Canaco Announces a New Mineralized Gold Lode at Magambazi and Increases Continuity of High-grade Mineralization in the Western Lode

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 24, 2011) - Canaco Resources Inc. (TSX VENTURE:CAN) ("Canaco" or the "Company") is pleased to announce drill results from six diamond drill holes that targeted mineralization west of the Magambazi Main Lode at the Company's Handeni project in Tanzania. The results highlight a new, high-grade steeply plunging shoot in the hangingwall gneiss (Southern Gneiss Lode) west of the Magambazi Main Lode, and add strike to the recently discovered Western Lode. Highlights include:

1. Mineralized true thicknesses are 50-100% of stated thicknesses. The calculation of drill intercepts employs a 0.3 gram/tonne cut-off and no cutting grade has been applied to high gold values.
2. Partial results only have been received for these holes.

Western Lode

Hole MGZD134, which intersected 34.3 metres grading 2.01 grams per tonne gold, including 7.7 metres grading 6.9 grams per tonne gold, was drilled in the Western Lode, 80 metres north along strike of hole MGZD129 (refer to Canaco's press release dated May 4, 2011), which intersected 17.5 metres at 7.29 grams per tonne gold. Hole MGZD101, 120 metres to the south of hole MGZD134, intersected 7.0 metres at 5.81 grams per tonne gold, including 4.2 metre sat 9.14 grams per tonne gold along strike in the same position (refer to Canaco's press release dated December 22, 2010).

Hole MGZD128 was drilled west of the Magambazi Main Lode and intersected the target stratigraphy approximately 35 metres west of the interpreted Magambazi Fault on section 60480N. This intercept is approximately 50 metres east of the new high-grade component of the Western Lode. Results for the remainder of hole MGZD131 are required to prove continuity over several hundred metres strike, and mineralization remains open.

Southern Gneiss (Hangingwall) Lode

Several new intercepts in drill holes MGZD083, MGZD101, MGZD134 and MGZD135 have highlighted a high-grade steeply plunging shoot in the hangingwall gneiss, west of Magambazi Main Lode and structurally above the Western Lode. This Southern Gneiss Lode has so far been defined on four drill sections over a 160 metre strike length and is open down dip and along strike to the north.

Hole MGZD083 intersected 17.0 metres at 23.76 grams per tonne gold, including 6.0 metres at 27.30 grams per tonne gold, in the hangingwall gneiss at Magambazi South. The gneiss was sampled and assayed recently during a large-scale project of cutting and sampling (including the hangingwall of most holes at Magambazi). When this high-grade intercept in a new lode position was returned, Canaco deemed it prudent to re-sample the intercept as part of Canaco's QA/QC (quality assurance, quality control) procedures to ensure excellence in reporting results from the project, and to test the target with several new holes. To ensure accurate reporting, the intercept was re-sampled (quarter core was cut) and assayed using a combination of fire assay and gravimetric analysis. The original 17.0 metre intercept was not reproduced in the quarter core due to the gold nugget effect (when half core was compared with quarter core the quarter core is always less accurate as it reflects a lesser volume sample). However, the lower intercept of 6.0 metres at 27.3 grams per tonne gold interval was confirmed, reporting 6.0 metres at 21.57 grams per tonne gold when re-assayed from the quarter core sample.

Definitions

Mineralization at Magambazi has so far been defined over a strike length of nearly one kilometre and is currently interpreted to occur in a doubly plunging, broadly synformal zone which has distinctive hangingwall gneiss. The Magambazi Zone is now known to contain at least five distinct lodes located in the hangingwall of the Magambazi North Thrust:

