Canaco Resources Inc.
TSX VENTURE : CAN

Canaco Resources Inc.

August 31, 2010 19:07 ET

Canaco Closes in Escrow on Copper-Gold Exploration Assets in Ethiopia and Announces Potential Spin-Off

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 31, 2010) - Canaco Resources Inc. (TSX VENTURE:CAN) is pleased to announce that the Company has closed in escrow its acquisition of 70% of the outstanding shares of Harvest Mining PLC ("Harvest"), a private Ethiopian exploration company from Beijing Donia Resources Co. Ltd. ("Donia"). The remaining 30% interest of Harvest is owned by Ezana Mining Development, an Ethiopian company.

Harvest owns a 100% interest in 468 km2 of exploration concessions in the Tigray state of Ethiopia. These concessions host several identified gold enriched, polymetallic volcanogenic massive sulphide ("VMS") prospects.

The Company has issued 3,508,771 common shares to Donia and paid cash of CAD$4,000,000. The consideration is being held in escrow by the Company's solicitors pending delivery of the remaining closing documents and receipt of final acceptance of the acquisition from the TSX Venture Exchange. The common shares issued to Donia will be subject to a four month hold period expiring on January 1, 2011. Release of the consideration is scheduled to occur on or before September 30, 2010.

Dr. Jingbin Wang is a Director of both Canaco and Donia. Donia is also a sister company of SinoTech (Hong Kong) Corporation Limited, a control person of Canaco. Mr. Shuixing Fu, a Director of Canaco, is also an officer of SinoTech. Dr. Wang and Mr. Fu do not directly own any shares of Canaco. Post transaction, SinoTech and Donia together own 51,508,771 shares, representing 31.6% of the outstanding shares of the Company. Dr. Wang and Mr. Fu abstained from any Canaco board discussions or decisions through this process, and the Boards Corporate Development Committee has reviewed and strongly recommended moving forward with this transaction.

Once the Harvest consideration is released from escrow, Canaco will consider options for maximizing the value of the acquisition for Canaco shareholders, including the possible spin out its Ethiopian assets into a new public company. The spin-out strategy will allow Canaco to continue focusing on its promising gold exploration properties in Tanzania and the spin-off company to focus on its Ethiopian mixed mineral resource properties. If the spin out strategy is selected, all existing shareholders of Canaco will own shares of a company which will be listed for trading on the TSX Venture Exchange. The Company is currently pursuing legal and tax advice as to the exact corporate procedures it will undergo to achieve the spin-out in the most expeditious manner with the lowest tax consequence possible. The spin-out will be subject to applicable shareholder and regulatory approvals.

Harvest's exploration assets consist of six exploration concessions covering 468 square kilometres, named the Nefasit, Hamlo, Terakimti, Adi Nebrid, Igub and Medri Felasi. The concessions are all located within the Neo-Proterozoic Asmara VMS type Cu-Zn-Au-Ag metallogenic belt where several deposits have been previously discovered in the NE extension of this belt in central Eritrea, including the Bisha deposit (27M tonnes grading 2.08 grams gold and 1.8% copper per tonne) and the Emba Derho, deposit (38M tonnes grading 1.08% copper, 0.18 grams gold and 9.31 grams silver per tonne – "Copper-rich primary ore").

Initial exploration results indicate there is significant potential for the discovery of similar deposits on Harvest's concessions. Since 2007, extensive exploration activities have been completed including, remote sensing, geological mapping, geochemical soil sampling, geophysical ground magnetic surveys, IP surveys, extensive trenching, and localized drilling on selected targets. Canaco is very excited about the exploration potential of these prospects. 

