MESABI TRUST

Results of Operations

Comparison of Iron Ore Pellet Production and Shipments for the Fiscal Years Ended January 31, 2024, January 31, 2023 and January 31, 2022

During fiscal 2024, production attributed to Trust lands totaled approximately 3.2 million tons, an increase of 276.6% as compared to production for fiscal year 2023 and a decrease of 29.0% as compared to production for fiscal 2022. Shipments to Northshore’s customers attributed to the Trust totaled approximately 3.2 million tons during fiscal 2024. This represents an increase of 276.6% as compared to shipments for fiscal year 2023 and a decrease of 25.1% as compared to shipments for fiscal year 2022. 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. As a result of the arbitration award discussed in Note 2, in addition to the shipped tons shown in the table below, as reported to the Trust in Cliffs’ quarterly royalty reports, the Trust recognized revenue during the fiscal year ended January 31, 2022 on an additional 1,173,667 tons deemed shipped from Mesabi Trust Lands for production that occurred in previous fiscal quarters.

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.

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 2025. 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, 2024 and January 31, 2023

Royalty Income

As shown in the table below, in fiscal 2024 base royalties increased by 361.3%, bonus royalties increased by 107.3% and fee royalties increased by 214.1%, each as compared to fiscal 2023. Accordingly,

the Trust’s total royalty income increased by 194.7% in fiscal 2024 as compared to fiscal 2023. The increase in royalties received by the Trust is the result of the mine being idled for less than three months in fiscal 2024, as compared to being idled for nine months in fiscal 2023.

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 Customer Contracts may increase or decrease, in some cases materially, the royalties paid to the Trust. Because the Trust is not a party to the Cliffs Customer Contracts, the Trustees are unable to predict the extent of any pricing adjustments that may occur under the Cliffs Customer Contracts 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 Customer Contracts 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 2024 increased by 257.6%, as compared to fiscal 2023, primarily due to an increase in total revenues related to the mine being idled for less than three months in fiscal 2024, as compared to being idled for nine months in fiscal 2023. Total expenses for fiscal 2024 increased by 59.4% as compared to fiscal 2023. A more detailed summary of the Trust’s expenses, including legal and consulting expenses, is set forth under the heading “Trust Expenses” in this Annual Report.

As discussed in the paragraph above, the Trust’s total revenue and net income for fiscal 2024 increased by 195.3% and 257.6%, respectively, primarily due to an increase in total revenues related to the mine being idled for less than three months during fiscal 2024, as compared to being idled for nine months during fiscal 2023. Despite the increase in the Trust’s net income in fiscal 2024, the timing of cash receipts and subsequent disbursements resulted in a 61.7% decrease in total distributions declared to Unitholders in fiscal 2024, as compared to fiscal year 2023.

Unallocated Reserve

As set forth in the table below, the Unallocated Reserve increased by $9,536,929 or 83.4% to $20,975,143, as of January 31, 2024, as compared to $11,438,214 as of January 31,2023. As of January 31, 2024, the Unallocated Reserve included$19,126,044 in unallocated cash and cash equivalents

and $1,960,358 of accrued income receivable, and $451,896 of a contract asset. Comparatively, as of January 31, 2023, the Unallocated Reserve included $13,966,500 in unallocated cash and cash equivalents, $23,562 of accrued income receivable, and $2,298,121 of a contract liability.

The 83.4% increase in the Unallocated Reserve for the fiscal year ended January 31, 2024 as compared to the fiscal year ended January 31, 2023, is primarily the result of an increase in the unallocated cash and cash equivalents, an increase in the accrued income receivable and a change from a contract liability in fiscal 2023 to a contract asset in fiscal 2024.

Contract Asset & Liability. The $451,896, or 100%, increase in the contract asset portion of the Unallocated Reserve relates to variable consideration for base overriding royalties that occurs as a result of escalating royalty rates earned as thresholds for tons of ore shipped are reached. At each period end, the Trust updates its estimate of total tons expected to be shipped for the calendar year and applies the estimated annual royalty rate to actual tons shipped in the period. The estimate of total tons to be shipped for the calendar year is determined based on historical, current, and forecasted shipment data. The recorded contract asset represents the additional revenue earned based on the estimated annual royalty rate compared to the effective contracted rate for tons shipped during the period. There was no contract asset for variable consideration as of January 31, 2023 due to the mine being idled. The $2,298,121, or 100%, decrease in the contract liability portion of the Unallocated Reserve is the result of a negative survey adjustment to pellets produced in fiscal 2023 as well as negative pricing adjustments recognized in the last quarter of the fiscal year ended January 31, 2023 which were offset against royalties paid to the Trust in fiscal 2024. There are no negative pricing adjustments or other contract liabilities as of January 31, 2024.

Accrued Income Receivable. The $1,936,796, or 8220.0%, increase in the accrued income receivable portion of the Unallocated Reserve is the result ofthe mine being in operation during the last month of the fiscal year ended January 31, 2024, as compared to the mine being idled during the last month of the fiscal year ended January 31, 2023.

