Canaco Resources Inc.
TSX VENTURE : CAN

Canaco Resources Inc.

January 18, 2007 18:25 ET

Canaco Signs Letter of Intent to Acquire Magembe Diamond Project From Douglas Lake

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 18, 2007) - Canaco Resources Inc. (TSX VENTURE:CAN) is pleased to announce the Company has signed a letter of intent with Douglas Lake Minerals to acquire an interest in the 46 square kilometre Magmebe diamond prospect in the Shinyanga District of Tanzania.

The Magembe diamond property consists of a number of prospecting licenses comprising a total area of 46 square kilometres that are directly adjacent to the eastern, northern and western boundaries of the Williamson Mine, one of Africa's most significant diamond producers.

"Canaco's management is excited about the opportunity to add a significant Tanzanian diamond prospect to the Company's growing portfolio of properties in East Africa," said Andrew Lee Smith, Canaco's Chairman and CEO. "Canaco feels that this property can complement our gold exploration programs in Tanzanian and the Company looks forward to developing an agreement that will benefit the shareholders of both companies."

The Magembe property is part of a two kilometre buffer zone created to surround the Williamson (Mwadui) Mine as part of the original mine development in the 1940's and 50's. This buffer zone was formed with the intention of ensuring that the mining operations could proceed in a safe and orderly manner through the prohibition of the mining of surficial diamond deposits in the area immediately adjacent to the mining operation. Elsewhere outside the buffer zone, artisanal mining of surficial diamonds is widespread and ongoing. The Shinyanga District is renowned for its diamond production from both the Williamson (Mwadui) mine and artisanal mining operations. Changes to the Tanzanian Mining Act in 2003 outlawed the existence of buffer zones and the mineral rights were acquired by Atlas Africa, a private Tanzanian company. Douglas Lake acquired the gemstone rights from Atlas Africa in December 2006.

The Williamson Mine is currently owned 75% by De Beers and 25% by the Government of Tanzania, and has a production history that spans six decades. The Williamson pipe covers 360 acres and, at the time of its discovery in 1940, was considered the largest economically exploitable pipe in the world. The large open pit mine is currently about 90 meters (300 ft) deep.

Production in the 1950s and 1960s was between 500,000 and 750,000 carats (100 and 150 kg) per year; the peak year of production was 1966, when 924,984 carats (185 kg) were produced. Today, the production level for all Williamson mine diamond recovery activities is about 300,000 carats (60 kg) per year. Notable stones produced at the Williamson mine include a 54 carat (10.8 g) flawless pink diamond (presented to then Princess Elizabeth and Prince Philip upon their wedding in 1947), and a 388 carat (77.6 g) diamond found in 1990. Since 1994, De Beers has improved the performance of the Williamson diamond mine by making needed capital investments in equipment, and bringing in expertise in technology, technique, and exploration. De Beers has identified several possible avenues for development that would keep the mine operating well into the future (Note: Source for Williamson Mine data contained in this release is www.wikipedia.org).

According to the letter of intent, Canaco will have a 30 day period within which to develop terms for the acquisition that are agreeable to both parties. The agreement will then be subject to a 60 day due diligence period. Douglas Lake and Canaco are partners in exploration in Tanzania through a strategic alliance formed between the two companies in April 2006.

Additional information on the Magembe property and other public documents are available on SEDAR at www.sedar.com or from the company's website at www.canaco.ca.

Canaco Resources is an emerging junior gold exploration company trading on the TSX Venture Exchange. The company is actively engaged in the acquisition of gold exploration and development projects.

The Company relies on litigation protection for "forward-looking" statements.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the release.

Contact Information

  • Canaco Resources Inc.
    Andrew Lee Smith
    Chairman and CEO
    (604) 488-0822 or 1-866-488-0822
    or
    Canaco Resources Inc.
    Nick Watters
    Investor Relations
    (604) 488-0822 or 1-866-488-0822
    Email: investors@canaco.ca
    Website: www.canaco.ca