Forward-Looking Statements

Certain information included in this Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. All such forward-looking statements, including those statements estimating iron ore pellet production or shipments, are based on information 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," "predict, " "intend," "believe," "anticipate," "expect," "estimate," "continue," "potential," "plan," "should," "assume," "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. These risks and uncertainties include volatility of iron ore

and steel prices, product supply and demand, competition, regulation or government action, litigation and uncertainties about estimates of reserves. Further, substantial portions of royalties earned by Mesabi Trust are based on estimated prices that are subject to interim and final adjustments which can be positive or negative and are dependent in part on multiple price and inflation index factors under agreements to which Mesabi Trust is not a party and that are not known until after the end of a contract year. 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. For a discussion of the factors, including without limitation, those that could materially and adversely affect Mesabi Trust's actual results and performance, see "Risk Factors" in Part I - Item 1A of Mesabi Trust's Annual Report on Form 10-K for the year-ended January 31, 2009, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.. Mesabi Trust undertakes no obligation, other than that imposed by law, 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.

This discussion should be read in conjunction with the condensed financial statements and notes presented in this Form 10-Q and the financial statements and notes in the last filed Annual Report on Form 10-K filed for the period ending January 31, 2009 for a full understanding of Mesabi Trust's financial position and results of operations for the three month period ended April 30, 2009.

Background

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 ("MIC"), 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 the Mesabi Land Trust (as such term is defined below) 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").

The Agreement of Trust specifically prohibits the Trustees from entering into or engaging in any business. This prohibition applies even to business activities the Trustees may deem necessary or proper for the preservation and protection of the Trust Estate. 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") after the payment of, or provision for, such expenses and liabilities, and protecting and conserving the assets held.

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. Mesabi Trust has no employees, but it engages independent consultants to assist the Trustees in, among other things, monitoring the volume 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 Mesabi Trust lands, and its parent company Cliffs Natural Resources Inc ("Cliffs"). References to Northshore in this quarterly report, unless the context requires otherwise, are applicable to Cliffs as well.

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 leasehold 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 price adjustments under the Cliffs Pellet Agreements 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 and sold at prices above a threshold price. 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 $47.43 per ton for calendar year 2008 and is $48.48 per ton for calendar year 2009. 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 and, as described elsewhere in this report, such adjustments may be positive or negative.

† 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 Amended Assignment of 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 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, under the terms of the Amended Assignment Agreements, 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 in accordance with the Amended Assignment Agreements. The minimum advance royalty was $790,721 for calendar year 2008 and is $808,177 for calendar year 2009. 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.

Under the relevant documents, Northshore may mine and ship iron ore products from lands other than Mesabi Trust lands. Northshore is obligated to make royalty payments in January, April, July and October of each year based on shipments of iron ore products from Silver Bay during each calendar quarter. In the case of base overriding royalties and royalty bonuses, these quarterly royalty payments are to be made whether or not the related proceeds of sale have been received by Northshore by the time such payments become due. Northshore alone determines whether to mine off Trust 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 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 from Silver Bay during such year in excess of six million tons.

Deutsche Bank Trust Company Americas, the Corporate Trustee, performs certain administrative functions for Mesabi Trust. The Trust maintains a website at www.mesabi-trust.com. The Trust makes available (free of charge) its annual, quarterly and current reports (and any amendments thereto) filed with the Securities and Exchange Commission (the "SEC") through its website as soon as reasonably practicable after electronically filing or furnishing such material with or to the SEC.

Results of Operations

Comparison of Iron Ore Pellet Production and Shipments for the Three Months Ended April 30, 2009 and April 30, 2008

As shown in the table below, production of iron ore pellets at Northshore from Mesabi Trust lands during the fiscal quarter ended April 30, 2009 totaled 681,178 tons, and actual shipments over the same period totaled 237,453 tons. By comparison, actual pellet production and actual shipments for the comparable prior period were 1,216,101 tons and 1,040,114 tons, respectively. The decrease in production and shipments at Northshore is the result of a significant decline in orders from Cliffs' customers and lower anticipated demand from Cliffs' customers as they continue to adjust their purchases based on anticipated demand from their customers.

                       Pellets Produced from   Pellets Shipped from
Fiscal Quarter Ended    Trust Lands (tons)      Trust Lands (tons)
   April 30, 2009                    681,178                237,453
   April 30, 2008                  1,216,101              1,040,114

Comparison of Royalty Income for the Three Months Ended April 30, 2009 and April 30, 2008

Total royalty income for the quarter decreased approximately 73.4% over the comparable prior period. The decrease in total royalty income is due to lower sales prices per ton of iron ore pellets sold and a decrease in the total volume of iron ore pellets shipped during the three months ended April 30, 2009, each as compared to the three months ended April 30, 2008. The lower sales prices per ton and the decrease in the volume of iron ore pellets shipped both contributed to a decrease in the base overriding royalty and the bonus royalty payments.

