Third Quarter Update
(Ended September 30, 1997)

Letter To Our Shareholders

Canarc continued with its New Strategy, post Bre-X, to conserve its working capital and accelerate discussions with major mining companies to joint venture several of Canarc's properties.  As a result of that focus, Canarc successfully closed two joint ventures; with Cyprus Amax Minerals on the Kwitaro property in Guyana, South America, and with Rio Tinto Mining on our Gatec and Hatec properties in Indonesia.  Should Cyprus Amax and Rio Tinto completely vest their interests in these two agreements the cash payments and work obligations would total in the US$10's of millions to Canarc, including US$9 million within the next 4 years. Management anticipates further JV announcements in the 4th Quarter of 1997. 

NEW POLARIS (B.C. 100% CANARC) 

In July Canarc reported its best drill intersection to date at New Polaris, returning .42 oz/ton gold over 112.2 ft. core length.  The Company was pleased to report that the B.C. Government's Environmental Assessment Office (EAO) has accepted Redfern Resource's Project Report for their Tulsequah Chief Property.  This is a major step forward in Redfern's mine permitting process and should favorably impact Canarc's permitting process for the New Polaris property which is located adjacent to Redfern's Tulsequah Chief project in northwestern British Columbia. 

A summer break in activities at the mine site has allowed our geologists to compile the data from our recent drill program.  A detailed, computer-based resource model is now being assembled that will identify the key remaining areas for infill drilling to develop mineable reserves in the next drill program.  Environmental, native and engineering studies also continued during the quarter. 

SARA KREEK (80% CANARC) 

The Company was pleased to announce an increase in gold production at the Sara Kreek mine in South America.  For the first six months ending June, 1997, raw gold production totaled 2,051 oz., an increase of 412% over the same period for 1996.  Annual production for 1997 is now projected to exceed 4,500 oz., or double of last year's production of 2,200 oz. 

BENZDORP (80% CANARC) 

Continued bulldozer trenching has extended the size of the large anomalies on the Benzdorp property.  The JQA bulldozer trench has now been extended a further 66 m east and is now grading .91 gpt over a 142 m width.  Additional augering on this 750 m long by 250 m wide gold porphyry target has confirmed that the mineralization is still open in all directions.  Additional trenching and augering on the JQS zone has also confirmed strong gold mineralization in saprolite which could very well be a southern extension of the JQA gold zone. 

The Company is in advanced stages of negotiations with several senior companies for the purpose of forming a joint venture to further develop the Benzdorp property. 

MANAGEMENT 

Management's focus on enhancing Canarc's cash position continues to be a priority.  The sale of some marketable securities, a consulting fee converted to shares, and employee layoffs are some of the steps management has taken to conserve cash.  We anticipate adding significantly to our working capital through additional joint ventures on our key projects. 

HIGHLIGHTS 

• Canarc intersects best drill hole ever at New Polaris - .42 oz./ton gold over II 2.2 feet
• Canarc options two Indonesian properties with Rio Tinto (RTZ:NYSE)
• Canarc options the Kwitaro property in Guyana with Cyprus Amax (CYM:NYSE)
• Additional trenching returned 0.91 gpt/gold over 142 m confirming an extension to the large gold zones on Benzdorp concession
• A 412% increase in gold production totaling 2,051 oz. for the first half of 1997 at the Sara Kreek property

Sincerely, 
Robert Carriere 
Manager Investor Relations