Exchange and thereafter will represent only the right to receive certain distributions payable to the certificate holders of record at the time of the termination of the Trust. Upon termination, the Trust is obligated to distribute ratably to these certificate holders the net monies remaining in the hands of the Trustees (after paying and providing for all expenses and obligations of the Trust), plus the balance in the Principal Charges account (this account is explained in the Trusts Annual Report sent to all certificate holders every year). All other Trust property (most notably the Trusts mineral properties) must be conveyed and transferred to the reversioner under the terms of the Trust Agreement.



We have previously provided information in our various Securities & Exchange
Commission filings, including our Annual Report, about the final distribution
payable to the certificate holders upon the Trusts termination. The exact
final distribution, though not determinable at this time, will generally consist
of the sum of the Trusts net monies (essentially, total assets less
liabilities and properties) and the balance in the Principal Charges account,
less any and all expenses and obligations of the Trust upon termination. To offer a hypothetical example,
without factoring in any expenses and obligations of the Trust upon its
termination, and using the financial statement values as of December 31, 2005,
the net monies were approximately $10.5 million and the Principal Charges
account balance was approximately $5.3 million, resulting in a final
distribution payable of approximately $15.8 million, or about $10.53 per share.
After payment of this final distribution, the certificates of beneficial
interest (shares) would be cancelled and will have no further value. It is
important to note, however, that the actual net monies on hand and the Principal
Charges account balance will most likely fluctuate during the ensuing years, and
will not be final until after the termination and wind-down of the
Trust. We offer this example to further inform investors about the conceptual
nature of the final distribution and do not imply or guarantee a specific known
final distribution amount.

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Results of Operations:

Royalties decreased $1,949,515 and $1,246,396 during the six months and three months ended June 30, 2006, respectively, as compared to the same periods in 2005, due mainly to an overall lower average earned royalty rate, the result of which was caused by our lessees mining more from our partial fee interest lands with lower effective royalty rates, and a decrease in tonnage mined from Trust lands.



Interest and other income increased $49,803 and $26,554 during the six months and three months ended June 30, 2006, respectively, as compared to the same periods in 2005, due mainly to improved yields on our funds held for investment.



Costs and expenses increased $102,165 and $10,384 during the six months and three months ended June 30, 2006, respectively, as compared to the same periods in 2005, due mainly to higher pension costs associated with funding the plan and expensing these costs by the Trusts termination date, and slightly higher estimated real estate taxes on Trust lands.



At their meeting held on June 12, 2006, the Trustees declared a second quarter distribution of $2.20 per share, amounting to $3,300,000 payable July 31, 2006 to certificate holders of record at the close of business on June 30, 2006. The Trustees have now declared two quarterly distributions in 2006. The first, in the amount of $2.00 per share, was paid on April 28, 2006 to certificate holders of record on March 31, 2006; and the second, that being the current distribution. The first and second quarter 2005 distributions were $2.20 and $2.40 per share, respectively. The Trustees intend to continue quarterly distributions and set the record date as of the last business day of each quarter. The next distribution will be paid in late October 2006 to certificate holders of record on September 29, 2006.



A mining agreement dated January 1, 1959 with United States Steel Corporation provides that one-half of annual earned royalty income, after satisfaction of minimum royalty payments, shall be applied to reimburse the lessee for a portion of its cost of acquisition of surface lands overlying the leased mineral deposits, which surface lands are then conveyed to the Trustees. There are surface lands yet to be purchased, the costs of which are yet unknown and will not be known until the actual purchases are made.



Liquidity:

In the interest of preservation of principal of Court-approved reserves and
guided by the restrictive provisions of Section 646 of the Tax Reform Act of
1986, as amended, monies are invested primarily in U.S. Treasury securities with maturity dates not to exceed
three years and, along with cash flows from operations, are deemed adequate to
meet currently foreseeable liquidity needs.

-7-

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

| | - None
| | ------



Item 4. Controls and Procedures

As of the end of the period covered by this report, the Trust conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the Trusts disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Trusts disclosure controls and procedures are effective to ensure that information required to be disclosed by the Trust in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. There was no change in the Trusts internal control over financial reporting during the Trusts most
recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trusts internal control over financial reporting.



PART II. OTHER INFORMATION

Item 1. Legal Proceedings

At a hearing held on May 3, 2006, in Ramsey County District Court, Saint Paul, Minnesota, the accounts of the Trustees for the year 2005 were approved.



Item 1A. Risk Factors

There are no material changes from the risk factors previously disclosed in the Trusts December 31, 2005 Annual Report on Form 10-K.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

| | - None
| | ------



Item 3. Defaults Upon Senior Securities

- None



Item 4. Submission of Matters to a Vote of Certificate Holders

- None



Item 5. Other Information

- None



Item 6. Exhibits

Exhibit 31.1  Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

Exhibit 31.2  Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

Exhibit 32  Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (Furnished but not filed)

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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.





|     |               |  | GREAT NORTHERN IRON ORE PROPERTIES
(Registrant)
|---- | ------------- |  | -----------------------------------------------
|Date | July 25, 2006 |  | By                                             
|     |               |  |                                                



|     |               |  |   
|---- | ------------- |  | --
|Date | July 25, 2006 |  | By
|     |               |  |   

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