*Unallocated Cash and Cash Equivalents.*The Trust’s unallocated cash and cash equivalents for unexpected obligations increased by 36.9% to $19,126,044 as of January 31, 2024 from $13,966,500 as of January 31,2023. The $5,159,544 increase in the Trust’s cash reserve resulted from greater royalty payments received and receivable in fiscal year 2024 due to the mine being operational for a larger portion of the year than in fiscal year 2023, combined with a decrease in distributions paid and payable fiscal year over fiscal year.

As described elsewhere in this Annual Report, pricing estimates are adjusted on a quarterly basis as updated pricing information is received from Cliffs. 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.

Comparison of Financial Results for Fiscal Years ended January 31, 2023 and January 31, 2022

Royalty Income

As shown in the table below, in fiscal 2023 base royalties decreased by 94.2%, bonus royalties decreased by 82.4% and fee royalties decreased by 70.3%, each as compared to fiscal 2022. Accordingly, the Trust’s total royalty income decreased by 89.4% in fiscal 2023 as compared to fiscal 2022. The decrease in royalties received by the Trust is the result of the mine being idled nine months in fiscal 2023, as compared to a full year of operations in fiscal 2022.

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 Customer Contracts may increase or decrease, in some cases materially, the royalties paid to the Trust. Because the Trust is not a party to the Cliffs Customer Contracts, the Trustees are unable to predict the extent of any pricing adjustments that may occur under the Cliffs Customer Contracts 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 Customer Contracts 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 2023 decreased by 92.3%, as compared to fiscal 2022, primarily due to a decrease in total revenues related to the mine being idled in fiscal 2023, as compared to fiscal 2022. Total expenses for fiscal 2023 decreased by 9.7% as compared to fiscal 2022. A more detailed summary of the Trust’s expenses, including legal and consulting expenses, is set forth under the heading “Trust Expenses” in this Annual Report.

As discussed in the paragraph above, the Trust’s total revenue and net income for fiscal 2023 decreased by 89.2% and 92.3%, respectively, due to a decrease in total revenues related to the mine being idled during fiscal 2023, as compared to fiscal 2022. The decrease in the Trust’s net income resulted in a 54.7% decrease in total distributions declared to Unitholders in fiscal 2023, as compared to fiscal year 2022.

Unallocated Reserve

As set forth in the table below, the Unallocated Reserve decreased by $19,356,535 or 62.9% to $11,438,214, as of January 31, 2023, as compared to $30,794,749 as of January 31,2022. As of January 31, 2023, the Unallocated Reserve included$13,966,500 in unallocated cash and cash equivalents, $23,562 of accrued income receivable, and $2,298,121 of a contract liability. Comparatively, as of January 31, 2022, the Unallocated Reserve included $24,767,504 in unallocated cash and cash equivalents, $4,631,510 of accrued income receivable, and $1,431,633 of a contract asset.

The 62.9% decrease in the Unallocated Reserve for the fiscal year ended January 31, 2023 as compared to the fiscal year ended January 31, 2022, is primarily the result of a decrease in the unallocated cash and cash equivalents, and a decrease in the accrued income receivable.

Contract Asset & Liability. The $1,431,633, or 100%, decrease in the contract asset portion of the Unallocated Reserve relates to variable consideration for base overriding royalties that occurs as a result of escalating royalty rates earned as thresholds for tons of ore shipped are reached. At each period end, the Trust updates its estimate of total tons expected to be shipped for the calendar year and applies the estimated annual royalty rate to actual tons shipped in the period. The estimate of total tons to be shipped for the calendar year is determined based on historical, current, and forecasted shipment data. The recorded contract asset during fiscal 2022 represented the additional revenue earned based on the estimated annual royalty rate compared to the effective contracted rate for tons shipped during the period. There was no contract asset for variable consideration as of January 31, 2023 due to the mine being idled. The $2,298,121, or 100%, increase in the contract liability portion of the Unallocated Reserve is the result of a negative survey adjustment to pellets produced in fiscal 2023 as well as negative pricing adjustments recognized in the last quarter of the fiscal year ended January 31, 2023. There were no negative pricing adjustments or other contract liabilities as of January 31, 2022.

Accrued Income Receivable. The $4,607,948, or 99.5%, decrease in the accrued income receivable portion of the Unallocated Reserve is the result ofthe idling of the mine through the end of the fiscal year ended January 31, 2023, as compared to the fiscal year ended January 31, 2022 when the mine was fully operational.

*Unallocated Cash and Cash Equivalents.*The Trust’s unallocated cash and cash equivalents for unexpected obligations decreased by 43.6% to $13,966,500 as of January 31, 2023 from $24,767,504 as of January 31,2022. The $10,801,004 decrease in the Trust’s cash reserve is due to a reduction in royalty payments received in the second half of fiscal year 2023 as a result of the idling of the mine.

As described elsewhere in this Annual Report, pricing estimates are adjusted on a quarterly basis as updated pricing information is received from Cliffs. 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.