China Direct Industries Reports Financial Results for the Second Quarter of 2009

DEERFIELD BEACH, FL--(Marketwire - August 14, 2009) - China Direct Industries, Inc. ("China
Direct Industries") (NASDAQ: CDII), a U.S. holding company with operations
in China, announced today its financial results for the second quarter of
2009.

Financial Highlights

For the second quarter ending June 30, 2009, China Direct Industries
recorded consolidated revenue of $20.4 million, similar to the $20.68
million recorded in the first quarter of 2009. Consolidated operations
resulted in a Non-GAAP net loss of $(2.1 million) (excluding non-cash
charges related to employee share-based compensation and the fair value of
securities granted for services) with a GAAP net loss of $(2.9 million).
Net income applicable to shareholders for the second quarter of 2009 on a
GAAP basis was $(0.12) per basic and diluted share as compared to net
income of $0.29 per basic share and $0.26 per diluted share on consolidated
revenue of $77.6 million in the same period in 2008. Non-GAAP basic EPS and
Non-GAAP diluted EPS was $(0.09) in the second quarter of 2009, as compared
to Non-GAAP Basic EPS of $0.32 and Non-GAAP Diluted EPS of $0.28 for the
same period in 2008 on 1.5 million more shares. Non-cash items excluded in
all non-GAAP calculations are presented in the reconciliation of GAAP to
non-GAAP net income set forth below.

The overall non-GAAP net loss per share in the second quarter of 2009 was
negatively impacted by a one-time renegotiation of a magnesium supply
contract resulting in substantial negative gross margins and reduced
revenue contributing to a net operating loss of $(1.1 million) for the
quarter in our Magnesium Segment.

The overall environment remains challenging in our two core business
segments of magnesium and basic materials. Magnesium demand remained
particularly weak in the second quarter of 2009 with further erosion in
prices as end market usage in the automobile, steel and aluminum alloying
industries remained anemic. Prices and demand, however, have begun to firm
in recent weeks creating a more active sales environment. Steel production
and aluminum demand is also firming up in China. In our basic materials
segment we recorded a modest net profit on improving margins and we
continue to see signs of stabilization in our customer base. While
visibility on future performance is improving, it remains somewhat limited.
Management continues to believe, however, that overall operating results
will improve in the second half of 2009 and into 2010.

Balance Sheet

At June 30, 2009, our balance sheet remains strong with total assets of
$100.8 million as compared to $107.4 million at December 31, 2008. At June
30, 2009, shareholder equity was $56.3 million on 23.5 million basic shares
as compared to $58.0 million on 24.4 million basic shares at December 31,
2008. At June 30, 2009, cash and cash equivalents were $13.8 million as
compared to $14.2 at December 31, 2008. Working capital was $33.5 million
as compared to working capital of $37.5 million at December 31, 2008.

While the global environment remains weak and visibility is still limited,
end markets recently appear to be stabilizing in China. As industry
forecasts in China have improved for our end market customers such as
automobile, steel and aluminum manufacturing and talks with large global
end customers for long term supply contracts remain active, we believe our
performance will improve for the remainder of 2009. China Direct
Industries is well positioned and well capitalized to fund its operations.
China Direct Industries will further discuss its results during its
conference call today, August 14, 2009 at 4:30 PM EDT.

Commenting on the quarter, Dr. James Wang, Chairman and CEO of China Direct
Industries, stated, "We experienced tremendous challenges in the first half
of 2009 and we have worked hard to reduce costs and preserve capital as we
navigate through this down cycle. We are seeing a firming environment in
our end markets and believe the worst effects of this downturn are largely
behind us. We intend to focus our efforts in the coming quarters on
returning to growth and profitability when the global economic recovery
takes hold."

China Direct Industries Conference Call to discuss the Company's financial
results for the second quarter of 2009.

The conference call will take place at 4:30 p.m. EDT on Friday, August
14th, 2009. Anyone interested in participating should call 1-866-296-4125
if calling within the United States or 1-706-758-9807 if calling
internationally approximately 5 to 10 minutes prior to 4:30 p.m.
Participants should ask for the China Direct 2009 Second Quarter Earnings
conference call/ Conference ID 24704774.

This call is being webcast by ViaVid Broadcasting and can be accessed at
China Direct's website at http://www.cdii.net/calendar-of-events. The
webcast may also be accessed at ViaVid's website at http://www.viavid.net.
The playback of the webcast can be accessed through either site until
August 14, 2010. To access the webcast, you will need to have the Windows
Media Player on your desktop. For the free download of the Media Player,
please visit:
http://www.microsoft.com/windows/windowsmedia/en/download/default.asp

About China Direct Industries, Inc.

