Canaco Resources Ltd. - Powderhorn Exploration Update.

WEST VANCOUVER, B.C.--(BUSINESS WIRE)--Dec. 9, 1998--Mr J. Malcolm Bell, President, reports that analysis of the results from the diamond drilling and exploration program at the Powderhorn Lake project, near the Buchans Mine area in Newfoundland, is nearing completion.

The project recently underwent exploration to test magmatic-style nickel mineralization present in the claims area. Exploration work also included geological mapping and sampling which uncovered a new area that hosts promising copper & zinc mineralization.

The property has been found to host two intrusive-related mineralizing environments, the Twin Lakes mafic complex and the Dawes Pond Granite, which have given rise to two distinctly different mineralizing systems within the 15km long, 2-4km wide belt of metasedimentary rocks encompassing the property. Surface trenching and shallow diamond drilling to examine localized occurrences of nickel mineralization and nearby electromagnetic ("EM") conductors determined that the three sample conductors tested were caused by strong sulphide/graphite mineralization within the metasedimentary rocks. Many other pulse EM conductors remain untested. The low-grade nickel values returned by the shallow diamond drill holes were associated with gabbroic dykes containing various-sized xenoliths of the overlying metasediments.

The second style of mineralization on the property has been located through geological mapping and sampling in a new area covering the northeast section of Powderhorn Lake. Two main mineralized zones, separated by a 0.7 km strike distance involving opposite sides of the lake, show significant concentrations of zinc mineralization (sphalerite) and copper mineralization (chalcopyrite). This second style of mineralization, associated with intense metasomatism in the paragneisses, consists of wide-spread alteration and mineralization in outcrops and intervening frost-heaved float and sub-outcrop material occupying a 5.6 km area around the northeast shore of the lake.

Assays of former prospector samples from these sites, combined with those recently collected by Canaco Resources Ltd. during its geological mapping program, have produced results of up to 4.5% Zn, 2.14% Cu, 1.2 g/t Ag and 1.2 g/t Au for the northern occurrence, and up to 2.5% Zn, 0.5% Cu, 10.3 g/t Ag and 250 ppb Au for the southern occurrence. Reconnaissance soil and float sampling by the vendor prospectors in 1996 across the general north-south strike of this zone yielded a coincident trend of elevated Cu, Zn, Au and Ag geochemical values, indicating a possible 2 km further strike extension to the mineralization. Assays were performed at Eastern Analytical Labs, Springdale Newfoundland.

For information please contact:

J. Malcolm Bell, President Anwar Badshah, Corporate Communications Toll-Free: 800/670-8086 Email: [e-mail] Web Site: www.canaco.ca Phone: [phone] Fax: [phone] Toll-Free Information Line: 877-4CANACO