Canaco Provides Update on Magambazi and Corporate Development

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 31, 2012) - Canaco Resources Inc. (TSX VENTURE:CAN) ("Canaco" or the "Company") provides an update on the status of the Magambazi project in Tanzania and corporate activities.

On May 15, 2012, Canaco announced an initial mineral resource estimate on the Magambazi project which included indicated mineral resources of 15.2 million tonnes grading 1.48 grams per tonne gold and containing 721,300 ounces, as well as inferred mineral resources of 6.7 million tonnes grading 1.36 grams per tonne gold and containing 292,400 ounces. (Refer to the Company's news release date May 15, 2012.) Based on this, Canaco is proceeding with a preliminary economic assessment (PEA) at Magambazi, which will use key information collected to date to evaluate the project's economic viability. The PEA is expected to be complete in the fourth quarter of 2012 at a planned cost of approximately $5 million.

President and CEO, Andrew Lee Smith, said: "We believe the Magambazi resource represents an opportunity to add value to the Company and we are therefore continuing with the PEA in order to fully understand the economics of the project. The PEA will analyze and estimate capital and operating costs as well as mine design and a preliminary production schedule. This information will allow us to determine next steps for the project."

Canaco is in a strong financial position, with $95 million cash on hand and no debt. Mr. Smith said: "We believe Canaco's solid cash balance gives the Company a strategic advantage in this market. We have embarked on a comprehensive strategic review of our business and are evaluating a range of acquisition and exploration opportunities to leverage the balance sheet to create value. Throughout this process, while we work to complete the PEA and evaluate corporate development opportunities, preservation of capital will be top priority. Exploration drilling has been put on hold and all other spending has been curtailed, other than first pass ground exploration – including geological mapping, and rock, soil and stream sampling – which continues on our other exploration properties in the Handeni region. Other than the $5 million targeted for the PEA, the Company's planned expenditures over the next six months are expected to be approximately $6 million, subject to approval of fiscal 2013 budgets."

Additional information including press releases, interim financial statements and other public documents about Canaco can be viewed at the Company's website www.canaco.ca or at www.sedar.com.

Qualified Persons

The planning, execution and monitoring of Canaco's drilling and quality control programs at the Handeni project are under the supervision of Jeff Heidema, P.Geo., Canaco's Vice President Exploration. Mr. Heidema is a Qualified Person as defined by National Instrument 43-101. Canaco's mineral resource estimate dated May 15, 2012 was prepared in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Mineral Reserves, adopted by CIM Council, as amended. The mineral resource estimate was prepared by independent qualified person, Mr. James N. Gray, P.Geo., of Advantage Geoservices Ltd. In support of this work, drilling data validation and historical context was provided by independent qualified persons Mr. Ian Farrelly, P.Geo., and Dr. Sandy Archibald, P.Geo., of Aurum Exploration Services. Mr. Gray, Mr. Farrelly and Dr. Archibald are each independent of Canaco and are Qualified Persons as defined by National Instrument 43-101.

About Canaco

Canaco is a Vancouver-based mineral exploration company focused on advanced exploration projects in Africa. The Company has $95 million cash and no debt. 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; the expected timing, costs, and results of the PEA; the expected burn rate; 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 information contained herein, except in accordance with applicable securities laws.