10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2018

☐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: 1-4488

MESABI TRUST

(Exact name of registrant as specified in its charter)

New York	13-6022277
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

c/o Deutsche Bank Trust Company Americas
Trust & Agency Services
60 Wall Street
16 Floor
New York, New York	10005
(Address of principal executive offices)	(Zip Code)

(904) 271-2520

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Units of Beneficial Interest in Mesabi Trust	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. No ☒  Yes ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. No ☒  Yes ☐

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 Registrant was required to submit and post such files). Yes ☒  No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company.)
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). No ☒  Yes ☐

As of July 31, 2017, the aggregate market value of the Units of Beneficial Interest in the registrant held by non-affiliates of the registrant was $176,802,899 * based on the closing sale price as reported on the New York Stock Exchange.  As of April 10, 2018, there were 13,120,010 Units of Beneficial Interest in Mesabi Trust outstanding.

*Includes approximately $135,000 representing the market value, as of July 31, 2017, of 10,000 Units of Beneficial Interest the beneficial ownership of which is disclaimed by affiliates (see Item 12 herein).

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Annual Report of the Trustees for the Fiscal Year Ended January 31, 2018 (Annual Report)	Parts I, II, and IV

MESABI TRUST

ANNUAL REPORT ON FORM 10-K

Table of Contents

Page

PART I
ITEM 1.	Business	3
ITEM 1A.	Risk Factors	3
ITEM 1B.	Unresolved Staff Comments	3
ITEM 2.	Properties	3
ITEM 3	Legal Proceedings	3
ITEM 4.	Mine Safety Disclosures	3
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities	4
ITEM 6.	Selected Financial Data	4
ITEM 7.	Trustees’ Discussion and Analysis of Financial Condition and Results of Operations	4
ITEM 7A	Quantitative and Qualitative Disclosures about Market Risk	4
ITEM 8.	Financial Statements and Supplementary Data	4
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	4
ITEM 9A.	Controls and Procedures	4
ITEM 9B.	Other Information	5
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	6
ITEM 11.	Executive Compensation	7
ITEM 12.	Security Ownership of Certain Beneficial Owners and Trustees	9
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	10
ITEM 14.	Principal Accountant Fees and Services	11
PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	12

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PART I

ITEM 1.              BUSINESS.

(a)          General Development of Business.

The information under the headings “Trustees’ Discussion and Analysis of Financial Condition and Results of Operations,” “The Trust Estate,” “Leasehold Royalties,” and “Land Trust and Fee Royalties” in the Annual Report of the Trustees of Mesabi Trust for the fiscal year ended January 31, 2018, filed as Exhibit 13 to this Form 10-K (the “Annual Report”) is incorporated herein by reference.

(b)          Financial Information About Segments.

Substantially all of the revenue, operating profits and assets of Mesabi Trust (“Mesabi Trust” or the “Trust”) relate to one business segment—iron ore mining.  The information under the heading “Selected Financial Data” in the Annual Report is incorporated herein by reference.

(c)          Narrative Description of Business.

The information under the headings “Overview,” “Trustees’ Discussion and Analysis of Financial Condition and Results of Operations,” “The Trust Estate,” and “Leasehold Royalties” in the Annual Report is incorporated herein by reference.

(d)          Financial Information About Geographical Areas.

All of the Trust’s revenues are derived from the assets of the Trust, information of which is set forth under the heading “The Trust Estate” of the Annual Report. The information under the heading “Selected Financial Data” in the Annual Report is incorporated herein by reference.

(e)          Availability of Reports on Registrant’s Website.

The information on the cover page of the Annual Report is incorporated herein by reference.

ITEM 1A.           RISK FACTORS.

The information under the heading “Risk Factors” in the Annual Report is incorporated by reference.

ITEM 1B.           UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.              PROPERTIES.

The information under the heading “The Trust Estate,” “Duration of the Trust Estate,” “History of the Trust’s Acquisition of the Trust Estate,” and “Description of the Mineral Properties and Northshore’s Mining Operations,” in the Annual Report is incorporated herein by reference.

ITEM 3.              LEGAL PROCEEDINGS.

None.

ITEM 4.              MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5.              MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The information under the headings “Unallocated Reserve” and “Certificates of Beneficial Interest” in the Annual Report is incorporated herein by reference.

ITEM 6.              SELECTED FINANCIAL DATA.

The information under the heading “Selected Financial Data” in the Annual Report is incorporated herein by reference.

ITEM 7.              TRUSTEES’ DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The information under the headings “Trustees’ Discussion and Analysis of Financial Condition and Results of Operations,” “Leasehold Royalties,” “Trust Expenses,” and “Unallocated Reserve” in the Annual Report is incorporated herein by reference.

ITEM 7A.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8.              FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements, including the Independent Registered Public Accounting Firm’s report thereon, filed as a part of this Form 10-K, are presented on pages F-3 through F-12 and are incorporated herein by reference.

ITEM 9.              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.           CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.  The Trust maintains a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Trust in the reports that it furnishes or files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and regulations of the Securities and Exchange Commission.  Due to the pass-through nature of the Trust, the Trust’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by Mesabi Trust is received from Cleveland-Cliffs Inc. (“Cliffs”) and its wholly-owned subsidiary, Northshore Mining Company (“Northshore”).  In order to help ensure the accuracy and completeness of the information required to be disclosed in the Trust’s periodic and current reports, the Trust employs certified public accountants, geological consultants, and attorneys.  These professionals hired by the Trust advise the Trust in its review and compilation of the information in this Form 10-K and the other periodic reports filed by the Trust with the SEC

As part of their evaluation of Mesabi Trust’s disclosure controls and procedures, the Trustees rely on quarterly shipment and royalty calculations provided by Northshore and Cliffs.  Because Northshore has declined to provide a written certification attesting to whether Northshore has established disclosure controls and procedures and internal controls sufficient to enable it to verify that the information furnished to the Trustees is accurate and complete, the Trustees also rely on (a) an annual certification from Northshore and Cliffs, certifying as to the accuracy of the royalty calculations, and (b) the related due diligence review performed by the Trust’s accountants.  In addition, Mesabi Trust’s

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consultants review the schedule of leasehold royalties payable, and shipping and sales reports provided by Northshore against production and shipment reports prepared by Eveleth Fee Office, Inc., an independent consultant to Mesabi Trust (“Eveleth Fee Office”). Eveleth Fee Office performs inspections of the Northshore mine and its pelletizing operations, observes production and shipping activities, gathers production and shipping information from Northshore and prepares monthly production and shipment reports for the Trustees. Furthermore, as part of its engagement by Mesabi Trust, Eveleth Fee Office also attends Northshore’s calibration and testing of its crude ore scales and boat loader scales which are conducted on a periodic basis.

As of the end of the period covered by this report, the Trustees carried out an evaluation of Mesabi Trust’s disclosure controls and procedures.  The Trustees have concluded that such disclosure controls and procedures are effective.

Trustees’ Report on Internal Control over Financial Reporting.  The Trustees’ Report on Internal Control over Financial Reporting is set forth on page F-2 of the Annual Report.  The attestation report of the Trust’s independent registered public accounting firm on its assessment of the Trust’s internal control over financial reporting is set forth on page F-3 of the Annual Report.

Changes in Internal Control over Financial Reporting.  To the knowledge of the Trustees, there has been no change in the Trust’s internal control over financial reporting that occurred during the Trust’s last fiscal quarter that has materially affected, or is likely to materially affect, the Trust’s internal control over financial reporting.  The Trustees note for purposes of clarification that they have no authority over, and make no statement concerning, the internal controls of Northshore or Cliffs.

ITEM 9B.           OTHER INFORMATION.

None.

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PART III

ITEM 10.            DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The Agreement of Trust dated July 18, 1961 (the “Agreement of Trust”) provides for a Corporate Trustee and four individual Trustees (collectively, the “Trustees”).  The Trust does not have, nor does the Agreement of Trust provide for officers, a board of directors or any committees.  Generally, the Trustees continue in office until their resignation or removal.  Any Trustee may be removed at any time, with or without cause, by the holders of two-thirds in interest of the Certificates of Beneficial Interest in the Trust (the “Trust Certificates”) then outstanding.  In the case of an individual Trustee, a successor is appointed if the individual Trustee dies, becomes incapable of acting or is adjudged bankrupt or insolvent.  In the case of the Corporate Trustee, a successor is appointed if a receiver of the Corporate Trustee or of its property is appointed, or if any public officer takes charge or control of the Corporate Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation.  Successor Trustees can only be appointed by the holders of a majority in interest of the Trust Certificates then outstanding.  Because such appointments are not made on a regular or periodic basis, the Trust does not have a standing nominating committee or a policy in place for the recommendation and nomination of successor Trustees.

The Trust’s activities are limited to collecting income, paying expenses and liabilities, distributing net income to the holders of Trust Certificates (the “Unitholders”) after the payment of, or provision for, such expenses and liabilities, and protecting and conserving the assets held.  The Trustees have adopted a Code of Ethics that applies to the Trustees.  A copy of the Code of Ethics is incorporated by reference in Exhibit 14 of this Form 10-K.

The Trust has not designated a separate audit committee comprised of independent committee members relying on an exemption provided by Rule 10A-3 of the Securities Exchange Act of 1934, as amended.  As such, the Trustees have not designated an “audit committee financial expert.”  The Trustees collectively perform the functions of an audit committee.

To carry out the Trustees’ duties under the Agreement of Trust, the Trustees meet on a quarterly basis to discuss information and circumstances relevant to the Trust.  The Trustees also conduct telephone conferences from time to time between the quarterly meetings to address developments that require more timely attention.  The Trustees held eleven meetings either in person or via teleconference in fiscal 2018.  All of the Trustees were present at all meetings held in fiscal 2018 except for one teleconference meeting in which Richard Lareau was unavailable and was later briefed on the substance of the meeting.

In the third quarter of each year, the Trustees also conduct an annual inspection trip in which they personally visit and tour Northshore’s mining operations and plant facilities located near Babbitt and in Silver Bay, Minnesota, respectively.  During the inspection trip, the Trustees meet with and interview Northshore personnel with respect to Northshore’s current operations, changes in operations, mining plans, capital equipment and facilities.

Because Mesabi Trustees are appointed until they resign or are removed, at the time of nomination the Trustees believe that it is necessary for each Trustee to possess many qualities and skills. Set forth below are the present Trustees’ principal occupations and directorships held with other public corporations during the past five years, or longer as material, their ages and the year each of the Trustees was first elected as a Trustee of the Trust.

Robert C. Berglund

Age: 71

Year Appointed and elected as Individual Trustee: 2009

Retired Mining Engineer, Cleveland-Cliffs Inc.

Mr. Berglund has extensive experience in the mining industry.  He retired from his position as Vice President and General Manager of Northshore Mining Company in 2003 after spending thirty-five years in mining production and operations management with Cliffs. Mr. Berglund joined Cliffs after graduating from Penn State University in 1968 with a B.S. in Mining Engineering. From 1968 until 2003, Mr. Berglund worked onsite at various mines owned and operated by Cliffs across North America.

6

James A. Ehrenberg

Age: 75

Year Appointed and elected as Individual Trustee: 2006

Retired Vice President, U.S. Bank, N.A.

Mr. Ehrenberg has extensive experience serving as corporate trustee.  Before retiring from his position as Senior Vice President of U.S. Bank, N.A. Mr. Ehrenberg spent nearly forty years in the corporate trust department of U.S. Bank, N.A. and its predecessor, First Trust Company of Saint Paul. From 1983 until April 2005, Mr. Ehrenberg was directly responsible for providing corporate trustee services to the Mesabi Land Trust of which Mesabi Trust is the sole trust certificate holder.

Richard G. Lareau

Age: 89

Year Appointed and elected as Individual Trustee: 1990

Retired Senior Partner, Oppenheimer Wolff & Donnelly LLP

Mr. Lareau retired in 2014 as a senior partner in the law firm of Oppenheimer Wolff & Donnelly LLP with which firm he had been associated since 1956.  Through his legal work, Mr. Lareau has represented numerous clients on a wide range of issues including, corporate, trust and real estate law.  Over the course of his legal career, Mr. Lareau has also served as a director on the boards of numerous publicly-traded companies.  During his service as a director on the boards of publicly-traded corporations, Mr. Lareau also served as a member, and frequently as chair, of board committees, including: audit, compensation, governance, nominating, and executive.

Michael P. Mlinar

Age: 64

Year Appointed and elected as Individual Trustee: 2014

Retired Mining Engineer, Cleveland-Cliffs Inc.

Mr. Mlinar, appointed and elected as a Mesabi Trustee in 2014, retired from his position as Vice President of North American Iron Ore Initiative in 2013 after spending thirty-six years in mining production and operations management.  Mr. Mlinar was General Manager at five different Cliffs subsidiaries: Tilden, Empire, Hibbing Taconite, United Taconite, and Northshore Mining, and then was Integration Lead for the Bloom Lake Mine, and in 2011 became a Vice President of North American Iron Ore.

Mr. Mlinar started working in October 2014 as a part-time, salaried employee for Krech Ojard & Associates, Inc. (“Krech”), a private engineering consulting firm, which provides consulting services to its customers in diverse industries, including Cliffs and Northshore. Mr. Mlinar is not, and has never been, an owner, partner, officer or director of Krech. Mr. Mlinar’s part-time employment does not include providing engineering consulting services through Krech for Cliffs or Northshore.

The Trust believes that each of the individual Trustees has a diversified background and extensive financial, business and industry specific expertise that make him an important resource in the oversight of the Trust’s affairs.  There are no family relationships among any of the Individual Trustees.

ITEM 11.            EXECUTIVE COMPENSATION.

Compensation Discussion and Analysis

The Trust does not have a board of directors, executive officers or any employees.  The compensation paid to the Trustees is governed by the Amendment to the Agreement of Trust dated October 25, 1982, as amended (the “Amendment”).  The Trust does not use any compensation consultants.

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The Amendment does not provide for any stock awards, option awards, non-equity incentive plan compensation, change in pension value, nonqualified deferred compensation earnings or any other compensation.  The Trust does not have severance agreements nor does it provide post-retirement benefits to the Trustees.  Accordingly, all such tables have been omitted from the Annual Report on this Form 10-K.

Pursuant to the Amendment, each individual Trustee receives at least $20,000 in annual compensation for services as Trustee.  Each year, annual Trustee compensation is adjusted up or down (but not below $20,000) in accordance with changes from the November 1981 level of 295.5 (the “1981 Escalation Level”) in the All Commodities Producer Price Index (with 1967 = 100 as a base).  The All Commodities Producer Price Index is published by the U.S. Department of Labor, Bureau of Labor Statistics.  The adjustment is made at the end of each fiscal year and is calculated on the basis of the proportion between (a) the level of such index for the November preceding the end of such fiscal year, and (b) the 1981 Escalation Level.  Any action to modify or otherwise vary the compensation of the individual Trustees as provided by the Amendment must be approved by the affirmative vote of 66 2/3% in interest of the Trust Certificates then outstanding.  Each of the individual Trustees received total compensation of $39,662 during fiscal 2018.

Under the Amendment, the Corporate Trustee receives annual compensation in an amount equal to the greater of (i) $20,000, or such other amount determined in accordance with the adjustments described in the preceding paragraph, or (ii) one quarter of one percent (1/4 of 1%) of the trust moneys, exclusive of proceeds of sale of any part of the Trust Estate (as such terms are defined in the Agreement of Trust), received by the Trustees and distributed to Unitholders.

Additionally, each year the Corporate Trustee receives $62,500 to cover clerical and administrative services to Mesabi Trust, other than services customarily performed by a registrar or transfer agent for which the Corporate Trustee is paid additional service fees.  The Corporate Trustee earned $111,372 in cash compensation for the fiscal year ended January 31, 2018, inclusive of the $62,500 administrative fee. The Corporate Trustee also received $7,366 for its services as registrar and transfer agent for the year ended January 31, 2018.  Accordingly, the Corporate Trustee earned $118,738 in total compensation for the fiscal year ended January 31, 2018.

Under the Amendment, the Individual Trustees may, in extraordinary circumstances, pay additional compensation to the Corporate Trustee.  The decision to pay such compensation must be unanimously approved by the Individual Trustees.  The Corporate Trustee did not receive any compensation for extraordinary services with respect to the year ended January 31, 2018.

Trustees’ Compensation Report

The Trustees have not designated a compensation committee and are not required to do so by applicable law or regulation.  The Trustees, as a group, have reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) and based on such review and discussion have recommended that the CD&A be included in this Annual Report on Form 10-K.

MESABI TRUST

Deutsche Bank Trust Company Americas

Robert C. Berglund

James A. Ehrenberg

Richard G. Lareau

Michael P. Mlinar

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Trustee Compensation

Summary Compensation Table

The table below summarizes the total compensation earned by each of the Individual Trustees and the Corporate Trustee in the fiscal year ended January 31, 2018.

						Change in
						Pension Value
						and Nonqualified
					Non-Equity	Deferred
	Trustee		Stock	Option	Incentive Plan	Compensation	All Other
	Fees Earned		Awards	Awards	Compensation	Earnings	Compensation		Total
Name	($)		($)	($)	($)	($)	($)		($)
Deutsche Bank Trust Company Americas, Corporate Trustee	$	111,372	N/A	N/A	N/A	N/A	7,366	(1)	$	118,738
Robert C. Berglund	$	39,662	N/A	N/A	N/A	N/A	N/A		$	39,662
James A. Ehrenberg	$	39,662	N/A	N/A	N/A	N/A	N/A		$	39,662
Richard G. Lareau	$	39,662	N/A	N/A	N/A	N/A	N/A		$	39,662
Michael P. Mlinar	$	39,662	N/A	N/A	N/A	N/A	N/A		$	39,662

(1) Represents fees and disbursements paid to Deutsche Bank Trust Company Americas for its services as registrar and transfer agent of the Units.

ITEM 12.            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND TRUSTEES.

Based on information that has been obtained from Mesabi Trust’s records and a review of statements of beneficial ownership filed with Mesabi Trust pursuant to Rule 13d-1 or Rule 13d-2 under the Securities Exchange Act of 1934, as amended, no person known to Mesabi Trust beneficially owns more than 5% in interest of the Trust Certificates outstanding as of April 1, 2018.

The table below sets forth information as to the Units of Beneficial Interest in Mesabi Trust beneficially owned as of April 1, 2018 by the Trustees individually and as a group.  Except as otherwise indicated and subject to applicable community property laws, each Trustee has sole voting and investment powers with respect to the securities listed.  There were no Certificates of Beneficial Interest of Mesabi Trust pledged by the Trustees as of January 31, 2018.  The Trust does not have any compensation plans under which securities of the Trust are authorized for issuance.

	Amount of Beneficial		Percent of
Name	Ownership of Units		Class
Deutsche Bank Trust Company Americas	0		0
Robert C. Berglund	2,000		**
James A. Ehrenberg	3,000	(1)	**
Richard G. Lareau	24,000	(2)	**
Michael P. Mlinar	4,499	(3)	**
All trustees as a group	33,499		**

** Less than 1%

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(1) All Units are held by James A. Ehrenberg and Donna Jean Ehrenberg Revocable Trust Dated September 12, 2012. Mr. and Mrs. Ehrenberg, as the trustees of the revocable trust, share the investment and voting power over all of those Units.

(2) Includes 10,000 Units owned by Mr. Lareau’s wife, over which Mr. Lareau does not have any investment or voting power and as to which Mr. Lareau disclaims any beneficial ownership.

(3) Includes 2,500 Units owned by Mr. Mlinar’s wife.

ITEM 13.            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related Person Transaction Policy

During the fiscal year ended January 31, 2018, the Trustees met on a quarterly basis and reviewed and approved or ratified certain transactions that occurred during each of the prior fiscal quarters.  In connection with their review of the Trust’s transactions, the Trustees consider whether there have been any related person transactions.  In determining whether to approve a related person transaction, the Trustees consider the following factors, in addition to any other factors they deem necessary or appropriate:

· whether the transaction is expressly permitted by the Agreement of Trust;

· whether the terms are fair to the Trust;

· whether the transaction is material to the Trust;

· the role of the related person in arranging the related person transaction;

· the structure of the related person transaction; and

· the interests of all related persons in the related person transaction.

The Trust maintains a written related person transaction approval policy, which sets forth the Trust’s policies and procedures for the review, approval or ratification of any transaction required to be reported in Mesabi Trust’s filings with the Securities and Exchange Commission.  The policy applies to any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships in which Mesabi Trust is a participant and in which a related person has a direct or indirect interest.

Certain types of transactions, which would otherwise require review, are pre-approved by the Trustees in accordance with the policy. These types of transactions include, for example, (i) transactions, when aggregated with the amount of all other transactions between the related person and the Trust, that involve less than $120,000 in a fiscal year; (ii) transactions where the interest of the related person arises only by way of a directorship or minority stake in another organization that is a party to the transaction; (iii) transactions with a related person involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services; and (iv) a transaction that is specifically contemplated by provisions of the Agreement of Trust.

Based on their review of the Trust’s transactions during the fiscal year ended January 31, 2018, the Trustees concluded that there were no related person transactions required to be disclosed in this Annual Report on Form 10-K.

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Pass-Through Royalty Trust Exemptions

Because of its legal structure and character as a pass-through royalty trust, the Trust is exempt from Rule 10A-3 of the Securities Exchange Act and the Corporate Governance Standards set forth in Section 303A of the New York Stock Exchange’s Listed Company Manual.

ITEM 14.            PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a)     Audit Fees.

The aggregate fees paid during fiscal 2018 for professional services rendered by Baker Tilly Virchow Krause, LLP (“Baker Tilly”) for the audit of the Trust’s annual financial statements, the attestation report of the Trustees’ assessment of internal control over financial reporting and review of the financial statements included in the Trust’s quarterly reports on Form 10-Q were $64,920.

The aggregate fees paid during fiscal 2017 for professional services rendered by Baker Tilly for the audit of the Trust’s annual financial statements, the audit of the Trustees’ assessment of internal control over financial reporting and review of the financial statements included in the Trust’s quarterly reports on Form 10-Q were $64,428.

(b)     Audit-Related Fees.

No fees were paid to Baker Tilly for assurance and related services that were not reasonably related to the performance of the audit or review of the Trust’s financial statements for fiscal 2018 or fiscal 2017.

(c)      Tax Fees.

No fees were paid to Baker Tilly for tax compliance, tax advice and tax planning for Mesabi Trust for fiscal 2018 or fiscal 2017.

(d)      All Other Fees.

No other fees were paid to Baker Tilly for services provided to Mesabi Trust, other than those described in item (a), for fiscal 2018 or fiscal 2017.

Before an independent registered public accounting firm is engaged to perform audit and review services for the Trust, the Trustees approve the engagement.

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PART IV

ITEM 15.            EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) 1.      Financial Statements:

The following Financial Statements are incorporated in this Report by reference from the following pages of the Annual Report:

Trustees’ Report on Internal Control over Financial Reporting	Page F-2
Report of Independent Registered Public Accounting Firm	Page F-3
Balance Sheets as of January 31, 2018 and 2017	Page F-4
Statements of Income for the years ended January 31, 2018, 2017, and 2016	Page F-5
Statements of Unallocated Reserve and Trust Corpus for the years ended January 31, 2018, 2017, and 2016	Page F-6
Statements of Cash Flows for the years ended January 31, 2018, 2017, and 2016	Page F-7
Notes to Financial Statements	Pages F-8 - F-12

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(a) 3.      Exhibits:

Item No.	Item	Filing Method
3	Agreement of Trust dated as of July 18, 1961	Incorporated by reference from Exhibit 3 to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1987. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
3(a)	Amendment to the Agreement of Trust dated as of October 25, 1982	Incorporated by reference from Exhibit 3(a) to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1988. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
4	Instruments defining the rights of Trust Certificate Holders	Incorporated by reference from Exhibit 4 to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1987. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(a)	Peters Lease	Incorporated by reference from Exhibits 10(a) - 10(d) to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1987. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(b)	Amendment of Assignment of Peters Lease	Incorporated by reference from Exhibits 10(a) - 10(d) to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1987. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(c)	Cloquet Lease	Incorporated by reference from Exhibits 10(a) - 10(d) to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1987. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(d)	Assignment of Cloquet Lease	Incorporated by reference from Exhibits 10(a) - 10(d) to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1987. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(e)	Modification of Lease, made as of January 23, 1946	Incorporated by reference from Exhibits 10(e) to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 2015.

