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Canada Gold Signs Letter of Intent for Tanzanian Project #3; Amends Letter of Intent for Project #2 Increasing Land Position to 1,992 km2 Over 12 Prospecting Licenses in Northeastern Tanzania

Vancouver, British Columbia, Canada – December 7, 2011 - Canada Gold Corporation (TSX-V: CI, Frankfurt: T9NB, OTC-BB: CNGZF) ("Canada Gold" or the "Company") announces that it has entered into a third Letter of Intent for Project #3 to acquire a 100% interest in one prospecting license comprising 30.69 km2, approximately 25 kilometers west of Canaco Resource Inc.'s ("Canaco") Magambazi Hill discovery area, and adjacent to Douglas Lake’s Handeni gold project. In addition, Canada Gold has amended the letter of intent for Project #2, dropping 2 licenses totaling 55.23 km2, southeast of Canaco and adding 2 licenses totaling 234.9 km2 to the west of Canaco and contiguous to the Company’s Project #3. There is no additional consideration for this amendment to Project #2 and all compensation remains the same as reported in the Company's news release of November 22, 2011.

With these deletions and additions, Canada Gold currently has options on approximately 1,726.59 km2 contiguous prospecting licenses, located approximately 40 kilometers north of Canaco, and will have approximately 265.59 km2 contiguous prospecting licenses starting approximately 25 kilometers west of Canaco’s discovery zone.

The consideration for the acquisition of Project #3 is cash payments totaling US $350,000 over 26 months. The vendor retains a 2% net smelter royalty of which 1% can be purchased at any time prior to commercial production for US $1,000,000. There is no share consideration nor is there any work commitments.

*Non-refundable unless licenses are invalid, under dispute or not as represented.

Notes:

• Vendor will retain a 2% net smelter royalty in which Canada Gold can purchase 1.0% for US $1,000,000 any time prior to commercial production;
• This 100% acquisition by Canada Gold is strictly cash, no shares are to be issued for consideration and no work commitment is applicable;
• Canada Gold retains the right to be the sole operator of the project at any time after TSX-V final approval and the issuance of payments of the first US $150,000.

With respect to Project #3, Canada Gold retained the services of Scarab Environmental and Geological Enterprises of Namibia to provide an independent geological report concerning the geological setting and potential for gold mineralization. Scarab’s report, dated December 4, 2011, states that Project #3 is located "within the Mozambique Mobile Belt, it being a potentially overprinted Greenstone-hosted gold terrane and the similarity in geological setting to that of nearby Canaco Resources' Magambazi Hill Project as well as Douglas Lake's adjacent Handeni Gold Project, generating significant potential for further exploration. In addition, a value of 31.9 ppm (AU) (or 31.9 grams per ton) from grab sample A2060 (metasediment), retrieved during a recent field visit of NS (Nico Scholtz, a qualified person under NI 43-101) further enhances the exploration potential".

These samples were manually obtained by Scarab, following International Standards, prepared by SGS Mwanza, Tanzania and assayed by SGS South Africa. Scarab also investigated regional airborne, as well as locally derived airborne geophysical data (from Douglas Lake Minerals, Howard, 2011) and generated two major target areas based on structural setting (predominately NE-SW shear zones), mapped geology and sample assay results. Canada Gold has initiated a due diligence program which includes additional mapping, 5 kilometers of trenching along the shear zones and sampling, with results expected by the end of January 2012.

Pursuant to the amendment of the letter of intent for Project #2, Canada Gold has determined that, by cancelling the two small license areas that were not contiguous and adding two larger license areas that are contiguous with Project #3, the Company will be able to better evaluate the structures and zones that appear to continue from Project #3. Canada Gold has initiated an independent, comprehensive technical report on both the northern and the western license areas covering the combined 1,286.33 km2 of which 1,051.43 km2 are contiguous to the Company’s Project #1.

Canada Gold has now signed a total of 3 letters of intent, comprising a total of approximately 1,992 km2 in Northeast Tanzania. As this land position is significant, Canada Gold will initiate additional due diligence as its Directors and Consultants deem appropriate for an acquisition of this nature. This could include additional interpretation of regional and available local airborne geophysics, conducting additional airborne geophysics, mapping, trenching, sampling and assaying of known geological structures so that a proper analysis and potential of these lands can be determined. Canada Gold is confident that this due diligence can be completed and all submissions to the regulatory authorities will be filed in the first quarter of 2012.

Additional information for viewing:

• An Area Map showing the locations of all the licenses in relation to other companies in the area
• The NI 43-101 report on Project #1
• The independent Geological Report dated December 4, 2011 detailing Project #3

The acquisition of the above prospecting licenses and the consideration payable are subject to TSX-V and regulatory approval, with formal agreements to act as part of the regulatory filing.

Mr. Paul Lemmon, P.Geo., FGS, Pri.Sci.Nat., Chief Geologist of the Company is a Qualified Person under NI 43-101 and has reviewed and approved the technical content of this news release.

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