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MESABI TRUST (MSB)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 2026 total revenues were $4.73M, down 24% year over year (Q1 2025: $6.25M), driven by a maintenance shutdown at Northshore and lower shipments/pricing; net income was $3.63M and EPS per unit was $0.2768 .
  • The Trust received $2.42M in cash royalties for calendar Q1 (base $1.07M; bonus $1.28M), sharply below the $5.06M received in the prior-year quarter; trustees declared a $0.56 distribution in April reflecting higher January receipts but noted ongoing industry and operational uncertainties .
  • Subsequent quarter (Q2 2026) revenues rose sequentially to $5.61M with EPS $0.3616; cash royalties improved to $5.30M (base $2.51M; bonus $2.59M), while the July distribution was cut to $0.12 vs $0.30 last year due to lower royalty inflows and reduced bonus rates .
  • Management emphasized continued swing-operation status at Northshore, limited third‑party arms‑length sales (affecting price references), and litigation around the Milepost 7 tailings basin, all contributing to variability in royalties and distributions; no earnings call transcript was available .

What Went Well and What Went Wrong

What Went Well

  • Sequential recovery in Q2 2026 cash royalties and revenues: royalties of $5.30M vs $2.42M in Q1; total revenues $5.61M vs $4.73M, supporting a sequential EPS increase to $0.3616 .
  • Legal expense normalization improved Q1 profitability YoY despite lower revenues; Q1 expenses fell to $1.10M (from $2.77M), lifting net income to $3.63M from $3.48M .
  • Bonus royalty framework remained operative with the 2025 adjusted threshold price at $69.41/ton, preserving bonus accruals when prices exceed threshold (Q1 bonus $1.78M; Q2 bonus $2.02M) .

What Went Wrong

  • Q1 2026 shipments fell due to an extended maintenance shutdown in February; pellets produced and shipped from Trust lands declined to 637,186 tons vs 978,498 tons last year, pressuring royalty income .
  • Reduced arms‑length third‑party sales limited price references, increasing uncertainty in royalty calculations and contributing to lower bonus royalty rates beginning July 1, 2025 .
  • July distribution cut to $0.12 (vs $0.30 last year) reflected weaker royalty inflows and lower bonus rates, highlighting sensitivity of distributions to operational and pricing dynamics .

Financial Results

MetricQ3 2025 (Oct 31, 2024)Q1 2026 (Apr 30, 2025)Q2 2026 (Jul 31, 2025)
Total Revenues ($)$79,001,840 $4,734,542 $5,606,755
Net Income ($)$78,325,525 $3,631,208 $4,743,882
EPS per Unit ($)$5.9699 $0.2768 $0.3616
Total Royalty Income ($)$7,348,366 $4,349,472 $5,416,904
Interest Income ($)$468,445 $385,070 $189,851
Distribution Declared ($/unit)$0.39 $0.56 $0.12
Royalty Cash ReceiptsQ3 2025Q1 2026Q2 2026
Total Royalty Cash Received ($)$7,355,929 (Oct 30, 2024) $2,422,329 (Apr 30, 2025) $5,300,287 (Jul 30, 2025)
Royalty Composition ($)Q1 2025 (YoY)Q1 2026Q2 2026
Base Overriding Royalties$3,417,645 $2,425,094 $3,216,028
Bonus Royalties$2,450,133 $1,783,835 $2,018,440
Fee Royalties$142,830 $140,543 $182,436
Total Royalty Income$6,010,608 $4,349,472 $5,416,904
KPIs (Tonnage)Q3 2025Q1 2026Q2 2026
Tons Credited Shipped (Cliffs Royalty Report)972,154 457,728 924,442
Pellets Produced from Trust Lands (tons)1,066,665 637,186 943,955
Pellets Shipped from Trust Lands (tons)1,066,665 637,186 943,955

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Distribution per UnitPayable May 20, 2025 (Q1 2026 reporting period)$0.29 (prior year same period) $0.56 Raised
Distribution per UnitPayable Aug 20, 2025 (Q2 2026 reporting period)$0.30 (prior year same period) $0.12 Lowered
Adjusted Threshold Price (Bonus Royalty)Calendar 2024 vs 2025$67.75/ton (2024) $69.41/ton (2025) Increased
Forward Financial GuidanceN/AN/ATrustees do not provide revenue/EPS guidance; distributions depend on royalties received and reserve policy Maintained policy