The table below shows that the base overriding royalties, the bonus royalties, and the fee royalties each decreased by 67.5%, 80.4%, and 49.3% respectively, for the three months ended April 30, 2009. The decreases in the base overriding royalties and the bonus royalties are both attributable to the lower sales prices per ton of iron ore pellets and the decrease in the volume of tons shipped during the three months ended April 30, 2009, each as compared to the three months ended April 30, 2008.

The table below summarizes the components of Mesabi Trust's royalty income for the three months ended April 30, 2009 and April 30, 2008, respectively:

                                             Three Months Ended April 30,
                                               2009               2008
Base overriding royalties                 $       570,565    $     1,756,171
Bonus royalties                                   383,761          1,958,725
Minimum advance royalty paid (recouped)                 -                  -
Fee royalties                                      67,386            132,814
Total royalty income                      $     1,021,712    $     3,847,710

Comparison of Income, Expenses and Distributions for the Three Months Ended April 30, 2009 and April 30, 2008

Net income for the three months ended April 30, 2009 was $801,046, a decrease of approximately 78% compared to the three months ended April 30, 2008. As with the decrease in total royalty income, the decrease in net income for the quarter ended April 30, 2009 is the result of lower sales prices per ton of iron ore pellets shipped and a decrease in the volume of tons shipped. The Trust's expenses of $223,835 for the three months ended April 30, 2009 was consistent with the Trust's expenses for the three month period ended April 30, 2008. The table below summarizes the Trust's income and expenses for the three months ended April 30, 2009 and April 30, 2008, respectively.

                          Three Months Ended April 30,
                            2009               2008
Total royalty income   $     1,021,712    $     3,847,710
Interest income                  3,169             14,097
Gross income                 1,024,881          3,861,807
Expenses                       223,835            222,154
Net income             $       801,046    $     3,639,653

As presented on the Trust's Condensed Statements of Income on page 2 of this quarterly report, the Trust's net income per unit decreased $0.2163 to $0.0611 for the three months ended April 30, 2009, as compared to the three months ended April 30, 2008. At the same time, distributions declared per unit increased $0.2600 from $0.1200 for the three months ended April 30, 2008 to $0.3800 for the three months ended April 30, 2009. Distributions are declared after receiving notification from Northshore Mining Company as to the amount of royalty income that is expected to be paid to the Trust based on

shipments through the end of each calendar quarter and such royalty payments may include pricing adjustments with respect to shipments during prior periods. The Trust accounts for and reports accrued income receivable based on shipments during the last month of the Trust's fiscal quarter (April, July, October and January) and price adjustments under the Cliffs Pellet Agreements (which can be positive or negative and can result in significant variations in royalties received by Mesabi Trust and cash available for distribution to Unitholders). The Trust accounts for these amounts by using estimated prices and reports such amounts even though accrued income receivable is not available for distribution to Unitholders until it is received by the Trust. Accordingly, distributions declared by the Trust are not equivalent to the Trust's Net Income during the periods reported in this quarterly report on Form 10-Q.

Comparison of Unallocated Reserve as of April 30, 2009, April 30, 2008 and January 31, 2009

The Unallocated Reserve (Deficit), which is comprised of accrued income receivable, cash reserve for potential fixed or contingent future liabilities, and, with respect to the three months ended April 30, 2009, deferred royalty revenue, decreased from $3,725,099 as of April 30, 2008 to ($392,377) as of April 30, 2009. The deficit in the Trust's Unallocated Reserve is primarily the result of an estimated $2,370,000 liability, which is represented on the Trust's balance sheet as deferred royalty revenue. Because of declines in the estimated pricing of iron ore pellets subsequent to January 31, 2009, the royalty payment received by the Trust in April includes approximately $2,370,000 of cash proceeds that were received by the Trust, but has not been recognized as revenue in accordance with the Trust's revenue recognition policy. The $2,370,000 deferred royalty revenue may, depending on future adjustments to iron ore pellet pricing, if any, cause a cumulative negative price adjustment related to shipments of pellets during prior periods, which could be offset against future royalty income to be received by the Trust.

Notwithstanding the deficit in the Trust's Unallocated Reserve as described above, the Trust's cash reserve for potential fixed or contingent future liabilities, represented on the Trust's balance sheet by unallocated cash and U.S. Government securities, increased 103% to $1,186,843 as of April 30, 2009 from $584,496 as of April 30, 2008. The increase in the cash reserve for potential fixed or contingent future liabilities is due to the Trustee's decision to supplement the Unallocated Reserve because of uncertainty surrounding the volatile global economic climate and the global financial, liquidity and credit crisis that unfolded during the second half of 2008. At the same time, the accrued income receivable portion of the Unallocated Reserve decreased from $3,140,603 as of April 30, 2008 to $790,780 as of April 30, 2009. The decrease in the accrued income receivable portion of the Unallocated Reserve is the result of significantly lower shipments during the month of April 2009, together with generally lower prices on pellets shipped by Northshore, both as compared to April 2008.