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Item No.	Item	Filing Method
10(f)	Modification of Lease and Consent to Assignment dated as of October 22, 1982	Incorporated by reference from Exhibit 10(e) to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 1988. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(g)	Amendment of Assignment, Assumption and Further Assignment of Peters Lease	Incorporated by reference from Exhibit A to Mesabi Trust’s Report on Form 8-K dated August 17, 1989. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(h)	Amendment of Assignment, Assumption and Further Assignments of Cloquet Lease	Incorporated by reference from Exhibit B to Mesabi Trust’s Report on Form 8-K dated August 17, 1989. (filed on paper – hyperlink is not required pursuant to Rule 105 of Regulation S-T)
10(i)	Summary Description of Trustees’ Compensation	Filed herewith.
13	Annual Report of the Trustees of Mesabi Trust for the fiscal year ended January 31, 2018	Filed herewith.
14	Trustees Code of Ethics	Incorporated by reference from Exhibit 14 to Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 2004.
31	Certification of Corporate Trustee of Mesabi Trust pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
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	Filed herewith.
101.INS	XBRL Instance Document	Filed herewith.
101.SCH	XBRL Taxonomy Extension Schema	Filed herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed herewith.
101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  April 13, 2018

MESABI TRUST
By:	DEUTSCHE BANK TRUST COMPANY
	AMERICAS
	Corporate Trustee
	Principal Administrative Officer and duly authorized signatory:*
By:	Deutsche Bank National Trust Company
	By:	/s/ Jeffrey Schoenfeld
	Jeffrey Schoenfeld
	Vice President

* There are no principal executive officers or principal financial officers of the registrant.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Robert C. Berglund	April 13, 2018
Robert C. Berglund
Individual Trustee
/s/ James A. Ehrenberg	April 13, 2018
James A. Ehrenberg
Individual Trustee
/s/ Richard G. Lareau	April 13, 2018
Richard G. Lareau
Individual Trustee
/s/ Jeffrey Schoenfeld	April 13, 2018
Jeffrey Schoenfeld
Vice President
Deutsche Bank National Trust Company
For Deutsche Bank Trust Company Americas
Corporate Trustee of Mesabi Trust
/s/ Michael P. Mlinar	April 13, 2018
Michael P. Mlinar
Individual Trustee

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EX-10.(I)

Exhibit 10(i)

SUMMARY DESCRIPTION OF TRUSTEES’ COMPENSATION

The compensation paid to each Individual Trustee and the Corporate Trustee is set forth in the Amendment to the Agreement of Trust dated as of October 25, 1982 (the “Amendment”).  The Amendment is filed as Exhibit 3(a) to the Form 10-K.

Pursuant to the Amendment, each Individual Trustee receives at least $20,000 in annual compensation for services as Trustee.  Each year, annual Trustee compensation is adjusted up or down (but not below $20,000) in accordance with changes from the November 1981 level of 295.5 (the “1981 Escalation Level”) in the All Commodities Producer Price Index (with 1967 = 100 as a base).  The All Commodities Producer Price Index is published by the U.S. Department of Labor.  The adjustment is made at the end of each fiscal year and is calculated on the basis of the proportion between (a) the level of such index for the November preceding the end of such fiscal year, and (b) the 1981 Escalation Level.  Each of the Individual Trustees received $39,662 in cash compensation for services to the Trust during the fiscal year ended January 31, 2018.

Also pursuant to the Amendment, Deutsche Bank Trust Company Americas, as the Corporate Trustee, receives annual compensation in an amount equal to the greater of (i) $20,000, or such other amount determined in accordance with the adjustments described in the preceding paragraph, or (ii) one quarter of one percent (1/4 of 1%) of the Trust Moneys, exclusive of proceeds of sale of any part of the Trust Estate (as such terms are defined in the Agreement of Trust), received by the Trustees and distributed to Trust Unitholders.  The Corporate Trustee earned $48,872 pursuant to this provision for the fiscal year ended January 31, 2018.

Additionally, each year the Corporate Trustee receives $62,500 (or more, if unanimously approved by the Individual Trustees) to cover clerical and administrative services to Mesabi Trust other than services customarily performed by a registrar or transfer agent.  In fiscal 2018, the Trust paid the Corporate Trustee $62,500 to cover clerical and administrative services to Mesabi Trust and $7,366 for services as registrar and transfer agent.  The Corporate Trustee earned $118,738 in total compensation for the fiscal year ended January 31, 2018.

EX-13

Exhibit 13

ANNUAL REPORT

OF THE TRUSTEES OF

MESABI TRUST

For The Year Ended January 31, 2018

ADDRESS

Mesabi Trust

c/o Deutsche Bank Trust Company Americas

Trust & Agency Services

60 Wall Street, 16th Floor

New York, NY 10005

(904) 271-2520 (telephone)

www.mesabi-trust.com

REGISTRAR AND TRANSFER AGENT

Deutsche Bank Trust Company Americas

LEGAL COUNSEL

Fox Rothschild LLP

REGISTRANT INFORMATION

Mesabi Trust maintains a website that provides access to its annual, quarterly, and other reports it files with the Securities and Exchange Commission.  Such reports can be accessed at www.mesabi-trust.com.  Mesabi Trust will provide, upon the written request of any Unitholder addressed to the Trustees at the above address and without charge to such Unitholder, (i) a paper copy of Mesabi Trust’s Annual Report on Form 10-K for the fiscal year ended January 31, 2018  (“Mesabi’s Annual Report”) as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, and (ii) the Trustees Code of Ethics.

Table of Contents
	Page
OVERVIEW	1
RISK FACTORS	2
OVERVIEW OF TRUST’S ROYALTY STRUCTURE	10
SELECTED FINANCIAL DATA	11
TRUSTEES’ DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
Results of Operations	12
Liquidity and Capital Resources	16
Off-Balance Sheet Arrangements	17
Contractual Obligations	17
Critical Accounting Estimates	17
Current Developments	18
TO THE HOLDERS OF CERTIFICATES OF BENEFICIAL INTEREST IN MESABI TRUST	21
The Trust Estate	21
Duration of the Trust Estate	22
History of the Trust’s Acquisition of The Trust Estate	23
Description of the Mineral Properties and Northshore’s Mining Operations	24
Leasehold Royalties	26
Land Trust and Fee Royalties	28
Trust Expenses	29
Unallocated Reserve	30
Certificates of Beneficial Interest	30
The Trustees	31
INDEX TO FINANCIAL STATEMENTS	F-1

Special Note Regarding Forward-Looking Statements

Certain statements contained in this document are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All such forward-looking statements, including those statements estimating calendar year 2017 production or shipments, are based on input from the lessee/operator (and its parent corporation) of the mine located on the lands owned and held in trust for the benefit of the holders of units of beneficial interest of Mesabi Trust.  These statements may be identified by the use of forward-looking words, such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast” and other similar words.  Such forward-looking statements are inherently subject to known and unknown risks and uncertainties.  Actual results and future developments could differ materially from the results or developments expressed in or implied by these forward-looking statements.  Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, but are not limited to, volatility of iron ore and steel prices, market supply and demand, regulation or government action, litigation and uncertainties about estimates of reserves, and those described under the caption “Risk Factors” in this annual report.  Mesabi Trust undertakes no obligation to make any revisions to the forward-looking statements contained in this filing or to update them to reflect circumstances occurring after the date of this filing.

OVERVIEW

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 the State of New York.  Mesabi Trust holds all of the interests formerly owned by Mesabi Iron Company, including all right, title and interest in the Amendment of Assignment, Assumption and Further 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 Amended Assignment of Peters Lease, the “Amended Assignment Agreements”), the beneficial interest in in a trust organized under the laws of the State of Minnesota to administer the Mesabi Fee Lands (as defined below) as the trust corpus in compliance with the laws of the State of Minnesota on July 18, 1961 (the “Mesabi Land Trust”) and all other assets and property identified in the Agreement of Trust.  The Amended 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 (“Dunka River”) and Claude W.  Peters (the “Peters Lease”) and the Amended Assignment of Cloquet Lease relates to an Indenture made May 1, 1916 between Cloquet Lumber Company and Claude W.  Peters (the “Cloquet Lease”).

A pass-through trust with certificates of beneficial interest in the trust traded on the New York Stock Exchange

Pursuant to a ruling from the Internal Revenue Service, which ruling was based on the terms of the Agreement of Trust including the prohibition against conducting any business, the Trust is not taxable as a corporation for federal income tax purposes.  Instead, the holders of Certificates of Beneficial Interest in Mesabi Trust (“Unitholders”) are considered “owners” of the Trust and the Trust’s income is taxable directly to the Unitholders.  The Certificates of Beneficial Interest in Mesabi Trust are listed on the New York Stock Exchange (“NYSE”) and is therefore subject to extensive regulation under, among others, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), each as amended, and the rules and regulations of the NYSE.

Limited authorities and responsibilities of the Trustees

The Agreement of Trust specifically prohibits the Trustees from entering into or engaging in any business.  This prohibition seemingly applies even to business activities the Trustees may deem necessary or proper for the preservation and protection of the Trust Estate (as defined on page 21 of this Annual Report).  Accordingly, the Trustees’ activities in connection with the administration of Trust assets are limited to collecting income, paying expenses and liabilities, distributing net income to the holders of Certificates of Beneficial Interest in Mesabi Trust (“Unitholders”) Unitholders after the payment of, or provision for, such expenses and liabilities, and protecting and conserving the assets held.  Because the Units of the Trust are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, and are listed on the New York Stock Exchange, the Trustees are also responsible for ensuring that the Trust maintains compliance with all applicable laws, rules and regulations.  Deutsche Bank Trust Company Americas, the Corporate Trustee, performs certain administrative functions for the Trust.

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The Trustees do not intend to expand their responsibilities beyond those permitted or required by the Agreement of Trust, the Amendment to the Agreement of Trust dated October 25, 1982 (the “Amendment”), and those required under applicable law.  The Trust has no employees, but it engages independent consultants to assist the Trustees in, among other things, monitoring the amount and sales prices of iron ore products shipped from Silver Bay, Minnesota, based on information supplied to the Trustees by Northshore Mining Company (“Northshore”), the lessee/operator of the lands leased under the Peters Lease and Cloquet Lease (the “Peters Lease Lands” and “Cloquet Lease Lands,” respectively, as further described on page 23 of this Annual Report) and the 20% fee interest of certain lands that are particularly described in, and subject to a mining lease under, the Peters Lease (the “Mesabi Fee Lands,” and together with the Peters Lease Lands and Cloquet Lease Lands, “Mesabi Trust Lands”), and its parent company Cleveland-Cliffs Inc.  (“Cliffs”).  References to Northshore in this Annual Report, unless the context requires otherwise, are applicable to Cliffs as well.

The information regarding amounts and sales prices of shipped iron ore products is used to compute the royalties payable to the Trust by Northshore.  The Trustees request material information, from time to time, for use in the Trust’s periodic reports and as part of their evaluation of the Trust’s disclosure controls and procedures.  The Trustees rely on Northshore to provide accurate and timely information for use in the Trust’s periodic and current reports filed with the Securities and Exchange Commission.

Duration and Termination of the Trust

The Trust is governed by New York trust and estate law, which prohibits creation of any trust estate that suspends the power of alienation by a condition or limitation for a period longer than lives in being at the time of the creation plus a term of twenty-one years.  Pursuant to a ruling from the Internal Revenue Service, which ruling was based on the terms of the Agreement of Trust including the prohibition against entering into any business, the Trust is not taxable as a corporation for federal income tax purposes.

Instead, the Unitholders are considered “owners” of the Trust and the Trust’s income is taxable directly to the Unitholders.  In accordance with the Agreement of Trust, the Trust may continue to remain in force and effect until twenty-one years after the death of the survivor of twenty-five persons named in an exhibit to the Agreement of Trust.  Based upon the results of research conducted by a third party private investigation firm engaged by the Trustees, as of October 1, 2014, at least five of the twenty-five persons were alive and the youngest of those was believed to be fifty-four years old.  The Trustees believed that there were a number of other individuals named in the Agreement of Trust who were also alive as of October 1, 2014.

The Trust may be terminated earlier at any time by the action of Unitholders holding 75% of the total units of beneficial interest of the Trust as evidenced by any instrument executed by such Unitholders or by such Unitholders’ voting in favor of the termination of the Trust at a duly called and held meeting of the Unitholders.

RISK FACTORS

The results of operations and financial condition of the Trust are subject to various risks.  Some of these risks are described below, and you should take such risks into account in evaluating the Trust or any investment decision involving the Trust.  This section does not describe all risks that may be applicable to the Trust and it is intended only as a summary of certain material risk factors.  More detailed information concerning the risk factors described below may also be contained in other sections of this Annual Report.

The Trustees have no control over the operations and activities of Cliffs or Northshore.

Except within the framework of the Amended Assignment Agreements, neither the Trust nor the Trustees have any control over the operations and activities of Cliffs or its wholly-owned subsidiary, Northshore.  Accordingly, the royalty income of the Trust is highly dependent upon the activities, investments and operational decisions of Cliffs and Northshore, including temporary or permanent idling of operations, the supply and demand of suppliers and customers in the iron ore and steel industry in the U.S.  and internationally, and the terms and conditions of the Amended Assignment Agreements.  Northshore, together with Cliffs, without any input or influence from the Trust or the Trustees, control: (i) current operating plans, including iron ore production volumes, marketing of iron ore products, operating and capital expenditures as they relate to Northshore, environmental and other liabilities and the effects of regulatory changes;

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(ii) plans for Northshore’s future production, operations and capital expenditures, if any; (iii) geological data relating to iron ore reserve estimates; (iv) sales and marketing efforts, and shipments of iron ore products to customers of Cliffs; and (v) the terms and conditions, especially related to pricing and price adjustment mechanisms, of the Cliffs Pellet Agreements (described on page 11 of this Annual Report).  Any substantial change in Cliffs’ financial condition or business, or the operations, production and shipments of iron ore products by Northshore, including production curtailments, temporary idling or permanent idling of Northshore operations, about which the Trust may have little or no prior notice, could adversely affect the royalty income of the Trust, as well as the resulting cash available for distribution by the Trust to Unitholders.

Due to the lack of industry and geographic diversification, adverse developments in the iron ore mining industry could adversely impact the Trust’s financial condition, results of operations and cash flows and reduce its ability to make distributions to the Trusts’ unitholders.

Substantially all of the revenue, operating profits and assets of the Trust relate to one business segment—iron ore mining.  In addition, the principal assets of the Trust consist of two different interests in certain properties in the Mesabi Iron Range located in northern Minnesota.  This concentration could disproportionately expose the Trust's interests to operational and regulatory risks in that area.  Due to the lack of diversification in industry type and location of the Trust's interests, adverse developments in the iron ore markets or at the location of the Trust’s real estate interests could have a significantly greater impact on the Trust's financial condition, results of operations and cash flows than if the Trust’s interests were more diversified.

The stability of Cliffs’ North American iron ore operations and the price adjustment provisions in the North American iron ore supply agreements with Cliffs’ customers could have a significant effect on the cash available for distribution by the Trust to Unitholders.

In its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission on February 14, 2018  (“Cliffs’ Annual Report”), Cliffs reported that during the twelve months ended December 31, 2017, a majority of its U.S.  Iron Ore sales and Asia Pacific Iron Ore sales were made under term supply agreements to a limited number of customers with approximately 74 percent of its revenue was derived from the North American integrated steel industry of which three customers accounted for 88 percent of such sales revenue.  In Cliffs’ Annual Report, Cliffs also cautioned that as a result of pricing adjustments contained in its existing customer contracts and those anticipated in the future periods, its financial results will have increased sensitivity to changes in iron ore and steel prices. 

As discussed elsewhere in Mesabi’s Annual Report, the price adjustment mechanisms under Cliffs’ North American long term customer supply agreements, which can be positive or negative, may result in significant variations in royalties payable to Mesabi Trust from quarter to quarter and year to year.  These variations could materially adversely affect the royalties payable to the Trust and, in turn, the resulting cash available for distribution to Unitholders.

Royalties received by the Trust, and distributions paid to Unitholders, in any particular quarter or year are not necessarily indicative of royalties or distributions that will be paid in any subsequent quarter or in any full year.

Royalties received by the Trust can fluctuate significantly from quarter to quarter and year to year based upon market prices for iron ore products, the level of orders for iron ore products from Cliffs’ customers, the consumption of inventory by Cliffs’ customers, and production decisions made by Northshore.  Moreover, because the royalties paid to the Trust in any particular quarter include payments made with respect to pellets shipped and sold at estimated prices that are subject to future interim and final multi-year adjustments in accordance with the supply agreements between Cliffs and its customers, a downward trend in demand and market prices for iron and steel products could result in negative adjustments to royalties in future quarters, some of which may be significant.  These negative price adjustments could have a material adverse effect on the Trust’s royalty income, which in turn could result in lower quarterly distributions, and possibly reduce or even eliminate funds available for distribution in any quarter and in some quarters may completely offset royalties otherwise payable to the Trust.

Due to the factors described above, cash available for distribution to Unitholders in future quarters could materially decrease, and in some cases, such decrease could result in no cash being available for distribution to Unitholders.  As a result, royalties received by the Trust, and the distributions paid to Unitholders, in any particular quarter are not necessarily indicative of royalties that will be received, or distributions that will be paid, in any

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subsequent quarter or in any full year.  Based on the foregoing and the current uncertainty in the economic environment, the Trust cannot ensure that there will be adequate cash available to make a distribution to Unitholders in any particular quarter.

Cliffs has cited certain economic and market risks in Cliffs’ Annual Report, including risks related to the volatility of commodity prices, uncertainty or weakness in global economic conditions, reduced economic growth in China and oversupply of iron ore and excess steel or imported products, any of which could adversely affect Cliffs’ ability to generate revenue, maintain stable cash flow and fund its operations, which in turn could adversely affect Northshore operations and could adversely affect royalties payable to the Trust.

In Cliffs’ Annual Report, Cliffs has disclosed that, as a mining company, its profitability is dependent upon the price of the commodities sold to its customers, and that the price of iron ore has fluctuated significantly in the past and is affected by factors beyond its control including steel inventories; international demand for raw materials used in steel production; rates of global economic growth, especially construction and infrastructure activity that requires significant amounts of steel; changes in the levels of economic activity in the U.S., China, India, Europe and other industrialized or developing countries; uncertainties or weaknesses in global economic conditions such as the U.S.  debt ceiling; changes in production capacity of other iron ore suppliers, especially as additional supplies come online or where there is a significant increase in imports of steel into the U.S.  or Europe; changes in trade laws; weather-related disruptions or natural disasters that may impact the global supply of iron ore; and the proximity, capacity and cost of infrastructure and transportation.  Further, Cliffs stated that its earnings may fluctuate with the prices of the commodities it sells.  To the extent that the prices of these commodities, including the average hot roll coil price, significantly decline for an extended period of time, Cliffs may have to revise its operating plans, including curtailing production, reducing operating costs and capital expenditures and discontinuing certain exploration and development programs.  Cliffs also disclosed that it may have to take impairments on its long-lived assets and/or inventory.  Sustained lower prices also could cause Cliffs to reduce existing reserves if certain reserves no longer can be economically mined or processed at prevailing prices.  Cliffs may be unable to decrease its costs in an amount sufficient to offset reductions in revenues and may incur losses.  These events could have a material adverse effect on Cliffs and, in certain circumstances, could potentially adversely affect Northshore, which in turn, could have a material adverse effect on future royalties payable to Mesabi Trust.

Uncertainty or weakness in the global economic conditions and reduced economic growth in China and oversupply of iron ore and excess steel or imported products could adversely affect future royalties payable to the Trust.

The world price of iron ore is strongly influenced by global economic conditions, including international demand and supply for iron ore products.  In particular, the current level of international demand for raw materials used in steel production is driven largely by industrial growth in China.    Cliffs cautioned in Cliffs’ Annual Report that uncertainties or weaknesses in global economic conditions, including the slowing economic growth rate in China, has resulted, and could in the future result, in decreased demand for its products and, together with oversupply of imported products, has and may continue to lead to decreased prices, resulting in lower revenue levels and decreasing margins, which have in the past and may in the future affect adversely its business and negatively impact its financial results.  We are not able to predict how the global economic conditions, including the current slower growth and challenging economic conditions of China, will change or not change and the impact it may have on Cliffs and Northshore’s operations and the iron ore and steel industries in general going forward.

Uncertainties or weaknesses in global economic conditions and national or regional economic or political instability or other events could produce major changes in demand patterns and consumption of raw materials used in steel production, which could have a material adverse effect on the royalties payable to the Trust.  The Trustees are not able to predict the impact the volatile global economic conditions will have on future royalties payable to the Trust.

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Although Cliffs reported that it has long-term contractual commitments for a majority of sales in its U.S.  Iron Ore business, it cautioned that the uncertainty in global economic conditions may adversely impact the ability of its customers to meet their obligations.  As a result of such market volatility, Cliffs’ customers could approach Cliffs about modifying their supply agreements with Cliffs or fail to perform under such agreements.  Considering Cliffs’ limited base of current and potential customers, any modifications to Cliffs’ sales agreements or customers’ failures to perform under such agreements could impact adversely Cliffs’ sales, margins, profitability and cash flows.  Any modifications to such supply agreements, including reductions in pricing, or Cliffs’ customers’ failures to perform under such agreements could materially adversely affect the royalties payable to the Trust and, in turn, the cash available for distribution to Unitholders.

Cliffs has disclosed certain financial risks in Cliffs’ Annual Report, including risks related to its substantial level of indebtedness, risks related to potential limitations on its ability to invest in the ongoing needs of its business, risks concerning its ability to generate sufficient cash flow to service all of its debt, and risks related to adverse changes in credit ratings, which may adversely affect its cost of financing

Cliffs has disclosed in Cliffs’ Annual Report that (i) due to its substantial level of indebtedness, it has to dedicate a significant portion of its cash flow from operations to the payment of debt service, reducing the availability of its cash flow to fund capital expenditures, acquisitions or other strategic development initiatives and other general corporate purposes, (ii) if its cash flows and capital resources are insufficient to fund its debt service obligations, it may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital, including additional secured or unsecured debt, or restructure or refinance its debt, which could be at higher interest rates and may require it to comply with more onerous covenants, which could further restrict its business operations, and (iii) credit rating agencies could downgrade its ratings either due to factors specific to its business, a prolonged cyclical downturn in the mining industry, or macroeconomic trends (such as global or regional recessions) and trends in credit and capital markets more generally, which would may result in an increase to its cost of financing and limit its access to the capital markets, which would harm its financial condition and results of operations, and hinder its ability to refinance existing indebtedness on acceptable terms, and may affect adversely the terms under which it purchases goods and services.

If Cliffs incurs significant losses in future periods, Cliffs believes that it may be unable to continue as a going concern.  Cliffs also reported in Cliffs’ Annual Report that if it is unable to continue as a going concern, it may consider, among other options, further restructuring its debt although there can be no assurance that these options will be undertaken and, if so undertaken, whether these efforts will succeed.

These potential circumstances, if they become real developments, could have a material adverse effect on Cliffs and Northshore, which in turn, could have a material adverse effect on royalties paid to Mesabi Trust in the future.

Equipment failures and other unexpected events at Northshore may lead to production curtailments or shutdowns.

Interruptions in production capabilities at the mine operated by Northshore may have an adverse impact on the royalties payable to the Trust.  In addition to planned production shutdowns or curtailments and equipment failures, the Northshore facilities are also subject to the risk of loss due to unanticipated events such as fires, explosions or extreme weather conditions.  The manufacturing processes that take place in Northshore’s mining operations, as well as in Northshore’s crushing, concentrating and pelletizing facilities, depend on critical pieces of equipment, such as drilling and blasting equipment, crushers, grinding mills, pebble mills, thickeners, separators, filters, mixers, furnaces, kilns and rolling equipment, as well as electrical equipment, such as transformers.  It is possible that this equipment may, on occasion, be out of service because of unanticipated failures or unforeseeable acts of vandalism or terrorism.  In addition, because the Northshore processing facilities have been in operation for several decades, some of the equipment is aged.  Because the Trustees have no control over the operations or maintenance of the equipment at Northshore, a shutdown or reduction in capacity may come with little or no advance warning.  The remediation of any interruption in production capability at Northshore could require Cliffs to make large capital expenditures which may take place over an extended period of time.  Cliffs also stated in its most recent annual report that if its cash flows and capital resources are insufficient to fund its debt service obligations, it may be forced to reduce or delay investments and capital expenditures.  At the end of November 2015, Northshore shut down all of its taconite production lines and remained idle until May 2016.  According to Cliffs, the temporary idle was a result of historic levels of steel imports into the U.S.  and reduced demand from our steel-producing customers.  Any additional idling, shutdown, reduction in operations, or production curtailment at Northshore would likely adversely affect the royalties payable to the Trust.

5

The mining operations of Northshore are subject to extensive governmental regulations and Northshore is subject to risks related to its compliance with federal and state environmental regulations.

