A Basic Company with Unique Advantages
This long-time favorite is setting up for a good buy target, and it carries a handsome dividend to boot, writes Bryan Perry of Cash Machine.
The basic materials sector is one of the deepest cyclical economic sectors, and the basis for my newest recommendation.
More specifically, I'm talking about mining iron ore in the great Mesabi Pass in Minnesota. The big player there is Mesabi Trust (MSB), and that's the company I'd like to focus on today.
You may already be familiar with MSB, as we've held it two times in recent years, but I'd still like to give you some background on this unique company before I delve into the Trust's technical information, and why I think now is the time to buy.
The trust began in 1961, mining ore at the eastern end of the Mesabi Iron Range in Minnesota. Cleveland Cliffs Inc. (CCI), together with its subsidiary, Northshore Mining Company, owns the rights to operate the mine, though the vast lands there are owned by MSB.
What I like about MSB is the unique relationship it has with Northshore. First, you should know that Northshore's role is to mine the ore and derive the iron particles from the hard rock. It then ships the resulting iron to CCI's customers, who use it in steel-producing blast furnaces.
Enter MSB. Mesabi receives royalties from Northshore, which are based on the selling price of the iron pellets it ships. It also receives a smaller royalty based on the tons of ore that are extracted at the mine.
MSB is a publicly held trust, run by fewer than ten people.