The Trust's Unallocated Reserve as of April 30, 2009 decreased by approximately $4,185,000 as compared to the fiscal year ended January 31, 2009. The decrease in the Unallocated Reserve is due to the Trust's accrual of $2,370,000 in deferred royalty revenue and the substantial reduction in accrued income receivable due to the reduced shipments from Northshore during the month of April 2009 and the absence of positive price adjustments which were present as of January 31, 2009. As a result of the price adjustment mechanisms under the Cliffs Pellet Agreements, the Trust received positive adjustments to the royalty income which is reflected in the royalty income for the year ended January 31, 2009. Those adjustments were attributable to shipments of iron ore pellets by Northshore/Cliffs to its customers from Silver Bay, Minnesota during calendar years 2006, 2007 and 2008. In the aggregate, the pricing adjustments increased the accrued income receivable reflected on the Trust's balance sheet as of January 31, 2009. At January 31, 2009, approximately 72% of the Unallocated Reserve or $2,721,978 was represented by accrued income receivable while 28% or $1,070,203 was represented by unallocated cash and U.S. Government securities.

The Trustees have determined that a portion of the Unallocated Reserve, usually within the range of $500,000 to $1,000,000 or such other amount as the Trustees may deem prudent, should be maintained as a reserve for potential fixed or contingent future liabilities. 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 intended that future distributions will be highly dependent upon royalty income as it is received and the level of Trust expenses. 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" beginning on page 3 of the Trust's Annual Report on Form 10-K for the fiscal year ended January 31, 2009, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.

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 adequate reserves at a prudent level, given the unpredictable nature of the iron ore industry, the Trust's dependence on the actions of the lessee/operator, and the fact that the Trust essentially has no other liquid assets.

Recent Developments

Production and Shipments. In its Form 10-Q filed May 1, 2009, Cliffs reported that production at Northshore for the three months ended March 31, 2009 was 0.9 million tons. Comparatively, production of iron ore pellets at Northshore for the three months ended March 31, 2008 was 1.3 million tons. Northshore has not provided the Trustees with an estimate of total expected shipments of iron ore pellets for calendar year 2009. During calendar years 2008, 2007, 2006 and 2005, the percentage of shipments of iron ore products from Mesabi Trust lands was approximately 90.2%, 88.2%, 90.9% and 90.1%, respectively, of total shipments. In its current report on Form 8-K filed May 5, 2009, Cliffs estimated total production of 3.2 million tons of iron ore pellets at Northshore during calendar year 2009 (which assumes that production at Northshore will resume in early July 2009). Northshore has not advised the Trustees as to the percentage of iron ore products from Mesabi Trust lands it anticipates shipping in calendar year 2009. However, based on information from the Trust's consultants, shipments of iron ore products from Mesabi Trust lands totaled only 24,900 tons in May 2009. See the description of the uncertainty of market conditions in the iron ore and steel industry under "Important Factors Affecting Mesabi Trust" below and the information under the heading "Risk Factors" in Part I - Item 1A of the Trust's Annual Report on Form 10-K for the year-ended January 31, 2009, as updated by Part II, Item 1A of this Quarterly Report on Form 10-Q.

Extension of Production Shutdown at Northshore. As reported in a current report on Form 8-K filed by the Trust on May 6, 2009, Cliffs filed a current report on Form 8-K on May 5, 2009 in which Cliffs announced an extension of the shutdown of production at Northshore. Instead of restarting production in May, Cliffs announced an extension of the production shutdown, which is now scheduled to continue into early July 2009. Cliffs also reported that the extension of the production shutdown will reduce total production at Northshore to approximately 3.2 million tons for calendar 2009 (which assumes that production at Northshore will resume in early July 2009). This number represents a 13.5% decrease from the 3.7 million tons of production previously estimated by Cliffs. Cliffs has not informed the Trustees as to whether the decrease in production will result in a decrease in shipments of iron ore pellets from Silver Bay, Minnesota. Accordingly, the Trustees are unable to make any projections regarding the extent to which the temporary production shutdown at Northshore may impact future royalties payable to Mesabi Trust.

Northshore Administrative Permit Amendment. As reported in the Trust's Form 10-K filed April 16, 2009, according to Cliffs' Form 10-K filed February 26, 2009, on December 16, 2006, Cliffs submitted an administrative permit amendment application to the MPCA with respect to Northshore's Title V operating permit. Cliffs reported that Northshore requested an amendment to its permit to delete a 30 year old "control city" monitoring requirement but the MPCA denied Northshore's application on February 23, 2007. In its Form 10-K, Cliffs further reported that it had appealed the denial of its

application to the Minnesota Court of Appeals and that subsequent to the filing of the appeal, the MPCA advised Northshore that the MPCA considered Northshore to be in violation of the control city standard. Cliffs also reported that it was in discussions with the MPCA with respect to the terms of a compliance schedule in which it would agree to take certain actions in settlement of the alleged violation. According to Cliffs' Form 10-K, the Minnesota Center for Environmental Advocacy had since filed a motion with the Court of Appeals to intervene in Northshore's appeal of the denial of an administrative amendment to Northshore's Title V operating permit.

On May 20, 2008, the Minnesota Court of Appeals issued a ruling on Northshore's appeal and held that the MPCA did not err in concluding that Northshore proceeded under the wrong permit modification procedures when it applied to amend its permit to eliminate the "control city" standard from its Title V . . .