Iron ore mining specialist Mesabi Trust (NYSE:MSB) announced yesterday its third-quarter distribution of $0.51 per unit, an 11% increase in the payout from last quarter, but 55% lower than the $1.13-per-unit rate paid in the third quarter of 2012.
Royalties are paid to Mesabi by Northshore Mining based on the volume of shipments of iron ore pellets for the particular quarter and year to date, the pricing of iron ore product sales, and the percentage of iron ore pellet shipments from Mesabi Trust lands rather than from non-Mesabi Trust lands. The volumes can vary from quarter to quarter and year to year based on a number of factors, including the requested delivery schedules of customers, general economic conditions in the iron ore industry, and weather conditions on the Great Lakes.
Further, the prices determined under contracts among Northshore, its parent Cliffs Natural Resources, and their customers are subject to interim and final pricing adjustments that are not known until after the end of a contract year under the agreements between them. Such factors can result in significant variations in the amount of royalties received by Mesabi Trust.
In the third calendar quarter of 2013, Northshore shipped 1.36 million tons of iron ore pellets excavated from Mesabi Trust lands, compared with 2.41 million tons of iron ore pellets during last year's third calendar.
The board of directors said the quarterly dividend is payable on Nov. 20 to the holders of record at the close of business on Oct. 30. The regular dividend payment equates to a $2.04-per-share annual dividend, yielding 9.4% based on the closing price Friday of Mesabi Trust's stock.