Yalian Steel Corporation

Yalian Steel Corporation

March 29, 2012 19:51 ET

Yalian Steel Announces First Quarter Financial and Operational Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 29, 2012) - Yalian Steel Corporation (TSX VENTURE:YL) today announced its financial and operating results for the three months ended December 31, 2011. 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"). Yalian reports its results in Canadian dollars, as reported here, unless otherwise stated.

For the three months ended December 31, 2011, Yalian reported revenues of $2,273,000; cost of sales of $3,163,000; operating expenses of $589,000 and other expenses (net of income) of $270,000. Net loss for the three months ended December 31, 2011 was $1,749,000, or $0.02 per share.

As at December 31, 2011, cash and cash equivalents were $680,000, short term deposit was $4,209,000 and the Company had a working capital deficiency of $11,872,000. Total assets were $90,215,000, short-term and long-term loans, net of financing costs, were $37,650,000, and total shareholders' equity was $41,932,000.

As at December 31, 2011, the Company has short-term loans and current portion of long-term loans due to mature within the next twelve months in the amount of $28,000,000 (comprising RMB 137,000,000, USD $5,600,000 and $170,000). The Company is currently making arrangements with banks to renew loans or obtain new short term loans to repay these obligations. Management is confident of securing additional loans or other financings which are required in order to fund its working capital and refinancing needs, both in the short and long term. However, there can be no assurance that adequate loans or other financings can be secured.

Operational and Business Highlights

During the quarter ended December 31, 2011, the Company manufactured and delivered 21 sales orders compared to 8 for the three-month period ended December 31, 2010. In terms of volume, total sales orders manufactured and delivered amounted to 3,663 metric tons for the three months ended December 31, 2011, as compared to 4,130 metric tons for the three months ended December 31, 2010.

The Company continues to engage with senior officers from a number of major state owned oil & gas companies within the PRC to develop and be accepted into key purchasing networks. During the last fiscal year, the Company successfully completed the certification process and thus was added to the Pre-Approved Suppliers List of CNPC, a major Chinese oil company. This enables the Company to bid for projects conducted by CNPC and its related companies.

The construction for the Company's new anti-corrosion coating line is progressing well. Installation of the exterior coating line has been completed and was substantially put into production in January 2012. The interior coating line is being installed and final completion date is expected to be April 2012. Total cost of the project is estimated to be approximately RMB 54 million ($8.8 million). Once fully completed, the new coating line is expected to be an essential part of the Company's business development plans and integration within its industrial chain. The anti-corrosion function of the pipe plays an important role in extending the longevity of the product, saves energy and also decreases environmental safety accidents that could be caused by leakage of fluids carried by the line pipe.

Subsequent to the quarter end, the Company obtained a short term loan for RMB 5 million ($808,000) from the Industry and Commercial Bank of China, and RMB 7 million ($1,131,200) short-term loan from Changshu Rural Commercial Bank. These short term loans were used to fund the Company's working capital needs. In addition, total of $7,064,000 (RMB 40,000,000 loans, a loan for USD 416,000 and a loan for $177,000) short term loans were renewed subsequent to the quarter end.

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.

This news release contains forward-looking information and forward-looking statements (collectively "forward looking statements"), within the meaning of applicable securities laws, with respect to the ability of the Company to secure additional loans and other financings, the completion of the anti-corrosion line and the Company's ability to execute its business plan. Such forward looking statements are based upon assumptions, and estimates made by management in light of its experience, current conditions and its expectations of future developments as well as other factors which it believes to be reasonable and relevant. These assumptions include those concerning the availability of financing and no significant decline in existing general business and economic conditions. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied in the forward looking statements and, accordingly, readers should not place undue reliance on those statements. Risks and uncertainties that may cause actual results to vary include, but are not limited to, the Company's limited financial resources and the availability of financing alternatives; changes in general economic conditions or conditions in the financial market; that the Company will be able to establish and/or maintain relationships with key suppliers, customers and strategic partners; and that the construction of the new anti-corrosion coating line will be completed in a timely manner and on budget as well as other risks and uncertainties which are more fully described in the Company's Management's Discussion and Analysis for the 2010 fiscal year and in other Company filings with securities and regulatory authorities which are available at www.sedar.com. Should one or more risks and uncertainties materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward looking statements and accordingly, readers should not place undue reliance on those statements. Readers are cautioned that the foregoing lists of risks, uncertainties, assumptions and other factors are not exhaustive. The forward looking statements contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements contained herein or in any other documents filed with securities regulatory authorities, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.

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.

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