Shares of Mesabi Trust (MSB) are down four points, or 13%, today after the company declared a distribution of 31.5 cents per beneficial unit late Friday, payable on Feb. 20 to shareholders of record on Jan. 30.

A year earlier, the distribution was 47 cents per unit for the same period -- a decline Mesabi attributed to significantly lower shipments of iron ore pellets in the calendar fourth quarter of 2006.

Royalty payments received by the trust in 2005 and 2006 continue to reflect pricing estimates for shipments of iron ore products that may be subject to further adjustment (upward or downward).

The royalties paid to the trust are dependent on three factors: the volume of shipments of iron ore pellets for the quarter and year-to-date, the pricing of the iron ore product sales, and the percentage of iron ore pellet shipments from Mesabi Trust's lands rather than from other lands.

Northshore Mining Co., which is a subsidiary of Cleveland Cliffs (the largest miner of iron ore in America), has not provided the Mesabi trustees with a forecast of either the production of iron ore pellets from Northshore, the volume of shipments of iron ore pellets, or what percentage of such production and shipments will be from Mesabi Trust iron ore.

As previously disclosed by Mesabi Trust in quarterly reports, the prices under the Cleveland-Cliffs Inc. pellet agreements 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.

This fact can result in significant and frequent variations in the royalties received by Mesabi Trust (and the resulting amount of royalties available for distribution to unitholders by the trust) from quarter to quarter, and on a comparative historical basis.

The bottom line here, friends, is that Mesabi is in the commodity business, which is highly volatile. There are a number of mitigating factors that can provide tremendous upside surprises, as we have enjoyed, or downside surprises like the present. And even with today's 13% pullback, we're still up 58% from our cost basis.

I have a call into Cleveland-Cliffs, as well as the lead trustee for Mesabi Trust, to determine how we can get a better read on current operations. I will most assuredly let you know what I learn. In the past, these corrections have proven to be excellent buying opportunities and the last I've heard, China (the biggest customer of iron ore) hasn't slowed in its efforts to erect more New York-size cities in the coming months and years.

We seem to always find ourselves in a "sell first, ask questions later" market, and this time is no different. My belief is that, given the long-term bullish outlook for iron ore prices stemming from demand by China and India, now will prove to be a good time to pick up shares of Mesabi.

If you don't own Mesabi and you are considering adding a 3% position -- per my recommended allocation -- then I recommend you pick up 1% of that 3% position now, with the intention of adding 1% more after I provide you with more information (assuming, of course, favorable feedback), and the final 1% when the selling dries up.

If you own Mesabi, hold it until I learn more. If this is a one-off situation (as I suspect), then we'll be fine. So hang in there and I'll get some answers as soon as possible.

Bryan Perry

Editor The 25% Cash Machine