Northshore, as the operator of the mine on Mesabi Trust Lands, is subject to various federal, state and local laws and regulations on matters such as employee health and safety, air quality, water pollution, plant, wetlands, natural resources and wildlife protection, reclamation and restoration of mining properties, the discharge of materials into the environment, and the effects that mining has on groundwater quality, conductivity and availability.  Northshore is required to maintain numerous permits and approvals issued by federal and state regulatory agencies and its mining operations are subject to inspection and regulation by the Mine Safety and Health Administration of the United States Department of Labor (“MSHA”) under the provisions of the Mine Safety and Health Act of 1977.  The Occupational Safety and Health Administration (“OSHA”) has jurisdiction over safety and health standards not covered by MSHA and the Minnesota Pollution Control Agency (“MPCA”) regulates various aspects of Northshore’s operations.  Northshore may from time to time be involved in disputes or litigation with the regulatory agencies over certain aspects of its operation but because the Trust has no control over Northshore’s operations, the potential impact of these proceedings cannot be determined.  Moreover, Northshore is solely responsible for its compliance with any laws, regulations or permits applicable to Northshore’s operations and Northshore may at times fail to operate in compliance with such laws, regulations and permits.  The Trust has no ability to control or determine whether Northshore has been or will in the future operate in compliance with such laws and regulations.  If Northshore fails to comply with these laws, regulations or permits, it could be subject to fines or other sanctions, any of which could have an adverse effect on its operations and its ability to ship iron ore products from Silver Bay, Minnesota, which could, in turn, have a material adverse effect on the royalties paid to the Trust.

TMDL (a regulatory term describing a value of the maximum amount of a pollutant that a body of water can receive while still meeting water quality standards under the Clean Water Act) regulations are contained in the Clean Water Act and as a part of Minnesota’s Mercury TMDL Implementation Plan, in cooperation with the MPCA, the taconite industry developed a Taconite Mercury Reduction Strategy and signed a voluntary agreement to effectuate its terms.  The strategy includes a 75 percent target reduction of mercury air emissions from Minnesota pellet plants collectively by 2025.  For Cliffs, the requirements in the voluntary agreement do not apply to Northshore.  Late in 2013, however, Minnesota published a draft mercury control rule that would require annual mercury emissions reporting and could require installation of mercury emission control equipment on all Cliffs’ Minnesota facilities including those of Northshore.  On September 22, 2014, Minnesota promulgated the Mercury Air Emissions Reporting and Reduction Rule mandating mercury air emissions reporting and reduction.  The adopted rule expanded applicability to all of Cliffs’ Minnesota operations and requires submitting a mercury reduction plan in 2018 to reduce mercury emissions from all of Cliffs’ Minnesota taconite furnaces by 72 percent by January 2025 and 70 percent reduction from Northshore’s industrial boilers by January 1, 2018.  The adopted rule does not include all four Adaptive Management Criteria for evaluating mercury reduction, which were agreed upon in the October 2009 Minnesota’s Mercury TMDL Implementation Plan.  According to Cliffs’ Annual Report, there is currently no proven technology to cost-effectively reduce mercury emissions from taconite furnaces to the target level of 72 percent that would meet all four Adaptive Management Criteria.  Cliffs expressed its concerns about the technical and economic feasibility to reduce taconite mercury emissions by 72 percent and are conducting detailed engineering analysis to determine the impact of the regulations on each unique iron ore indurating furnace affected by this rule.  The Trustees are unable to predict what impact, if any, the Mercury Air Emissions Reporting and Reduction Rule will have on production and shipments from Northshore or future royalties payable to the Trust.

The Trust does not control the portion of Northshore’s shipments that will come from ore mined from Mesabi Trust Lands.

The Trustees do not exert any influence over mining operational decisions at Northshore and Northshore alone determines whether to mine from Mesabi Trust Lands or state-owned lands, based on its current production estimates and engineering plan.  Northshore’s mining operations include Mesabi Trust Lands and mineral-producing land owned by the State of Minnesota and others.  Ore mined by Northshore from lands other than Mesabi Trust Lands is processed, along with ore mined from Mesabi Trust Lands, in Northshore-owned crushing, concentrating and pelletizing facilities and is separately accounted for on a periodic basis.  Northshore also has the ability to process and ship iron ore products from lands other than Mesabi Trust Lands.  In certain circumstances, the Trust may be entitled to royalties on those other shipments, but not in all cases.  In general, the Trust will receive higher royalties (assuming all other factors are equal) if a higher percentage of shipments is from Mesabi Trust Lands.  The percentages of shipments from Mesabi Trust Lands were 92.6%, 99.6%, 88.9%, 90.8% and 93.5% in calendar years 2017, 2016, 2015, 2014 and 2013, respectively.  If

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Northshore decides to materially reduce the percentage of ore mined, or pellets shipped, from Mesabi Trust Lands, the income of the Trust could be materially adversely affected.

Royalties payable to the Trust could be materially adversely affected by the failure of the Trust’s independent consultants to competently perform.

As permitted by the terms of the Agreement of Trust and the Amendment, the Trustees are authorized to, and in fact do, rely upon certain independent consultants to assist the Trustees in carrying out and fulfilling their obligations as Trustees.  Independent consultants perform services, render advice and produce reports with respect to monthly production and shipments, which include figures on crude ore production, iron ore pellet production, iron ore pellet shipments, and discussions concerning the condition and accuracy of the scales used to weigh iron ore pellets produced at Northshore’s facilities.  The Trustees have also retained an accounting firm to provide non-audit services, including preparing financial statements, reviewing financial data related to shipping and sales reports provided by Northshore and reviewing the schedule of leasehold and fee royalties payable to the Trust.  The Trustees believe that the independent consultants are qualified to perform the services and functions assigned to them.  Nevertheless, any negligence or the failure of any such independent consultants to competently perform could materially adversely affect the royalties to be received by the Trust.

The Trust relies on Cliffs’ estimates of recoverable reserves, and if those estimates are inaccurate, the total potential future royalty stream to the Trust and distributions payable to Unitholders may be materially adversely affected.

The Trustees do not participate in preparing the recoverable ore reserve estimates reported by Cliffs.  According to Cliffs’ Annual Report, Cliffs regularly evaluates its iron ore reserves based on revenues and costs and updates them as required in accordance with Securities Act Industry Guide 7, promulgated by the Securities and Exchange Commission.  In 2013, the Trustees engaged an independent firm of geological experts to evaluate the process Cliffs uses to estimate the recoverable iron ore reserves at the Peter Mitchell Mine.  Still, there are numerous uncertainties inherent in estimating quantities of reserves of mineral producing lands and such estimates necessarily depend upon a number of variable factors and assumptions, such as production capacity, effects of regulations by governmental agencies, future prices for iron ore, future industry conditions and operating costs, severance and excise taxes, development costs and costs of extraction and reclamation costs, all of which may in fact vary considerably from actual results.  All of these factors are outside of the control and influence of the Trustees.  For these reasons, estimates of the economically recoverable quantities of mineralized deposits attributable to Mesabi Trust Lands and the classifications of such reserves based on the risk of recovery prepared by different engineers or by the same engineers at different times may vary substantially as the criteria change.  Cliffs’ estimate of the ore reserves could be negatively affected by future industry conditions, geological conditions and ongoing mine planning at the Peter Mitchell Mine.  Actual reserves will likely vary from estimates, and if such variances are negative and material, the expected royalties payable to the Trust could be materially adversely affected and the value of the Trust’s Units could decline.

Cliffs has disclosed certain operational risks, including risks that could arise related to substantial costs from idled production capacity, announced and potential mine closures and risks related to its ability to transport its products to customers at competitive rates and in a timely manner.

In Cliffs’ Annual Report, Cliffs indicated that its decisions concerning which mines to operate and at what capacity levels are made based upon our customers' orders for products, the quality of and cost to mine and process the remaining ore body, as well as the capabilities and cost performance of our mines.  During depressed market conditions, it may concentrate production at certain mines and not operate others in response to customer demand and as a result we will incur idle facility costs.  In 2016, two of its Minnesota mines were temporarily idled for a portion of the year and it indefinitely idled the Empire mine in Michigan in August 2016.  When it restarts idled facilities, it incurs certain costs to replenish inventories, prepare the previously idled facilities for operation, perform the required repair and maintenance activities and prepare employees to return to work safely and to resume production responsibilities.  The amount of any such costs can be material, depending on a variety of factors, such as the period of idle time, necessary repairs and available employees, and is difficult to project.  In addition, Cliffs stated that faced with overcapacity in the iron ore market, it may seek to rationalize assets through asset sales, temporary shutdowns, indefinite idles or closures of facilities.

Cliffs has disclosed in Cliffs’ Annual Report, that mine closures entail substantial costs, that it has idled its Wabush Scully mine in Newfoundland and Labrador, and in November 2014 it began to implement the permanent

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closure plan for that mine.  In January 2015, Cliffs ceased active production at the Bloom Lake mine and the mine transitioned to "care-and-maintenance" mode.  Cliffs previously announced that its Canadian affiliates commenced restructuring proceedings under the Companies’ Creditors Arrangement Act (CCAA) to mitigate closure costs in connection with the shutdown of the Bloom Lake mine.  During the second quarter of 2015, the CCAA protection granted to the Bloom Lake Group was extended to include the Wabush Group to facilitate the reorganization of each of their businesses and operations.  As of December 31, 2017, CCAA proceedings are still ongoing.  The Monitor appointed by the court in the CCAA proceedings for the Bloom Lake Group and the Wabush Group has conducted a claims process pursuant to which creditors have filed claims against the Bloom Lake Group and the Wabush Group.  The Monitor is reviewing all claims filed as part of this claims process.  Currently, there is uncertainty as to the amount of the distribution that will be made to the creditors of the Bloom Lake Group and the Wabush Group, including, if any, to Cliffs, and whether Cliffs could be held liable for claims that may be asserted by or on behalf of the Bloom Lake Group or the Wabush Group or by their respective representatives against non-debtor affiliates of the Bloom Lake Group and the Wabush Group.  During 2017, Cliffs became aware that it was probable the Monitor will assert a preference claim against Cliffs and/or certain of our affiliates.  Given that it is probable the claim will be asserted by the Monitor, Cliffs recorded an estimated liability of $55.6 million, which includes the value of Cliffs related-party claims against the Bloom Lake Group and the Wabush Group.  Should the Monitor proceed to assert the claim, Cliffs believes the Monitor will demand an amount in excess of the value of our related-party claims against the estate.  Thus, it is possible that a change in the estimated liability may occur in the future.  Cliffs denies liability for any amount and has indicated it will vigorously defend such claim.  Cliffs also disclosed that if it closes one or more of its own mines, Cliffs’ results of operations and financial condition would likely be affected adversely.  Any additional idling, shutdown, reduction in operations, or production curtailment at Northshore could adversely affect the royalties payable to the Trust.

Cliffs also disclosed that in its U.S.  Iron Ore operations, disruption of the lake and ocean-going vessels and rail transportation services due to weather-related problems and lack of alternative transportation sources could impair Cliffs’ ability to supply iron ore to its customers at competitive rates or in a timely manner, and thus, could adversely affect its sales, margins and profitability. 

These events could have a material adverse effect on Cliffs and potentially Northshore, which in turn, could have a material adverse effect on royalties paid to Mesabi Trust in the future.

The operations at Northshore are largely dependent on a single-source energy supplier.

The operations at Northshore are largely dependent on Silver Bay Power Company, a 115 megawatt power plant, for its electrical supply.  Silver Bay Power Company, which is wholly owned by Northshore, has an interconnection agreement with Minnesota Power, Inc.  for backup power when excess generation is necessary.  In May 2016, Silver Bay Power entered into an agreement with Minnesota Power to purchase roughly half of Northshore's electricity needs from Minnesota Power through 2019.  On January 1, 2020, Silver Bay Power will purchase 100 percent of the electricity requirements of Northshore from Minnesota Power and Silver Bay Power plans to idle both of its generating units except under certain circumstances.  Until the transition is complete, a significant interruption in service from Silver Bay Power Company due to vandalism, terrorism, weather conditions, natural disasters, or any other cause could cause a decrease in production capacity or require a temporary shutdown of Northshore’s operations.  In addition, one natural gas pipeline serves all of Cliffs’ Minnesota mines, and a pipeline failure could idle or substantially impair the operations at Northshore.  Any substantial interruption of, or material reduction in, Northshore’s operations could materially adversely affect the royalties payable to the Trust.

If steelmakers use methods other than blast furnace production to produce steel, or shut down or reduce production using blast furnaces, the demand for iron ore pellets may decrease.

In Cliffs’ Annual Report, Cliffs reported that the demand for Cliffs’ iron ore products in North America is determined by the operating rates for the blast furnaces of steel companies although not all finished steel is produced by blast furnaces.  Finished steel also may be produced by other methods that do not require iron ore pellets and use scrap steel, pig iron, hot briquetted iron and direct reduced iron.  North American steel producers can also produce steel using imported iron ore, semi-finished steel products or other lighter-weight steel alternatives, which eliminates the need for domestic iron ore.  Future environmental restrictions on the use of blast furnaces in North America also may reduce the use of blast furnaces in steel production.  Because the maintenance of blast furnaces can require substantial capital expenditures and may cause prolonged outages, which may reduce demand for pellets, steel manufacturers may choose not to maintain their blast furnaces, and some of them may not have the resources necessary to adequately maintain their

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blast furnaces.  If steel manufacturers alter the methods they use to produce steel or otherwise substantially reduce their use of iron ore pellets, demand for iron ore pellets will decrease, which could materially adversely affect the royalties payable to the Trust.

Certain risk factors affecting Cliffs’ North American Iron Ore Business generally, and Northshore operations in particular, could have a material adverse effect on the royalties payable to the Trust.

Because substantially all of the Trust’s revenue is derived from iron ore products shipped by Northshore from Silver Bay, Northshore’s iron ore pellet processing and shipping activities directly impact the Trust’s revenues in each quarter and each year.  A number of the risk factors, as disclosed in Cliffs’ Annual Report, affect Cliffs’ operations, and could impact Northshore’s production and shipment volume.  In Cliffs’ Annual Report, Cliffs identified the following six categories of risk that Cliffs is subject to: (i) economic and market, (ii) regulatory, (iii) financial, (iv) operational, (v) development and sustainability, and (vi) human capital.  These risk factors include, among others, the global economic climate and financial market conditions, economic conditions in the iron ore industry, extensive governmental regulations relating to environmental matters and the costs and risks related thereto, availability of substitute materials, pricing by domestic and international competitors, long-term customer contracts or arrangements by Northshore or its competitors, price adjustment provisions in Cliffs’ North American term supply agreements (which take into account various price indexes), availability of ore boats, production at Northshore’s mining operations, natural disasters, shipping conditions in the Great Lakes and production at Northshore’s pelletizing/processing facility.  Specifically, if any portion of Northshore’s pelletizing lines becomes idle for any reason, production, shipments and, consequently, the royalties payable to the Trust could be materially adversely affected.

We are dependent upon third party information technology systems, which are subject to cyber threats, disruption, damage and failure. 

We are dependent upon third party information systems and other technologies, including those related to our financial and operational management and those related to Cliffs financial and operational management.  Network and information systems‑related events, such as computer hackings, cyber‑attacks, ransomware, computer viruses, worms or other destructive or disruptive software, process breakdowns, denial of service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing, or power outages, natural disasters, terrorist attacks or other similar events, could result in damage to our information and data that is stored or transmitted by our third party vendors or damage or disruption to Cliffs business operations.  Any security breaches, such as misappropriation, misuse, leakage, falsification or accidental release or loss of information maintained in these information technology systems could damage our or Cliffs reputation and require us or Cliffs to expend significant capital and other resources to remedy any such security breach.  There can be no assurance that these events and security breaches will not occur in the future or not ultimately have an adverse effect on the royalties payable to the Trust. 

The Trustees are not subject to annual election and, as a result, the ability of the holders of Trust Certificates to influence the policies of the Trust may be limited.

Directors of a corporation are generally subject to election at each annual meeting of shareholders or, in the case of staggered boards, at regular intervals.  Under the Agreement of Trust, however, Mesabi Trust is not required to hold annual meetings of holders of Trust Certificates to elect Trustees and Trustees generally hold office until their death, resignation or disqualification.  As a result, the ability of holders of Trust Certificates to effect changes in the composition of those serving as Trustees and the policies of the Mesabi Trust is significantly more limited than that of the shareholders of a corporation.

We are subject to the continued listing criteria of the NYSE, and our failure to satisfy these criteria may result in delisting of our units.

Our units are currently listed for trading on the NYSE.  In order to maintain the listing, we must maintain certain objective standards such as unit prices and a minimum number of public unitholders.  In addition to objective standards, the NYSE may delist the securities of any issuer using subjective standards such as, if in the NYSE’s opinion, the issuer’s financial condition and/or operating results appear unsatisfactory or if any event occurs or any condition exists which makes continued listing on the NYSE inadvisable.

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If the NYSE delists our units, unitholders may face material adverse consequences, including, but not limited to, a lack of trading market for our units and reduced liquidity.

OVERVIEW OF TRUST’S ROYALTY STRUCTURE

Leasehold royalty income constitutes the principal source of the Trust’s revenue.  Royalty rates are determined in accordance with the terms of Mesabi Trust’s leases and assignments of leases.  Three types of royalties, as well as royalty bonuses, comprise the Trust’s royalty income:

· Base overriding royalties.  Base overriding royalties have historically constituted the majority of Mesabi Trust’s royalty income.  Base overriding royalties are determined by both the volume and selling price of iron ore products shipped.  Northshore is obligated 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 a percentage of the gross proceeds of iron ore products produced at Mesabi Trust Lands (and to a limited extent other lands) and shipped from Silver Bay, Minnesota.  The percentage ranges from 2-1/2% of the gross proceeds for the first one million tons of iron ore products so shipped annually to 6% of the gross proceeds for all iron ore products in excess of 4 million tons so shipped annually.  Base overriding royalties are subject to interim and final price adjustments under the Cliffs Pellet Agreements (described on page 11 of this Annual Report) and, as described elsewhere in this report, such adjustments may be positive or negative.

· Royalty bonuses.  The Trust earns royalty bonuses when iron ore products shipped from Silver Bay are sold at prices above a threshold price per ton.  The royalty bonus is based on a percentage of the gross proceeds of product shipped from Silver Bay.  The threshold price is adjusted (but not below $30.00 per ton) on an annual basis for inflation and deflation (the “Adjusted Threshold Price”).  The Adjusted Threshold Price was $53.80 per ton for calendar year 2016 and $54.74 per ton for calendar year 2017, and will be $55.74 per ton for calendar year 2018.  The royalty bonus percentage ranges from 1/2 of 1% of the gross proceeds (on all tonnage shipped for sale at prices between the Adjusted Threshold Price and $2.00 above the Adjusted Threshold Price) to 3% of the gross proceeds (on all tonnage shipped for sale at prices $10.00 or more above the Adjusted Threshold Price).  Royalty bonuses are subject to price adjustments under the Cliffs Pellet Agreements (described in this Annual Report); such adjustments may be positive or negative.  See the section entitled “Comparison of Financial Results for Fiscal Years ended January 31, 2018 and January 31, 2017”  in this Annual Report for more information.

· Fee royalties.  Fee royalties have historically constituted a smaller component of the Trust’s total royalty income.  Fee royalties are payable to the Mesabi Land Trust, a Minnesota land trust, which holds a 20% interest as fee owner in the Peters Lease.  Mesabi Trust holds the entire beneficial interest in the Mesabi Land Trust for which U.S.  Bank N.A.  acts as the corporate trustee.  Mesabi Trust receives the net income of the Mesabi Land Trust, which is generated from royalties on the amount of crude ore mined after the payment of expenses to U.S.  Bank N.A.  for its services as the corporate trustee.  Crude ore is the source of iron oxides used to make iron ore pellets and other products.  The fee royalty on crude ore is based on an agreed price per ton, subject to certain indexing.

· Minimum advance royalties.  Northshore’s obligation to pay base overriding royalties and royalty bonuses with respect to the sale of iron ore products generally accrues upon the shipment of those products from Silver Bay.  However, regardless of whether any shipment has occurred, Northshore is obligated to pay to Mesabi Trust a minimum advance royalty.  Each year, the amount of the minimum advance royalty is adjusted (but not below $500,000 per annum) for inflation and deflation.  The minimum advance royalty was $897,008 for calendar year 2016 and $912,725 for calendar year 2017, and will be $929,320 for calendar year 2018.  Until overriding royalties (and royalty bonuses, if any) for a particular year equal or exceed the minimum advance royalty for the year, Northshore must make quarterly payments of up to 25% of the minimum advance royalty for the year.  Because minimum advance royalties are essentially prepayments of base overriding royalties and royalty bonuses earned each year, any minimum advance royalties paid in a fiscal quarter are recouped by credits against base overriding royalties and royalty bonuses earned in later fiscal quarters during the year.

The current royalty rate schedule became effective on August 17, 1989 pursuant to the Amended Assignment Agreements, which the Trust entered into with Cyprus Northshore Mining Corporation (“Cyprus NMC”).  Pursuant to the Amended Assignment Agreements, overriding royalties are determined by both the volume and selling price of iron

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ore products shipped.  In 1994, Cyprus NMC was sold by its parent corporation to Cliffs and renamed Northshore Mining Company.  Cliffs now operates Northshore as a wholly owned subsidiary.

Under the relevant agreements, Northshore has the right to mine and ship iron ore products from lands other than Mesabi Trust Lands.  Northshore alone determines whether to conduct mining operations on Mesabi Trust Lands and/or such other lands based on its current mining and engineering plan.  The Trustees do not exert any influence 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 from Silver Bay, whether or not the iron ore products are from Mesabi Trust Lands.  Mesabi Trust receives royalties at the greater of (i) the aggregate quantity of iron ore products shipped that were mined from Mesabi Trust Lands, and (ii) 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 such year, 85% of the next two million tons shipped during such year, and 25% of all tonnage shipped during such year in excess of six million tons.

Royalty income, which constitutes the principal source of the Trust’s revenue, comprised 99.7% to 99.9% of the Trust’s total revenue in each of the fiscal years ended January 31, 2018,  January 31, 2017 and January 31, 2016.  A more complete discussion of royalty rates and the manner in which they are determined is set forth under the headings “Leasehold Royalties” and “Land Trust and Fee Royalties,” in this Annual Report.

During the course of its fiscal year some portion of royalties expected to be paid to Mesabi Trust is based in part on estimated prices for iron ore products sold under term contracts between Northshore, Cliffs and their customers (the “Cliffs Pellet Agreements”).  The Cliffs Pellet Agreements use estimated prices which are subject to interim and final pricing adjustments, which can be positive or negative, and which adjustments are dependent in part on multiple price and inflation index factors that are not known until after the end of a contract year.  Even though Mesabi Trust is not a party to the Cliffs Pellet Agreements, these adjustments can result in significant variations in royalties payable to Mesabi Trust (and in turn the resulting amount available for distribution to Unitholders by the Trust) from quarter to quarter and on a comparative historical basis, and these variations, which can be positive or negative, cannot be predicted by Mesabi Trust.  In either case, these price adjustments will impact future royalties payable to the Trust that become available for distribution to Unitholders. 

As described elsewhere in this Annual Report, the royalty percentage paid to the Trust increases as the aggregate tonnage of iron ore products shipped, attributable to the Trust, in any calendar year increases past each of the first four one-million ton volume thresholds.  Assuming a consistent sales price per ton throughout a calendar year, shipments of iron ore product attributable to the Trust later in the year generate a higher royalty to the Trust, as total shipments for the year exceed increasing levels of royalty percentages and pass each of the first four one-million ton volume thresholds.

As also described elsewhere in this Annual Report, the Trust receives a bonus royalty equal to a percentage of the gross proceeds of iron ore products (mined from Mesabi Trust lands) shipped from Silver Bay and sold at prices above the Adjusted Threshold Price.  Although 98.1% all of the iron ore products shipped from Silver Bay during calendar 2017 were sold at prices higher than the Adjusted Threshold Price, the Trustees are unable to project whether Cliffs will continue to be able to sell iron ore products at prices above the applicable Adjusted Threshold Price, entitling the Trust to any future bonus royalty payments.

SELECTED FINANCIAL DATA

Years ended January 31	2018		2017		2016		2015		2014
Royalty and interest income	$	34,567,557	$	10,736,534	$	9,721,508	$	26,080,115	$	22,045,153
Trust expenses		1,071,990		1,123,422		1,162,667		1,312,267		988,864
Net income(1)	$	33,495,567	$	9,613,112	$	8,558,841	$	24,767,848	$	21,056,289
Net income per Unit(2)	$	2.553	$	0.733	$	0.652	$	1.888	$	1.605
Distributions declared Per unit(2)(3)	$	2.530	$	0.640	$	0.090	$	1.840	$	1.620
Total Assets	$	26,123,020	$	14,249,882	$	9,816,961	$	10,097,620	$	8,553,797

(1) The Trust, as a grantor trust, is exempt from federal and state income taxes.

