The following analysis of the results of operations and financial condition of the company for the period ending May 31, 2008 should be read in conjunction with the company's financial statements, including the notes thereto contained elsewhere in this form 10-KSB. Our consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Discussion of Operations & Financial Condition

During the twelve months ended May 31, 2008 the Company recorded an operating loss of $327,828 as compared to an operating loss of $404,058 for the twelve months ended May 31, 2007, and recorded a net loss after other items of $376,307 as compared to a net loss of $97,937 for the twelve months ended May 31, 2007. This is a decrease in operating loss of $76,230 and an increase in the net loss of $278,370. The net loss represents $0.0182 per common share. The Company incurred $327,828 in operating expenses which consist mainly of: mineral property costs of $150,504 (2007 - $109,020), management and consulting fees of $72,000 (2007 - $113,746), investor relations of $21,918 (2007 - $68,137), commissions of $15,000 (2007 - $18,057) and professional fees of $31,332 (2007 - $41,482). The Company also recorded other items totaling $45,183 for the year ending May 31, 2008, which includes $47,655 in interest and bank charges and a gain on disposal of assets of $2,472. Conversely, the Company recorded other items in the year ending May 31, 2007 which reduced the net loss by $306,121. This included $82,161 in interest and bank charges less $388,282 for the writedown of old and invalid liabilities. The Company has not yet generated any revenues from its Mineral Exploration Program. Our ability to emerge from the exploration stage and conduct mining operations is dependent, in large part, upon our raising additional equity financing

Selected annual information

                                             May 31, 2008     May 31, 2007
                                            --------------   --------------
        Revenues                                       Nil              Nil
        Net Loss                            $      376,307   $       97,937
        Loss per share-basic and diluted    $         0.02   $        0.005
        Total Assets                        $      439,279   $      174,319
        Total Liabilities                   $      630,888   $      573,237
        Cash dividends declared per share              Nil              Nil

As of May 31, 2008, Gemco had total liabilities of $630,888 consisting of $38,322 in accounts payable and accrued liabilities, $66,429 due to shareholders, $205,771 in notes payable and $320,365 due to related parties. Liabilities increased approximately $57,651 from 2007 due primarily to the following: an increase in amounts due to related parties of $101,907 from a combination of amounts loaned to the Company as well as wages and expenses accrued less $86,547 of debt converted to 432,737 common shares at $0.20 per share; less $38,496 decrease in accounts payable and a decrease of $32,108 in shareholder loans.

Gemco's current assets at May 31, 2008, consisted of $3,277 in cash which decreased by $11,476 from $14,753 as of May 31, 2007. Total assets as of May 31, 2008 were $439,279 with Mineral claims recorded at $111,886, equipment recorded at $49,116 net of depreciation and investments recorded at $275,000 for a mortgage held on commercial property, as disclosed in note 3 of the financial statements.

Revenues
No revenue was generated by the Company's operations during the years ended May 31, 2008 and May 31, 2007.

Net Loss
The Company's expenses are reflected in the Consolidated Statements of Operations under the category of Operating Expenses. To meet the criteria of United States generally accepted accounting principles ("GAAP"), all exploration and general and administrative costs related to projects are charged to operations in the year incurred.

The significant components of expense that have contributed to the loss of $376,307 consists of mineral property costs, management and consulting fees, investor relations, commissions, professional fees and accrued interest on short term notes as mentioned above. These expenses were recorded primarily as accrued expenses as well as a combination of cash payments and an issuance of shares as disclosed in the Statement of Cashflows.

The Company's ability to emerge from the exploration stage to conduct mining operations on its mineral properties, and to develop and market its industrial abrasive products, are dependent in large part, upon our raising additional equity financing.

The Company is determined in its mandate to exploit its assets and will continue to pursue raising capital as outlined in its SB2 prospectus filing. The use the proceeds from the prospectus offering will primarily finance the drilling program for Burns Mountain and provide the necessary working capital to expedite our works program on the Mexican properties and develop and market its industrial abrasives.

Burns Mountain Mining Property

We are continuing our exploration program on the Burns Mountain Project. The objective of this geological exploration program is to determine and define gold deposits in order to provide a basis for the assessment of the feasibility of future additional exploration activities, including test mining activities, at the Burns Mountain Project. We plan to conduct further exploration of the Perkins Gulch and Fosters Ledge within the Burns Mountain Project.

Our planned geological exploration program is described further in the section of this Annual Report on Form 10-KSB entitled Description of Properties - Burns Mountain Project. The actual amount that we spend on exploration will depend on the actual amount of funds that we have available for exploration. We are presently seeking the sufficient financing to enable us to proceed with these plans and will require additional financing if we are able to proceed with further exploration plans.