China Direct Industries, Inc. (NASDAQ: CDII) is a U.S. owned, rapidly
growing holding company operating in China in two core business segments,
pure magnesium production and distribution and the distribution of basic
materials in China. China Direct Industries also provides advisory services
to China based companies competing in the global economy. Headquartered in
Deerfield Beach, Florida, China Direct Industries operates 10 subsidiaries
throughout China. This infrastructure creates a platform to expand business
opportunities globally while effectively and efficiently accessing the U.S.
capital markets. For more information about China Direct Industries, please
visit http://www.cdii.net.

CHINA DIRECT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

June 30, December 31,
2009 2008
------------- -------------
ASSETS Unaudited
------------- -------------
Current Assets:
Cash and cash equivalents $ 13,792,725 14,205,229
Investment in marketable securities
available for sale 4,928,754 7,569,333
Investment in marketable securities
available for sale - related party 385,101 160,459
Investment in subsidiaries -- cost method 290,864 290,864
Accounts receivable, net of allowance 5,874,166 9,457,306
Accounts receivable - related parties 4,349,383 1,676,191
Inventories, net 9,992,885 8,559,593
Prepaid expenses and other current assets 6,508,666 8,127,300
Prepaid expenses - related parties 4,142,066 8,007,111
Loans receivable - related parties 1,120,432 1,652,728
Due from related parties 42,002 35,710
Total current assets 51,427,044 59,741,824

Restricted cash 1,663,343 846,197
Property, plant and equipment, net 44,641,972 43,455,683
Prepaid expenses and other assets 1,800,431 2,744,427
Property use rights, net 1,281,046 591,277
------------- -------------
Total assets $ 100,813,836 $ 107,379,408
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Loans payable-short term $ 2,768,503 $ 933,735
Accounts payable and accrued expenses 9,736,879 8,590,010
Accounts payable-related parties 1,552,780 7,516,728
Advances from customers 1,503,580 1,545,273
Other payables 1,405,597 1,624,370
Taxes payable 843,731 1,039,112
Due to related parties 71,963 978,739
------------- -------------
Total current liabilities 17,883,033 22,227,967

Loans payable-long term 8,035 186,018

Stockholders' equity:
China Direct Industries, Inc. stockholders'
equity
Series A Convertible Preferred Stock: $.0001
par value, stated value $1,000 per share;
10,000,000 authorized, 1,006 shares and 0
shares issued and outstanding at June 30,
2009 and December 31, 2008, respectively 1,006,250 1,006,250
Common Stock: $.0001 par value, 1,000,000,000
authorized, 26,519,623 and 23,530,642 issued
and outstanding at June 30, 2009 and
December 31, 2008, respectively 2,652 2,353
Additional paid-in capital 56,239,467 51,701,293
Deferred compensation (11,000)
Accumulated comprehensive income (13,554,759) (11,711,021)
Retained earnings 12,629,575 17,037,407
------------- -------------
Total China Direct Industries, Inc.
stockholders' equity 56,323,185 58,025,282
------------- -------------
Non-controlling interests 26,599,583 26,940,141
------------- -------------
Total Equity 82,922,768 84,965,423
------------- -------------
Total liabilities and stockholders'
equity $ 100,813,836 $ 107,379,408
============= =============

CHINA DIRECT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------ -------------------------
2009 2008 2009 2008
----------- ----------- ----------- ------------

Revenues $18,417,789 $75,999,328 $34,474,466 $134,659,553
Revenues-related
parties 2,007,621 1,344,725 6,637,053 2,078,646
----------- ----------- ----------- ------------
Total revenues 20,425,410 77,344,053 41,111,519 136,738,199

Cost of revenues 21,136,660 63,893,924 40,453,953 113,307,926
----------- ----------- ----------- ------------
Gross profit (711,250) 13,450,129 657,566 23,430,273

Operating expenses:
Selling, general,
and administrative 2,419,684 2,486,588 5,518,814 4,097,581
----------- ----------- ----------- ------------
Operating (loss)
income (3,130,934) 10,963,541 (4,861,248) 19,332,692

Other income (expense):
Other income (expense) (403,548) 102,874 (331,963) 296,492
Interest (expense)
income (86,911) 143,018 (40,797) 239,877
Realized (loss) gain
on sale of marketable
securities (79,221) 3,756 (311,932) (35,705)
----------- ----------- ----------- ------------
Total other
(expense) income (569,680) 249,648 (684,692) 500,664
----------- ----------- ----------- ------------

