Discovery Hole at Canaco's Harvest Project in Ethiopia Intersects 52.1 Metres at 1.55 Grams Gold Per Tonne and 4.10% Copper

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 6, 2011) - Canaco Resources Inc. (TSX VENTURE:CAN) ("Canaco" or the "Company") is pleased to announce exciting diamond drill results from the Terakimti concession, part of the Company's Harvest project in Ethiopia, acquired in August 2010 (and which remains subject to certain conditions and final acceptance from the TSX Venture Exchange). Significant drill results from a 1,600-metre program of 12 holes, 11 of which were drilled over an 800-metre strike length, included massive sulphide intersections of:

• 52.1 metres at 1.55 grams gold per tonne, 4.10% copper and 25.97 grams silver per tonne in hole 10HTD003 starting at a depth of 45.6 metres, including 23.7 metres at 1.88 grams gold per tonne, 7.30% copper, and 21.88 grams silver per tonne;
• 13.2 metres at 2.84 grams gold per tonne and 300.11 grams silver per tonne in hole 10HTD002 from a depth of 28.8 metres. This hole is located 350 metres northeast of hole 10HTD003 and is open at depth;
• 13.9 metres at 1.17 grams gold per tonne, 2.67% copper, 3.42% zinc and 21.57 grams silver per tonne in hole 09HTD005 starting at a depth of 77.0 metres. This hole is located 270 metres northeast of hole 10HTD003; and
• 12.0 metres at 0.88 grams gold per tonne, 1.06% copper, 4.11% zinc and 24.33 grams silver per tonne in hole 09HTD002 from a depth of 42.0 metres. This hole is located 570 metres northeast of hole 10HTD003.

Drilling was conducted as part of Canaco's due diligence process in acquiring the project in an attempt to confirm the potential for a gold enriched, polymetallic Volcanogenic Massive Sulphide ("VMS") deposit beneath gold rich gossans previously identified by surface trenching. Ten of the 11 holes contained significant mineralization, as follows:

Hole No	North	East	Local Azi/Dip	From (m)	To (m)	Interval	Au g/t	Ag g/t	Cu %	Zn %
10HTD001	54,189	24,383	275/-70	71.7	79.3	7.6	4.01	35.63	2.07	2.59
				85.3	93.8	8.5	0.32	4.62	0.41	0.59
10HTD002	54,096	24,327	275/-65	28.8	42.0	13.2	2.84	300.11	0.16	0.02
10HTD003	53,758	24,246	261/-76	45.6	97.7	52.1	1.55	25.97	4.10	0.13
				61.7	85.4	23.7	1.88	21.88	7.30	0.15
10HTD005	53,870	24,359	275/-65	164.6	167.8	3.2	1.57	8.12	0.83	5.02
10HTD006	53,741	24,323	260/-65	149.2	154.0	4.8	0.35	12.54	0.32	2.43
09HTD001	53,643	24,201	260/-75	39.0	42.0	3.0	0.39	11.22	3.75	0.01
09HTD002	54,311	24,368	275/-65	42.0	54.0	12.0	0.88	24.33	1.06	4.11
				75.0	92.0	17.0	0.38	10.21	0.33	1.10
09HTD003	54,207	24,304	275/-75	17.0	22.0	5.0	0.70	41.26	0.61	1.51
				41.0	52.2	11.2	0.37	2.87	0.34	0.15
09HTD004	53,884	24,280	275/-70	69.0	76.0	7.0	0.37	11.20	0.30	4.21
09HTD005	54,018	24,325	260/-75	66.3	69.9	3.6	1.58	30.12	3.05	1.68
				77.0	90.9	13.9	1.17	21.57	2.67	3.42

Drill intercept lengths are down-hole lengths reflecting apparent widths of mineralization, with true widths ranging between 60-90% of the reported down-hole lengths.

Location
Canaco's Ethiopian exploration asset consists of six exploration concessions covering 468 square kilometres in a 70%-owned joint venture with Ezana Mining Development, an Ethiopian company. The Nefasit, Hamlo, Terakimti, Adi Nebrid, Igub and Medri Felasi concessions are located in the Tigray region of Ethiopia within the Neo-Proterozoic Asmara VMS Cu-Zn-Au-Ag metallogenic belt. Several deposits have been discovered along the north-eastern extension of this belt in central Eritrea. The drilling conducted on the Terakimti concession is located 140 kilometres southwest along strike of Sunridge Gold Corp.'s Emba Derho VMS deposit, which is estimated to contain 62.5 million tonnes grading 0.72% copper, 1.38% zinc, 0.2 grams gold per tonne and 10 grams silver per tonne, and 150 kilometres southeast of Nevsun Resources Ltd.'s Bisha VMS deposit, estimated to contain 27.3 million tonnes grading 2.1 grams gold per tonne, 42.1 grams silver per tonne, 1.8% copper and 3.8% zinc. Bisha is in the commissioning stage and once in full production is expected to produce 1.06 million ounces of gold, 9.4 million ounces of silver, 734 million pounds of copper, and over one billion pounds of zinc.

