Bayhorse Silver Announces US$, Net Revenue Participation, Convertible, Silver-Convertible, Debenture Offering

May 20, 2016 BHS2016-05

Bayhorse Silver Inc. BHS: TSX-V (the “Company” or “Bayhorse“) announces, subject to TSX-Venture Exchange (TSX-V) approval, a financing consisting of a three year Convertible, Silver-Convertible, Net Revenue Participation Debenture (the “Debenture”) for gross proceeds of up to US$2,000,000.

The Debenture shall bear interest at a rate of twelve (12%) percent per annum, payable bi-annually in arrears. Additionally, at the election of the Holders, the Debenture will be convertible into common shares of the Company at C$0.125 cents per share in accordance with the policies of the TSX-V, or, conditional upon notification by the Corporation of silver production, the Debenture holder may elect to convert the Debenture principal and accrued interest into ounces of silver at a conversion rate of US$15.50 an ounce.

The Debenture Holders (the “Holders”) shall also be entitled to a pro-rata payment representing an aggregate of 2% of net revenues from any silver production from the Bayhorse Silver Mine during the term of the Debenture.

The Company may, twelve months after the date of issue, elect to redeem the US$5,000 Debentures, in part or in full, at a price of US$5,600 per each redeemed Debenture, plus payment of all accrued amounts due in respect of the redeemed Debentures. Each Debenture shall entitle the Holder to twenty thousand Warrants the “Debenture Warrants”) exercisable into common shares of the Company at Canadian $0.25 per Debenture Warrant Share until three years from the date of issue.

Purchasers of the Debentures shall be granted pre-emptive rights during the time they hold the Debentures to participate in any future issuance of debt securities of the Company where the principal purpose of the financing is to mine and/or upgrade mineralized material to direct shipping material on any other patented ground properties it identifies, where it is permitted to do so under existing permitting exemptions.

Proceeds are for adit rehabilitation and mine up to 5,000 cu/yds (approximately15,000 tons) from the historic Bayhorse Silver Mine workings. As reported in the Company’s news release BHS2014-01, two samples taken at the adit contained 150kg/t (330lb/t) and 80kg/t (176lb/t) of silver respectively. The adit safety work is to access a mineralized zone reported to be 85 feet in width, approximately 840 feet in length, with an average thickness of approximately 22 feet, and is reported to contain 160,000 tons with an historic estimated grade of 17-20 ounces of silver/ton at a 7.5 ounce per ton cut off (Herdrick 1981, see Company’s National Instrument 43-101 report dated February 2014 and news release BHS2015-10, February 2015). Proceeds are also for the planned drill program at the Bridging the Gap Project in Idaho’s highly prolific Silver Valley.

The Company advises that a qualified person has not done sufficient work to verify the historical estimates nor classify the historical estimates as current mineral resources or mineral reserves and the Company is not treating the historical estimates as current mineral resources or mineral reserves.

In addition to any other exemption available to the Company, participation in the Debenture financing is also open to all existing shareholders, even if not accredited investors, under the “existing shareholder” exemption of National Instrument 45-106 as promulgated in Multilateral CSA notice 45-313 in participating jurisdictions. Finder fees may be payable on a portion of the financing according to the policies of the TSX-V.

The Debenture announced August 6, 2016 was completed May 10, 2016.