(Loss) income from
continuing operations,
before tax (3,700,614) 11,213,189 (5,545,940) 19,833,356
Income tax (expense)
benefit (13,492) (716,791) 58,087 (1,040,424)
----------- ----------- ----------- ------------
(Loss) income from
continuing operations,
net of tax (3,714,106) 10,496,398 (5,487,853) 18,792,932
Income from discontinued
operations - (70,151) - 73,357
----------- ----------- ----------- ------------

Net (loss) income (3,714,106) 10,426,247 (5,487,853) 18,866,289
Net (loss) income
attributable to
non-controlling
interests 826,450 (2,911,372) 1,144,666 (6,598,538)
----------- ----------- ----------- ------------
Net (loss) income
attributable to China
Direct Industries,
Inc. (2,887,656) 7,514,875 (4,343,187) 12,267,751
=========== =========== =========== ============

Deduct dividends on
Series A Preferred
Stock:
Preferred stock
dividend (20,271) (1,047,937) (53,926) (1,189,467)
Relative fair value
of detachable
warrants issued - - - (2,765,946)
Preferred stock
beneficial
conversion feature - - - (2,451,446)
----------- ----------- ----------- ------------
(Loss) income
attributable to China
Direct Industries,
Inc. common
stockholders $(2,907,927) $ 6,466,938 $(4,397,113) $ 5,860,892
=========== =========== =========== ============

Basic and diluted income
(loss) per common share
after deduction in the
first quarter of 2008,
of noncash deemed
dividends attributable
to Series Convertible A
Preferred Stock as
described in Note 11
Basic $ (0.12) $ 0.29 $ (0.18) $ 0.27
=========== =========== =========== ============
Diluted $ (0.12) $ 0.26 $ (0.18) $ 0.24
=========== =========== =========== ============
Basic weighted average
common shares
outstanding 24,168,640 22,663,337 24,082,025 21,833,388
=========== =========== =========== ============
Diluted weighted
average common shares
outstanding 24,168,640 25,427,385 24,082,025 24,160,683
=========== =========== =========== ============

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

The following table reconciles the calculation of net income per share on a
basic and fully diluted basis from the amounts reported in accordance with
generally accepted accounting principles ("GAAP") to such amounts before
giving effect to employee share-based compensation expense and the fair
value of securities granted for services. This disclosure is being provided
as we believe it is meaningful to our investors and other interested
parties to understand our operating performance on a consistent basis
without regard to the anti-dilutive effects of the timing of the employee
share-based compensation and the fair value of securities granted for
services expenses. The presentation of the non-GAAP information titled
"Non-GAAP net income," "Non-GAAP net loss," "Non-GAAP Earnings applicable
to common stockholders," "Non-GAAP Basic EPS" and "Non-GAAP Diluted EPS" is
not meant to be considered in isolation or as a substitute for net income
or diluted income per share prepared in accordance with GAAP.

Q2 FY 2009 GAAP Reconciliation

RECONCILIATION OF GAAP to NON-GAAP NET INCOME

Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
----------- ---------- ----------- -----------
GAAP net income
attributable to China
Direct Industries, Inc. $(2,887,656) $7,514,875 $(4,343,187) $12,267,751
Employee share-based
compensation expense 600,132 641,091 1,122,803 848,364
Fair value of securities
granted for services 200,605 57,344 205,165 103,708
Non-GAAP net income
attributable to China
Direct Industries, Inc. $(2,086,919) $8,213,310 $(3,015,219) $13,219,823

GAAP Earnings applicable
to common stockholders $(2,907,927) $6,466,938 $(4,397,113) $ 5,860,892
GAAP Basic EPS (0.12) 0.29 (0.18) 0.27
GAAP Diluted EPS (0.12) 0.26 (0.18) 0.24
Non-GAAP net income
reconciliation
total 800,737 698,435 1,327,968 952,072
Non-cash deducted related
to Preferred Stock
issuance:
Relative Fair Value of
warrants - - - 2,765,946
Beneficial Conversion
Feature - - - 2,451,446
NON-GAAP Earnings applicable
to common stockholders (2,107,190) 7,165,373 (3,069,145) 12,030,356
NON-GAAP Basic EPS (0.09) 0.32 (0.13) 0.55
NON-GAAP Diluted EPS $ (0.09) $ 0.28 $ (0.13) $ 0.50
----------- ---------- ----------- -----------
Shares used in basic net
income per-share
calculation - GAAP 24,168,640 22,663,337 23,851,403 21,833,388
Shares used in basic net
income per-share
calculation - Non-GAAP 24,168,640 22,663,337 23,851,403 21,833,388
Shares used in diluted net
income per-share
calculation - GAAP 24,168,640 25,427,385 23,851,403 24,160,683
Shares used in diluted net
income per-share
calculation - Non-GAAP 24,168,640 25,427,385 23,851,403 24,160,683
----------- ---------- ----------- -----------

