Canaco Discovers New Gold Zone at Handeni-Drills 18 Metres Grading 3.3 Grams Gold Per Tonne at Magambazi North

13:12 EST Wednesday, January 27, 2010

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 27, 2010) - Canaco Resources Inc. (TSX VENTURE:CAN) is pleased to announce a new discovery from surface diamond drilling at Magambazi North, 800 metres northwest from Magambazi, on the 100% owned Kilindi license at the Company's Handeni Gold Project, located in the Handeni region of the United Republic of Tanzania.

Following the successful initial diamond drilling campaign at Magambazi (refer to our press releases dated October 6, 2009, November 3, 2009 and December 16, 2009), with best intersections of 56.2 metres at 6.43 g/t Au in MGZD0012, a diamond drilling program was initiated at Magambazi North, broadly along trend of the mineralized zones at Magambazi. The objective was to test the largest coincident gold and arsenic soil anomaly on the Canaco property.

To date, nine diamond drill holes (MGZD018 to MGZD020 & MGZ023 to MGZ028) totalling 1,325 metres have been drilled to evaluate targets at Magambazi North. Initial results from Hole 19 have indicated the presence of an extensive zone of alteration and gold mineralization, similar in nature to that at Magambazi, but dipping gently southwest, confirming that it is sited within a thrust zone. Subsequent drilling (holes 23 through 28) has continued to intersect broad intervals of strong sulphide mineralization and confirmed the continuity of the mineralized thrust zone at Magambazi North. The mineralized thrust zone has now been traced 140m along strike to the west and 200m down-dip and remains open in both directions. The drill program at Magambazi North is ongoing with assay results pending for drill holes 23 through 28. Holes 21 and 22 were drilled to intersect targets in Magambazi Central and will be reported separately.

TABLE 1 - Magambazi North Initial Drill Results

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                                        Au Grade
                              Interval        (2)
Drill          From       To        (1)   (grams/
Hole(3)     (metres) (metres)  (metres)    tonne)  Notes        Dip/Azimuth
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MGZD019          70       88        18      3.30   Mineralized  -50 degrees
                                                   Thrust      /237 degrees

           Incl. 70       78         8      5.68   Mineralized             
                                                   Thrust              

            And 100      103         3      3.04   -                       
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MGZD018          21     24.7       3.7      2.25   Mineralized  -50 degrees
                                                   Thrust      /340 degrees
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MGZD020          63     63.7       0.7      4.00   -            -90 degrees
                                                                 /0 degrees
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MGZD023          18       32        14    Assays   Mineralized  -55 degrees
                                         Pending   Thrust      /237 degrees

             And 54       75        21    Assays                           
                                         Pending                           
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MGZD024          64       72         8    Assays   Mineralized  -55 degrees
                                         Pending   Thrust      /237 degrees
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MGZD025          36       54        18    Assays   Mineralized  -55 degrees
                                         Pending   Thrust      /237 degrees

             And 75       83         8    Assays                           
                                          Pending                          
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MGZD026          95      105        10    Assays   Mineralized  -55 degrees
                                         Pending   Thrust      /237 degrees
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MGZD027         101      126        25    Assays   Mineralized  -55 degrees
                                         Pending   Thrust      /237 degrees
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MGZD028         180      189         9    Assays   Mineralized  -55 degrees
                                         Pending   Thrust      /237 degrees
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(1) Drill intercept lengths are down-hole lengths reflecting apparent
    widths of mineralization with true widths ranging between 60% - 100%
    of the reported down-hole lengths.
(2) The calculation of drill intercept employs a 0.3 gAu/t cut-off and no
    cutting grade for high gold values
(3) A drill collar location map can be found on the company's website,
    www.canaco.ca

Bedrock exposure is limited in the Magambazi North area, although an alteration zone in a small pit returned rock chip samples of 5 metres at 4.92 g/t Au (refer to our press release dated November 3, 2009). Importantly, this mineralized zone appeared to be located in a thrust zone that had a gentle (about 30 degree) dip to the southwest on a broadly east-northeast trend, similar to the trends of other structurally-controlled gold deposits further east in the Lake Victoria Goldfields. For example, the majority of the gold in the giant Geita gold deposit is hosted in an east-northeast trending thrust zone.

The Magambazi North prospect was originally defined by geochemical surveying designed to identify the source of large alluvial deposits found in river beds draining the immediate area. The results of the soil sampling program returned 33 samples greater than100ppb Au with a peak value of 1218ppb Au (1.22g/t Au). The Magambazi North anomaly is part of a 1.4 kilometre long trend of gold mineralization defined by bedrock gold occurrences, artisanal mine workings and soil geochemical anomalies. This 1.4 kilometre trend includes the Magambazi, Magambazi Central and Magambazi North targets (collectively known as the Magambazi prospects) and represents the southernmost segment of the 11 kilometre Handeni Gold Trend contained within the Company's Handeni property.

Further drill results at Magambazi have confirmed the down dip continuity of the gold mineralized zone. The mineralization remains open along strike and down dip and will be the subject of the second phase of the diamond drilling program scheduled for the first quarter of 2010 and will begin once the phase one drilling at Magambazi North is complete.

TABLE 2 - Magambazi Drill Results to Date - Recent Intercepts

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                                        Au Grade
                              Interval        (2)
Drill          From       To        (1)   (grams/
Hole(3)     (metres) (metres)  (metres)    tonne)  Notes        Dip/Azimuth
---------------------------------------------------------------------------
MGZD014          41       46         5      1.53   Upper Lode -61.5 degrees
                                                                /57 degrees
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MGZD015         149      154         5      2.10   Upper Lode   -73 degrees
                                                                /57 degrees

            And 200      210        10      2.76   Lower Lode              
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MGZD016         135      140         5      5.17   Upper Lode   -81 degrees
                                                                /57 degrees

          And 240.7      246       5.3      2.76   Lower Lode              

        Incl. 240.7    244.2       3.5      8.30   Lower Lode              
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MGZD017          94       99         5      3.06   Upper Lode   -81 degrees
                                                                /57 degrees
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(1) Drill intercept lengths are down-hole lengths reflecting apparent
    widths of mineralization with true widths ranging between 60% - 100%
    of the reported down-hole lengths. 
(2) The calculation of drill intercept employs a 0.3 gAu/t cut-off and no
    cutting grade for high gold values 
(3) A drill collar location map can be found on the company's website,
    www.canaco.ca 

The 2010 exploration program at the Handeni project is ongoing. The program will be multi-phased consisting of geological, geochemical and geophysical surveys combined with RAB, RC and diamond drilling designed to continue the development of the discoveries at Magambazi and Magambazi North and the assessment of priority targets along the 11 kilometre Handeni Gold Trend. An airborne magnetic survey is being initiated that will provide the Company with the ability map the magnetic responses associated with the alteration and mineralization at Magambazi and guide exploration.