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(2) Based on 13,120,010 Units of Beneficial Interest outstanding during all years.

(3) The Trust declares distributions in January of each year and pays such distributions in February which is in the Trust’s next fiscal year.  Because of this, distributions declared generally do not equal the amount of cash distributed in the same fiscal year.  During the Trust’s fiscal year ended January 31, 2018, the Trustees distributed $1.49 per Unit (including $0.14 per Unit declared in fiscal 2017 but distributed in fiscal 2018 (February 2017)) and in fiscal 2018 declared a distribution of $1.18 per Unit payable in February 2018, the next fiscal year.  During the Trust’s fiscal year ended January 31, 2017, the Trustees distributed $0.55 per Unit (including $0.05 per Unit declared in fiscal 2016 but distributed in fiscal 2017 (February 2016)) and in fiscal 2017 declared a distribution of $0.14 per Unit payable in February 2017, the next fiscal year.  During the Trust’s fiscal year ended January 31, 2016, the Trustees distributed $0.68 per Unit (including $0.64 per Unit declared in fiscal 2015 but distributed in fiscal 2016 (February 2015)) and in fiscal 2016 declared a distribution of $0.05 per Unit payable in February 2016, the next fiscal year.  During the Trust’s fiscal year ended January 31, 2015, the Trustees distributed $1.77 per Unit (including $0.57 per Unit declared in fiscal 2014 but distributed in fiscal 2015 (February 2014)) and in fiscal 2015 declared a distribution of $0.64 per Unit payable in February 2015, the next fiscal year.  During the Trust’s fiscal year ended January 31, 2014, the Trustees distributed $1.54 per Unit (including $0.49 per Unit declared in fiscal 2013 but distributed in fiscal 2014 (February 2013)) and in fiscal 2014 declared a distribution of $0.57 per Unit payable in February 2014, the next fiscal year.

TRUSTEES’ DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Comparison of Iron Ore Pellet Production and Shipments for the Fiscal Years Ended January 31, 2018,  January 31, 2017 and January 31, 2016

During fiscal 2018, production attributed to Trust lands totaled approximately 4.8 million tons, an increase of 29.8% as compared to production for fiscal year 2017 and an increase of 38.8% as compared to production for fiscal 2016.  Shipments to Northshore’s customers attributed to the Trust totaled approximately 4.9 million tons during fiscal 2018.  This represents an increase of 48.6% as compared to shipments for fiscal year 2017 and an increase of 39.8% as compared to shipments for fiscal year 2016.  The table below, which is based on information provided to the Trust by Northshore, shows the total production and total shipments of iron ore pellets from Mesabi Trust lands during the prior three fiscal years.

	Pellets Produced from	Pellets Shipped from
	Trust Lands	Trust Lands
Fiscal Year Ended	(Tons)	(Tons)
January 31, 2018	4,806,391	4,920,633
January 31, 2017	3,702,144	3,312,159
January 31, 2016	3,463,945	3,519,869

Production of iron ore pellets for the fourth quarter of fiscal 2018 decreased 1.2% as compared to production of iron ore pellets for the fourth quarter of fiscal 2017 due primarily to a decrease in orders from Northshore’s customers as they adjusted production based on anticipated demand from their customers.  Shipments of iron ore pellets by Northshore during the fourth quarter of fiscal 2018 decreased by 54.4% as compared to shipments of iron ore pellets during the fourth quarter of fiscal 2017.  The decrease in shipments in the fourth quarter of fiscal 2018 was caused by a decrease in demand from Northshore’s customers.

	Pellets Produced from	Pellets Shipped from
	Trust Lands	Trust Lands
Three Months Ended	(Tons)	(Tons)
January 31, 2018	1,335,413	649,469
January 31, 2017	1,351,264	1,424,484

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The table below shows the change in the percentages of production and shipments from lands owned or leased by Mesabi Trust versus the percentages of production and shipments from lands owned by the State of Minnesota and others for the most recent three fiscal years.

			Percentage of	Percentage of
	Percentage of	Percentage of	Pellets	Pellets
	Pellets Produced	Pellets Produced	Shipped	Shipped
	From Trust	From Non-Trust	From Trust	From Non-Trust
Fiscal Year ended	Lands	Lands	Lands	Lands
January 31, 2018	89.1%	10.9%	92.6%	7.4%
January 31, 2017	99.2%	0.8%	99.6%	0.4%
January 31, 2016	88.8%	11.2%	88.9%	11.1%

As is the case with the volume of shipments from Silver Bay, Minnesota, the Trustees cannot predict what percentage of production or shipments will be attributable to iron ore mined from Mesabi Trust lands in fiscal 2018.  However, pursuant to the Amendment, Mesabi Trust will be credited with at least 90% of the first four million tons of iron ore pellets shipped from Silver Bay, Minnesota in each calendar year, at least 85% of the next two million tons of pellets shipped from Silver Bay, Minnesota in each calendar year, and at least 25% of all tons of pellets shipped from Silver Bay, Minnesota in each calendar year in excess of six million tons.

Comparison of Financial Results for Fiscal Years ended January 31, 2018 and January 31, 2017

Royalty Income

As shown in the table below, in fiscal 2018 base royalties increased by 160.0%, bonus royalties increased by 406.9% and fee royalties increased by 24.6%, each as compared to fiscal 2017.  Accordingly, the Trust’s total royalty income increased by 221.3% in fiscal 2018 as compared to fiscal 2017.  The increase in royalties received by the Trust is primarily the result of an increase in iron prices and the corresponding bonus royalty rate and an increase in tons shipped in fiscal 2018, as compared to fiscal 2017.

	Fiscal Year ended January 31,				% increase
	2018		2017		(decrease)
Base overriding royalties	$	19,296,634	$	7,422,672	160.0%
Bonus royalties		14,659,069		2,891,948	406.9%
Minimum advance royalty paid (recouped)		—		—	—
Fee royalties		519,327		416,788	24.6%
Total royalty income	$	34,475,030	$	10,731,408	221.3%

The royalty amounts set forth in the table above include pricing adjustments made to royalty payments previously received by the Trust based on shipments from Silver Bay, Minnesota during prior calendar years.  Depending on the year, the volume of shipments, and the interim and final price paid to the Trust for shipments from Silver Bay, Minnesota, the price adjustment provisions of the Cliffs Pellet Agreements may increase or decrease, in some cases materially, the royalties paid to the Trust.  Because the Trust is not a party to the Cliffs Pellet Agreements, the Trustees are unable to predict the extent of any pricing adjustments that may occur under the Cliffs Pellet Agreements or whether the adjustments will increase or decrease royalties payable to the Trust.  With the current volatility in demand and prices for iron ore and steel products, the price adjustment provisions in the Cliffs Pellet Agreements may have a significant impact on future royalties payable to the Trust and the adjustments, depending on whether they are positive or negative, may increase or decrease the distributions payable to Unitholders.

Total Revenues, Expenses, Net Income and Distributions

As set forth in the table below, net income for fiscal 2018 increased by 248.4%, as compared to fiscal 2017, primarily due to an increase in iron prices and the corresponding bonus royalty rate and an increase in tons shipped.  Total expenses for fiscal 2018 decreased by 4.6% as compared to fiscal 2017.  A more detailed summary of the Trust’s

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expenses, including legal and accounting expenses, is set forth under the heading “Trust Expenses” in this Annual Report.

	Fiscal Year ended January 31,				% increase
	2018		2017		(decrease)
Total Revenues	$	34,567,557	$	10,736,534	222.0%
Expenses		1,071,990		1,123,422	-4.6%
Net Income	$	33,495,567	$	9,613,112	248.4%

As discussed in the paragraph above,  the Trust’s total royalty income and net income for fiscal 2018 increased by 222.0% and 248.4%, respectively, due to an increase in the iron prices and the corresponding bonus royalty rate during fiscal 2018, both as compared to fiscal 2017.  The increase in the Trust’s net income resulted in a 295.3% increase in total distributions declared to Unitholders in fiscal 2018, as compared to fiscal year 2017.

	Fiscal Year ended January 31,				% increase
	2018		2017		(decrease)
Total Distributions Declared	$	33,193,626	$	8,396,806	295.3%
Distributions Declared per Unit	$	2.53	$	0.64	295.3%

Unallocated Reserve

As set forth in the table below, the Unallocated Reserve increased by $301,941 or 3.0% to $10,507,411, as of January 31, 2018, as compared to $10,205,470 as of January 31, 2017.  As of January 31, 2018, the Unallocated Reserve consisted of $8,630,674 in unallocated cash and U.S.  Government securities, $1,956,091 of accrued income receivable and no deferred royalty revenue.  Comparatively, as of January 31, 2017, the Unallocated Reserve consisted of $12,314,425 in unallocated cash and U.S.  Government securities, $45,045 of accrued income receivable and deferred royalty revenue of $2,099,415.

	Fiscal Year ended January 31,				% increase
	2018		2017		(decrease)
Accrued Income Receivable	$	1,956,091	$	45,045	4242.5%
Unallocated Cash and U.S.  Government Securities		8,630,674		12,314,425	-29.9%
Prepaid Expenses and (Accrued Expenses), net		(79,354)		(54,585)	45.4%
Deferred Royalty Revenue		—		(2,099,415)	-100.0%
Unallocated Reserve	$	10,507,411	$	10,205,470	3.0%

The 3.0% increase in the Unallocated Reserve for the fiscal year ended January 31, 2018 as compared the fiscal year ended January 31, 2017,  is primarily the result of an increase in the accrued income receivable and a decrease in the deferred royalty revenue.

Accrued Income Receivable.  The $1,911,046, or 4242.5%, increase in the accrued income receivable portion of the Unallocated Reserve is the result of positive pricing adjustments recognized and the royalties earned on shipments in the last month of the fiscal year ended January 31, 2018, as compared to the fiscal year ended January 31, 2017.

Deferred Royalty Revenue.  The $2,099,415, or 100%, decrease in the deferred royalty revenue portion of the Unallocated Reserve is the result of negative pricing adjustments recognized in the last month of the fiscal year ended January 31, 2017, as compared to the fiscal year ended January 31, 2018.

As described elsewhere in this Annual Report, pricing estimates are adjusted on a quarterly basis as updated pricing information is received from Northshore.  It is possible that future negative price adjustments could offset, or even eliminate, royalties or royalty income that would otherwise be payable to the Trust in any particular quarter, or at year end, thereby potentially reducing cash available for distribution to the Trust’s Unitholders in future quarters.  See discussion under the heading “Risk Factors” in this Annual Report.

Unallocated Cash and U.S.  Government Securities.  The Trust’s unallocated cash and U.S.  Government Securities for unexpected obligations decreased by 29.9% to $8,630,674 as of January 31, 2018 from $12,314,425 as of January 31, 2017.  The $3,683,751 decrease in the Trust’s cash reserve resulted from a decrease in the royalty payment received in January 2018 as compared to the royalty payment received in January 2017.

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Comparison of Financial Results for Fiscal Years ended January 31, 2017 and January 31, 2016

Royalty Income

As shown in the table below, in fiscal 2017 base royalties decreased by 1.0%, bonus royalties increased by 61.0% and fee royalties decreased by 0.1%, each as compared to fiscal 2016.  Accordingly, the Trust’s total royalty income increased by 10.5% in fiscal 2017 as compared to fiscal 2016.  The increase in royalties received by the Trust is primarily the result of an increase in iron prices and the corresponding bonus royalty rate in fiscal 2017, as compared to fiscal 2016.

	Fiscal Year ended January 31,				% increase
	2017		2016		(decrease)
Base overriding royalties	$	7,422,672	$	7,500,989	-1.0%
Bonus royalties		2,891,948		1,796,117	61.0%
Minimum advance royalty paid (recouped)		—		—	—
Fee royalties		416,788		417,311	-0.1%
Total royalty income	$	10,731,408	$	9,714,417	10.5%

The royalty amounts set forth in the table above include pricing adjustments made to royalty payments previously received by the Trust based on shipments from Silver Bay, Minnesota during prior calendar years.  Depending on the year, the volume of shipments, and the interim and final price paid to the Trust for shipments from Silver Bay, Minnesota, the price adjustment provisions of the Cliffs Pellet Agreements may increase or decrease, in some cases materially, the royalties paid to the Trust.  Because the Trust is not a party to the Cliffs Pellet Agreements, the Trustees are unable to predict the extent of any pricing adjustments that may occur under the Cliffs Pellet Agreements or whether the adjustments will increase or decrease royalties payable to the Trust.  With the current volatility in demand and prices for iron ore and steel products, the price adjustment provisions in the Cliffs Pellet Agreements may have a significant impact on future royalties payable to the Trust and the adjustments, depending on whether they are positive or negative, may increase or decrease the distributions payable to Unitholders.

Total Revenues, Expenses, Net Income and Distributions

As set forth in the table below, net income for fiscal 2017 increased by 12.3%, as compared to fiscal 2016, primarily due to an increase in iron prices and the corresponding bonus royalty rate.  Total expenses for fiscal 2017 decreased by 3.4% as compared to fiscal 2016.  A more detailed summary of the Trust’s expenses, including legal and accounting expenses, is set forth under the heading “Trust Expenses” in this Annual Report.

	Fiscal Year ended January 31,				% increase
	2017		2016		(decrease)
Total Revenues	$	10,736,534	$	9,721,508	10.4%
Expenses		1,123,422		1,162,667	-3.4%
Net Income	$	9,613,112	$	8,558,841	12.3%

As discussed in the paragraph above,  the Trust’s total royalty income and net income for fiscal 2017 increased by 10.4% and 12.3%, respectively, due to an increase in the iron prices and the corresponding bonus royalty rate during fiscal 2017, both as compared to fiscal 2016.  The increase in the Trust’s net income resulted in a 611.1% increase in total distributions declared to Unitholders in fiscal 2017, as compared to fiscal year 2016.

	Fiscal Year ended January 31,				% increase
	2017		2016		(decrease)
Total Distributions Declared	$	8,396,806	$	1,180,801	611.1%
Distributions Declared per Unit	$	0.64	$	0.09	611.1%

Unallocated Reserve

As set forth in the table below, the Unallocated Reserve increased by $1,216,306 or 13.5% to $10,205,470, as of January 31, 2017, as compared to $8,989,164 as of January 31, 2016.  As of January 31, 2017, the Unallocated Reserve consisted of $12,314,425 in unallocated cash and U.S.  Government securities, $45,045 of accrued income

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receivable, and deferred royalty revenue of $2,099,415.  Comparatively, as of January 31, 2016, the Unallocated Reserve consisted of $8,127,881 in unallocated cash and U.S.  Government securities, $978,146 of accrued income receivable, and no deferred royalty revenue.

	Fiscal Year ended January 31,				% increase
	2017		2016		(decrease)
Accrued Income Receivable	$	45,045	$	978,146	-95.4%
Unallocated Cash and U.S.  Government Securities		12,314,425		8,127,881	51.5%
Prepaid Expenses and (Accrued Expenses), net		(54,585)		(116,863)	-53.3%
Deferred Royalty Revenue		(2,099,415)		—	100.0%
Unallocated Reserve	$	10,205,470	$	8,989,164	13.5%

The 13.5% increase in the Unallocated Reserve for the fiscal year ended January 31, 2017 as compared the fiscal year ended January 31, 2016,  is primarily the result of an increase in the unallocated cash and U.S.  Government securities caused by a change in the timing of the royalty report received from NSM on a quarterly basis from the beginning of the month in the past, which allowed the Trust to make distributions on the royalty received, to the end of the month in the last several quarters, which does not allow the Trust to make distributions on these royalties received until the following quarter.

Accrued Income Receivable.  The $933,101, or 95.4%, decrease in the accrued income receivable portion of the Unallocated Reserve is the result of pricing adjustments recognized in the last month of the fiscal year ended January 31, 2017, as compared to the fiscal year ended January 31, 2016.

Deferred Royalty Revenue.  The $2,099,415, or 100%, increase in the deferred royalty revenue portion of the Unallocated Reserve is the result of negative pricing adjustments recognized in the last month of the fiscal year ended January 31, 2017, as compared to the fiscal year ended January 31, 2016.

As described elsewhere in this Annual Report, pricing estimates are adjusted on a quarterly basis as updated pricing information is received from Northshore.  It is possible that future negative price adjustments could offset, or even eliminate, royalties or royalty income that would otherwise be payable to the Trust in any particular quarter, or at year end, thereby potentially reducing cash available for distribution to the Trust’s Unitholders in future quarters.  See discussion under the heading “Risk Factors” in this Annual Report.

Unallocated Cash and U.S.  Government Securities.  The Trust’s unallocated cash and U.S.  Government Securities for unexpected obligations increased by 51.5% to $12,314,425 as of January 31, 2017 from $8,127,881 as of January 31, 2016.  The $4,186,544 increase in the Trust’s cash reserve resulted from a change in the timing of the royalty report received from NSM on a quarterly basis from the beginning of the month in the past, which allowed the Trust to make distributions on the royalty received, to the end of the month in the last several quarters, which does not allow the Trust to make distributions on these royalties received until the following quarter.

Liquidity and Capital Resources

The Trust’s activities are limited to the collection of royalties, payment of expenses and liabilities, distribution of net income to the Trust’s Unitholders and protection and conservation of Trust assets.  Distributions of net income to the Trust’s Unitholders are based on the amount of total royalty income after providing for the payment of expenses and, to the extent deemed prudent by the Trustees, reserving funds in the Unallocated Reserve to provide for potential fixed or contingent future liabilities, including potential future liabilities that cannot be accurately quantified.  See the discussion of the Trustees’ management of liquidity set forth under the heading “Unallocated Reserve” in this Annual Report.

The Trust’s primary short-term liquidity needs are related to the Trust’s distributions to its Unitholders following the Trust’s receipt of royalty payments from Northshore each calendar quarter.  After the Trust receives the royalty payments, the Trust’s current assets are invested in U.S.  government securities, either through direct purchases of U.S.  government securities or through investments in a money market fund that invests its assets in U.S.  Treasury securities and securities guaranteed by the U.S.  government, its agencies or instrumentalities, or the FDIC.  Due to the short-term duration and investment grade nature of these investments, the Trustees believe that the Trust’s current assets are adequate to meet the Trust’s currently foreseeable liquidity needs.  As of January 31, 2018, the Trust held $314,835 

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in cash and cash equivalents, all of which was invested in a money market fund that exclusively invests in obligations of the U.S.  Treasury.  In February 2018, the Trust distributed $15,481,612 to Unitholders of record on January 30, 2018.

Off-Balance Sheet Arrangements

The Trust has no off-balance sheet arrangements.

Contractual Obligations

The Trust has no payment obligations under any long-term borrowings, capital lease, operating lease, or purchase agreement.

Critical Accounting Estimates

This “Trustees’ Discussion and Analysis of Financial Condition and Results of Operations” is based upon the Trust’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires the Trustees to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  These estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  The Trustees base their estimates and judgments on historical experience and on various other assumptions that the Trustees believe are reasonable under the circumstances.  However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.  Critical accounting policies are those that have meaningful impact on the reporting of the Trust’s financial condition and results of operations, and that require significant judgment and estimates.  For a complete description of the Trust’s significant accounting policies, please see Note 2 to the financial statements on pages F-8 through F-10.

Revenue Recognition

Royalty income under the Amended Assignment Agreements with Northshore is recognized as it is earned.  Under the Amended Assignment Agreements, royalties are earned upon shipment from Silver Bay, Minnesota, regardless of whether the actual sales proceeds for any shipment are received by Northshore.  The amount of base overriding royalties and royalty bonuses payable to the Trust are determined based on the volume of iron ore tonnage shipped from Silver Bay, Minnesota during each calendar quarter and the proceeds to Cliffs resulting from shipments by Cliffs to its customers in accordance with the iron ore pellet sales agreements between Cliffs and its customers.

The Trust’s royalty income includes accrued income receivable.  Accrued income receivable represents royalty income earned but not yet received by the Trust.  Accrued income receivable is calculated using estimated prices and includes (i) shipments during the last month of Mesabi Trust’s fiscal year, if any, and (ii) net positive adjustments (which may include the sum of positive and negative price adjustments) calculated using the pricing adjustment mechanisms in the iron ore pellet sales agreements between Cliffs and its customers that determine the final sales price of the shipments from Silver Bay, Minnesota.

Adjustments to royalty income may result from changes in final reconciliations of tonnage shipped by Northshore with the final amounts received from Cliffs’ customers.  Adjustments may also result from revisions to estimated prices previously used to record revenue for tonnage shipped.  Pricing decreases may give rise to negative price adjustments which may be applied against future royalty income recognized by the Trust and changes in iron ore pellet prices may have a significant impact on the revenue recognized by the Trust.

During the fourth quarter of fiscal 2018, positive price adjustments were recorded by Mesabi Trust and added to accrued income receivable due to price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from Northshore with respect to certain shipments during calendar year 2017.  During the fiscal year ended January 31, 2017, negative price adjustments were recorded by Mesabi Trust as deferred royalty revenue due to price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from Northshore with respect to shipments during calendar year 2016.  As of January 31, 2018, the Trust recognized revenue related to approximately 1,068,786 tons of iron ore that were

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shipped by Northshore as of December 31, 2017, but for which Cliffs has indicated that final pricing was not yet known.  Pricing related to these shipments is expected to be finalized in the first quarter of calendar 2019.

Deferred royalty revenue represents an estimate of decreases in pellet revenue related to tons of iron ore that were shipped by Northshore, but for which Northshore has indicated that final pricing is not yet known and is adjusted in accordance with the Trust’s revenue recognition policy each quarter as updated pricing information is received.  Changes in iron ore pellet prices may have a significant impact on the revenue recognized by the Trust.

Current Developments

January 2018 Quarterly Royalty Report.  On January 26, 2018, the Trustees of Mesabi Trust received the quarterly royalty report of iron ore shipments from Silver Bay, Minnesota during the quarter ended December 31, 2017 from Cliffs, the parent company of Northshore. 

As reported to the Trust by Cliffs in the quarterly royalty report, based on shipments of iron ore products by Northshore during the three months ended December 31, 2017, Mesabi Trust was credited with a base royalty of $4,779,006.  Mesabi Trust also was credited with a bonus royalty in the amount of $2,385,071.  Royalties paid to Mesabi Trust, however, reflected a reduction of $1,098,372 as a result of negative pricing adjustments to base and bonus royalty calculations related to changes in price estimates made in the previous calendar quarters of 2017.  In addition, a royalty payment of $133,245 was paid to the Mesabi Land Trust.  Accordingly, the total royalty payments received on January 30, 2018 by Mesabi Trust from Northshore were $6,198,950. 

The royalties paid to Mesabi Trust are based on the volume of shipments of iron ore pellets for the quarter and the 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.  In the fourth calendar quarter of 2017, Northshore credited Mesabi Trust with 905,923 tons of iron ore shipped, as compared to 1,838,938 tons during the fourth calendar quarter of 2016. 

The volume of shipments of iron ore pellets (and other iron ore products) by Northshore varies 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 under the term contracts between Northshore, Cliffs, and certain of their customers (the “Cliffs Pellet Agreements”), to which Mesabi Trust is not a party, are subject to interim and final pricing adjustments, dependent in part on multiple price and inflation index factors that are not known until after the end of a contract year.  These multiple factors can result in significant variations in royalties received by Mesabi Trust (and in turn the resulting funds available for distribution to Unit holders by Mesabi Trust) from quarter to quarter and from year to year.  These variations, which can be positive or negative, cannot be predicted by the Trustees of Mesabi Trust.  Royalty payments received in fiscal 2018 and prior years continue to reflect pricing estimates for shipments of iron ore products that were subject to positive or negative pricing adjustments pursuant to the Cliffs Pellet Agreements.  Based on the above factors and as indicated by the Trust’s historical distribution payments, the royalties received by the Trust, and the distributions paid to Unit holders, if any, in any particular quarter are not necessarily indicative of royalties that will be received, or distributions that will be paid, if any, in any subsequent quarter or full year. 

With respect to calendar year 2018, Northshore has not advised Mesabi Trust of its expected shipments of iron ore products or what percentage of 2018 shipments will be from Mesabi Trust iron ore.  Cliffs indicated that the royalty payments being reported today are based on estimated iron ore pellet prices under the Cliffs Pellet Agreements, which are subject to change.  It is possible that future negative price adjustments could offset, or even eliminate, royalties or royalty income that would otherwise be payable to Mesabi Trust in any particular quarter, or at year end, thereby potentially reducing cash available for distribution to Mesabi Trust’s Unit holders in future quarters. 

