Canaco Resources Ltd. to Acquire Chala Gold Project.

WEST VANCOUVER, British Columbia--(BUSINESS WIRE)--March 16, 1999--Mr. J. Malcolm Bell, President, is pleased to announce that effective as of March 12, 1999, Canaco Resources Ltd. (ME:CSE) has entered into a preliminary agreement (the "Acquisition Agreement") to acquire 100% of the outstanding and issued shares of Balkan Mineral Resources Ltd. (BMR). BMR was formed by a group of mining professionals in order to focus on mineral opportunities afforded by the move of Bulgaria to a free market economy and the anticipated liberalization of the country's mining laws.

The principle asset of BMR is an Agreement with the Bulgarian Committee of Geology and Mineral Resources which grants BMR a license to conduct geological research and exploration within an area of 700 sq. km in the eastern Rhodope Mountains of southern Bulgaria, approximately 30 km north of the Greek border. Within the exploration area lies the Chala gold deposit. Underlying remnants of extensive Roman surface workings, mineralization at Chala, is hosted within classic fissure-type, low-sulphidation, epithermal fissure veins and breccias. Bulgarian resource estimates as of 1st Sept. 1996, based on extensive surface and underground exploration since 1983, stated the deposit contains an equivalent indicated and inferred resource in the USBM System of 1.84 million tons averaging 7.2 g/t gold (Jakubiak 1997). Evaluation of Chala by BMR since January 1997, and supervised by a UK-based independent geological consultant has resulted in the identification of a number of bonanza grade gold shoots. The estimated resource calculated from raw assay results, indicate the following potential (Jakubiak 1997): -0-

          TONS             GRAMS /TON       OUNCES GOLD

ZONE 3    320,000             29.8           305,000
 Incl.    185,000             43.8           250,000

ZONE 4     85,000             18.1            46,000

ZONE 7    128,000              5.3            22,000

ZONE 8    305,000             11.4           112,000

TOTAL     838,000             18.1           485,000

This restatement of the Chala tonnages requires verification by further check sampling and additional drilling. Potential also exists to increase the resource base at Chala. Previous work by the Bulgarian Geological Survey, adjacent to the above resource at Zone 1A, estimated 550,000 tons at 8.8 g/t Au; however, these estimates cannot be accepted as part of the overall resource unless they are confirmed in future drilling. BMR is currently applying to convert the Chala exploration agreement into a mining lease with a 25-year term.

Previous exploration established that the gold mineralization occurs in northeast and east-northeast trending linear zones containing quartz filled fissure veins and breccias hosted by latites and controlled by splay faults branching off a 10-40m wide rhyolite dyke. The overall geometry of the Chala deposit has been reasonably well delineated by drilling and underground development. The geometry and structure of the mineralization at Chala will require underground mining and can be mined utilizing the existing seven levels of adit access. Mineralized widths are generally in excess of 2m, ranging up to 8m; wall rocks are competent, with no water problems anticipated, permitting open stope mining. Reported results of Bulgarian process test-work indicate that the mineralization is amenable to gravity separation and direct cyanidation recovering 90% of the gold.

Taking all the above parameters into consideration, a stand-alone mining operation at Chala is believed to be feasible at current gold prices (Jakubiak 1997). Canaco has commissioned Giroux Consultants Ltd. of Vancouver to examine the Chala data and the surface geology on site to produce a further independent resource estimate with recommendations for a feasibility study.

Regionally, within the limits of the 700 sq. km exploration area, the exploration potential is highlighted by a number of geochemical and geophysical anomalies. There appears to be at least two generations of hydrothermal mineralization. All known showings are situated within or in close proximity to massive bodies of advanced argillic alteration composed of alunite-quartz, kaolinite-dickite-quartz or quartz alone. These structures are surrounded by wider haloes of pervasive propylitisation. More than 20 regional targets have been identified by BMR on the basis of soil geochemical gold anomalies and known showings of gold and base metal mineralization.

The terms of the Acquisition Agreement provide for Canaco to acquire from the shareholders of BMR all of the issued and outstanding shares of BMR in consideration for the issuance to the BMR shareholders of 3,500,000 (post-consolidation) shares of Canaco. The Acquisition Agreement contemplates a June 10, 1999, closing date subject to certain closing conditions being satisfied, including Canaco completing an equity financing of not less than $2,000,000 (net) which funds would be used to fund the mineral exploration and development projects at Chala, Canaco implementing a consolidation of its shares on a "five old for one new" basis, the parties each completing a satisfactory due diligence review of the other party, the parties entering into a definitive agreement which would incorporate the terms of the Acquisition Agreement together with such other terms as are customary in transactions of a similar nature, and Canaco obtaining all necessary regulatory approvals.