Mexican Operation - 4 Amigos

Gemco is continuing its initial phase of geological works and testing to confirm the quantity and attributes of the ilmenite and magnetite minerals at the Gaudalupana 1 and 2 mineral property, internally referred to as the 4 Amigosmineral property. Such works described will be completed within the next quarter upon which Gemco will engage one or more independent qualified persons to prepare an in depth geological report to support project financing. The modified as exploration and testing results become available. Modifications to our plans will be based on many factors, including: results of exploration and testing, assessment of data, weather conditions, exploration and testing costs, the price of precious metals and industrial minerals and available capital. Further, the extent of our exploration programs that we undertake will be dependent upon the amount of financing available to us. We do not have any commercially viable reserves on any of our properties.

[[Image Removed: (MAP)]]

Figure 2: Location map of the Four Amigos Property in Baja California, Mexico.
(drafted by Michael Dawson, April 2007)

[[Image Removed: (MAP)]]

The property is under option from Minera Canamex, S.A. Gemco has incorporated a wholly owned subsidiary in Mexico, named Black Stone Industries S.A. de C.V., which will carry out all future business activities on behalf of Gemco in Mexico. Also, to note, in Mexico placer and mineral claims are one in the same and are said to be mineral. In order to maintain the property, semi annual tenure fees are paid to the Mexican Federal Government, and are paid in full by Gemco Minerals Inc. as required.

To date, there has been no mining conducted on the property, although basic exploration works have been conducted at the property by Gemco Minerals Inc. to confirm the presence of magnetite and ilmenite at the property. Equipment was rented for the digging of the test pits and no equipment or plant is currently owned by Gemco Minerals Inc for the purpose of exploration or proposed future mining activities at the 4 Amigos mineral claim. Further exploration activities are required. Future plans, besides extensive exploration of the ground, include the construction of a concentrating plant which could be powered by a 3-phase power line which runs through the property; although, it is more likely that the plant will be powered by a diesel gen-set.

No known geological reports exist for the property and no known mineral exploration activites are known to have been conducted at the property prior to Gemco Minerals Inc involvement. The property is currently in exploration stage and no known reserves exist at the 4 Amigos mineral claim. To date a total of $82, 880 has been spent in maintaining and exploring the property; and $80,000 is proposed to be budgeted for exploration works on the property in the coming year.

Expenditures on property to date:

           ITEM                                          COST ($USD)
           ------------------------------------------ - -------------
           Geological Assessment works and permitting   $      46,200
           Prospecting                                  $      27,260
           Equipment Rental                             $       3,300
           Technical consulting and sampling            $       6,120
                                                        -- ----------
                                                TOTAL   $      82,880

Other Mining Properties - Snowflake

Secondary to the Burn's Group hard rock property, the Company will also focus on establishing an exploration program on its newly acquired gold and silver property, "Snowflake", in Oliver, BC. The Company acquired a 66.6% controlling interest in the property last year, and has initiated a reconnaissance program at this time.

The Snowflake Property, registered with Mineral Titles as the Tom Group, presently consists of fifty six cells over four tenures and 1181.66 hectares of land which is located a few short kilometres northwest of Oliver, British Columbia. 100% owned by EKG Minerals Inc., the nearly 1182 hectares of contiguous mineral tenure is located entirely within NTS map sheet 082E/04 and is centred at approximately UTM Zone 11U 310500E, 5454500N (NAD 83). The operator at the property is Gemco Minerals Inc. The property lies within the Osoyoos Mining District's boundary.

The Snowflake Property is located on the eastern margin of the Thompson Plateau in the Okanogan Valley. Elevations at the property range from about 600 meters to nearly 900 meters above sea level. The terrain of the property consists of moderately steep to rounded bulbous hills with flat to gently sloped fertile grassland valleys. The natural vegetation of the this region consists of Ponderosa Pine, Douglas Fir, Bluebunch wheat grass as well as other lowlying brush and succulents.

[[Image Removed: (MAP)]]

Figure 3: Property Location Map for the Snowflake Property, near Oliver, BC, Canada.

DiSpirito (1988) generally describes the property geology as follows:

The general area... lies within the central part of the Okanagan Plutonic and Metamorphic complex. The oldest rocks on the property are the Carboniferous Kobau Group which comprises a great thickness of metamorphosed stratified rocks mainly of sedimentary origin. These include schists, gneiss, phyllites, quartzites, and greenstones. The quartzite members are thinly bedded and commonly micaceous or graphitic. The schists are usually fine grained, siliceous and arnicaccous, but others contain chlorite, hornblende, graphite, and talc. The associated greenstones are variously sheared. The Kobau Group forms a lenticular zone in contact with the Nelson Plutonic rocks to the south and with the Valhalla Plutonic rocks to the northwest.