• Magambazi Main Lode – This is the principal steep west-dipping high-grade gold lode that has been the focus of much of the drilling to date and is continuous over approximately 900 metres strike. It includes intersections at the geographical localities at Magambazi South, Magambazi Central and Magambazi North. This Lode lies east of the Magambazi Fault, which is interpreted to partly control the high-grade gold shoot component to the mineralization;
• Cave Lode – The Cave Lode is a near surface SW-dipping lode of lower grade gold mineralization which has been drilled in the north. It is interpreted to lie on a gently SW-dipping thrust (Magambazi North Thrust) which under-plates the mineralized system that is the Magambazi Zone;
• Magambazi West (Upper) – This is a steep east-dipping lode located 30 to 250 metres west of the Magambazi Main Lode, and associated with the Western Fault. It was identified early in the drilling campaign at Magambazi North and has recently been intersected at Magambazi South;
• Magambazi West (Lower) – This is a gently dipping lode to the west of the Magambazi Main Lode. It was also originally identified at Magambazi North, and has recently been intersected at Magambazi South as a high-grade shoot in several holes listed in this release; and
• Southern (Hangingwall) Gneiss Lode – Mineralization occurs within the hangingwall gneiss, and forms several coherent zones of variable grade mineralization which have a dip ranging from steeply east to sub-horizontal. Recent intersections in the gneiss include high-grade intercepts from drill holes MGZD083 and MGZD135.

To view a drill hole location map, plan view map and complete list of drill hole intercepts, please visit the following link: http://media3.marketwire.com/docs/can524i.pdf.

Quality Control

The planning, execution and monitoring of Canaco's quality control programs at the Handeni project are under the supervision Jeff Heidema, P.Geo., Canaco's Vice President Exploration, and Dr. David Groves, Canaco's Director of Project Development. Mr. Heidema and Dr. Groves are Qualified Persons as defined by National Instrument 43-101. Drill samples are prepared and analyzed at the SGS Geochemical Laboratory in Mwanza, Tanzania. Samples are processed by Fire Assay with A.A. finish under the SGS FAA505 protocol. Canaco utilizes an industry standard QA/QC protocol with respect to sampling procedures. Blanks and certified reference standards are inserted into the sample stream to monitor laboratory performance and duplicates of pulps and bulk rejects are also used to monitor laboratory performance.

Additional information, press releases and public documents about Canaco, including a complete list of drill hole intercepts and drill collar maps, can be viewed at the Company's website www.canaco.ca or at www.sedar.com.

About Canaco

Canaco is a Vancouver-based mineral exploration company focused on advanced exploration in Africa. Built on a foundation of experienced management and focused on rapidly advancing exploration projects in Tanzania and Ethiopia, Canaco is well positioned to build shareholder value through discovery and resource development.

Canaco's shares trade on the TSX Venture Exchange under the symbol CAN.

On behalf of the Board of Directors:

Andrew Lee Smith, P.Geo., President, CEO and Director

Cautionary Statement Regarding Forward-Looking Information

This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "anticipate", "believe", "plan", "expect", "intend", "estimate", "forecast", "project", "budget", "schedule", "may", "will", "could", "might", "should" or variations of such words or similar words or expressions. Forward-looking information is based on reasonable assumptions that have been made by the Company as at the date of such information and is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: risks associated with mineral exploration and development; metal and mineral prices; availability of capital; accuracy of the Company's projections and estimates; interest and exchange rates; competition; stock price fluctuations; availability of drilling equipment and access; actual results of current exploration activities; government regulation; political or economic developments; environmental risks; insurance risks; capital expenditures; operating or technical difficulties in connection with development activities; personnel relations; the speculative nature of strategic metal exploration and development including the risks of diminishing quantities of grades of reserves; contests over title to properties; and changes in project parameters as plans continue to be refined. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to the price of gold; the demand for gold; the ability to carry on exploration and development activities; the timely receipt of any required approvals; the ability to obtain qualified personnel, equipment and services in a timely and cost-efficient manner; the ability to operate in a safe, efficient and effective manner; and the regulatory framework regarding environmental matters, and such other assumptions and factors as set out herein. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking contained herein, except in accordance with applicable securities laws.