ROYALTY AGREEMENT

6 Months Ended

Jul. 31, 2011

ROYALTY AGREEMENT

ROYALTY AGREEMENT

Note 4. Mesabi Trust receives royalties based on (i) the aggregate quantity of iron ore products shipped that were produced using iron ore mined from Mesabi Trust lands, or (ii) if greater, a portion of the aggregate quantity of all iron ore products shipped from Silver Bay that were mined from any lands, such portion being 90% of the first four million tons shipped from Silver Bay during the calendar year, 85% of the next two million tons shipped during the calendar year, and 25% of all tonnage shipped from Silver Bay during such year in excess of six million tons. As of July 31, 2011, the percentage of iron ore shipped from Mesabi Trust lands was less than 90% of the total tons shipped from Silver Bay for the year to date.  The deferred royalty revenue of $991,000 represents royalty payments received from Northshore to fulfill the 90% minimum quarterly and annual threshold required under the royalty agreement.  If future shipments of iron ore products from Mesabi Trust lands during the remainder of the current calendar year exceed the thresholds described above, royalty payments made to Mesabi Trust based on the stated 90% minimum quarterly and annual threshold, to the extent such credited shipments exceed actual shipments, may be used by Northshore to offset royalties to be received by the Trust in the fourth quarter of the current calendar year.