Cliffs Announced Plan to Make Capital Investments in Northshore for DR-Grade Pellet Production.  During its third quarter earnings call on October 20, 2017, Cliffs announced that it is investing $75 million at Northshore Mining in Silver Bay over the next two years (through 2019), financing that Cliffs says will allow the plant to more efficiently produce DR-grade pellets.  Cliffs’ CEO Lourenco Goncalves indicated that the company makes about 100,000 tons a year of DR-grade pellets, but the Northshore plant upgrades will boost production capability up to 3.5 million long tons of DR-grade pellets a year, enough to supply the Cliffs’ planned hot-briquetted iron facility in Toledo, Ohio.  Cliffs indicated that work has started on the Northshore upgrades, with plans to complete it by mid-2019. 

Cliffs Announced Groundbreaking Ceremony for its HBI Production Plant in Toledo, Ohio.  Cliffs conducted a groundbreaking event on April 5, 2018 to celebrate the commencement of construction of its first hot-briquetted iron (“HBI”) production plant.  Cliffs also announced that it is investing $700 million to build one of the world’s most modern

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and efficient iron making plants, generating a total of 130 new jobs in Toledo, Ohio.  At peak construction, Cliffs estimated that 1,200 people will be working on the site.  The Toledo plant will produce 1.6 million metric tons per year of customized high-quality HBI, and will make Cliffs the sole producer of high-quality customized feedstock for the domestic electric arc furnace (“EAF”) steelmakers located in the Great Lakes region.  In its announcement, Cliffs noted that Cliffs’ domestically produced HBI will supply a Great Lakes market currently estimated at 3 million metric tons, which is currently supplied exclusively by imports of commercial quality pig iron and HBI from countries such as Russia, Ukraine, Brazil and Venezuela, among others.  Start-up of the plant is expected to happen in the summer of 2020.

In its announcement, Lourenco Goncalves, Chairman, President and Chief Executive Officer, was quoted saying, “Today we are launching a new era for the iron and steel industry in the United States.  As Cleveland-Cliffs begins the construction of the first HBI production plant in the Great Lakes region, we are taking the initial steps to enable EAF steelmakers to produce the specs associated with high margin steels for sophisticated end markets, such as automotive and others.”  Lourenco Goncalves added: “For several decades, Cleveland-Cliffs has been supplying the American steelmakers in the Great Lakes with customized pellets to feed their blast furnaces.  With the growth in participation of EAFs, it was just a matter of time for Cleveland-Cliffs to become a supplier of these important steelmakers.  Our HBI will be for the EAFs the same great feedstock our taconite pellets are, and will continue to be, for our blast furnace clients.”

Cliffs Announcement Regarding Tariffs on Steel Imports.  On March 1, 2018, Cliffs issued the following statement regarding President Trump’s announcement of tariffs of 25 percent on steel imported to the United States.  Lourenco Goncalves, Cliffs' Chairman, President and Chief Executive Officer, said, ”We applaud and thank President Trump for taking real action under Section 232 to punish the perpetrators and enablers of unfairly traded steel.  The 25 percent tariffs to be imposed next week will support our ability to continue to produce iron ore pellets and steel in our country, enhancing a vibrant manufacturing economy and our national security.  Artificially cheap steel boosted by subsidies, dumping and circumvention are not signs of competitiveness; these are just signs of blatant disregard to real free trade and to our trade laws.  Once free from these unfair practices, we will finally have a level playing field for steel in the United States.  Going forward, we expect that the Administration will fully enforce the announced actions, making sure that the offenders, particularly the enablers within our borders, will be treated as seriously as they deserve.”

President Trump Signed Orders Imposing Tariffs on Imported Steel.  On March 8, 2018, President Trump signed orders imposing stiff and sweeping new tariffs on imported steel and aluminum.  But he sought to soften the impact on America’s closest allies with a more flexible plan than originally envisioned.  Mr. Trump agreed to exempt, for now, Canada, Mexico and Australia and held out the possibility of later excluding additional allies.  “The actions we are taking today are not a matter of choice; they are a matter of necessity for our security,” Mr. Trump said in a ceremony at the White House where he officially authorized the tariffs, which were effective March 23, 2018.

Flanked by a handful of steel and aluminum workers, some wearing coveralls and holding hardhats, Mr. Trump presented his move as a way to rebuild vital industries decimated by foreign competition.  “Our factories were left to rot and to rust all over the place; thriving communities turned into ghost towns,” he said.  “The workers who poured their souls into building this great nation were betrayed.  But that betrayal is now over.”

The orders represented Mr. Trump’s most expansive use of federal power to rewrite the rules of global trade since he took office and upended the prevailing consensus on free markets that has largely governed Washington under administrations of both parties for decades.  A longtime critic of globalization, Mr. Trump argued that the United States has been ravaged by unfair trading partners.

As a result of Mr. Trump’s action, levies on foreign steel will rise by 25 percent and on imported aluminum by 10 percent.  The United States is the largest steel importer in the world and the order could hit South Korea, China, Japan, Germany, Turkey and Brazil the hardest.  Mr. Trump said his tariff orders were tailored to give him the authority to raise or lower levies on a country-by-country basis and add or take countries off the list as he deems appropriate.

In language authorizing the tariffs, the White House said any nation “with which we have a security relationship is welcome to discuss with the United States alternative ways to address the threatened impairment of the national security caused by imports from that country.”  The tariffs would be lifted if a country arrives “at a satisfactory alternative means to address the threat,” the order said.

Mercury TMDL and Minnesota Taconite Mercury Reduction Strategy.  TMDL regulations are contained in the Clean Water Act.  As a part of Minnesota's Mercury TMDL Implementation Plan, in cooperation with the MPCA, the taconite industry developed a Taconite Mercury Reduction Strategy and signed a voluntary agreement in 2009 to effectuate its terms.  The strategy includes a 75% target reduction of mercury air emissions from Minnesota pellet plants collectively by 2025.  It recognizes that mercury emission control technology currently does not exist and will be

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pursued through a research effort.  According to the voluntary agreement, any developed technology must meet the "adaptive management criteria" such that the technology must be economically feasible, must not impact pellet quality, and must not cause excessive corrosion in pellet furnaces, associated duct work and existing wet scrubbers on the furnaces.

According to the voluntary agreement, the mines proceeded with medium- and long-term testing of possible technologies.  For Cliffs, the requirements in the voluntary agreement apply to the United Taconite and Hibbing facilities.  At this time, Cliffs was unable to predict the potential impacts of the voluntary Taconite Mercury Reduction Strategy. 

Cross State Air Pollution Rule.  In July 2011, the EPA promulgated the CSAPR, which was intended to address interstate transport of regional haze causing pollutants (NOx and SO 2) via emission limits and trading mechanisms.  Northshore's Silver Bay Power plant is subject to CSAPR.  Complying with CSAPR simultaneously satisfies related regional haze BART obligations because EPA has determined that CSAPR yields greater progress toward attaining EPA's regional haze goals than would application of BART.  The Eighth Circuit Court of Appeals re-affirmed that EPA's use of CSAPR is equal to or better than BART in its March 2016 decision.  Silver Bay Power's CSAPR compliance obligations are met via a combination of fuel management, installation of lower NOx burners, and purchase of NOx and SO 2 allowances from the emission trading market.  NOx and SO 2 allowance prices continue to decline and the estimated cost to purchase NOx and SO 2 allowances currently is less than $5,000.

Future NOx and SO 2 emission allowances allocated to Silver Bay Power will decrease and long-term allowance prices are expected to increase.  In Cliffs’ Annual Report, Cliffs has disclosed that it continues to monitor the availability and pricing of CSAPR allowances and future EPA allocations of CSAPR allowances to its Silver Bay Power plant, but at this time, Cliffs does not anticipate exposure to material costs for future CSAPR obligations.  At this time, Cliffs cannot reasonably estimate the long-term cost impact of CSAPR should EPA significantly reduce overall allowance allocations in response to future lower ozone or particulate matter 2.5 regulations.

Securities Regulation.  The Trust is a publicly traded, pass-through royalty trust with its Trust Certificates listed on the NYSE and is therefore subject to extensive regulation under, among others, the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, each as amended, and the rules and regulations of the NYSE.  Issuers failing to comply with such authorities risk serious consequences, including criminal as well as civil and administrative penalties.  In most instances, these laws, rules and regulations do not specifically address their applicability to a publicly-traded pass-through royalty trust such as Mesabi Trust.  In particular, Sarbanes-Oxley mandated the adoption by the Securities and Exchange Commission and NYSE of certain rules and regulations that are impossible for the Trust to literally satisfy because of its nature as a pass-through trust (having no employees and none of its own operations, among other things).  Furthermore, pursuant to NYSE rules, as a pass-through royalty trust, the Trust is exempt from many of the corporate governance requirements that apply to other publicly traded corporations.  The Trust does not have, nor does the Agreement of Trust provide for, a board of directors, an audit committee, a corporate governance committee, a compensation committee or executive officers, the these functions are basically performed by the Mesabi Trustees in accordance with the Agreement of Trust.  The Trustees and their advisors closely monitor the Securities and Exchange Commission’s and NYSE’s rulemaking activities and will comply with their rules and regulations to the extent applicable.

Review of Unallocated Reserve.  Each quarter, as authorized by the Agreement of Trust, the Trustees will evaluate all relevant factors including all costs, expenses, charges, obligations, and present and future liabilities (whether known or contingent) of the Trust in determining a prudent level of Unallocated Reserve in light of the unpredictable nature of the iron ore industry and current economic conditions.  As of January 31, 2018, the Trust’s unallocated reserve was $10,507,411.

Other Information.  Mesabi Trust has no employees.  Each year the Trust engages independent consultants to assist the Trustees in monitoring, among other things, the volume and sales prices of iron ore products shipped by Northshore from Silver Bay, Minnesota pursuant to Cliffs’ customer orders and in reviewing all records and calculations of the royalties payable to the Trust each quarter.  As noted above, the information regarding volume and sales prices of shipped iron ore products is used to compute the royalties payable to Mesabi Trust by Northshore.  Deutsche Bank Trust Company Americas, the Corporate Trustee, also performs certain administrative functions for Mesabi Trust.

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TO THE HOLDERS OF

CERTIFICATES OF BENEFICIAL INTEREST IN

MESABI TRUST

THE TRUST ESTATE

The principal assets of Mesabi Trust consist of two different interests in certain properties in the Mesabi Iron Range: (i) Mesabi Trust’s interest as assignor in the Amended Assignment of Peters Lease and the Amended Assignment of Cloquet Lease, which together cover properties aggregating approximately 9,750 largely contiguous acres in St.  Louis County, Minnesota (the “Peters Lease Lands” and the “Cloquet Lease Lands,” respectively), and (ii) Mesabi Trust’s ownership of the entire beneficial interest in the Mesabi Land Trust, which has a 20% interest as fee owner in the Peters Lease Lands and a 100% fee ownership in certain non-mineral-bearing lands adjacent to the Peters and Cloquet Lease Lands (the “Mesabi Lease Lands,” together with Mesabi Trust Lands, the “Trust Estate”).  The map below shows the approximate location of the Trust Estate.

☐The boxed area indicates the approximate location of Mesabi Trust’s Trust Estate (not drawn to scale), as defined above under the “Trust Estate,” which is a small part of the region known as the Mesabi Iron Range.  Mesabi Trust does not own any property interests other than those in the Trust Estate

Under the Amended Assignment Agreements, Northshore produces iron ore from Mesabi Trust Lands for the manufacture of iron ore products to be sold to various customers of Cliffs.  Mesabi Trust receives royalties on the crude ore extracted from such lands and the pellets produced from such crude ore, and in each case the royalties are based upon the volume of iron ore products shipped and the prices charged to Cliffs’ customers.

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DURATION OF THE TRUST ESTATE

The largest component of the Trust Estate is the Peters Lease Lands.  The Peters Lease provides that the leasehold estate thereunder will continue until the reserves of iron ore, taconite and other minerals or materials on the land subject to the Peters Lease are exhausted.  The Amended Assignment of Peters Lease terminates when the Peters Lease terminates.  The Cloquet Lease, executed in 1916, provides that the leasehold estate thereunder will continue until the reserves of iron ore, taconite and other minerals or materials on the land subject to the Cloquet Lease are exhausted.  The Amended Assignment of Cloquet Lease terminates when the Cloquet Lease terminates.  If Northshore decides to terminate or surrender either the Amended Assignment of Peters Lease or the Amended Assignment of Cloquet Lease, or both of them, it must first give Mesabi Trust at least six months’ notice of its intention to do so and, at Mesabi Trust’s request, reassign all of such leasehold interests to Mesabi Trust.  If any such reassignment occurs, Northshore must transfer the leasehold interests to Mesabi Trust free and clear of liens, except public highways.  In return, Mesabi Trust must assume Northshore’s future obligations as lessee under the reassigned leases.  Upon termination of the lease under either the Amended Assignment of Peters Lease or the Amended Assignment of Cloquet Lease, or both of them, Northshore is obligated to remove within 90 days all engines, tools, machinery, railroad tracks and structures erected or placed by it, or under its direction, on the lands but may not remove or impair any supports placed in the mines, nor any timber or frameworks necessary to the use and maintenance of the shafts or other approaches to the mine.

The Peters Lease Lands and the Cloquet Lease Lands are located at the northeastern end of the Mesabi Iron Range and contain mineral deposits consisting of a highly metamorphosed sedimentary bed of banded magnetite in siliceous gangue, a form of low-grade iron ore known as taconite, approximately three tons of which must be beneficiated to produce one ton of high-grade pellets.  The Mesabi Lease Lands contain substantially no commercial ore deposits and have been used principally in connection with mining the taconite from other parts of the Trust Estate, such as the provision of an area for location of service roads, supporting plants and equipment and dump sites for overburden.

Because the Trust is not involved with the mining operations at Northshore, the Trust relies on the ore reserve estimates reported in Cliffs’ Form 10-K filed with the Securities and Exchange Commission each year.  In Cliffs’ Annual Report, the following information was provided by Cliffs regarding the estimated ore reserves at Northshore.

U.S.  Iron Ore Mineral Reserves

As of December 31, 2017

(In Millions of Long Tons)

		Proven		Probable		Proven & Probable		Saleable Product(1), (2)		Previous Year
	Cliffs		%		%		%	Process		P&P Crude	Saleable
Property	Share	Tonnage	Grade	Tonnage	Grade	Tonnage	Grade(4)	Recovery(3)	Tonnage	Ore	Product
Northshore	100%	235.8	24.9	557.4	24.2	793.2	24.4	32%	255.9	808.0	261.1

(1) Saleable product is a standard pellet containing 60 to 66 percent Fe calculated from both proven and probable mineral reserves.

(2) Saleable product is reported on a dry basis; shipped products typically contain 1 to 4 percent moisture.

(3) Process recovery includes all factors for converting crude ore tonnage to saleable product.

(4) Cutoff grade was 19%.

According to Cliffs’ Annual Report on Form 10-K for the year ended December 31, 2016 (“Cliffs’ 2016 Report”), reserve estimates are based on pricing that does not exceed the three-year trailing average of benchmark prices for iron ore adjusted to Cliffs’ realized price.  The latest reserve estimate for Northshore was completed in 2015.  In Cliffs’ 2016 Report, Cliffs reported that the average international benchmark price of 62 percent Fe CFR China was $70 per dry metric ton for the three-year period 2014 to 2016.

The Trustees engaged an independent geological consulting firm, Roscoe Postle Associates, Inc.  (“RPA”), to confirm that the process used by Cliffs to estimate the ore reserves in the mine at Northshore is reasonable.  RPA delivered its report to the Trustees in March 2018.  In its report to the Trustees, RPA summarized its review and evaluation of Cliffs’ ore reserve estimation process which was performed by Cliffs in 2015.  RPA reported to the Trustees that the reserve estimation process used by Cliffs is reasonable and comports with the reporting requirements set forth in Securities Act Industry Guide 7.  Based on the report of RPA, at least 90% of the ore reserves in the mine at Northshore, as reported by Cliffs, is attributable to Mesabi Trust Lands.

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HISTORY OF THE TRUST’S ACQUISITION OF THE TRUST ESTATE

Prior to the creation of Mesabi Trust and Mesabi Land Trust on July 18, 1961, Mesabi Iron Company (“MIC”), the Trust’s predecessor in interest, owned the interests in the Peters Lease Lands, Cloquet Lease Lands and Mesabi Lease Lands.  MIC obtained its interests as follows:

Peters Lease Lands.  MIC owned a 20% interest in the fee ownership in the Peters Lease Lands.  Originally, the Peters Lease Lands were owned by East Mesaba Iron Company and Dunka River Iron Company which were wholly owned subsidiaries of Dunka-Mesaba Security Company (“Dunka-Mesaba”).  In August 1951, East Mesaba Iron Company and Dunka River Iron Company conveyed the Peters Lease Lands to their parent company, Dunka-Mesaba, which in turn conveyed to each of its stockholders an undivided interest in the Peters Lease Lands in proportion to each stockholder’s ownership in the parent company.  Accordingly, MIC, which had been the owner of 20% of the outstanding capital stock of Dunka-Mesaba, acquired a 20% undivided interest in the Peters Lease Lands and the right to receive a 20% fee royalty under the Peters Lease.

By an instrument dated October 1, 1917, as of April 30, 1915, East Mesaba and Dunka River leased their properties to Claude W.  Peters.  This instrument, as modified by instruments dated February 3, 1921, July 17, 1939 and July 31, 1951, is known as the “Peters Lease.”  Claude W.  Peters acquired the Peters Lease on behalf of MIC and an assignment of the Peters Lease from Claude W.  Peters to MIC was recorded in 1919.  In 1939, MIC assigned the Peters Lease to Reserve Mining Company (“Reserve”) in consideration for which Reserve agreed to pay MIC a percentage of its net profits.  Later, these payments were changed to royalty payments.

Cloquet Lease Lands.  MIC held a leasehold interest in the Cloquet Lease Lands pursuant to the Indenture of Lease dated May 1, 1916.  In 1939, MIC assigned its interest in the Cloquet Lease as lessee to Reserve.

Mesabi Lease Lands.  MIC held a fee interest in the Mesabi Lease Lands, subject to earlier grants of mineral rights to other parties.  In 1939, MIC leased its interest in the Mesabi Lease Lands to Reserve (“Mesabi Lease”).  One 40-acre parcel of the Mesabi Lease Lands was forfeited in the 1980s to the State of Minnesota and subsequently sold to the United States government, excluding the mineral rights granted to other parties.  Further, another 40-acre parcel of the Mesabi Lease Lands, for which the Trust owns only surface rights, is currently being explored for non-ferrous deposits by the holder of the mineral rights to the parcel.  The Trustees do not believe that either parcel was ever involved in, or otherwise material to, Northshore’s mining operations.

Acquisition of Interests from MIC.  MIC had not engaged in actual mining operations since 1939, with all of its ownership of land in fee having been leased out and its leaseholds in land assigned to Reserve in exchange for royalty payments.  Because MIC’s activities in connection with the administration of its assets were limited to the collection of income, the payment of expenses and liabilities, the distribution of the net income and the protection and conservation of the assets held, in July 1961 its board of directors proposed, and its stockholders subsequently approved, to adopt a plan of complete liquidation as a result of which MIC’s assets were transferred to and administered by two trust entities.

To comply with the law of the State of Minnesota, which requires that a trust holding real property located in that state must be administered under Minnesota law, the Mesabi Land Trust was created under Minnesota law on July 18, 1961 pursuant to an Agreement of Trust of even date.  MIC transferred to the Mesabi Land Trust its 20% interest as fee owner in the Peters Lease Lands and its interest as 100% fee owner in the Mesabi Lease Lands and as lessor of the Mesabi Lease (subject to the reservation of mineral rights described above).

Also pursuant to an Agreement of Trust, the Mesabi Trust was created under New York law on July 18, 1961.  MIC transferred to the Mesabi Trust instruments assigning the Amended Assignment of Peters Lease and the Amended Assignment of Cloquet Lease (covering its interest as assignor of the entire leasehold interest in the Peters Lease Lands and the Cloquet Lease Lands), together with cash, marketable securities and other assets.  The Mesabi Trust also received all of the beneficial interest in the Mesabi Land Trust.

Reserve, the original lessee, operated the mine until it closed on July 31, 1986.  Cyprus Minerals Company (“Cyprus”) purchased substantially all of Reserve’s assets on August 17, 1989 and resumed operations as Cyprus NMC.  On September 30, 1994, Cliffs purchased all of Cyprus NMC’s capital stock from Cyprus.  Cliffs renamed the operation Northshore Mining Corporation.

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Since the creation of Mesabi Land Trust and Mesabi Trust, although the mining operators have changed and the Peters Lease, the Cloquet Lease and the Mesabi Lease have been further amended and assigned, the Trust Estate has not changed beyond the forfeiture of one parcel of the Mesabi Lease Lands described above.

The diagram below illustrates the relationships of the various parties that own the lands and have interests in the lands the Trust has interests in:

DESCRIPTION OF THE MINERAL PROPERTIES AND NORTHSHORE’S MINING OPERATIONS

Mine and Rock Formation.  The Trust Estate, including the ore mine, are located in northeastern Minnesota, approximately two miles south of Babbitt, Minnesota.  The ore mine on the Trust Estate is called the Peter Mitchell Mine, an open pit mine consisting of a 10-mile long segment of a host rock called the Biwabik Iron Formation, which is a very hard cherty rock containing magnetite as the ore mineral.  The Biwabik Iron Formation extends west and southwest for over 100 miles and constitutes the Mesabi Iron Range.  Recoverable iron grades range from 21% magnetic iron in the west end of the mine open pit to 26% magnetic iron in the central portion and east end.  The ore body dips south under the hanging wall called the Virginia Formation.  To date, the Mesabi Trust properties have been explored for their iron ore potential.  To the knowledge of the Mesabi Trustees, no other minerals have been explored on the Trust Estate.

Mining Properties.  As disclosed elsewhere in this Annual Report, Northshore, a wholly owned subsidiary of Cliffs, currently conducts the mining operation upon the Trust Estate.  The main entrance to the Northshore mine is accessed by means of a gravel road and is located off County Road 70.  Northshore’s processing facilities are located in Silver Bay, Minnesota, near Lake Superior, on U.S.  Highway 61.  Each year, the Trustees visit the Northshore mine in Babbitt, Minnesota and the processing plant in Silver Bay, Minnesota.  During such visits, the Trustees inspect the condition of the mining properties as well as mining equipment and facilities.  Based on information provided to the Trustees during the most recent inspection trip in the third fiscal quarter of 2017, the mining properties and facilities at Northshore were in good operating condition.

Northshore’s Operations.  Because Mesabi Trust is not involved in Northshore’s mining operations, the Trustees do not have detailed firsthand information relating to such operations or the equipment and facilities used by Northshore.  Therefore, the Trustees rely on information provided by Northshore personnel, disclosures by Cliffs in its periodic and current reports filed with the Securities and Exchange Commission and, to some extent, information

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provided in other reports published by independent organizations, such as Skillings Mining Review, in providing the information relating to Northshore’s mining operations, equipment and facilities.

· Mining and Railroad.  Drilling at the Northshore mine is conducted with five rotary units.  The drilling is followed with blasts using a gassed sensitized emulsion which breaks an average of 700,000 to 1,200,000 tons of crude taconite.  After blasts, taconite is then removed by a loading fleet consisting of four electric rope shovels and one loader.  A haulage fleet of nine production trucks carry crude taconite to the primary and secondary crushers located about two miles away.  At the crushers, taconite is emptied from the end-dump trucks into a primary gyratory unit and four secondary crushers for reduction to a nominal size coarse ore.  The coarse ore is then fed into 90-ton capacity ore cars for transportation to Silver Bay via a 47-mile-long, single track railroad owned by Northshore.  Each train is pulled by three diesel electric locomotives.

· Concentrating and Pelletizing Process.   Upon arrival at the pelletizing facility in Silver Bay, the coarse taconite ore first passes through a fine crushing stage where it is reduced in size.  Non-magnetic material is rejected through a dry cobber magnetic separation stage and then rail-hauled seven miles to the Mile Post 7 disposal site.  Magnetic material is fed into one of the seventeen active grinding lines.  Each line includes one rod mill and two ball mills.  The final grinding of the crude taconite is reduced to 90% minus 325 mesh.

During the concentrating process, ore concentrate is separated by a two-stage magnetic separation, which removes low grade tailings from the ore concentrate.  The tailings are pumped uphill to the Mile Post 7 disposal site.  The concentrate is then fed into hydro-separators followed by a final flotation upgrading accomplished with two flotation cells per grinding line.  Next, the concentrate proceeds to a central filtering facility, through which the moisture content in the concentrate is reduced and the final concentrate becomes ready for pelletizing.  The pelletizing process first feeds the ore concentrate, to which bentonite and starch has been added as a binder, into a balling drum.  The revolving action of the drum causes the concentrate to build up into green balls.  Next, the green balls are conveyed to one of four moving grates and enter into an accompanying high temperature furnace where they are heated to over 2,400°F and are hardened into the final pellet product.  From the four furnaces the pellets are conveyed to a dockside storage area with a 5-million ton storage capacity.  Northshore’s sheltered harbor at Silver Bay can handle lake-going vessels with capacities up to 55,000 tons.