In completing this transaction Canaco will take ownership of the Harvest Project, the main exploration achievements on the property are as follows:

The Nefasit Concession Block

  • The Adi Angoda Prospect
    • Four intermittent sulphide zones with outcrops of surface oxides have been mapped with strong base metal mineralization and a strong co-incident IP anomaly.
    • Diamond drilling results for four recently completed holes indicate the presence of a primary sulphide copper-zinc ore body below the surface oxide cap. Two of these holes drilled to test the IP response encountered several ten meter wide zones of base metal mineralization, including sections of massive sulphides. Assay results for these holes are pending.
    • These results have confirmed the potential for the discovery of a medium-large size VMS type copper-zinc deposit in this area.
  • The Medadib Prospect
    • Geological mapping has outlined a surface oxide zone which has 360 meters of aggregate strike length and mineralization over widths of 3 to 20 meters. Analytical results have confirmed anomalous values for copper and zinc. An IP survey completed in November 2009 indicates a strong IP response co-incident with the surface oxide zone and is interpreted as indicating the presence of primary sulphides at depth.
    • Previous RC drilling of the surface oxide cap intersected a gold mineralization with an average thickness of 20m and average gold grade of 4.6 g/t.

Terakimti Concession Block

  • Several zones of sulphide mineralization have been identified within the felsic tuffs and at the contact of the intermediate meta-volcaniclastic rocks and felsic tuff at Terakimti. The sulphide mineralized zone measures 3.5 km along strike and 30 m to 110 m wide – locally reaching widths of up to 400 m.
  • Disseminated sulphides, surface oxide zones have been identified in outcrop. Strong copper, zinc and lead anomalies have been confirmed associated with the surface oxide zones. 
  • The Mai Sensela Prospect
    • A surface sulphide zone anomalous in Cu and Pb has been mapped with over a strike length of 1,200 m and width ranging from 20 m to 100 m.
    • Contained within the surface sulfide zone a surface gold oxide zone with a strike length of 800 m and an average width of 20 m has been defined through surface trenching. The average gold grade is 3 grams gold per tonne with peak values of 43 grams gold per tonne. IP surveying has detected chargeability anomalies coincident with the surface gold oxide mineralization and is interpreted as indicating the presence of primary sulphide concentrations at depth.

The Hamlo Concession Block

  • Geological mapping has outlined seven sulphidic alteration zones locally with massive sulphide oxide caps. In the north of the Hamlo block, a sulphide zone with strike length of 2.2 km and thickness of 200 m to 300 m has been mapped. Within this sulphide zone a massive sulphide oxide zone with an aggregate length of 1,200 m and thickness of 10-30 m has been identified.
  • The Wuhidet Prospect
    • Three sulphidic zones have been identified, including one zone measuring 4 km long and 60 m wide.
    • Mapping has indicated a surface sulphide zone that measures 800 m along strike and 20 m wide.
    • Initial field work has indicated these sulphide zones are strongly anomalous in Cu and Zn.
  • The Hamlo area contains a geological setting favourable for the discovery of Au-enriched VMS deposits. Initial exploration programs will include extensive trenching, ground magnetic and profile IP surveys and test drilling of selected targets.

"The acquisition of Harvest by Canaco is a significant event in the corporate development of the Company and is consistent with the Company's strategy of acquiring advanced exploration projects poised for discovery programs," said Andrew Smith, Canaco's CEO. "Due diligence has confirmed the geological potential for the discovery of gold-enriched, polymetallic VMS deposits on Harvest's properties is exceptional in the view of Canaco's technical team." 

Additional information and public documents about Canaco Resources can be viewed at the Company's website www.canaco.ca or at www.sedar.com. Canaco Resources Inc. is listed on the TSX Venture Exchange and is engaged in the exploration and development of Tanzanian gold prospects.

Andrew Lee Smith, P.Geo, CEO 

Canaco Resources Inc. 

Dr. Jingbin Wang, Chairman

Canaco Resources Inc.

The Acquisition is subject to a number of conditions as set out above. There can be no assurance that the Acquisition will be completed as proposed or at all. The Company relies on litigation protection for "forward-looking" statements. This press release contains forward-looking statements that are based on the Company's current expectations and estimates. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "suggest", "indicate" and other similar words or statements that certain events or conditions "may" or "will" occur, and include, without limitation, statements regarding the Company's plans with respect to the exploration and development of its projects. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual events or results to differ materially from estimated or anticipated events or results implied or expressed in such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein. No independent consultant has rendered an expert opinion on the property.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information