Casey Investment Alert # 389 – BYV, Take 3, & PEM

Dear Subscribers,

Bayfield Ventures (C$0.54, 40.3M SO, 58M FD, C$21.8M MCap, www.bayfieldventures.com)

HOLD or BUY ON WEAKNESS—Bayfield Ventures Corp. just announced a significant high-grade gold discovery on its Burns Block property in the Rainy River District of northwestern Ontario. The Burns Block is situated immediately to the east and on strike to Rainy River Resources’ (V.RR) multi-million ounce gold deposit.

Highlights:

• Significant high-grade gold discovery early in 20,000+ meter (50+ holes) diamond drill program
• Bayfield intersects 31.71 g/t gold over 3.0 meters within 12.88 g/t gold over 9.0 meters
• New high-grade gold zone intersected at a vertical depth of 160 meters
• The combination of the high grades and length of this gold intercept is one of the more notable gold discoveries in the Rainy River area, especially considering the shallow depth of the zone
• 8 additional holes completed; assays pending

Drill hole RR10-15 has intersected high-grade gold mineralization within the upper portion of a lapilli tuff unit from 190 meters to 199 meters down hole. The intercept totals 9.0 meters at 12.88 g/t gold and includes 3.0 meters of 31.71 g/t gold. The hole was collared to explore for the eastward extension of Rainy River Resources’ ODM17 gold zone. This extends the known mineralization previously encountered in exploration holes drilled by Rainy River Resources in 2008 and by Bayfield earlier this year.

The high-grade gold mineralization in drill hole RR10-15 is surrounded above, below and to the west by more disseminated gold mineralization identified in holes RR10-12, RR10-13, RR10-14 and RR10-16. These holes all encountered highly anomalous gold values ranging up to 55 meters thick within the known mineralized West Gold Zone. The gold values within the mineralized envelope range from 200 ppb to 1000 ppb. In hole RR10-15, low grade, disseminated gold mineralization occurs up hole and down hole of the new zone.

A Burns Block drilling exploration map can be seen at:

http://www.bayfieldventures.com/i/maps/BYV_Burns_Exploration_Map_July_2010.jpg

The geometry of the hole indicates that the high-grade gold zone is relativity shallow at 160 to 168 meters vertically below surface. Fine grains (to 3 mm) of visible gold occur in the highest-grade portions of the intersection (15 to 20 gold grains noted in the 195.5 to 195.75 meter interval). This mineralogical data strongly suggest that the intersection is not based on sporadic occurrence of very coarse gold but rather due to the presence of pervasive mineralization of microscopic gold within the entire zone.

Bayfield is referring to this new zone of gold mineralization as the 606 High Grade Gold Zone. Where intersected in hole RR10-15, the 606 Zone lies within the previously established West Gold Zone. Favorable comparison can be made between the 606 High Grade Gold Zone and the Bonanza grade gold zones recently discovered by Rainy River Resources immediately to the west. In both cases, high-grade gold zones occur within large zones of more disseminated gold mineralization. The combination of intercept grade, length, and depth of the 606 Zone would rank high on the list of all gold intercepts in the Rainy River district to date.

Based on the details of core logging of the gold zone in RR10-15, as well as logging results from surrounding holes, Bayfield believes the 9-meter interval in RR10-15 reported here is close to or at true width.

Our Take

We realize that we just called for taking profits, for those among us who had free-trading shares, but these results change the story significantly for the better. The first holes reported were along strike from the portion of RR’s mineralization most likely to continue into BYV’s Burns Block – no great shock to see that they hit pay dirt. This second area, the West Zone, was a bit more of a stretch, with commensurately longer odds against. Hitting an unambiguously great high-grade intercept in this new area, parallel to the area of the previous hits, makes the whole Burns Block look much more likely to have substantial gold resources of its own (not just the edge of RR’s ODM Zone).

That said, both these results and the preceding ones are very close to the property line. They extend RR’s mineralization and make BYV more likely to be taken over than ever, but they don’t establish a lot of tonnage on BYV’s ground yet.

We are seeking to arrange a field trip to have a closer look at the Burns Block and other BYV projects, and see if we can gain a better sense of the potential to develop resources.

Meanwhile, it seems unlikely that nature stopped depositing gold mineralization in both zones right where these two companies would, in the future, have a property line. We suspect we’ll see some more good news soon – and that should generate a lot of excitement for this tiny MCap company.

And, even if there is to be a big market correction that knocks these shares back, that will just be an obvious opportunity for BYV to get bought out, which should drive the share price back up again.

In short, this play is looking much better than just a few days ago, and more likely than ever to get taken over – as close to a sure thing in this business as you get.

Consequently, we’re feeling much less sense of urgency to recover our initial investment, and may even recommend this stock to subscribers of the International Speculator in next month’s issue, if the stock doesn’t get too expensive before then. That would be good news for those of us who have still-restricted stock from the private placement we recommended. (Those shares will come free trading on the first of September.)

What if you took profits already? That was the way to play the odds at the time, and may still work out for the best, as there’s no guarantee the next assays won’t kill off the possibility of extending BYV’s discovery much farther into the Burns Block. But if the stock gets cheaper again, as we’ve speculated before that it might, remember the takeover potential, and consider averaging down.