Yalian Steel Announces Third Quarter Financial and Operational Results

TSX-V:YL

VANCOUVER, Aug. 27 /CNW/ - Yalian Steel Corporation (TSX-V: YL) today announced its consolidated financial and operating results for the three and nine month periods ended June 30, 2010. The "Company" or "Yalian" refers to Yalian Steel Corporation (formerly China Drill Corporation) and its subsidiary, Yangzhou Yalian Steel Pipe Co. Ltd "Yangzhou Yalian" which operates primarily within the People's Republic of China ("PRC"). The Company completed its qualifying transaction and began trading as a public company in December 2008. Yalian reports its results in Canadian dollars, as reported here, unless otherwise stated.

For the three month period ended June 30, 2010, Yalian reported revenues of $211,527; cost of sales of $316,100; expenses of $680,262 and other loss of $276,707 (comprising a foreign currency exchange loss of $300,754 and interest income of $24,047). Net loss for the three month period was $1,061,542, or $0.01 per share. After accounting for an unrealized foreign currency translation gain of $2,514,778, the comprehensive income for the period was $1,453,236.

For the nine month period ended June 30, 2010, Yalian reported revenues of $524,609; cost of sales of $673,261; expenses of $2,611,314 and other income of $169,487 (comprising government grants of $228,900, a foreign currency exchange loss of $176,104 and interest income of $116,691).  Net loss for the nine month period was $2,590,479, or $0.03 per share.  After accounting for an unrealized foreign currency translation loss of $28,405, the comprehensive loss for the period was $2,618,884.

As at June 30, 2010, cash and cash equivalents were $12,028,033, inventory was $1,408,730, prepaid expenses were $8,934,528, other amount receivable was $3,657,192, prepayments for property plant and equipment totaled $6,234,222, property plant and equipment was $54,460,418 and the Company's working capital position was $15,335,439. The long-term loans, net of financing costs, were $33,662,000 and deferred government grant was $5,786,120.  Accounts payable and accrued liabilities totaled $1,955,216.  Total shareholders' equity was $45,495,147.

Operational and Business Highlights

During the three and nine month periods ended June 30, 2010, Yalian achieved a number of operational and business milestones including:

In February 2010, Yangzhou Yalian received approval from the American Petroleum Institute for certification and license registration of "5L X-70 Grade" for its high grade steel large diameter pipe mill and is in the process of applying for additional certification of X-80 grade and higher.

In March 2010, Yangzhou Yalian received an A1 Grade production license from the State General Administration of the PRC for Quality Supervision, Inspection and Quarantine.  The "A1 Grade" is the highest production license available and permits Yangzhou Yalian to manufacture LSAW pipes for all grades of steel to be manufactured and sold within the PRC. By the end of March 2010, Yangzhou Yalian had received all of its required permits, licenses and industry certifications necessary to commence operations in China.

For the quarter ended June 30, 2010, the Company manufactured and delivered additional test orders and continued to focus its efforts on the development and expansion of its sales and marketing activities within China.  The Company's focus during the quarter has been to build strategic alliances with major state owned oil & gas companies within the PRC to develop and be accepted into key purchasing networks.  During the quarter, the Company qualified and was added to the pre-approved natural gas vendor lists for Hubei and Jiangsu provinces and is in the process of being qualified and added to the natural gas vendor list for Guangdong province.  The Company also continues to build relationships with a number of major international trading companies and is working to expand its distribution network within the PRC and abroad.  The Company also completed the planning and engineering phase of its new anticorrosion line and placed orders with various suppliers to procure the necessary materials and equipment.  The project is expected to cost approximately $5,300,000 and is expected to be completed in early calendar year 2011.

Subsequent to June 30, 2010, the Company voluntarily repaid the USD $2,000,000 ($2,121,200) unsecured term loan.

For more detailed information, please refer to the Company's filings on SEDAR at www.sedar.com.

About Yalian Steel Corporation

Yalian Steel Corporation is a British Columbia corporation focused on the production of high quality Longitudinally Submerged Arc Welded (LSAW) steel pipe to service Asia's rapidly growing energy transportation infrastructure market. The Company has recently completed construction of its initial manufacturing facility in city of Yangzhou, in the Jiangsu province of China. The Company's production line has a rated capacity of up to 200,000 metric tons per year, depending on product and mix specifications. The Yangzhou Yalian plant utilizes the JCOE (J-ing, C-ing, O-ing, Expanding) process, an advanced method of LSAW pipe production that involves the bending and shaping of X-70 and higher grade steel.

For further company information please access our website: www.yaliansteel.com

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

This press release contains forward-looking statements based on current expectations. These forward-looking statements entail various risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Risks and uncertainties about Yalian's business are more fully discussed in the Company's disclosure materials filed with the securities regulatory authorities in Canada. All amounts are stated in Canadian dollars unless noted otherwise.

For further information:

YALIAN STEEL CORPORATION

Murray G. Flanigan, Chief Financial Officer
Tel. No.: [phone]