Yalian Steel Announces Second Quarter Financial and Operational Results

    VANCOUVER, May 27 /CNW/ - Yalian Steel Corporation (TSX-V: YL) ("Yalian"
or the "Company") today announced its financial and operating results for the
three and six- month periods ended March 31, 2009. Yalian was incorporated in
June 2008, and completed its qualifying transaction and began trading as a
public company in December 2008. Therefore, there are no comparative quarterly
results for the previous year. Yalian reports its results in Canadian dollars.
    For the three months ended March 31, 2009, Yalian reported operation
expenses of $416,716 and income of $734,430. Income was comprised of $714,543
in proceeds from a grant from the Chinese local municipal government to
encourage foreign investment in the city of Yangzhou, Jiangsu Province, China
where Yalian's new facility is located, and $19,887 in interest income. Net
income for the three-month period was $122,649, or $0.00 per share. For the
six-month period ended March 31, 2009, Yalian reported operation expenses
totaling $645,610, income of $824,045 and a net loss of $16,313 or $0.00 per
    As at March 31, 2009, prepayments for property plant and equipment
totaled $39.9 million, cash and cash equivalents were $3.6 million, and
working capital was $2.2 million.

    Operational and Business Highlights

    Yalian has achieved a number of operational and business milestones

    -   The construction of the LSAW production line in Yangzhou, which
        commenced in June of 2008, is expected to be completed in late 2009.
        Management believes that the output for the first twelve (12) months
        following completion will be approximately 110,000 tons of LSAW
        pipes. The plant is designed to eventually produce 150,000 to 200,000
        tons of LSAW pipes per year. As of May 26, 2009, the steel structure
        and the ceiling of the main facility and material warehouse, as well
        as the equipment base, have been fully completed. Equipment has been
        inspected, delivered, and installations have begun. The system
        linkage empty-load testing is expected to begin on August 31, 2009.

    -   In December 2008, Yalian obtained all required approvals, completed
        its qualifying transaction, and began trading under the stock symbol
        "YL" on the TSX Venture Exchange.

    -   In February 2009, the Company was awarded a grant of $1 million from
        the PRC local municipal government to encourage foreign investment in
        the city of Yangzhou. The first payment by the local government in
        the amount of $714,543 was received during the quarter.

    -   Mr. Ray G. Harris, F.C.A. joined the Yalian board in March 2009. Mr.
        Harris is an independent business consultant and a fellow of the
        institute of chartered accountants of Ontario, Alberta, and
        Saskatchewan. After his retirement from Deloitte & Touche, Mr. Harris
        has served as an accounting and auditing standards consultant
        throughout Asia. Mr. Harris is a member of a number of public and
        private company boards in Canada.

    Subsequent to the end of the quarter:

    -   Yalian announced in April 2009 that it would assume 100 percent
        ownership in Yangzhou Yalian Steel Pipe Co. Ltd. ("Yangzhou Yalian")
        through an agreement with Jiangsu Tongyu Steel Pipe Group Co., Ltd.
        ("Tongyu") to acquire Tongyu's 15 percent equity interest in Yangzhou
        Yalian, which owns all the assets including land rights, buildings,
        and production and plant equipment in Yangzhou. Under the terms of
        the agreement, Tongyu will withdraw its original paid-in-capital of
        US$5,700,000 from the Yangzhou Yalian joint venture and relinquish
        its 15 percent ownership in Yangzhou Yalian to Yalian. In a separate
        transaction, Tongyu will then subscribe for 5,700,000 common shares
        of Yalian at a price of US$1.00 (~C$1.21) per share in a private
        placement. With the completion of the withdrawal of Tongyu's 15
        percent equity interest in Yangzhou Yalian, Yalian will gain full
        operational control of Yangzhou Yalian while maintaining its working
        relationship with Tongyu through the terms of a cooperation agreement
        dated June 6, 2008 between the parties. Yalian will continue to
        leverage Tongyu's resources, experienced management, established
        sales relationships, and technical expertise in order to establish
        and grow its steel pipe business.

    -   In May 2009, Yalian announced that Edward (Bud) M. Siegel, Jr. had
        joined the Yalian board. Mr. Siegel's career in the steel industry
        spans over forty years. Most recently, he served as the President and
        Chief Executive Officer, and a director, of Russel Metals Inc. (TSX:
        RUS), one of the largest metals distribution and processing companies
        in North America with revenue in 2008 of approximately $3.4 billion.
        Subsequent to Mr. Siegel joining the board, Xinduo Yu and Paul Kelly,
        who have served as Yalian's Chairman and Acting CEO, respectively,
        since December 3, 2008, stepped down from those positions, and Mr.
        Segal was appointed as Chairman and Acting Chief Executive Officer of
        Yalian. Both Messrs. Yu and Kelly will remain as directors of Yalian.

    Selected Financial Highlights

                                                   Three months   Six months
                                                          ended        ended
    In Canadian dollars except share data             31-Mar-09    31-Mar-09

    Interest income                                      19,887      109,502
    Other income (government grant)                     714,543      714,543
                                                        734,430      824,045
    Operating expenses
      General and Administrative                        360,772      554,004
      Amortization                                       55,947       91,606
    Income before taxes                                 317,711      178,435

    Income taxes                                        114,733      114,733
    Non-controlling interest                             80,330       80,015
    Net income (loss)                                   122,648      (16,313)

    Basic and diluted income(loss) per share               0.00        (0.00)
    Weighted average number of common shares
    Basic                                            40,984,000   40,968,783
    Fully diluted                                    46,119,333   40,968,783

    As At March 31, 2009
    Cash                                                        $  3,604,000
    Property, plant and equipment                                 14,391,000
    Prepayments for property, plant and equipment                 39,991,000
    Working capital                                                2,177,000
    Total assets                                                  58,073,000
    Total long term financial liabilities(1)                       7,899,000
    Total equity                                                $ 41,293,000

    (1) Represents deferred government grant received in July of 2008.

    The Company expects to secure a project loan shortly which will enable
the Company to fund the remaining capital costs for the Yangzhou plant, as
well as working capital. To the extent that additional funds are required to
fund working capital, management is confident that such funds can be obtained
through working capital loans or other sources of financing.

    About Yalian Steel Corporation

    Yalian Steel Corporation is a British Columbia corporation which
currently holds an 85% equity interest in Yangzhou Yalian Steel Pipe Co., Ltd.
("Yangzhou Yalian"), a sino-foreign equity joint venture which is constructing
its first steel pipe plant for the manufacture of longitudinal submerged arc
welded ("LSAW") pipes in Yangzhou, Jiangsu Province, China. The Yangzhou
Yalian plant will use an advanced process of production of LSAW pipes that
involves the bending and shaping of X80 grade steel by progressively moving
and expanding from shapes that follow the patterns of the letters "J", "C",
and "O".

For further information:

For further information: YALIAN STEEL CORPORATION: Hong (Iris) Duan,
Chief Financial Officer, Tel. No. (604) 696-6388

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