Bayhorse Silver, Annual General Meeting Shareholder Update (BHS-TSX:V)

Dear Bayhorse Shareholders and Investors.

As CEO of Bayhorse Silver Inc, I wish to bring you up to date on the Company’s affairs as we near our Annual and General Meeting, to be held on July 28th here in Vancouver.

Why are we pushing forward with the Bayhorse Silver Mine during these difficult financing times?…To Get Immediate Realizable Cash Flow So Our Shareholders Can Benefit.

Do you know of any mine in the world right now that can commence mining for so few dollars, and achieve cash flow in such a short time, except for the Bayhorse Silver Mine. We don’t.

Jim Cramer of thestreet.com has just issued a report (read here) stating silver is going to rally and Steve St. Angelo from the SRSrocco Report states there is extreme tightness (read here) in the silver market, so if Mr Cramer and Mr St. Angelo are correct, any increase in the spot silver price is a bonus for us.. Why?

Because we believe we can establish immediate cash flow at current silver spot prices, at very little cost to the Company, by conducting our planned bulk sample program.

Once we complete the adit safety work, that will take 17 days and US$150,000 to complete, we should immediately be able to commence continuous bulk sampling operations at the Bayhorse Silver mine. Our expectation is to mine the bulk sample at 100 tons/day at an anticipated average grade of 17 – 20 ounces/ton gross silver content At today’s current spot price of $15.50 this gives a gross rock value of $26,350 – $40,000 per day not considering processing losses.

The Bayhorse mine closed in 1984 solely due to low silver prices. It is a high grade mine, with demonstrated bonanza grades, as shown by our recent assay of a rock chip sample of 4,835 ounces/ton silver at the mine.

The Bayhorse mine data that we have developed over the past year and a half is consistent with both the the historic records, and in the 1984 mining records. As reported in our National Instrument 43-101 report there is a historic estimate of 160,000 tons of 17 – 20 ounces per ton silver at a 7.5 ounce cut off (Herdrick 1981) for approximately 2,800,000 to 3,200,000 gross ounces silver. This is adequate for a six year operation at 500,000 ounces per year operation.

Additionally, according to the 1984 records and maps of Silver King Mines, they had blocked out approximately 1,890 tons ready to mine before closing down due to very low silver prices. We believe that with the planned bulk sampling program we can ship from the property material containing between 300,000 to 500,000 gross ounces of silver per year.

We have demonstrated through our dense media separation testing program that we can create direct shipping material grading 130 ounces per ton silver or better, with a reduction in waste of up to 8 times. Even at today’s silver prices of approximately US$15/oz, 130 ounce per ton rock would have a gross silver value of approximately US$2,000/ton. We are permitted to take off the property up to 15,000 tons per year. However, we anticipate shipping only 3,900 tons of upgraded material in the next 12 months at 130 ounces/ton or better for a projection of 500,000 gross ounces. We are continuing to refine our understanding of costs and upgrading methods to increase our confidence in our numbers for the bulk sampling program.

We do not have to install prohibitively expensive processing equipment to bring the mined material up to direct shipping grade, nor do we have to spend millions of dollars to re-open the mine (only approximately US$150,000). We have identified buyers to take and pay for any direct shipping material we produce. We be in a position to commence the bulk sample within 30 days from completing C$200,000 of the debenture funding.

On the Saskatchewan Oil prospects…

We believe any success by Saturn and Jaguar from their first new oil well should also on their Bannock Creek project should also have a significant positive effect for Bayhorse, due to our farm-in with Saturn on their adjacent Little Swan project.

Jaguar Minerals, Saturn’s JV partner on their Bannock Creek project, has recently announced that they have funding committed to drill four, and up to ten, oil wells, at Bannock. This includes re-drilling in the vicinity of the first well the was drilled and lost two months ago before reaching target. According to Jaguar, the first well of their bew program is to be drilled during July, sooner than anyone thought.

On Financing…

Being able to fund the Company during these trying times is clearly on everyone’s mind. How are we going to do it?

With the continuing weakness in the Resource Sector we have been keeping our G&A costs as low as we can, however we do need to fund these G&A costs. No company however can survive these tough times without being able to fund operations, so in any financing, we must make the financing terms attractive enough for the subscribers without unduly issuing too many shares and creating substantial dilution. We have announced a 2,000,000 Unit financing at $0.06 cents for $120,000. We have closed 1,000,000 Units, of which I personally subscribed for 800,000 Units.

To fund the bulk sample we have announced a $500,000 silver-convertible debenture with a 2 year term at 12% compounded annually. This carries the option to convert principal and interest into shares of Bayhorse, or, alternatively, on notification of commencement of the bulk sample, to convert into ounces of silver, or the cash equivalent, at US$16.50 per ounce. (Due to the continuing weakness in silver prices, we may amend the terms of this debenture to make it more attractive for subscribers.)

In the event that Saturn and Jaguar are successful in drilling an oil well at Bannock Creek, Bayhorse should substantially benefit share price wise, that should help in closing the funding for both the silver mine and also for ongoing funding for development work at the Little Swan project.

On a successful implementation of the bulk sample, we can also fund the Company from the sale proceeds from the mine bulk sampling program, with minimal future dilution to the Company.

We have maintained our low float, having only 26 million shares out as of this writing, in spite of the market difficulties.

With prospective cash flow in US$ Dollars and much of our G&A in Canadian dollars, we anticipate being able to grow the Company, avoid dilution, and bring added value for our shareholders, ensuring that we can proposer during these difficult times.

In closing, I ask you to register your votes for the Annual General Meeting, and I thank you for your continued support and hope to see you at there.

Graeme O’Neill

CEO, Bayhorse Silver Inc.