Structurally, the rocks trend northwesterly in the area; however, crosscutting northeasterly faults and shears also occur. The dips are variable and the shearing is frequently contorted and drag- folded. Quartz veins and veinlets often occupy tension fractures.

Metamorphism and metasomatism are evident in the sheared metasediments and are considered to be favourable host for gold- bearing, quartz-filled vein zones.

The 2007 reconnaissance exploration project at the Snowflake Property concentrated on these known gold bearing, silica rich veins while in search of new prospects.

DiSpirito (1988) goes on to explain the deposit types and mineralization as follows:

The ore deposits of the Fairview Camp occur in three ways:

1. quartz veins in schists conforming closely to the strike and dip of the schistosity
2. quartz veins in the schist crosscutting the schist in dip and strike
3. quartz veins emplaced in the granite which do not have an apparent general direction of dip and strike.

The third type of deposition is predominate on the Claims examine for this report. These Veins range from near horizontal to subvertical within relatively short distances. Several veins in the granitic rocks are fairly persistent (60 meters or more) along strike.

Examples of veins within the Valhalla Plutonic rocks ("Oliver Granite") are the Susie and Standard Mines ... The Susie vein consists of a wide, flat-lying vein striking near the shaft at approximately N 10 degrees E and dipping about 25 degrees SE. The apparent width of the Susie vein, where exposed, ranges from 3 to 4.6 meters.

The past-producing Standard Mine ... quartz vein ... is hosted by the "Oliver Granite" and strikes approximately N 40 degrees E and dips 65 degrees to the southeast. The gold and silver occur along small fractures within the quartz vein which varies in thickness from 0.8 to 1.5 meters.

Mineralization within the Fairview Camp consists of pyrite, galena, sphalerite, lesser chalcopyrite, hessite (silver telluride), and gold hosted in quartz veins. The geometry of the deposits has been complicated by dykes and faults which offset the veins.

EKG Minerals Inc. Snowflake Property occurs in the historic region of the Fairview Mining Camp. Just to note, the Annual Report to the Minister of Mines in 1890 states that Fairview was once called new camp Okanogan. Lode gold and silver exploration and mining began in this area in mid to late 1800's and dwindled down by 1906, according to the historic information found on the Fairview monument at the old Fairview townsite, located south of the EKG Minerals Inc. Snowflake Property. More local to the property, the BC Ministry of Energy, Mines and Petroleum Resources MINFILE report on the old Standard Mine, on the southeast portion of the property, is described as follows:

Little is known about the discovery and early history of the Standard occurrence. By 1934, the Standard occurrence was part of the Empire claim group consisting of the Empire (Lot 611) (082ESW093), Standard, Monarch and others. The claim group was owned by a Vancouver syndicate. Early workings consisted of a 12-metre opencut exposing a quartz vein. The Standard occurrence and surrounding area were sampled extensively between 1961 and 1962 by Nor ex Mines Ltd. and Continental Consolidated Mines Ltd. Development work during this period consisted of several shafts, three adits (Nos. 1 to 3) and four diamond-drill holes at the end of the No. 2 adit; production was from the No. 2 adit. In the late 1970s the property was restaked as the Snowflake claim by B. Hegan and an option granted to Vermillion Resources Corp. In 1984, Vermillion Resources Corp. conducted exploration at the Standard occurrence that included 5 drillholes totalling 262 metres in the first phase and five holes totalling 330 metres in the second phase. Subsequent to diamond drilling, an electromagnetic survey was carried out but results were inconclusive. In 1986, Silver Saddle Mines Ltd. optioned the property. Two drillholes, geochemical soil sampling and another electromagnetic survey were carried out but the results only partially released. Millenium Resources Inc. optioned the property in 1987. Their program consisted of underground geological mapping and 610 metres of diamond drilling in ten holes.