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2025)Previous Mentions (Q-1: Q4 2025)Current Period (Q1 2026)Trend
Northshore operating statusCliffs to treat Northshore as swing operation; operations partially restarted; variability expected No updates on 2025 plans; swing operation comments reiterated Extended maintenance shutdown in Feb impacted Q1 shipments; continued swing status cited Neutral to negative (volume variability)
Arms‑length sales/pricing referencesVery limited third‑party sales; arbitration award recognized; price adjustments can be significant Royalty calculations based on highest arms‑length price; limited transactions Ongoing limited arms‑length sales; lower highest contract price reduced bonus rate from July 1, 2025 Negative (bonus rate pressure)
Royalty cash variabilityHigh inflows in Q3 (incl. arbitration); winter shipping reductions noted Q4 2025 royalty cash $8.99M; distribution policy ties to cash received Q1 2026 cash royalties down to $2.42M; sequential recovery in Q2 to $5.30M Mixed (down YoY, up QoQ)
Regulatory/legal (Milepost 7)DNR initially found no EIS; later reversed/remanded by court Noted risks and potential production impacts MN Supreme Court denied review; later court denied temporary injunction; outcome uncertain Uncertain (headline risk)
Macro/tariffs and steel demandTariff and macro uncertainties emphasized Similar macro cautions Continued macro/cycle risks cited in forward‑looking statements Stable caution

Management Commentary

  • “The Trustees have received no specific updates on Cliffs’ plans for the current year concerning Northshore iron ore operations or Northshore’s production, sale or shipments of iron ore products.” (July distribution release) .
  • “Cliffs… will continue to treat that facility as our swing operation. And at this time, we still do not expect to operate Northshore in full any time this year.” (Trustees’ Discussion and Analysis) .
  • “Cliffs’ Royalty Report… indicated that royalty calculations are based on prices that are subject to change.” (Q1 2026 8‑K) .
  • “According to Cliffs’ quarterly royalty reports… the highest contract price… decreased, resulting in a lower bonus royalty rate for the Trust beginning July 1, 2025.” (Q2 2026 10‑Q) .
  • “The Trustees are unable to predict what impact, if any, the… decision to reverse and remand the DNR order will have on mining, production and shipments… or future royalties payable to the Trust.” (Q2 2026 10‑Q) .

Q&A Highlights

  • No earnings call transcript was found for Q1 2026; the Trust typically communicates via 8‑K and press releases rather than analyst Q&A [ListDocuments returned 0 transcripts].
  • Trustees clarified the distribution policy ties to cash royalties received and prudent reserve management; April distribution reflected higher January receipts, while July distribution was reduced amid weaker inflows and uncertainties .
  • Royalty composition and shipment data were detailed in filings (base/bonus/fee, tons shipped), including explanations of price adjustment mechanisms and bonus thresholds .

Estimates Context

  • Wall Street consensus (S&P Global) for MSB was unavailable for EPS, revenue, target price, and recommendation for Q1 2026 and FY 2026; MSB appears to have no active analyst coverage. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Distributions are highly sensitive to quarterly royalty cash receipts; April’s $0.56 was supported by strong January royalties, while July’s $0.12 reflected weaker inflows and a lower bonus rate—expect continued variability tied to shipments/pricing .
  • Sequential fundamentals improved in Q2 2026 (revenues $5.61M, EPS $0.3616) as shipments recovered, but YoY remains pressured by reduced arms‑length sales and bonus rate headwinds—monitor Cliffs’ sales mix and Northshore cadence .
  • Limited third‑party arms‑length transactions constrain royalty price references and can lower bonus royalties; absent a shift in sales strategy, bonus rates may stay under pressure .
  • Regulatory developments (Milepost 7) inject operational uncertainty; while a temporary injunction was denied, further reviews could affect production and royalties—track DNR outcomes and litigation milestones .
  • Expense normalization post‑arbitration supports earnings resilience in softer revenue quarters; this aided Q1 net income despite lower shipments .
  • Winter seasonality and swing‑operation status mean quarter‑to‑quarter shipment swings are structural; prudent reserve management and distribution timing remain central to capital returns .
  • With no analyst call or consensus coverage, primary filings (8‑K/10‑Q) and Cliffs’ royalty reports are critical for near‑term signals on distributions and unit holder cash flow .