Terakimti Concession
Exploration on the Ethiopian concessions has been conducted over the past three years by Beijing Donia Resources Co. Ltd. This has included remote sensing, geological mapping, geochemical soil sampling, geophysical ground magnetic surveys, IP surveys and extensive trenching, but only localized drilling on select targets. Trenching at Terakimti highlighted the potential of the area, where gold-rich gossans define a VMS target with greater than 800 metre strike potential. Trench channel sampling gold intercepts from the gossans include (at 0.3 grams gold per tonne cut-off):

• 40 metres at 3.24 grams gold per tonne (TRK-TR3) including 19 metres at 5.3 grams gold per tonne;
• 25 metres at 2.68 grams gold per tonne (TRK-TR5) including 14 metres at 4.17 grams gold per tonne; and
• 38 metres at 2.37 grams gold per tonne (TRK-TR7) including 9 metres at 5.91 grams gold per tonne.

Of the 11 holes drilled at Terakimti, 10 contained significant gold and base metal intercepts and all holes contained significant zones of disseminated and stringer style sulphide mineralization and intense alteration including chlorite pyrite and sericite.

Like Bisha and Emba Derho to the north, the near-surface Terakimti VMS body is vertically zoned due to weathering and supergene processes. This weathering provides important enrichment of gold at surface in gossans, enrichment of gold and silver in a leached zone beneath the gossans and strong copper enrichment in the supergene transition to fresh rock. At Terakimti, there is strong evidence of:

1. Surface gold enrichment in gossans at surface indicated from systematic rock channel sampling (i.e. 19 metres at 5.3 grams gold per tonne). Start-up pits on VMS deposits such as Bisha lead the Company to believe this gold-rich surface mineralization should provide strong cash flow at the commencement of the project;
2. Gold and silver enrichment at depth in the weathered zone (i.e. 13.2 metres at 2.84 grams gold per tonne and 300.11 grams silver per tonne in hole 10HTD002 from about 22 metres true depth to below 35 metres depth ). This is highly encouraging as it demonstrates a thick zone ( greater than 35 metres deep) of gold and spectacular silver enrichment (i.e. 10 grams silver per tonne);
3. Copper enrichment in the supergene transition. Hole 10HTD003 intersected 52.1 metres at 1.55 grams gold per tonne, 4.10% copper and 25.97 grams silver per tonne from 45.6 metres depth (true depth of about 40 metres). This intercept has been recalculated for the important zones of weathering:
   • Strongly weathered zone – 16.1 metres at 1.41 grams gold per tonne, 0.90% copper and 44.76 grams silver per tonne from 45.6 metres depth; and
   • Supergene zone – 25.0 metres at 1.79 grams gold per tonne, 6.96% copper, 20.83 grams silver per tonne from 61.7 metres depth. This highlights a thick zone of very high-value copper enriched mineralization with significant gold credits.
4. High-grade massive sulphide in fresh rock. The last part of hole 10HTD003 intersected fresh chalcopyrite-rich massive sulphide, yielding 7.0 metres at 1.37 grams gold per tonne, 3.46% copper and 13.29 grams silver per tonne. This is extremely important as it indicates the presence of high-grade primary massive sulphide mineralization. Other primary sulphide mineralization intersected includes 13.9 metres at 1.17 grams gold per tonne, 2.67% copper, 3.42% zinc and 21.57 grams silver per tonne (hole 09HTD005 - from 77.0 metres depth).

Nefasit Concession
Five diamond drill holes totalling 513 metres were also drilled to test VMS potential on the Nefasit prospect approximately 20 kilometres to the east-southeast of Terakimti. Two holes intersected significant zones of massive sulphide, indicating the presence of a second target with potential to yield significant VMS mineralization. Peak results from two holes drilled 470 metres apart include:

• 3 metres at 1.41 grams gold per tonne, 2.34% copper and 22.68 grams silver per tonne in hole 09HND004 - from 52.15 metres depth; and
• 3 metres at 1.13 grams gold per tonne, 0.68% copper and 5.42 grams silver per tonne in hole 09HND001 - from 71.93 metres depth.

Drilling at Nefasit is in its infancy and detailed work is expected to be conducted to locate targets associated with the proven massive sulphide system.

2011 Program
Canaco has commenced a dynamic exploration program aimed at defining drill targets at both Terakimti and Nefasit, whilst regional exploration is also accelerated (see the Company's August 31, 2010 press release for information on other concessions). Exploration under way or planned for the near future includes gravity and micro-gravity (2,800 stations planned as a first pass), 50 line kilometres of time domain electromagnetic ("EM") survey, detailed Niton handheld XRF-based soil-geochemical sampling over principal targets and all known gossan occurrences across all concessions, one metre topographic contour generation and acquisition of high-resolution Quickbrid stereo photos, and reprocessing airborne EM over the southern half of the concession areas. This exploration work is directed toward targeting drill holes to maximize the chance of success and allow rapid advancement of the project.

The closing of the Harvest acquisition is pending the execution of transfer documents by Ezana Mining Development, the owner of the other 30% of the project, and final acceptance from the TSX Venture Exchange.

Once the Harvest acquisition is complete, Canaco will consider options for maximizing the value of the acquisition for Canaco shareholders, including the possible spin-out of its Ethiopian assets into a new public company. The spin-out strategy is expected to 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 is expected to be listed on the TSX Venture Exchange. The Company is currently pursuing legal and tax advice as to the exact procedures it will undergo to achieve the spin-out in the most expeditious manner with the least onerous tax consequences possible. Any spin-out transaction will be subject to Board, shareholder and regulatory approvals.

Quality Control
The planning, execution and monitoring of Canaco's quality control programs at the Harvest project are under the supervision Jeff Heidema, P.Geo, Canaco's VP 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. 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 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 throughout Africa, Canaco is well positioned to build shareholder value through discovery and resource development.

Canaco's shares are listed and posted for trading 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.