Yalian Steel Announces Second Quarter Financial and Operational Results

Yalian Steel Corporation (TSX VENTURE:YL) today announced its financial and
operating results for the three and six months ended March 31, 2012. 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 March 31, 2012, Yalian reported revenues of
$2,078,000; cost of sales of $2,685,000; operating expenses of $624,000 and
finance expenses (net of income) of $382,000. Net loss for the three months
ended March 31, 2012 was $1,614,000, or $0.02 per share.


For the six months ended March 31, 2012, Yalian reported revenues of $4,351,000;
cost of sales of $5,849,000; operating expenses of $1,213,000 and finance
expenses (net of income) of $652,000. Net loss for the six months ended March
31, 2012 was $3,363,000, or $0.03 per share.


As at March 31, 2012, cash and cash equivalents were $3,279,000, short term
deposit was $3,576,000 and the Company had a working capital deficiency of
$14,201,000. Total assets were $88,717,000, short-term and long-term loans, net
of financing costs, were $38,903,000, and total shareholders' equity was
$39,375,000.


As at March 31, 2012, 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
$29,410,000 (comprising of RMB 149,000,000, USD $5,616,000 and $177,000). 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 March 31, 2012, the Company manufactured and delivered
17 sales orders compared to 15 for the three-month period ended March 31, 2011.
In terms of volume, total sales orders manufactured and delivered amounted to
3,079 metric tons for the three months ended March 31, 2012, as compared to
9,243 metric tons for the three months ended March 31, 2011. 


The Company continues to engage with senior officers from three major domestic
oil & gas companies in China, China National Petroleum Corporation ("CNPC"),
China National Offshore Oil Corporation("CNOOC")and Sino-China Petrochemical
Corporation ("SINOPEC"), to gain access to and to be eventually included in
their key purchasing networks, as well as to build strategic alliances with them
which will foster the Company's long-term growth. Now the Company is a qualified
supplier of CNPC and has obtained steel pipe orders for the projects undertaken
by CNOOC and SINOPEC. 


The Company is working to develop and expand its business in global markets by
actively participating in a number of major international trade shows and
engaging with various distributors. Currently, the Company's products are sold
to customers in North America, Latin America, Middle East, and Europe etc.


The Company substantially completed the construction of its new anti-corrosion
line in March, 2012.Total cost of the project is approximately RMB 55 million
($8.7 million). This new coating line is integrated within its industrial chain
and expected to be an essential part of the Company's business development
plans. The Company is the first pipe manufacturer in China equipped with
semi-automatic control system in the coating line, which increases safety and
precise control of the production process. With the new anti-corrosion line the
Company can provide external and internal 3PE, 3PP, FBE/DFBE coating service
with annual capacity of 2,500,000 square meters for the external coating line
and 2,000,000 square meters for internal the coating line. The anti-corrosion
feature plays an important role in extending the longevity of the steel pipe,
saving energy and also decreasing environmental accidents that could be caused
by leakage of fluids carried by the pipe line.


Subsequent to the quarter end, the Company obtained an RMB 20,000,000
($3,172,000) line of credit from the Bank of Nanjing. The credit facility is
valid for six months from March 31, 2012 to October 30, 2012. As of the end of
May, 2012, total of RMB 6,000,000 ($951,600) demand loans were drawn and total
of RMB 12,000,000 ($1,903,200) was earmarked for the issuance of bankers'
acceptance notes against the credit line. In connection with the issuance of the
banker's acceptance notes, RMB 6,000,000 ($951,600) cash deposits have been
placed with the Bank of Nanjing as collateral. In addition, total of $3,172,000
(RMB 20,000,000) short term loans were repaid 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.


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

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.