· Capital Expenditures.   During calendar year 2017, Northshore’s spending increased from 2016.  While Northshore’s expenditures during 2016 were limited to necessary environmental compliance projects, the expenditures in 2017 were more consistent with the previous years. 

· Northshore Mine Safety and Health Administration Safety Data.  The operation of the Northshore mine is subject to regulation by MSHA under the FMSH Act.  In Cliffs’ Annual Report, Cliffs reported that MSHA inspects its mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the FMSH Act.  In Cliffs’ Annual Report, Cliffs provided information regarding certain mining safety and health citations which MSHA has issued with respect to Northshore’s mining operations.  In evaluating this information, consideration should be given to factors such as: (i) the number of citations and orders will vary depending on the size of the mine, (ii) the number of citations issued will vary from inspector to inspector, and (iii) citations and orders can be contested and appealed, and in that process, are often reduced in severity and amount, and are sometimes dismissed.

Under the recently enacted Dodd-Frank Act, each operator of a coal or other mine is required to include certain mine safety results within its periodic reports filed with the SEC.  As required by the reporting requirements included in §1503(a) of the Dodd-Frank Act, in Cliffs’ Annual Report, Cliffs presented the following items regarding certain mining safety and health matters for the Northshore Mine.

(A) The total number of violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal or other mine safety or health hazard under section 104 of the FMSH Act (30 U.S.C.  814) for which the operator received a citation from MSHA;

(B) The total number of orders issued under section 104(b) of the FMSH Act (30 U.S.C.  814(b));

(C) The total number of citations and orders for unwarrantable failure of the mine operator to comply with mandatory health or safety standards under section 104(d) of the FMSH Act (30 U.S.C.  814(d));

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(D) The total number of imminent danger orders issued under section 107(a) of the FMSH Act (30 U.S.C.  817(a));

(E) The total dollar value of proposed assessments from MSHA under the FMSH Act (30 U.S.C.  801 et seq.);

(F) Legal actions pending before Federal Mine Safety and Health Review Commission involving such coal or other mine as of the last day of the period;

(G) Legal actions initiated before the Federal Mine Safety and Health Review Commission involving such coal or other mine during the period; and

(H) Legal actions resolved before the Federal Mine Safety and Health Review Commission involving such coal or other mine during the period.

In Cliffs’ Annual Report, Cliffs reported that the Northshore mine did not receive any flagrant violations under Section 110(b)(2) of the FMSH Act, no orders issued under Section 104(b) of FMSH Act, and no written notices of a pattern of violations, or the potential to have a pattern of such violations, under section 104(e) of the FMSH Act were received during the year ended December 31, 2017.  In addition, according to Cliffs there were no mining-related fatalities at the Northshore mine during the same period.

Following is a summary of the information listed above with respect to Northshore for the year ended December 31, 2017.

		Year Ended December 31, 2017
		(A)	(B)	(C)	(D)	(E)	(F)		(G)	(H)
					Section				Legal	Legal
					107(a)	Total Dollar			actions	Actions
		Section	Section	Section	Citations	Value of MSHA			Initiated	Resolved
		104 S&S	104(b)	104(d)	&	Proposed	Pending		During	During
Mine Location	Operation	Citations	Orders	Orders	Orders	Assessments $ (1)	Legal Action		Period	Period
Northshore Plant	Iron Ore	15	—	—	—	20,352	7	(2)	7	12
Northshore Mine	Iron Ore	1	—	—	—	2,151	—		—	—

(1) Amounts included under the heading “Total Dollar Value of MSHA Proposed Assessments” are the total dollar amounts for proposed assessments received from MSHA on or before December 31, 2017.

(2) This number consists of 7 pending legal actions related to contests of proposed penalties referenced in Subpart C of FMSH Act’s procedural rules.

LEASEHOLD ROYALTIES

Northshore is obligated to pay to Mesabi Trust base overriding royalties and royalty bonuses on all pellets (and other iron ore products) produced from the Peters Lease Lands and the Cloquet Lease Lands (“Mesabi Ore”) and shipped from Silver Bay in each calendar year.  The royalties are based on prices per unit of product, volumes of product shipped and where on the escalating scale of royalties—2-1/2% on the first million long tons to 6% on shipments above four million long tons per calendar year—each shipment falls.

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Base overriding royalties.  Base overriding royalties are calculated on the basis of an escalating scale of percentages of gross sales proceeds of iron ore shipped.  The applicable percentage is determined by reference to the tonnage of pellets (and other iron ore products) previously shipped in the then current calendar year, as follows:

	Applicable royalty
	(expressed as a percentage
Tons of iron ore products	of gross sales proceeds
shipped in calendar year	within each tranche)
one million or less	2-1/2%
more than one but not more than two million	3-1/2%
more than two but not more than three million	5%
more than three but not more than four million	5-1/2%
more than four million	6%

Royalty bonuses.  Royalty bonuses are payable on all iron ore products produced from Mesabi Ore shipped from Silver Bay during a calendar quarter and sold at prices above the Adjusted Threshold Price.  The Adjusted Threshold Price was $53.80 for calendar year 2016 and $54.74 for calendar year 2017, and will be $55.74 for calendar year 2018.  The Adjusted Threshold Price is subject to adjustment (but not below $30 per ton) for inflation and deflation and is determined each year on the basis of the change in the Gross Domestic Product Implicit Price Deflator, a broad-based index of inflation and deflation published quarterly by the U.S.  Department of Commerce.

The amount of royalty bonuses payable for any calendar quarter is calculated on the basis of an escalating scale of percentages of the gross sales proceeds to Northshore of pellets produced from Mesabi Ore that are sold at prices above the Adjusted Threshold Price.  The applicable percentage is determined by reference to the amount by which the sales prices for a particular quantity of pellets exceeds the Adjusted Threshold Price, as follows:

Amount by which sales price per ton	Applicable
exceeds Adjusted Threshold Price	Percentage
$2 or less	1/2 of 1%
more than $2 but not more than $4	1%
more than $4 but not more than $6	1-1/2%
more than $6 but not more than $8	2%
more than $8 but not more than $10	2-1/2%
more than $10	3%

Leasehold royalty example.  To illustrate the calculation of base overriding royalties and royalty bonuses, assume that no shipments of iron ore products were made during the first calendar quarter of 2018, and further assume that pellets were shipped from Silver Bay in the second and third calendar quarters of 2018 in the following tonnage quantities and rendering the following gross proceeds:

	Tonnage	Sales Price per Ton		Gross Proceeds
2nd Quarter:	500,000	$	55	$	27,500,000
3rd Quarter:	500,000	$	57	$	28,500,000
	1,000,000	$	59	$	59,000,000
	1,000,000	$	61	$	61,000,000
	1,000,000	$	65	$	65,000,000
	1,500,000	$	67	$	100,500,000

In this example, the base overriding royalties payable in respect of the second and third calendar quarters of 2018 would be as follows:

2nd Quarter:	$	27,500,000 x 2-1/2%	=	$	687,500
3rd Quarter:	$	28,500,000 x 2-1/2%	=	$	712,500
	$	59,000,000 x 3-1/2%	=	$	2,065,000
	$	61,000,000 x 5%	=	$	3,050,000
	$	65,000,000 x 5-1/2%	=	$	3,575,000
	$	100,500,000 x 6%	=	$	6,030,000

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Based on the same example, the base overriding royalty percentage applicable for all iron ore products shipped in the fourth calendar quarter of 2018 would be 6%, because more than four million tons were shipped during the first three quarters.

Further, the royalty bonuses payable in respect of the second and third calendar quarters of 2018 would be as follows (with reference to the Adjusted Threshold Price (“ATP”) of $55.74

2nd Quarter:	$	55.00/ton falls below ATP: no bonus payable	=		None
3rd Quarter:	$	28,500,000 x 0.5%	=	$	142,500
	$	59,000,000 x 1.0%	=	$	590,000
	$	61,000,000 x 1.5%	=	$	915,000
	$	65,000,000 x 2.5%	=	$	1,625,000
	$	100,500,000 x 3.0%	=	$	3,015,000

The above figures are provided only to illustrate the method for calculating base overriding royalties and royalty bonuses and do not indicate the amount of base overriding royalties or royalty bonuses the Trustees expect Mesabi Trust to earn in calendar 2018 or any other calendar or fiscal year.  Accordingly, the foregoing example illustrating the calculation of base overriding royalties and royalty bonuses should not be considered a prediction of the amount of base overriding royalties or royalty bonuses Mesabi Trust will receive.

Bonuses on other ore.  Northshore also must pay base overriding royalties and royalty bonuses on pellets produced from lands other than Mesabi Trust Lands (“Other Ore”) to the extent necessary to assure payment of base overriding royalties and royalty bonuses on at least 90% of the first four million tons of pellets shipped from Silver Bay in each calendar year, at least 85% of the next two million tons of pellets shipped therefrom in each calendar year, and at least 25% of all tonnage of pellets shipped therefrom in each calendar year in excess of six million tons.  Base overriding royalties and royalty bonuses payable on Other Ore can be recouped by Northshore out of base overriding royalties and royalty bonuses paid on Mesabi Ore.  The amount of base overriding royalties and royalty bonuses on Other Ore that can be recouped on any payment date cannot, however, exceed 20% of the amount of Mesabi Ore royalties and royalty bonuses which are otherwise payable on that payment date.

Advance royalties.  Northshore is obligated to pay Mesabi Trust advance royalties in equal quarterly installments.  The advance royalty was  $897,008 for calendar year 2016,  $912,725 for calendar year 2017,  and is $929,320 for calendar year 2018.  The amount of advance royalties payable is subject to adjustment (but not below $500,000 per annum) for inflation and deflation and is determined each year in the same manner as the Adjusted Threshold Price.  All payments of advance royalties are credited against payments of base overriding royalties and royalty bonuses payable on Mesabi Ore until fully recouped by Northshore.  The amount of advance royalties payable in respect of each calendar quarter constitutes the minimum overriding royalty amount payable by Northshore in respect of that calendar quarter.

Other leasehold royalty information.  Base overriding royalties and royalty bonuses are payable quarterly and accrue upon shipment, whether or not the actual sales proceeds for any shipment are received by Northshore.  The amount of base overriding royalties and royalty bonuses payable with respect to the first three quarters in any calendar year are determined on the basis of tonnage shipped during each such calendar quarter and the actual sales proceeds of such shipments, with an adjustment made to the royalties payable with respect to the last quarter in any calendar year to account for adjustments.

LAND TRUST AND FEE ROYALTIES

Mesabi Land Trust holds 20% interest as fee owner in the Peters Lease Lands and a 100% interest as fee owner in the Mesabi Lease Lands as lessor of the Mesabi Lease.  Mesabi Trust holds the entire beneficial interest in Mesabi Land Trust and is entitled to receive the net income of Mesabi Land Trust after payment of expenses.  Northshore is not obligated to pay royalties or rental to Mesabi Land Trust as fee owner of the non-mineral bearing Mesabi Lease Lands, a consideration having been paid in that respect at the inception of the Mesabi Lease.

Northshore is required to pay a base royalty to the fee owners in an amount which, at its option, is either (a) 11-2/3¢ per gross ton of crude ore it mines from the Peters Lease Lands, or (b) $0.0056 for each 1% of metallic iron ore natural contained in each gross ton of pellets it produces from the Peters Lease Lands and ships.  The base fee royalty

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rate is adjusted up or down each quarter (but not below the base royalty specified above) by adding or subtracting an amount to be determined by reference to changes in Lower Lake Mesabi Range pellet prices and the All Commodities Producer Price Index.  The adjustment factor is computed by multiplying the base fee royalty rate specified above by a percentage that is the sum of (a) one-half of the percentage change, if any, by which the then prevailing price per iron unit of Mesabi Range taconite pellets delivered by rail or vessel at Lower Lake Erie ports exceeds 80.5¢ (the price per iron unit in effect in January 1982), plus (b) one-half of the percentage change, if any, by which the All Commodities Producer Price Index exceeds 295.8 (the level of the Index for December 1981).  Fee royalties aggregating $519,327 with respect to crude ore mined by Northshore were earned by Mesabi Land Trust during the fiscal year ended January 31, 2018.

TRUST EXPENSES

Total Trust Expenses

Total Trust expenses for the fiscal year ended January 31, 2018 were $1,071,990, representing a decrease of $51,432, or 4.6%, from the $1,123,422 of total Trust expenses in fiscal 2017.  The decrease in Trust expenses from fiscal 2018 to fiscal 2017 was due primarily to a decrease in legal expenses to the Trust as discussed further in the Trust Legal Expenses section below.

Total Trust expenses for the fiscal year ended January 31, 2017 were $1,123,422, representing a decrease of $39,245, or 3.4%, from the $1,162,667 of total Trust expenses in fiscal 2016.  The decrease in Trust expenses from fiscal 2017 to fiscal 2016 was due primarily to a decrease in legal expenses to the Trust as discussed further in the Trust Legal Expenses section below.

Trust Legal Expenses

Mesabi Trust paid Fox Rothschild LLP (formerly Oppenheimer Wolff & Donnelly LLP (“Oppenheimer”)) $366,205 for legal services provided to the Trust during the fiscal year ended January 31, 2018.  Comparatively, Mesabi Trust paid Fox Rothschild LLP and Oppenheimer $399,737 and $494,057 for legal services provided to the Trust during fiscal years ended January 31, 2017 and January 31, 2016, respectively.

In each of the last three fiscal years, Fox Rothschild and Oppenheimer represented the Trust and assisted the Trustees in the preparation and filing of the Trust’s current, periodic and annual reports with the Securities and Exchange Commission and related securities law compliance.  Fox Rothschild and Oppenheimer also advised the Trust on various other legal matters, which included royalty reporting matters and matters related to inquiries from third parties in the ordinary course of the Trust’s administration.  The total amount of Fox Rothschild and Oppenheimer’s legal fees for services rendered during fiscal 2018 decreased approximately $33,532, or 8.4% as compared to fiscal 2017.  The decrease in legal fees in fiscal 2018, as compared to fiscal 2017, resulted primarily from the increased legal work in fiscal 2017 relating to royalty reporting matters, more meetings, current reporting related to difficult economic conditions in the iron ore and steel industries generally, and as it impacted Cliffs and Northshore operations in particular.

The total amount of Oppenheimer’s legal fees for services rendered during fiscal 2017 decreased approximately $94,320, or 19.1% as compared to fiscal 2016.  The decrease in legal fees in fiscal 2017, as compared to fiscal 2016, resulted primarily from the increased legal work in fiscal 2016 as compared to fiscal 2017, which related to royalty reporting matters, more meetings, current reporting related to difficult economic conditions in the iron ore and steel industries generally, and as it impacted Cliffs and Northshore operations in particular.

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Total Trust expenses by category for fiscal 2018,  2017 and 2016 are set forth in the table below.

	Fiscal Year ended January 31,
	2018		2017		2016
Compensation of Trustees	$	207,520	$	188,789	$	188,283
Corporate Trustee’s Administrative Fees		62,500		62,500		62,500
Professional fees and expenses
Legal		366,205		399,737		494,057
Accounting and auditing		142,214		151,947		146,562
Mining consultant and field representatives		56,100		27,988		28,378
Insurance		118,392		118,490		120,084
Annual stock exchange fee		59,967		53,095		45,637
Transfer agent’s and registrar’s fees		7,366		5,540		8,308
Other Trust Expenses		51,726		115,336		68,858
	$	1,071,990	$	1,123,422	$	1,162,667

UNALLOCATED RESERVE

Each quarter, as authorized by the Agreement of Trust, the Trustees will reevaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether known or contingent) in determining an appropriate level of unallocated reserve for the Trust in order to be in position to meet the current and ongoing challenges in the iron ore and steel industries.  The actual amount of the Unallocated Reserve will fluctuate from time to time and may increase or decrease from its current level.  Accordingly, although the actual amount of the Unallocated Reserve will fluctuate from time to time, and may increase or decrease from its current level, it is currently expected that future distributions will be highly dependent upon royalty payments received quarterly and the level of Trust expenses that the Trustees anticipate occurring in subsequent quarters.  Pursuant to the Agreement of Trust, the Trust makes decisions about cash distributions to Unitholders based on the royalty payments it receives from Northshore when received, rather than as royalty income is recorded in accordance with the Trust’s revenue recognition policy.  Refer to Note 5 for further information.  See “Current Developments” — “Review of Unallocated Reserve”  in this Annual Report.  The amount of future royalty income available for distribution will be subject to the volume of iron ore product shipments and the dollar level of sales by Northshore.  Shipping activity is greatly reduced during the winter months and economic conditions, particularly those affecting the steel industry, may adversely affect the amount and timing of such future shipments and sales.  It is possible that future negative price adjustments could offset, or even eliminate, royalties or royalty income that would otherwise be payable to the Trust in any particular quarter, or at year end, thereby potentially reducing cash available for distribution to the Trust’s Unitholders in future quarters.  See discussion under the heading “Risk Factors” in this Annual Report.

The Trustees will continue to monitor the economic circumstances of the Trust to strike a responsible balance between distributions to Unitholders and the need to maintain reserves at a prudent level, given the unpredictable nature of the iron ore industry, the Trust’s dependence on the actions of Cliffs and Northshore, and the fact that the Trust essentially has no other liquid assets.

CERTIFICATES OF BENEFICIAL INTEREST

The Mesabi Trust’s Certificates of Beneficial Interest are traded on the New York Stock Exchange.  Distributions declared to Unitholders during the fiscal year ended January 31, 2018 totaled $33,193,626 as compared to $8,396,806 during fiscal year ended January 31, 2017, and $1,180,801 during the fiscal year ended January 31, 2016.  The Trust paid Unitholders distributions of $2.53 per Unit for the fiscal year ended January 31, 2018, compared with distributions of $0.64 and $0.09 per Unit for the fiscal years ended January 31, 2017 and 2016, respectively.

30

During the past two fiscal years, the market ranges of the certificates for each quarterly period and the distributions declared for such quarterly periods were as follows:

					Distribution		Distribution
Fiscal Quarter Ended	High		Low		Declared		Per Unit
April 30, 2017	$	17.42	$	13.55	$	7,216,006	$	0.55
July 31, 2017	$	15.60	$	12.70		2,099,202		0.16
October 31, 2017	$	24.80	$	13.50		8,396,806		0.64
January 31, 2018	$	30.92	$	20.60		15,481,612		1.18
					$	33,193,626	$	2.53

					Distribution		Distribution
Fiscal Quarter Ended	High		Low		Declared		Per Unit
April 30, 2016	$	9.91	$	4.00	$	2,624,002	$	0.20
July 31, 2016	$	11.74	$	7.95		2,624,002		0.20
October 31, 2016	$	10.69	$	8.82		1,312,001		0.10
January 31, 2017	$	14.45	$	8.05		1,836,801		0.14
					$	8,396,806	$	0.64

As of the close of business on April 10, 2018, the beneficial interest in Mesabi Trust was represented by 13,120,010 Units, 358,983 Units of which were held by 845 holders of record.

THE TRUSTEES

The name and address of each Trustee and the principal occupation of each individual Trustee are as follows:

Name and Address of Trustee	Principal Occupation
Deutsche Bank Trust Company Americas Corporate Trustee 60 Wall Street 27th Floor New York, New York 10005	New York banking corporation
Robert C.  Berglund Individual Trustee PO Box 351 Corona, New Mexico 88318	Retired mining engineer
James A.  Ehrenberg Individual Trustee 29394 Whispering Pines Rd. Danbury WI 54830	Until April 2005, Senior Vice President, Corporate Trust Services, U.S.  Bank, N.A.
Richard G.  Lareau Individual Trustee 10201 Rosemont Ct. Fort Myers, FL 33908	Retired Attorney
Michael P.  Mlinar Individual Trustee 444 West Anoka Street Duluth, MN 55803	Retired mining engineer
New York, New York April 13, 2018	Respectfully submitted, DEUTSCHE BANK TRUST COMPANY AMERICAS ROBERT C.  BERGLUND JAMES A.  EHRENBERG RICHARD G.  LAREAU MICHAEL P.  MLINAR

31

INDEX TO FINANCIAL STATEMENTS

Trustees’ Report on Internal Control over Financial Reporting	Page F-2
Report of Independent Registered Public Accounting Firm	Page F-3
Balance Sheets as of January 31, 2018 and 2017	Page F-4
Statements of Income for the years ended January 31, 2018, 2017, and 2016	Page F-5
Statements of Unallocated Reserve and Trust Corpus for the years ended January 31, 2018, 2017, and 2016	Page F-6
Statements of Cash Flows for the years ended January 31, 2018, 2017, and 2016	Page F-7
Notes to Financial Statements	Pages F-8 —  F-12

F-1

TRUSTEES’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Mesabi Trustees are responsible for establishing and maintaining adequate internal control over financial reporting for Mesabi Trust.  The Trust’s internal control system was designed to provide reasonable assurance to the Trustees regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Mesabi Trustees assessed the effectiveness of the Trust’s internal control over financial reporting as of January 31, 2018.  In making this assessment, they used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013).  Based on their assessment, the Trustees believe that, as of January 31, 2018, the Trust’s internal control over financial reporting is effective, based on those criteria.

Baker Tilly Virchow Krause, LLP, the Trust’s independent registered public accounting firm, has issued an audit report on its assessment of the Trust’s internal control over financial reporting for the fiscal year ending January 31, 2018.  This report appears immediately below.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Unitholders and Trustees of Mesabi Trust:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying balance sheets of Mesabi Trust as of January 31, 2018 and 2017, and the related statements of income, unallocated reserve and trust corpus, and cash flows for the years ended January 31, 2018, 2017 and 2016, and the related notes (collectively referred to as the "financial statements").  We also have audited the Trust’s internal control over financial reporting as of January 31, 2018, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as of January 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years ended January 31, 2018, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.  Also in our opinion, the Trust maintained, in all material respects, effective internal control over financial reporting as of January 31, 2018, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinion

The Trust’s Trustees are responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Trustees’ Report on Internal Control over Financial Reporting.  Our responsibility is to express an opinion on the Trust’s financial statements and an opinion on the Trust’s internal control over financial reporting based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S.  federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects. 

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by the Trustees, as well as evaluating the overall presentation of the financial statements.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of the trustees of the entity; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Baker Tilly Virchow Krause, LLP

We have served as the Trust’s auditor since 2012.

