2nd Quarter Report to Shareholders

Vancouver, British Columbia, Canada,
September 5, 1997

Vancouver, British Columbia, Canada, September 5, 1997.....Canarc Resource Corp. is pleased to announce its Quarterly Report for the period ending June 30, 1997.

HIGHLIGHTS

• Underground drilling at New Polaris intersects best hole ever grading 0.42 oz./ton gold over 112.2 feet in C1 Zone.
• Trenching and drilling at Sara Kreek identify additional high grade gold mineralization at Breakfast prospect (7.0 gpt over 13.5 m and 13.6 gpt over 10.0 m)
• Trenching at Benzdorp confirms large, low grade gold JQA prospect (1.2 gpt over 62.0 m) and augering intersects high grade gold in JQB prospect (43 gpt over 4.0 m).
• Mr. Walter Riva is a newly appointed Director to Canarc's Board. Management has implemented measures to preserve working capital and to joint venture Canarc projects with senior partners.

INTRODUCTION
Canarc continued to generate excellent exploration results on several properties in the Second Quarter ending June 30, 1997.

However, the Bre-X fiasco and other unfortunate scandals have depressed the junior mining sector to such an extent that management felt it important to change our strategy in order to reflect this new reality.

As a result, we initiated joint venture discussions with major mining companies on several of our key projects. Our first success is the joint venture of two of our C.O.W.'s in Kalimantan with Rio Tinto, announced subsequent to the quarter end.

We expect to attract senior partners into joint ventures on other key properties in coming months. That would expand Canarc's exposure to continued exploration success, while preserving Canarc's working capital.

NEW POLARIS (B.C. 100% Canarc)
The Company announced its best drill intersection ever at New Polaris in early July. Drill hole PT97-44 returned 0.42 oz/ton gold over a 112.2 foot core length. Several other high grade intercepts from infill drilling were also reported.

Subsequent to the end of the Second Quarter onsite drilling took a break to allow the latest drill and underground sample results to be compiled and added to the computerized resource model.

Joint venture discussions accelerated in July so management has elected not to aggressively continue the infill drilling at this time, in keeping with our new strategy to conserve cash and fund exploration through joint ventures. Confidentiality agreements have been signed by several large companies. Management is optimistic that a suitable partner will be selected to continue the feasibility program shortly.

SARA KREEK, SURINAME (80% Canarc)
Additional trenching and drilling returned significant new high grade gold assays in the Breakfast and Parbo prospects, including 7.0 gpt over 13.5 m and 13.6 gpt over 10.0 m. Confidentiality agreements have been signed by several major companies and due diligence is now underway.

BENZDORP, SURINAME (80% Canarc)
New trenching confirmed the large low grade nature of the JQA prospect (1.2 gpt over 62.0 m). As well, new augering in the JQB prospect located additional high grade gold mineralization (43 gpt over 4.0 m). Confidentiality agreements have been signed by a number of major companies and due diligence is now underway.

MANAGEMENT
In order to enhance Canarc's cash position, management initiated several cost-saving measures during and subsequent to the quarter end. Employee layoffs reduced our head office costs, a consulting fee was converted in part to 208,000 shares at $2.00 per share and some marketable securities were sold for cash. We anticipate adding significantly to our working capital through additional joint ventures on our key projects.

FINANCIAL
On June 30, 1997, Canarc had cash and equivalents of US$1.25 million. The three month loss of US$1.2 million includes a write-down of US$600,000 on our Indonesian properties.

Canarc Resource Corp. is a growth-oriented, international gold exploration and mining company with active projects worldwide. Major shareholders include Barrick Gold Corp. and Echo Bay Mines Ltd. The Company's common shares trade under the symbol "CCM" on the Toronto Stock Exchange as well as on the following exchanges: Vancouver: Vista-CCM, Frankfurt: Third Market Segment-CAN, Berlin: Over the Counter-CAN, NASD: Electronic Bulletin Board-CRCUF.