Why did MSB's operating expenses drop sharply in Q3 2025?

Mesabi Trust's operating expenses dropped sharply in Q3 2025 due to a decline in the volume of iron ore shipments and subsequent royalties received from Cliffs. The shipment volume decreased from 1,006,692 tons in Q1 2024 to 457,728 tons in Q1 2025, leading to a reduction in royalties paid to Mesabi Trust. This decline in royalties, which are based on the volume of iron ore pellets and other products produced or shipped, directly impacted the operating expenses of Mesabi Trust. The Trust's financial report indicated that the royalties received did not include any adjustments related to previous quarters, and there were no new third-party arms-length sales transactions beyond the two low-volume shipments recorded in December 2024.

1. **Significant Decrease in Royalties**: The most notable factor contributing to the drop in operating expenses was the substantial decrease in royalties received from Cliffs. Mesabi Trust was credited with royalties amounting to $2,422,329 for Q1 2025, which was significantly lower than the royalties received for the same period in the previous year. This reduction was primarily due to the decrease in iron ore shipments, with Cliffs crediting Mesabi Trust with 457,728 tons of iron ore shipped in Q1 2025 compared to 1,006,692 tons in Q1 2024.
2. **No Adjustments or Additional Transactions**: The royalties paid to Mesabi Trust did not include any adjustments related to previous quarters, nor were there any new third-party arms-length sales transactions recorded. This lack of adjustments and additional transactions meant that the operating expenses in Q3 2025 were not influenced by any one-time factors or exceptional events.
3. **Influence of Economic and Industry Trends**: The volatility in royalties, which impacted the distributions available to Unitholders, was subject to broader economic and industry trends. Factors such as operational decisions, economic conditions, and weather can cause significant variations in the royalties received by Mesabi Trust. These factors, combined with the decline in shipment volume, contributed to the overall drop in operating expenses in Q3 2025.

In conclusion, the sharp drop in Mesabi Trust's operating expenses in Q3 2025 can be attributed to the significant decrease in royalties received from Cliffs, which was a result of lower iron ore shipments and the absence of adjustments or additional transactions. This decline was influenced by various economic and industry factors, leading to a reduction in the Trust's operating expenses during that quarter.