Minneapolis, Minnesota

April 13, 2018

F-3

MESABI TRUST

BALANCE SHEETS

AS OF JANUARY 31, 2018 AND 2017

	2018		2017
Assets
Cash and cash equivalents	$	314,835	$	13,695,168
U.S.  Government securities, at amortized cost (which approximates market)		23,797,451		456,058
Accrued income receivable		1,956,091		45,045
Prepaid expenses		54,640		53,608
Current assets		26,123,017		14,249,879
Fixed property, including intangibles, at nominal values
Assignments of leased property
Amended assignment of Peters Lease		1		1
Assignment of Cloquet Leases		1		1
Certificate of beneficial interest for 13,120,010 units of Land Trust		1		1
		3		3
Total assets	$	26,123,020	$	14,249,882
Liabilities, Unallocated Reserve And Trust Corpus
Liabilities
Distribution payable	$	15,481,612	$	1,836,801
Accrued expenses		133,994		108,193
Deferred royalty revenue		—		2,099,415
Total liabilities		15,615,606		4,044,409
Unallocated reserve		10,507,411		10,205,470
Trust corpus		3		3
Total liabilities, unallocated reserve and trust corpus	$	26,123,020	$	14,249,882

See Notes to Financial Statements

F-4

MESABI TRUST

STATEMENTS OF INCOME

YEARS ENDED JANUARY 31, 2018,  2017, AND 2016

	2018		2017		2016
Revenues
Royalties under amended lease agreements	$	33,955,703	$	10,314,620	$	9,297,106
Royalties under Peters Lease fee		519,327		416,788		417,311
Interest		92,527		5,126		7,091
Total revenues		34,567,557		10,736,534		9,721,508
Expenses
Compensation of Trustees		207,520		188,789		188,283
Corporate Trustee’s administrative fees		62,500		62,500		62,500
Professional fees and expenses:
Legal		366,205		399,737		494,057
Accounting and auditing		142,214		151,947		146,562
Mining consultant and field representatives		56,100		27,988		28,378
Insurance		118,392		118,490		120,084
Annual stock exchange fee		59,967		53,095		45,637
Transfer agent’s and registrar’s fees		7,366		5,540		8,308
Other Trust expenses		51,726		115,336		68,858
Total expenses		1,071,990		1,123,422		1,162,667
Net income	$	33,495,567	$	9,613,112	$	8,558,841
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING		13,120,010		13,120,010		13,120,010
Net income per unit (Note 2)	$	2.553	$	0.733	$	0.652

See Notes to Financial Statements

F-5

MESABI TRUST

STATEMENTS OF UNALLOCATED RESERVE AND TRUST CORPUS

YEARS ENDED JANUARY 31, 2018,  2017, AND 2016

	Unallocated Reserve
	Number of			Trust
	Units	Amount		Corpus
BALANCE, JANUARY 31, 2015	13,120,010	$	1,611,124	$	3
Net income	—		8,558,841		—
Distribution paid May 20, 2015, $.00 per unit	—		—		—
Distribution paid August 20, 2015, $.04 per unit	—		(524,800)		—
Distribution paid November 20, 2015, $.00 per unit	—		—		—
Distribution declared January 15, 2016, paid February 20, 2016, $.05 per unit	—		(656,001)		—
BALANCE, JANUARY 31, 2016	13,120,010	$	8,989,164	$	3
Net income	—		9,613,112		—
Distribution paid May 20, 2016, $.20 per unit	—		(2,624,002)		—
Distribution paid August 20, 2016, $.20 per unit	—		(2,624,002)		—
Distribution paid November 20, 2016, $.10 per unit	—		(1,312,001)		—
Distribution declared January 30, 2017, paid February 20, 2017, $.14 per unit	—		(1,836,801)		—
BALANCE, JANUARY 31, 2017	13,120,010	$	10,205,470	$	3
Net income	—		33,495,567		—
Distribution paid May 20, 2017, $.55 per unit	—		(7,216,006)		—
Distribution paid August 20, 2017, $.16 per unit	—		(2,099,202)		—
Distribution paid November 20, 2017, $.64 per unit	—		(8,396,806)		—
Distribution declared January 30, 2018, paid February 20, 2018, $1.18 per unit	—		(15,481,612)		—
BALANCE, JANUARY 31, 2018	13,120,010	$	10,507,411	$	3

See Notes to Financial Statements

F-6

MESABI TRUST

STATEMENTS OF CASH FLOWS

YEARS ENDED JANUARY 31, 2018,  2017, AND 2016

	2018		2017		2016
Operating activities
Royalties received	$	30,470,480	$	13,702,276	$	9,294,808
Interest received		86,616		5,541		6,939
Expenses paid		(1,047,221)		(1,124,467)		(1,080,534)
Net cash from operating activities		29,509,875		12,583,350		8,221,213
Investing activities
Maturities of U.S. Government securities		37,636,412		5,740,659		510,573
Purchases of U.S. Government securities		(60,977,805)		—		(5,940,958)
Net cash from (used for) from investing activities		(23,341,393)		5,740,659		(5,430,385)
Financing activity
Distributions to unitholders		(19,548,815)		(7,216,006)		(8,921,606)
Net change in cash and cash equivalents		(13,380,333)		11,108,003		(6,130,778)
Cash and cash equivalents, beginning of year		13,695,168		2,587,165		8,717,943
Cash and cash equivalents, end of year	$	314,835	$	13,695,168	$	2,587,165
Reconciliation of net income to net cash from operating activities
Net income	$	33,495,567	$	9,613,112	$	8,558,841
Decrease (increase) in accrued income receivable		(1,911,046)		933,101		(419,761)
Decrease (increase) in prepaid expense		(1,032)		1,322		27
Increase (decrease) in accrued expenses		25,801		(63,600)		82,106
Increase (decrease) in deferred royalty revenue		(2,099,415)		2,099,415		—
Net cash from operating activities	$	29,509,875	$	12,583,350	$	8,221,213
Non cash financing activity
Distributions declared and payable	$	15,481,612	$	1,836,801	$	656,001

See Notes to Financial Statements

F-7

MESABI TRUST

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2018,  2017, AND 2016

NOTE 1 - NATURE OF BUSINESS AND ORGANIZATION

Nature of Business

Mesabi Trust was created in 1961 upon the liquidation of Mesabi Iron Company.  The sole purpose of the Trust, as set forth in the Agreement of Trust dated as of July 18, 1961, is to conserve and protect the Trust Estate and to collect and distribute the income and proceeds there from to the Trust’s certificate holders after the payment of, or provision for, expenses and liabilities.  The Agreement of Trust prohibits the Trust from engaging in any business.  In accordance with the Agreement of Trust, the Trust will terminate twenty-one years after the death of the survivor of twenty-five persons named in an exhibit to the Agreement of Trust, the youngest of whom was believed to be fifty-four years old as of October 1, 2014.

The lessee/operator of Mesabi Trust’s mineral interests is Northshore Mining Corporation (NMC), a subsidiary of Cleveland-Cliffs Inc.  (Cliffs).  Prior to September 30, 1994, the lessee/operator had been a subsidiary of Cyprus Amax Minerals Company and was named Cyprus Northshore Mining Corporation (Cyprus NMC).

Organization

The beneficial interest in Mesabi Trust is represented by 13,120,010 transferable units distributed on July 27, 1961 to shareholders of Mesabi Iron Company.

The Trust’s status as a grantor trust was confirmed by letter ruling addressed to Mesabi Iron Company from the Internal Revenue Service in 1961.  As a grantor trust, Mesabi is exempt from Federal income taxes and its income is taxable directly to the Unitholders.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

The Trust considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  As of January 31, 2018 and 2017, the Trust held $314,835 and $13,695,168, respectively, in a money market fund that invests primarily in obligations of the U.S.  Treasury, which it considers to be cash and cash equivalents.

Investments

The Trust invests solely in U.S.  Government securities.  The Trustees determine the appropriate classifications of the securities at the time they are acquired and evaluate the appropriateness of such classifications as of each balance sheet date.

The U.S.  Government securities are classified as held-to-maturity securities as the Trust has the positive intent and ability to hold to maturity and are therefore stated at amortized cost.

Revenue Recognition

Royalty income under the amended lease agreements with NMC is recognized as it is earned.  Under such agreements, royalties are earned upon shipment from Silver Bay, Minnesota (NMC’s location), regardless of whether the actual sales proceeds for any shipment are received by NMC’s parent, Cliffs.  The amount of base overriding royalties and royalty bonuses payable are determined on the volume of tonnage shipped from Silver Bay, Minnesota during each calendar quarter and the actual proceeds to Cliffs resulting from such shipments. 

Royalty income includes accrued income receivable.  Accrued income receivable represents royalty income earned but not yet received by the Trust under the royalty agreements described elsewhere in these notes.  Accrued income receivable is calculated based on (i) shipments during the last month of Mesabi Trust’s fiscal year, if any, and (ii) net

F-8

price adjustments resulting from the price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from Silver Bay, Minnesota. 

Adjustments to royalty income may result from changes in final reconciliations of tonnage shipped by NMC with the final amounts received from NMC customers.  Adjustments may also result from revisions to estimated prices between NMC and its customers previously used to record revenue for tonnage shipped.  Pricing decreases may give rise to negative price adjustments which may be applied against future royalty income recognized by the Trust.

As of January 31, 2018, positive price adjustments were recorded by Mesabi Trust to accrued income receivable due to price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from NMC with respect to certain shipments during calendar year 2017.  As of January 31, 2018, the Trust recognized revenue related to approximately 1,068,786 tons of iron ore that were shipped by NMC as of December 31, 2017, but for which Cliffs has indicated that final pricing is not yet known.  Pricing related to these tons is expected to be finalized in the first calendar quarter of 2019.

Royalty income under the Peters Lease fee agreement is also recognized quarterly as it is earned.  Under such agreement, however, royalties are earned at the option of NMC either upon mining of crude ore from Peters Lease lands or upon shipment from Silver Bay of iron ore product produced from Peters Lease lands.

Fixed Property, Including Intangibles

The Trust’s fixed property, including intangibles, is recorded at nominal values and includes the following:

1. The entire beneficial interest as assignor in the Amended Peters Lease Assignment and the Amended Cloquet Lease Assignment covering taconite properties in Minnesota which are leased to NMC.

2. The entire beneficial interest in Mesabi Land Trust which owns a 20% fee interest in the lands subject to the Peters Lease and the entire fee interest in other properties in Minnesota.

Deferred Royalty Revenue

Deferred royalty revenue represents an estimate of decreases in royalty revenue related to tons of iron ore that were shipped by Northshore, but for which Northshore has indicated that final pricing is not yet known and is adjusted in accordance with the Trust’s revenue recognition policy each quarter as updated pricing information is received.

Net Income Per Unit

Net income per unit is computed by dividing net income by the weighted average number of units outstanding.

Concentration of Credit Risk

Financial instruments which potentially subject the Trust to concentrations of credit risk consist primarily of cash that is maintained at an FDIC insured financial institution.  At times during the year, the Trust’s cash balance may exceed insured limits.

As further described in Note 1, NMC is the lessee/operator of the Mesabi Trust land.  All royalty income earned by the Trust is received from NMC, and accordingly, substantially all of the accrued income receivable is also due from NMC.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Trustees to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Specifically, the accrued income receivable, deferred royalty revenue and related royalty revenue are significant estimates which are subject to change in the near term, and changes to these estimates could have a material effect on the Trust’s financial statements.

F-9

Subsequent Events

Material subsequent events are evaluated for recognition or disclosure in the accompanying financial statements.

Fair Value Measures

Valuation Hierarchy

GAAP establishes a three-level valuation hierarchy for classification of fair value measurements.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

· Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 — Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety.

The carrying amounts of financial instruments approximated fair value as of January 31, 2018 and 2017, because of the relative short maturity of these instruments.

Recent Accounting Pronouncements

The Trust has reviewed all recently issued, but not yet effective, accounting pronouncements.  The Trust would like to draw further attention to the following issued pronouncement regarding the accounting for revenue from contracts with customers:

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No.  2014-09, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted.  In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date,” which defers the adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period, however the Trust did not early adopt.  The Trust has evaluated the new standard as it relates to its existing royalty contracts with Northshore Mining.  The Trust believes it is unlikely that a significant change in the timing of revenue recognition will occur and it is expected that the amount of revenue recognized annually will remain largely unchanged.  The Trust is planning to implement the guidance using the full retrospective transition method.  The main impact of the adoption on the financial statements relates to additional disclosures over revenue recognition in the notes to the financial statements.

Various accounting standards and interpretations were issued during the fiscal year ended January 31, 2018.  The Trust has evaluated the recently issued accounting pronouncements that are effective for the fiscal year ended January 31, 2018 and believe they will not have a material effect on the Trust’s financial position, results of operations or cash flows when adopted.

F-10

NOTE 3 - U.  S.  GOVERNMENT SECURITIES

U.S.  government securities at January 31, 2018 and 2017 are classified as held-to-maturity and mature as follows:

	2018				2017
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value
Due within one year	$	23,797,451	$	23,800,904	$	456,058	$	455,050
Due after one year		—		—		—		—
	$	23,797,451	$	23,800,904	$	456,058	$	455,050

The fair value of U.S.  government securities have been valued using level 1 inputs.

NOTE 4 - ROYALTY AGREEMENT

The current royalty rate schedule became effective on August 17, 1989, which was established pursuant to certain agreements (the “Amended Assignment Agreements”) the Trust entered into with Cyprus Northshore Mining Corporation (“Cyprus NMC”).  Pursuant to the Amended Assignment Agreements, overriding royalties are determined by both the volume and selling price of iron ore products shipped.

Pursuant to the Amended Assignment Agreements, NMC is obligated to pay Mesabi Trust base overriding royalties, in varying amounts constituting a percentage of the gross proceeds of shipments, from Silver Bay, Minnesota, of iron ore product produced from Mesabi Trust lands or, to a limited extent, other lands.  NMC is obligated to make payments of overriding royalties on product shipments within 30 days following the calendar quarter in which such shipments occur.  NMC resumed mining operations and shipping product from Silver Bay in the second calendar quarter of 1990, and the first payment of overriding royalties was made in July 1990.

Royalty bonuses are payable on all iron ore products produced from Mesabi Ore shipped from Silver Bay during a calendar quarter and sold at prices above the Adjusted Threshold Price.  The Adjusted Threshold Price was $53.80 per ton for calendar year 2016,  $54.74 per ton for calendar year 2017, and will be $55.74 per ton for calendar year 2018.  The Adjusted Threshold Price is subject to adjustment (but not below $30 per ton) for inflation and deflation and is determined each year on the basis of the change in the Gross Domestic Product Implicit Price Deflator, a broad based index of inflation and deflation published quarterly by the U.S.  Department of Commerce.

NMC is obligated to pay to Mesabi Trust a minimum advance royalty of $500,000 per annum, subject to adjustment for inflation and deflation (but not below $500,000), which is credited against base overriding royalties and royalty bonuses.  NMC is obligated to make quarterly payments of the minimum advance royalty in January, April, July and October of each year.  For the calendar year ending December 31, 2018, the minimum advance royalty threshold is $929,320.  The minimum annual advance royalty threshold was $912,725 and $897,008, for the calendar years ended December 31, 2017 and 2016, respectively.

NOTE 5 - UNALLOCATED RESERVE AND DISTRIBUTIONS

Each quarter, as authorized by the Agreement of Trust, the Trustees will reevaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether known or contingent) in determining a prudent level of unallocated reserve in light of the unpredictable nature of the iron ore industry and current economic conditions.  The actual amount of the Unallocated Reserve will fluctuate from time to time and may increase or decrease from its current level.  Accordingly, although the actual amount of the Unallocated Reserve will fluctuate from time to time, and may increase or decrease from its current level, it is currently expected that future distributions will be highly dependent upon royalty payments received quarterly and the level of Trust expenses that the Trustees anticipate occurring in subsequent quarters.

F-11

As of January 31, 2018 and January 31, 2017, the unallocated cash and U.S.  Government securities portion of the Trust’s Unallocated Reserve consisted of the following components:

	January 31, 2018		January 31, 2017
Cash and U.S.  Government securities	$	24,112,286	$	14,151,226
Distribution payable		(15,481,612)		(1,836,801)
Unallocated cash and U.S.  Government securities	$	8,630,674	$	12,314,425

A reconciliation of the Trust’s Unallocated Reserve from January 31, 2017 to January 31, 2018 is as follows:

Unallocated Reserve, January 31, 2017	$	10,205,470
Net income		33,495,567
Distributions declared		(33,193,626)
Unallocated Reserve, January 31, 2017	$	10,507,411

The Trustees determine the level of distributions on a quarterly basis after receiving notification from NMC as to the amount of royalty income that will be received and after determination of any known or anticipated expenses, liabilities and obligations of the Trust.  As a result of fluctuations in the accrued income receivable portion of the Unallocated Reserve, future distributions may vary depending upon the adjustments to royalty income, which are determined by NMC, and the level of Trust expenses that the Trustees anticipate occurring in subsequent quarters.

During the fiscal years ended January 31, 2018,  2017, and 2016, the Trustees distributed cash payments totaling $19,548,815 ($1.49 per Unit), $7,216,006 ($0.55 per Unit), and $8,921,606 ($0.68 per Unit), respectively.  In addition, in January 2018, the Trustees declared a distribution of $1.18 per Unit of beneficial interest, which was paid in February 2018.

NOTE 6 - SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)

The quarterly results of operations for the years ended January 31, 2018 and 2017 are presented below:

	2018
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenue	$	3,656,754	$	13,354,627	$	12,191,575	$	5,364,601
Expenses		295,047		240,493		227,330		309,120
Net income	$	3,361,707	$	13,114,134	$	11,964,245	$	5,055,481
Net income per unit	$	0.256	$	1.000	$	0.912	$	0.385

	2017
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenue	$	1,679	$	2,609,635	$	3,442,645	$	4,682,575
Expenses		431,931		189,389		234,494		267,608
Net income (loss)	$	(430,252)	$	2,420,246	$	3,208,151	$	4,414,967
Net income (loss) per unit	$	(0.033)	$	0.184	$	0.245	$	0.337

F-12

EX-31

Exhibit 31

CERTIFICATION

I, Jeffrey Schoenfeld, certify that:

1. I have reviewed this annual report on Form 10-K of Mesabi Trust, for which Deutsche Bank Trust Company Americas acts as Corporate Trustee;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, distributable income and changes in trust corpus of the registrant as of, and for, the period presented in this annual report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), or for causing such controls and procedures and internal control over financial reporting to be established and maintained, for the registrant and have:

a) designed such disclosure controls and procedures, or caused such controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors:

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves persons who have a significant role in the registrant’s internal control over financial reporting.

In giving the foregoing certifications in paragraphs 4 and 5, I have relied to the extent I consider reasonable on information provided to me by Eveleth Fee Office, Inc., Northshore Mining Company and Cleveland-Cliffs Inc.

Date: April 13, 2018	By:	/s/ Jeffrey Schoenfeld
		Jeffrey Schoenfeld *
		Vice President
		Deutsche Bank National Trust Company For Deutsche Bank Trust Company Americas

* There are no principal executive officers or principal financial officers of the registrant.

EX-32

Exhibit 32

PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, the Corporate Trustee of Mesabi Trust, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Annual Report of Mesabi Trust on Form 10-K for the fiscal year ended January 31, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Form 10-K fairly presents in all material respects the financial condition and results of operations of Mesabi Trust.

/s/ Jeffrey Schoenfeld	April 13, 2018
Jeffrey Schoenfeld *
Vice President
Deutsche Bank National Trust Company For Deutsche Bank Trust Company Americas

* There are no principal executive officers or principal financial officers of the registrant.

A signed original of this written statement required by Section 906 has been provided to Mesabi Trust and will be retained by Mesabi Trust and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - USD ($)	12 Months Ended
	Jan. 31, 2018	Apr. 10, 2018	Jul. 31, 2017
Document and Entity Information
Entity Registrant Name	MESABI TRUST
Entity Central Index Key	0000065172
Document Type	10-K
Document Period End Date	Jan. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--01-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 176,802,899
Entity Common Stock, Shares Outstanding		13,120,010
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

XML

Condensed Balance Sheets - USD ($)	Jan. 31, 2018	Jan. 31, 2017
ASSETS
Cash and cash equivalents	$ 314,835	$ 13,695,168
U.S. Government securities, current, at amortized cost (which approximates market)	23,797,451	456,058
Accrued income receivable	1,956,091	45,045
Prepaid expenses	54,640	53,608
Current assets	26,123,017	14,249,879
Assignments of leased property
Amended assignment of Peters Lease	1	1
Assignment of Cloquet Leases	1	1
Certificate of beneficial interest for 13,120,010 units of Land Trust	1	1
Total fixed property	3	3
Total assets	26,123,020	14,249,882
LIABILITIES, UNALLOCATED RESERVE AND TRUST CORPUS
Distribution payable	15,481,612	1,836,801
Accrued expenses	133,994	108,193
Deferred royalty revenue		2,099,415
Total liabilities	15,615,606	4,044,409
Unallocated reserve	10,507,411	10,205,470
Trust corpus	3	3
Total liabilities, unallocated reserve and trust corpus	$ 26,123,020	$ 14,249,882

XML

Condensed Balance Sheets (Parenthetical) - shares	Jan. 31, 2018	Jan. 31, 2017
Condensed Balance Sheets
Certificate of beneficial interest of Land Trust, units	13,120,010	13,120,010

XML

Condensed Statements of Operations - USD ($)	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
REVENUES
Royalties under amended lease agreements	$ 33,955,703	$ 10,314,620	$ 9,297,106
Royalties under Peters Lease fee	519,327	416,788	417,311
Interest	92,527	5,126	7,091
Total revenues	34,567,557	10,736,534	9,721,508
EXPENSES
Compensation of Trustees	207,520	188,789	188,283
Corporate Trustee's administrative fees	62,500	62,500	62,500
Professional fees and expenses:
Legal	366,205	399,737	494,057
Accounting and auditing	142,214	151,947	146,562
Mining consultant and field representatives	56,100	27,988	28,378
Insurance	118,392	118,490	120,084
Annual stock exchange fee	59,967	53,095	45,637
Transfer agent's and registrar's fees	7,366	5,540	8,308
Other Trust expenses	51,726	115,336	68,858
Total Expenses	1,071,990	1,123,422	1,162,667
Net income	$ 33,495,567	$ 9,613,112	$ 8,558,841
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING	13,120,010	13,120,010	13,120,010
Net income per unit (Note 2) (in dollars per unit)	$ 2.553	$ 0.733	$ 0.652

XML

STATEMENTS OF UNALLOCATED RESERVE AND TRUST CORPUS (Equity) - USD ($)	Unallocated Reserve	Trust Corpus	Total
Beginning Balance at Jan. 31, 2015	$ 1,611,124	$ 3
Units, Beginning Balance at Jan. 31, 2015	13,120,010
Increase (Decrease) in Unallocated Reserve and Trust Corpus
Net income	$ 8,558,841		$ 8,558,841
Second quarter's distribution paid	(524,800)
Fourth quarter's distribution declared/paid	(656,001)
Ending Balance at Jan. 31, 2016	$ 8,989,164	3
Units, Ending Balance at Jan. 31, 2016	13,120,010
Increase (Decrease) in Unallocated Reserve and Trust Corpus
Net income	$ 9,613,112		$ 9,613,112
First quarter's distribution paid	(2,624,002)
Second quarter's distribution paid	(2,624,002)
Third quarter's distribution paid	(1,312,001)
Fourth quarter's distribution declared/paid	(1,836,801)
Ending Balance at Jan. 31, 2017	$ 10,205,470	3
Units, Ending Balance at Jan. 31, 2017	13,120,010		13,120,010
Increase (Decrease) in Unallocated Reserve and Trust Corpus
Net income	$ 33,495,567		$ 33,495,567
First quarter's distribution paid	(7,216,006)
Second quarter's distribution paid	(2,099,202)
Third quarter's distribution paid	(8,396,806)
Fourth quarter's distribution declared/paid	(15,481,612)
Ending Balance at Jan. 31, 2018	$ 10,507,411	$ 3
Units, Ending Balance at Jan. 31, 2018	13,120,010		13,120,010

XML

STATEMENTS OF UNALLOCATED RESERVE AND TRUST CORPUS (Parenthetical) - $ / shares	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
STATEMENTS OF UNALLOCATED RESERVE AND TRUST CORPUS
First Quarterly Distribution Paid Per Unit	$ 0.55	$ 0.20	$ 0.00
Second Quarterly Distribution Paid Per Unit	0.16	0.20	0.04
Third Quarterly Distribution Paid Per Unit	0.64	0.10	0.00
Fourth Quarterly Distribution Declared Or Paid Per Unit	$ 1.18	$ 0.14	$ 0.05

XML

Condensed Statements of Cash Flows - USD ($)	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Operating activities
Royalties received	$ 30,470,480	$ 13,702,276	$ 9,294,808
Interest received	86,616	5,541	6,939
Expenses paid	(1,047,221)	(1,124,467)	(1,080,534)
Net cash from operating activities	29,509,875	12,583,350	8,221,213
Investing activities
Maturities of U.S. Government securities	37,636,412	5,740,659	510,573
Purchases of U.S. Government securities	(60,977,805)		(5,940,958)
Net cash from (used for) investing activities	(23,341,393)	5,740,659	(5,430,385)
Financing activity
Distributions to unitholders	(19,548,815)	(7,216,006)	(8,921,606)
Net change in cash and cash equivalents	(13,380,333)	11,108,003	(6,130,778)
Cash and cash equivalents, beginning of year	13,695,168	2,587,165	8,717,943
Cash and cash equivalents, end of period	314,835	13,695,168	2,587,165
Reconciliation of net income to net cash from operating activities
Net income	33,495,567	9,613,112	8,558,841
Decrease (increase) in accrued income receivable	(1,911,046)	933,101	(419,761)
Decrease (increase) in prepaid expense	(1,032)	1,322	27
Increase (decrease) in accrued expenses	25,801	(63,600)	82,106
Increase (decrease) in deferred royalty revenue	(2,099,415)	2,099,415
Net cash from operating activities	29,509,875	12,583,350	8,221,213
Non cash financing activity
Distributions declared and payable	$ 15,481,612	$ 1,836,801	$ 656,001

XML

NATURE OF BUSINESS AND ORGANIZATION

12 Months Ended

Jan. 31, 2018

NATURE OF BUSINESS AND ORGANIZATION

NATURE OF BUSINESS AND ORGANIZATION

NOTE 1 - NATURE OF BUSINESS AND ORGANIZATION

Nature of Business

Mesabi Trust was created in 1961 upon the liquidation of Mesabi Iron Company.  The sole purpose of the Trust, as set forth in the Agreement of Trust dated as of July 18, 1961, is to conserve and protect the Trust Estate and to collect and distribute the income and proceeds there from to the Trust’s certificate holders after the payment of, or provision for, expenses and liabilities.  The Agreement of Trust prohibits the Trust from engaging in any business.  In accordance with the Agreement of Trust, the Trust will terminate twenty-one years after the death of the survivor of twenty-five persons named in an exhibit to the Agreement of Trust, the youngest of whom was believed to be fifty-four years old as of October 1, 2014.

