China Drill Corporation has entered into an agreement to acquire an 85% equity interest in Yalian Steel Pipe Company Limited. The acquisition agreement is with the owners of Yanqiu Zhang Company and the shareholders of Ninghua Chemical Company Limited for the acquisition of Yanqiu and the acquisition of all of the outstanding shares of Ninghua. The acquisition constitutes an arm's length qualifying transaction in accordance with the policies of the TSX Venture Exchange and is not subject to shareholder approval.

Yalian is 20% owned by Yanqiu and it is 65% owned by Ninghua. The remaining 15% of Yalian is owned by Jiangsu Tongyu Steel Pipe Group Company Limited. Jiangsu Pipe has 18 years of experience in the manufacturing and sale of helical submerged arc welded steel pipes and longitudinal submerged arc welded steel pipes.

Yalian was incorporated in January of 2008 with registered capital of USD 38 million, which cash amount was paid into Yalian by the three shareholders, in proportion to their respective percentage equity interests in Yalian.

These funds are, in part, being used by Yalian to construct an initial manufacturing plant in Yangzhou, Jiangsu province, China, to manufacture LSAW pipes using a JCOE manufacturing process. The construction of the first production line is expected to commence this month and to be completed in the summer of 2009 with management projecting output for the first 12 months following completion at 150,000 tonnes of LSAW pipe. The plant is ideally located on a 42 acre parcel of land just north of Jiangsu Pipe's facilities such that Yalian can maximize its expected strategic leverage with Jiangsu Pipe by being able to draw on its experienced management team, established sales relationships and technical expertise.

Jiangsu Pipe began the production of steel pipes in 1990 and now employs over 580 people. Its main focus is on the production of spiral welded pipes, with annual production of 300,000 tons of pipe’