Yalian Steel Announces Third Quarter Financial and Operational Results

    VANCOUVER, Aug. 28 /CNW/ - Yalian Steel Corporation (TSX-V: YL) ("Yalian"
or the "Company") today announced its financial and operating results for the
three and nine-month periods ended June 30, 2009. Yalian was incorporated in
June 2008, completed its qualifying transaction and began trading as a public
company in December 2008. Therefore, this is the first quarter that
comparative results can be provided for the previous year. Yalian reports its
results in Canadian dollars, as reported here, unless otherwise stated.
    For the three months ended June 30, 2009, Yalian reported operating
expenses of $516,813 and income of $13,418, being interest income. Net loss
for the three-month period was $450,783, or $0.01 loss per share. For the
nine-month period ended June 30, 2009, Yalian reported operating expenses
totaling $1,162,423, income of $837,463 ($714,543 from a government grant and
interest income of $122,920) and a net loss of $467,096 or $0.01 loss per
    As at June 30, 2009, prepayments for property plant and equipment totaled
$16,656,829, property plant and equipment was $45,679,372, cash and cash
equivalents were $14,224,414, and working capital was $13,322,221.

    Operational and Business Highlights

    Yalian has achieved a number of operational and business milestones

    The construction of the Longitudinally Submerged Arc Welded Pipe ("LSAW")
production line commenced in June of 2008 and is expected to be completed by
mid-October, 2009 with Management projecting output for the first twelve (12)
months following completion at 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 August 18, 2009, all civil construction for the main Yangzhou Yalian
plant and ancillary buildings is 95 percent complete. Since the beginning of
June, Yalian has shifted its focus from construction to equipment installation
and testing. Approximately 75 percent of the equipment required for the
production line has been delivered to the plant and the installation of
critical components for the production line has been completed. The major
operators, main technicians, and engineers for the lab, testing, and quality
control operations are already on site. Debugging of the production line
commenced in August, 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 second 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.

    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 that agreement, Tongyu withdrew its original
paid-in-capital of US$5,700,000 from the Yangzhou Yalian joint venture on June
19, 2009 and relinquished its 15 percent ownership in Yangzhou Yalian to
Yalian effective that date. In a separate transaction, Tongyu agreed to
subscribe for 5,700,000 common shares of Yalian at a price of US$1.00 ($1.21)
per share in a private placement. This transaction is expected to close by the
fiscal year-end. With the completion of the withdrawal of Tongyu's 15 percent
equity interest in Yangzhou Yalian, Yalian gained full operational control of
Yangzhou Yalian while maintaining its working relationship with Tongyu. 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. Siegal 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. Siegal was appointed as Chairman and Acting Chief Executive Officer of
Yalian. Both Messrs. Yu and Kelly remain as directors of Yalian.

    Yalian completed a "bought deal" private placement equity financing on
June 19, 2009. The Company issued 5,000,000 common shares (the "Common
Shares") at a price of $1.70 per Common Share (the "Offering") to raise
aggregate gross proceeds of $8,500,000. GMP Securities L.P. acted as the
underwriter in connection with the Offering, and in consideration of its
services, received a cash commission of $510,000 and warrants to purchase
300,000 Common Shares at an exercise price of $1.70 (the "Underwriter's
Warrants"). The Underwriter's Warrants are exercisable until December 19,
2010. The Common Shares were offered on a private placement basis to Canadian
residents who are accredited investors under applicable securities laws, and
in the United States on a private placement basis pursuant to an exemption
from the registration requirements of the United States Securities Act of
1933, as amended. Both the Common Shares and the Underwriter's Warrants issued
pursuant to the Offering are subject to a hold period in accordance with
applicable Canadian securities laws, which expires on October 20, 2009.

    On June 17, 2009 the Company closed the arrangements for a RMB170 million
($27.5 million) credit facility with the Agricultural Bank Of China. The
Credit Facility has a three-year term, and carries an interest rate of
approximately 5.4 percent. As at June 30, 2009, Yangzhou Yalian has received
proceeds from loan draw downs of $23,586,679 (RMB140,000,000), which are being
used to fund the final phase of construction and working capital of the
Company's LSAW production plant in Yangzhou, Jiangsu Province, China.

    Selected Financial Highlights        As At June 30,   As At September 30,
                                                  2009                  2008

    Cash                                  $ 14,224,414          $ 13,638,241
    Property, plant and equipment           45,679,372               248,230
    Prepayments for property, plant and
    equipment                               16,656,829            32,509,625
    Working capital                         13,322,221            13,519,219
    Total assets                            76,678,745            46,423,017
    Total long term financial
    liabilities(1)                          30,885,091             6,555,044
    Total equity                          $ 44,805,331          $ 39,722,030
    (1) Includes deferred government grant received in July, 2008 of

    In Canadian dollars except         Three months ended   Nine months ended
     share data                            30-Jun-09            30-June-09

    Interest income                                13,418            122,920
    Other income (government grant)                     0            714,543
                                                   13,418            837,463
    Operating expenses
      General and Administrative                  461,631          1,015,635
      Amortization                                 55,182            146,788
    Loss before taxes                             503,395            324,960

    Income taxes (recovery)                       (32,211)            82,522
    Non-controlling interest                      (20,401)            59,614
    Net loss                                      450,783            467,096
    Basic and diluted income(loss)
     per share                                      (0.01)             (0.01)
    Weighted average number of common
     shares outstanding
    Basic                                      85,493,253         57,167,571
    Fully diluted                              85,493,253         57,167,571

    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 is currently completing construction of its initial
manufacturing facility in City of Yangzhou, in the Jiangsu province of China.
Completion of the first production line, with a capacity of up to 200,000
metric tons per year, is scheduled for the fall of 2009. The Yangzhou Yalian
plant will utilize 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-80 grade steel.

    For further company information please access our website:

    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:

For further information: YALIAN STEEL CORPORATION): George Dorin, Acting
Chief Financial Officer, Tel. No. (604) 696-6388

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