The lessee/operator of Mesabi Trust’s mineral interests is Northshore Mining Corporation (NMC), a subsidiary of Cleveland-Cliffs Inc.  (Cliffs).  Prior to September 30, 1994, the lessee/operator had been a subsidiary of Cyprus Amax Minerals Company and was named Cyprus Northshore Mining Corporation (Cyprus NMC).

Organization

The beneficial interest in Mesabi Trust is represented by 13,120,010 transferable units distributed on July 27, 1961 to shareholders of Mesabi Iron Company.

The Trust’s status as a grantor trust was confirmed by letter ruling addressed to Mesabi Iron Company from the Internal Revenue Service in 1961.  As a grantor trust, Mesabi is exempt from Federal income taxes and its income is taxable directly to the Unitholders.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Jan. 31, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

The Trust considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  As of January 31, 2018 and 2017, the Trust held $314,835 and $13,695,168, respectively, in a money market fund that invests primarily in obligations of the U.S.  Treasury, which it considers to be cash and cash equivalents.

Investments

The Trust invests solely in U.S.  Government securities.  The Trustees determine the appropriate classifications of the securities at the time they are acquired and evaluate the appropriateness of such classifications as of each balance sheet date.

The U.S.  Government securities are classified as held-to-maturity securities as the Trust has the positive intent and ability to hold to maturity and are therefore stated at amortized cost.

Revenue Recognition

Royalty income under the amended lease agreements with NMC is recognized as it is earned.  Under such agreements, royalties are earned upon shipment from Silver Bay, Minnesota (NMC’s location), regardless of whether the actual sales proceeds for any shipment are received by NMC’s parent, Cliffs.  The amount of base overriding royalties and royalty bonuses payable are determined on the volume of tonnage shipped from Silver Bay, Minnesota during each calendar quarter and the actual proceeds to Cliffs resulting from such shipments. 

Royalty income includes accrued income receivable.  Accrued income receivable represents royalty income earned but not yet received by the Trust under the royalty agreements described elsewhere in these notes.   Accrued income receivable is calculated based on (i) shipments during the last month of Mesabi Trust’s fiscal year, if any, and (ii) net price adjustments resulting from the price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from Silver Bay, Minnesota. 

Adjustments to royalty income may result from changes in final reconciliations of tonnage shipped by NMC with the final amounts received from NMC customers.  Adjustments may also result from revisions to estimated prices between NMC and its customers previously used to record revenue for tonnage shipped.  Pricing decreases may give rise to negative price adjustments which may be applied against future royalty income recognized by the Trust.

As of January 31, 2018, positive price adjustments were recorded by Mesabi Trust to accrued income receivable due to price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from NMC with respect to certain shipments during calendar year 2017.  As of January 31, 2018, the Trust recognized revenue related to approximately 1,068,786 tons of iron ore that were shipped by NMC as of December 31, 2017, but for which Cliffs has indicated that final pricing is not yet known.  Pricing related to these tons is expected to be finalized in the first calendar quarter of 2019.

Royalty income under the Peters Lease fee agreement is also recognized quarterly as it is earned.  Under such agreement, however, royalties are earned at the option of NMC either upon mining of crude ore from Peters Lease lands or upon shipment from Silver Bay of iron ore product produced from Peters Lease lands.

Fixed Property, Including Intangibles

The Trust’s fixed property, including intangibles, is recorded at nominal values and includes the following:

1. The entire beneficial interest as assignor in the Amended Peters Lease Assignment and the Amended Cloquet Lease Assignment covering taconite properties in Minnesota which are leased to NMC.

2. The entire beneficial interest in Mesabi Land Trust which owns a 20% fee interest in the lands subject to the Peters Lease and the entire fee interest in other properties in Minnesota.

Deferred Royalty Revenue

Deferred royalty revenue represents an estimate of decreases in royalty revenue related to tons of iron ore that were shipped by Northshore, but for which Northshore has indicated that final pricing is not yet known and is adjusted in accordance with the Trust’s revenue recognition policy each quarter as updated pricing information is received.

Net Income Per Unit

Net income per unit is computed by dividing net income by the weighted average number of units outstanding.

Concentration of Credit Risk

Financial instruments which potentially subject the Trust to concentrations of credit risk consist primarily of cash that is maintained at an FDIC insured financial institution.  At times during the year, the Trust’s cash balance may exceed insured limits.

As further described in Note 1, NMC is the lessee/operator of the Mesabi Trust land.  All royalty income earned by the Trust is received from NMC, and accordingly, substantially all of the accrued income receivable is also due from NMC.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Trustees to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Specifically, the accrued income receivable, deferred royalty revenue and related royalty revenue are significant estimates which are subject to change in the near term, and changes to these estimates could have a material effect on the Trust’s financial statements.

Subsequent Events

Material subsequent events are evaluated for recognition or disclosure in the accompanying financial statements.

Fair Value Measures

Valuation Hierarchy

GAAP establishes a three-level valuation hierarchy for classification of fair value measurements.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

· Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 — Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety.

The carrying amounts of financial instruments approximated fair value as of January 31, 2018 and 2017, because of the relative short maturity of these instruments.

Recent Accounting Pronouncements

The Trust has reviewed all recently issued, but not yet effective, accounting pronouncements.  The Trust would like to draw further attention to the following issued pronouncement regarding the accounting for revenue from contracts with customers:

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No.  2014-09, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted.  In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date,” which defers the adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period, however the Trust did not early adopt.  The Trust has evaluated the new standard as it relates to its existing royalty contracts with Northshore Mining.  The Trust believes it is unlikely that a significant change in the timing of revenue recognition will occur and it is expected that the amount of revenue recognized annually will remain largely unchanged.  The Trust is planning to implement the guidance using the full retrospective transition method.  The main impact of the adoption on the financial statements relates to additional disclosures over revenue recognition in the notes to the financial statements.

Various accounting standards and interpretations were issued during the fiscal year ended January 31, 2018.  The Trust has evaluated the recently issued accounting pronouncements that are effective for the fiscal year ended January 31, 2018 and believe they will not have a material effect on the Trust’s financial position, results of operations or cash flows when adopted.

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U. S. GOVERNMENT SECURITIES

12 Months Ended

Jan. 31, 2018

U. S. GOVERNMENT SECURITIES

U. S. GOVERNMENT SECURITIES

NOTE 3 - U.  S.  GOVERNMENT SECURITIES

U.S.  government securities at January 31, 2018 and 2017 are classified as held-to-maturity and mature as follows:

	2018				2017
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value
Due within one year	$	23,797,451	$	23,800,904	$	456,058	$	455,050
Due after one year		—		—		—		—
	$	23,797,451	$	23,800,904	$	456,058	$	455,050

The fair value of U.S.  government securities have been valued using level 1 inputs.

XML

ROYALTY AGREEMENT

12 Months Ended

Jan. 31, 2018

ROYALTY AGREEMENT

ROYALTY AGREEMENT

NOTE 4 - ROYALTY AGREEMENT

The current royalty rate schedule became effective on August 17, 1989, which was established pursuant to certain agreements (the “Amended Assignment Agreements”) the Trust entered into with Cyprus Northshore Mining Corporation (“Cyprus NMC”).  Pursuant to the Amended Assignment Agreements, overriding royalties are determined by both the volume and selling price of iron ore products shipped.

Pursuant to the Amended Assignment Agreements, NMC is obligated to pay Mesabi Trust base overriding royalties, in varying amounts constituting a percentage of the gross proceeds of shipments, from Silver Bay, Minnesota, of iron ore product produced from Mesabi Trust lands or, to a limited extent, other lands.  NMC is obligated to make payments of overriding royalties on product shipments within 30 days following the calendar quarter in which such shipments occur.  NMC resumed mining operations and shipping product from Silver Bay in the second calendar quarter of 1990, and the first payment of overriding royalties was made in July 1990.

Royalty bonuses are payable on all iron ore products produced from Mesabi Ore shipped from Silver Bay during a calendar quarter and sold at prices above the Adjusted Threshold Price.  The Adjusted Threshold Price was $53.80 per ton for calendar year 2016,  $54.74 per ton for calendar year 2017, and will be $55.74 per ton for calendar year 2018.  The Adjusted Threshold Price is subject to adjustment (but not below $30 per ton) for inflation and deflation and is determined each year on the basis of the change in the Gross Domestic Product Implicit Price Deflator, a broad based index of inflation and deflation published quarterly by the U.S.  Department of Commerce.

NMC is obligated to pay to Mesabi Trust a minimum advance royalty of $500,000 per annum, subject to adjustment for inflation and deflation (but not below $500,000), which is credited against base overriding royalties and royalty bonuses.  NMC is obligated to make quarterly payments of the minimum advance royalty in January, April, July and October of each year.  For the calendar year ending December 31, 2018, the minimum advance royalty threshold is $929,320.  The minimum annual advance royalty threshold was $912,725 and $897,008, for the calendar years ended December 31, 2017 and 2016, respectively.

XML

UNALLOCATED RESERVE AND DISTRIBUTIONS

12 Months Ended

Jan. 31, 2018

UNALLOCATED RESERVE AND DISTRIBUTIONS

UNALLOCATED RESERVE AND DISTRIBUTIONS

NOTE 5 - UNALLOCATED RESERVE AND DISTRIBUTIONS

Each quarter, as authorized by the Agreement of Trust, the Trustees will reevaluate all relevant factors including all costs, expenses, obligations, and present and future liabilities of the Trust (whether known or contingent) in determining a prudent level of unallocated reserve in light of the unpredictable nature of the iron ore industry and current economic conditions.  The actual amount of the Unallocated Reserve will fluctuate from time to time and may increase or decrease from its current level.  Accordingly, although the actual amount of the Unallocated Reserve will fluctuate from time to time, and may increase or decrease from its current level, it is currently expected that future distributions will be highly dependent upon royalty payments received quarterly and the level of Trust expenses that the Trustees anticipate occurring in subsequent quarters.

As of January 31, 2018 and January 31, 2017, the unallocated cash and U.S.  Government securities portion of the Trust’s Unallocated Reserve consisted of the following components:

	January 31, 2018		January 31, 2017
Cash and U.S.  Government securities	$	24,112,286	$	14,151,226
Distribution payable		(15,481,612)		(1,836,801)
Unallocated cash and U.S.  Government securities	$	8,630,674	$	12,314,425

A reconciliation of the Trust’s Unallocated Reserve from January 31, 2017 to January 31, 2018 is as follows:

Unallocated Reserve, January 31, 2017	$	10,205,470
Net income		33,495,567
Distributions declared		(33,193,626)
Unallocated Reserve, January 31, 2017	$	10,507,411

The Trustees determine the level of distributions on a quarterly basis after receiving notification from NMC as to the amount of royalty income that will be received and after determination of any known or anticipated expenses, liabilities and obligations of the Trust.  As a result of fluctuations in the accrued income receivable portion of the Unallocated Reserve, future distributions may vary depending upon the adjustments to royalty income, which are determined by NMC, and the level of Trust expenses that the Trustees anticipate occurring in subsequent quarters.

During the fiscal years ended January 31, 2018,  2017, and 2016, the Trustees distributed cash payments totaling $19,548,815 ($1.49 per Unit), $7,216,006 ($0.55 per Unit), and $8,921,606 ($0.68 per Unit), respectively.  In addition, in January 2018, the Trustees declared a distribution of $1.18 per Unit of beneficial interest, which was paid in February 2018.

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SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)

12 Months Ended

Jan. 31, 2018

SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)

SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)

NOTE 6 - SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)

The quarterly results of operations for the years ended January 31, 2018 and 2017 are presented below:

	2018
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenue	$	3,656,754	$	13,354,627	$	12,191,575	$	5,364,601
Expenses		295,047		240,493		227,330		309,120
Net income	$	3,361,707	$	13,114,134	$	11,964,245	$	5,055,481
Net income per unit	$	0.256	$	1.000	$	0.912	$	0.385

	2017
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenue	$	1,679	$	2,609,635	$	3,442,645	$	4,682,575
Expenses		431,931		189,389		234,494		267,608
Net income (loss)	$	(430,252)	$	2,420,246	$	3,208,151	$	4,414,967
Net income (loss) per unit	$	(0.033)	$	0.184	$	0.245	$	0.337

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Jan. 31, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

Cash and Cash Equivalents

The Trust considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  As of January 31, 2018 and 2017, the Trust held $314,835 and $13,695,168, respectively, in a money market fund that invests primarily in obligations of the U.S.  Treasury, which it considers to be cash and cash equivalents.

Investments

Investments

The Trust invests solely in U.S.  Government securities.  The Trustees determine the appropriate classifications of the securities at the time they are acquired and evaluate the appropriateness of such classifications as of each balance sheet date.

The U.S.  Government securities are classified as held-to-maturity securities as the Trust has the positive intent and ability to hold to maturity and are therefore stated at amortized cost.

Revenue Recognition

Revenue Recognition

Royalty income under the amended lease agreements with NMC is recognized as it is earned.  Under such agreements, royalties are earned upon shipment from Silver Bay, Minnesota (NMC’s location), regardless of whether the actual sales proceeds for any shipment are received by NMC’s parent, Cliffs.  The amount of base overriding royalties and royalty bonuses payable are determined on the volume of tonnage shipped from Silver Bay, Minnesota during each calendar quarter and the actual proceeds to Cliffs resulting from such shipments. 

Royalty income includes accrued income receivable.  Accrued income receivable represents royalty income earned but not yet received by the Trust under the royalty agreements described elsewhere in these notes.   Accrued income receivable is calculated based on (i) shipments during the last month of Mesabi Trust’s fiscal year, if any, and (ii) net price adjustments resulting from the price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from Silver Bay, Minnesota. 

Adjustments to royalty income may result from changes in final reconciliations of tonnage shipped by NMC with the final amounts received from NMC customers.  Adjustments may also result from revisions to estimated prices between NMC and its customers previously used to record revenue for tonnage shipped.  Pricing decreases may give rise to negative price adjustments which may be applied against future royalty income recognized by the Trust.

As of January 31, 2018, positive price adjustments were recorded by Mesabi Trust to accrued income receivable due to price adjustment mechanisms in the agreements between Cliffs and its customers that determine the final sales price of the shipments from NMC with respect to certain shipments during calendar year 2017.  As of January 31, 2018, the Trust recognized revenue related to approximately 1,068,786 tons of iron ore that were shipped by NMC as of December 31, 2017, but for which Cliffs has indicated that final pricing is not yet known.  Pricing related to these tons is expected to be finalized in the first calendar quarter of 2019.

Royalty income under the Peters Lease fee agreement is also recognized quarterly as it is earned.  Under such agreement, however, royalties are earned at the option of NMC either upon mining of crude ore from Peters Lease lands or upon shipment from Silver Bay of iron ore product produced from Peters Lease lands.

Fixed Property, Including Intangibles

Fixed Property, Including Intangibles

The Trust’s fixed property, including intangibles, is recorded at nominal values and includes the following:

1. The entire beneficial interest as assignor in the Amended Peters Lease Assignment and the Amended Cloquet Lease Assignment covering taconite properties in Minnesota which are leased to NMC.

2. The entire beneficial interest in Mesabi Land Trust which owns a 20% fee interest in the lands subject to the Peters Lease and the entire fee interest in other properties in Minnesota.

Deferred Royalty Revenue

Deferred Royalty Revenue

Deferred royalty revenue represents an estimate of decreases in royalty revenue related to tons of iron ore that were shipped by Northshore, but for which Northshore has indicated that final pricing is not yet known and is adjusted in accordance with the Trust’s revenue recognition policy each quarter as updated pricing information is received.

Net Income Per Unit

Net Income Per Unit

Net income per unit is computed by dividing net income by the weighted average number of units outstanding.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments which potentially subject the Trust to concentrations of credit risk consist primarily of cash that is maintained at an FDIC insured financial institution.  At times during the year, the Trust’s cash balance may exceed insured limits.

As further described in Note 1, NMC is the lessee/operator of the Mesabi Trust land.  All royalty income earned by the Trust is received from NMC, and accordingly, substantially all of the accrued income receivable is also due from NMC.

Accounting Estimates

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires the Trustees to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Specifically, the accrued income receivable, deferred royalty revenue and related royalty revenue are significant estimates which are subject to change in the near term, and changes to these estimates could have a material effect on the Trust’s financial statements.

Subsequent Events

Subsequent Events

Material subsequent events are evaluated for recognition or disclosure in the accompanying financial statements.

Fair Value Measures

Fair Value Measures

Valuation Hierarchy

GAAP establishes a three-level valuation hierarchy for classification of fair value measurements.  The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

· Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

· Level 3 — Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety.

The carrying amounts of financial instruments approximated fair value as of January 31, 2018 and 2017, because of the relative short maturity of these instruments.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Trust has reviewed all recently issued, but not yet effective, accounting pronouncements.  The Trust would like to draw further attention to the following issued pronouncement regarding the accounting for revenue from contracts with customers:

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No.  2014-09, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted.  In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date,” which defers the adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period, however the Trust did not early adopt.  The Trust has evaluated the new standard as it relates to its existing royalty contracts with Northshore Mining.  The Trust believes it is unlikely that a significant change in the timing of revenue recognition will occur and it is expected that the amount of revenue recognized annually will remain largely unchanged.  The Trust is planning to implement the guidance using the full retrospective transition method.  The main impact of the adoption on the financial statements relates to additional disclosures over revenue recognition in the notes to the financial statements.

Various accounting standards and interpretations were issued during the fiscal year ended January 31, 2018.  The Trust has evaluated the recently issued accounting pronouncements that are effective for the fiscal year ended January 31, 2018 and believe they will not have a material effect on the Trust’s financial position, results of operations or cash flows when adopted.

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U. S. GOVERNMENT SECURITIES (Tables)

12 Months Ended

Jan. 31, 2018

U. S. GOVERNMENT SECURITIES

Schedule of U.S. government securities classified as held-to-maturity

	2018				2017
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value
Due within one year	$	23,797,451	$	23,800,904	$	456,058	$	455,050
Due after one year		—		—		—		—
	$	23,797,451	$	23,800,904	$	456,058	$	455,050

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UNALLOCATED RESERVE AND DISTRIBUTIONS (Tables)

12 Months Ended

Jan. 31, 2018

UNALLOCATED RESERVE AND DISTRIBUTIONS

Schedule of unallocated cash and U.S. Government securities portion of the Trust's Unallocated Reserve

	January 31, 2018		January 31, 2017
Cash and U.S.  Government securities	$	24,112,286	$	14,151,226
Distribution payable		(15,481,612)		(1,836,801)
Unallocated cash and U.S.  Government securities	$	8,630,674	$	12,314,425

Schedule of reconciliation of Trust's Unallocated Reserve

Unallocated Reserve, January 31, 2017	$	10,205,470
Net income		33,495,567
Distributions declared		(33,193,626)
Unallocated Reserve, January 31, 2017	$	10,507,411

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SUMMARY OF QUARTERLY EARNINGS (UNAUDITED) (Tables)

12 Months Ended

Jan. 31, 2018

SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)

Summary of quarterly results of operations

	2018
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenue	$	3,656,754	$	13,354,627	$	12,191,575	$	5,364,601
Expenses		295,047		240,493		227,330		309,120
Net income	$	3,361,707	$	13,114,134	$	11,964,245	$	5,055,481
Net income per unit	$	0.256	$	1.000	$	0.912	$	0.385

	2017
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenue	$	1,679	$	2,609,635	$	3,442,645	$	4,682,575
Expenses		431,931		189,389		234,494		267,608
Net income (loss)	$	(430,252)	$	2,420,246	$	3,208,151	$	4,414,967
Net income (loss) per unit	$	(0.033)	$	0.184	$	0.245	$	0.337

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NATURE OF BUSINESS AND ORGANIZATION (Details)		12 Months Ended
	Oct. 01, 2014	Jan. 31, 2018 item shares	Jan. 31, 2017 shares
NATURE OF BUSINESS AND ORGANIZATION
Period of termination of the Trust after the death of the survivor of persons named in the exhibit		21 years
Number of persons named in the exhibit to the Agreement of Trust | item		25
Age of the youngest survivor	54 years
Beneficial interest in the Trust (in units) | shares		13,120,010	13,120,010

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Jan. 31, 2018 USD ($) T	Jan. 31, 2017 USD ($)
Cash and Cash Equivalents
Amount held by the Trust in a money market fund | $	$ 314,835	$ 13,695,168
Revenue Recognition
Quantity of iron ore shipped by NMC subject to price determination recognized in revenue (in tons) | T	1,068,786
Fixed Property, Including Intangibles
Percentage of fee interest owned by Mesabi Land Trust in the lands subject to the Peters Lease	20.00%

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U. S. GOVERNMENT SECURITIES (Details) - U.S. government securities - USD ($)	Jan. 31, 2018	Jan. 31, 2017
Carrying Value
Due within one year	$ 23,797,451	$ 456,058
Total	23,797,451	456,058
Fair Value, Inputs, Level 1 [Member]
Fair Value
Due within one year	23,800,904	455,050
Total	$ 23,800,904	$ 455,050

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ROYALTY AGREEMENT (Details) - Cyprus NMC	12 Months Ended
	Dec. 31, 2018 USD ($) $ / T	Jan. 31, 2018 USD ($) $ / T	Dec. 31, 2017 USD ($) $ / T	Dec. 31, 2016 USD ($) $ / T
ROYALTY AGREEMENT
Adjusted threshold price (in dollars per ton)			54.74	53.80
Adjusted threshold price subject to adjustment (in dollars per ton)	55.74
Maximum
ROYALTY AGREEMENT
Period for payments of overriding royalties on product shipments		30 days
Minimum
ROYALTY AGREEMENT
Adjusted threshold price (in dollars per ton)		30
Advance royalty threshold | $		$ 500,000	$ 912,725	$ 897,008
Advance royalty threshold, next calendar year | $	$ 929,320

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UNALLOCATED RESERVE AND DISTRIBUTIONS (Details) - USD ($)	1 Months Ended	3 Months Ended								12 Months Ended
	Jan. 31, 2018	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jan. 31, 2017	Oct. 31, 2016	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Unallocated Cash and Securities portion of Unallocated Reserve
Cash and U.S. Government securities	$ 24,112,286	$ 24,112,286				$ 14,151,226				$ 24,112,286	$ 14,151,226
Distribution payable	(15,481,612)	(15,481,612)				(1,836,801)				(15,481,612)	(1,836,801)
Unallocated cash and U.S. Government securities	8,630,674	8,630,674				12,314,425				8,630,674	12,314,425
Reconciliation of Trust's Unallocated Reserve
Unallocated Reserve at the beginning of the period					$ 10,205,470					10,205,470
Net income		5,055,481	$ 11,964,245	$ 13,114,134	$ 3,361,707	4,414,967	$ 3,208,151	$ 2,420,246	$ (430,252)	33,495,567	9,613,112	$ 8,558,841
Distributions declared										(33,193,626)
Unallocated Reserve at the end of the period	$ 10,507,411	$ 10,507,411				$ 10,205,470				10,507,411	10,205,470
Payments of Dividends										$ 19,548,815	$ 7,216,006	$ 8,921,606
Distribution declared or paid (in dollars per unit)										$ 1.49	$ 0.55	$ 0.68
Distribution declared per unit	$ 1.18									$ 1.18	$ 0.14	$ 0.05

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SUMMARY OF QUARTERLY EARNINGS (UNAUDITED) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jan. 31, 2017	Oct. 31, 2016	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)
Revenue	$ 5,364,601	$ 12,191,575	$ 13,354,627	$ 3,656,754	$ 4,682,575	$ 3,442,645	$ 2,609,635	$ 1,679	$ 34,567,557	$ 10,736,534	$ 9,721,508
Expenses	309,120	227,330	240,493	295,047	267,608	234,494	189,389	431,931	1,071,990	1,123,422	1,162,667
Net income	$ 5,055,481	$ 11,964,245	$ 13,114,134	$ 3,361,707	$ 4,414,967	$ 3,208,151	$ 2,420,246	$ (430,252)	$ 33,495,567	$ 9,613,112	$ 8,558,841
Net income (loss) per unit (in dollars per unit)	$ 0.385	$ 0.912	$ 1.000	$ 0.256	$ 0.337	$ 0.245	$ 0.184	$ (0.033)	$ 2.553	$ 0.733	$ 0.652