Canaco Announces Revised Six Month Budget and Grants Options

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 7, 2012) - Canaco Resources Inc. (TSX VENTURE:CAN) ("Canaco" or the "Company") is pleased to announce its Board of Directors has approved a revised budget of $3.5 million for the six months ending December 31, 2012, reduced from $11 million as previously announced (refer to the Company's news release dated May 31, 2012).

In regards to this news, Canaco President and CEO, Andrew Lee Smith, commented: "Steps have been taken to reduce company operating costs with the preservation of capital and advancement of project development as our top priorities. Canaco has strategic assets in the form of a $95 million treasury and the Handeni property, which provide capacity to create shareholder value in challenging resource markets. In parallel with ongoing engineering, the Board and management are currently evaluating a number of potential opportunities for strategic alternatives for growth."

As announced on August 2, 2012, Canaco has entered into a memorandum of understanding (MOU) with an arm's length third party, a Chinese gold producer, to create a joint venture to develop Canaco's Magambazi project in Tanzania. The MOU is non-binding and subject to certain conditions including, but not limited to, the completion of due diligence and a positive economic evaluation by the Chinese third party. "This agreement creates the possibility for the development of Magambazi to proceed without the requirement for financial contributions by Canaco during the earn-in period," Smith said. "In response to the potential development of a joint venture, management has taken the decision to defer the completion of a Magambazi PEA pending third-party economic evaluations, further reflecting our commitment to preserving cash in this market environment."

Ongoing engineering work at Magambazi will include the completion of environmental baseline reports along with flow sheet design and site plan development to continue advancing the permitting process and provide a basis for the completion of the PEA, if required.

The Board has granted an aggregate of 6,000,000 stock options to directors, officers and consultants pursuant to Canaco's Stock Option Plan. The options have an exercise price of $0.40 per share and an expiry date of August 3, 2017.

Additional information including press releases and public documents about Canaco 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 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; 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 information contained herein, except in accordance with applicable securities laws.