DISCLOSURE

NOTICE:

In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, China Direct Industries, Inc., is hereby
providing cautionary statements identifying important factors that could
cause our actual results to differ materially from those projected in
forward-looking statements (as defined in such act). Any statements that
are not historical facts and that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, indicated through the use of words or
phrases such as "will likely result," "are expected to," "will continue,"
"is anticipated," "estimated," "intends," "plans," "believes" and
"projects") may be forward-looking and may involve estimates and
uncertainties which could cause actual results to differ materially from
those expressed in the forward-looking statements. These statements
include, but are not limited to, our expectations regarding our guidance
and expectations regarding revenues, our future performance, stabilization
of our customer base and end markets, earnings, prices, demand and
production of magnesium, steel and aluminum and our expected overall growth
and profitability, including our magnesium segment. In addition, any such
statements are qualified in their entirety by reference to, and are
accompanied by, the following key factors that have a direct bearing on our
results of operations:

-- Continued global economic weakness is expected to reduce demand for
our products in each of our segments.
-- Fluctuations in the availability of magnesium and in levels of customer
demand.
-- Changes in the prices of magnesium and magnesium-related products.
-- Our ability to implement our business strategy of growing our business
through increased magnesium production capacity and acquisitions.
-- Fluctuations in the cost or availability of coke gas and coal.
-- Loss of orders from any of our major customers.
-- The value of the equity securities we accept as compensation is subject
to adjustment which could result in losses to us in future periods.
-- Our ability to effectively integrate our acquisitions and to manage our
growth and our inability to fully realize any anticipated benefits of
acquired business.
-- Our need for additional financing which we may not be able to obtain on
acceptable terms, the dilutive effect additional capital raising
efforts in future periods may have on our current shareholders and the
increased interest expense in future periods related to additional debt
financing.
-- Our dependence on certain key personnel.
-- Our ability to establish adequate management, cash, legal and financial
controls in the PRC.
-- The lack of various legal protections in certain agreements to which we
are a party and which are material to our operations which are
customarily contained in similar contracts prepared in the United
States.
-- Potential impact of PRC regulations on our intercompany loans.
-- Our ability to assure that related party transactions are fair to our
company.
-- Yuwei Huang, our executive vice president - magnesium, director and an
officer of several of our magnesium subsidiaries is also an owner and
executive officer of several companies which directly compete with our
magnesium business.
-- Our ability to comply with the United States Foreign Corrupt Practices
Act which could subject us to penalties and other adverse consequences.
-- Limits under the Investment Company Act of 1940 on the value of
securities we can accept as payment for our business consulting
services.
-- Our acquisition efforts in future periods may be dilutive to our then
current shareholders.
-- The risks and hazards inherent in the mining industry on the operations
of our basic materials segment.
-- The effect of changes resulting from the political and economic
policies of the Chinese government on our assets and operations located
in the PRC.
-- The impact of Chinese economic reform policies.
-- The influence of the Chinese government over the manner in which our
Chinese subsidiaries must conduct our business activities.
-- The impact on future inflation in China on economic activity in China.
-- The impact of any recurrence of severe acute respiratory syndrome,
or SARS, or another widespread public health problem.
-- The limitation on our ability to receive and use our revenues
effectively as a result of restrictions on currency exchange in China.
-- Our ability to enforce our rights due to policies regarding the
regulation of foreign investments in China.
-- Recent substantial declines in the market price for shares of our
common stock and continued highly volatile and wide market price
fluctuations.
-- The impact on our stock price due to sales of our stock by existing
shareholders and stock option exercises and sales of those shares of
stock.
-- The impact on our stock price due to sales of our stock by existing
shareholders and stock option and warrant exercises and sales of shares
of stock exercised pursuant to stock options.
-- Possible claim for underwriting fees and expenses.

We caution that the factors described herein could cause actual results to
differ materially from those expressed in any forward-looking statements we
make and that investors should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks
only as of the date on which such statement is made, and we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect
the occurrence of anticipated or unanticipated events or circumstances. New
factors emerge from time to time, and it is not possible for us to predict
all of such factors. Further, we cannot assess the impact of each such
factor on our results of operations or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. This press release is
qualified in its entirety by the cautionary statements and risk factor
disclosure contained in our Securities and Exchange Commission filings,
including our Annual Report on Form 10-K for the year ended December 31,
2008.