The former Susie mine is located 1.0 kilometre east of Burnell Lake and 4.75 kilometres northwest of Oliver, British Columbia. The Susie claim (Lot 1917) was discovered and staked by G.A. Guess prior to 1901. In 1901, the claim was Crown granted. Approximately 363 tonnes of ore are reported stoped from surface outcrops in 1911. From this, 6.34 tonnes of hand-sorted ore were shipped to a Tacoma smelter. By 1913, three shafts and numerous opencuts and surface stripping exposed or intersected a 1.2 to 12.2 metre wide quartz vein. By 1922, the property was owned by Federal Mining Co. The Susie claim group now consisted of the Susie, Banker, Federal and Agricola claims. A 61-metre tunnel was developed on the Federal claim. A 4.57-metre wide quartz vein was intersected. The vein strikes north. The vein was also traced on surface by several opencuts, surface stripping and diamond-drill holes. Further underground development was carried out on the Susie, in 1923. Between 1932 and 1934, the Victoria (Oliver) property, adjoining the Susie Group to the north, was developed by several opencuts and an adit. During this time, 27 tonnes of ore yielding 560 grams of gold and 1430 grams of silver was shipped. In 1934, the Susie claim group had expanded and consisted of the Susie, Oakville, Federal, Banker, Agricola, Grey Gables and Tres Hermanos Crown-granted claims. The following year, ownership was changed to the Federal Mining and Smelting Co. On the Susie claim, a new low-level adit was developed and 853 metres of drifting and crosscutting was done. Various lessees have worked this property between 1960 and 1976, when most of its production occurred. In 1987, Highland Valley Resources Ltd. conducted an extensive exploration program on the Susie and Stemwinder (082ESW007) properties. Work on the Susie property was limited to detailed rock sampling of favourable quartz vein sections on all three underground levels and quartz vein outcrops near the decline portal.

Further to the above mentioned, the Snowflake Property also holds some potential for its uranium; however exploration for uranium is not being conducted.

The Snowflake Property was acquired by EKG Minerals Inc. from Ken Burke in February 2005. The 1025 hectare Snowflake, Snowflake #2 and Snowflake #3 mineral claims were converted to cells in March of 2005. In July 2006, the tenures were abandoned, restaked and renamed the 'Tom' group. To date, EKG Minerals Inc. has conducted minor grassroots exploration activities at the property with Gemco Minerals Inc as operator. In 2007, 3.18 line kilometers of grid was established near Burnell Lake and 2.19 line kilometers of self potential geophysics was conducted, in addition to reconnaissance prospecting and sampling of the overall property. To date, Gemco Minerals has spent a total of $6758.99 in direct exploration on the ground; and an additional $7,000 is proposed to be budgeted for exploration works on the property in the coming year.

Expenditures on property to date:

            ITEM                                          COST ($USD)
            ------------------------------------------ - -------------
            Field Crew including mob/demob and lodging   $     4422.89
            Geochemical Assays                           $      455.85
            Equipment Rental and fuel                    $      980.25
            Technical Report                             $      900.00
                                                         -- ----------
                                                 TOTAL   $     6758.99

Other Mining Properties - Hawk and Joytown Placer Claims

Gemco Minerals Inc also hold 100% placer rights to two placer lease of placer mineral (LPM) claims in the heart of the Barkerville Gold Belt of the Cariboo Mining District. The Hawk LPM is located about 5 kilometers east of Wells, BC and is accessible by travelling north approximately 3 kilometers along the Bowron Lake Road, a hard pack gravel road which intersects Highway 26 at the Barkerville Airstrip. The Joytown LPM is located about 20 kilometers southeast of Wells, BC and is accessible by travelling south along the 3100 Road (which also starts at the Barkerville Airstrip) to the 31X Road where a right hand turn will guide towards the 'N' Road, the road which accesses the western extremity of the property. The east side of the property can be accessed along the 'Yanks Peak Trail' from the 31X Road.

No equipment or infrastructure exists at either of the properties, except for a small work shed located at the Hawk property. No power is located at either of the properties and water, at both properties, is in abundance.

In British Columbia, a lease is defined as a production tenure for mining. A claim allows the holder to explore and develop the mineral or placer mineral resource, and contains a production limit for mineral claims of 1000 tonnes of ore in a year from each unit in a legacy claim or each cell in a cell claim, and for placer claims of 2000 cubic metres of pay dirt from each legacy claim in a year or 1000 cubic metres of pay dirt from each cell in a cell claim in a year. A bulk sample of up to 10000 tonnes of ore may be extracted from a mineral claim not more than once every five years. Production beyond these limits requires a lease tenure.

Leases are issued according to a survey plan and for a specific term. A lease is maintained by payment of the annual rental of $10 per hectare for a mining lease and $5 per hectare for a placer lease. There are no work requirements on a lease, but the term of a lease will only be renewed if the lease is required for a mining activity.

To date, Gemco Minerals Inc has not conducted any detailed exploration activites at the Hawk and Joytown LPM's; and no immediate plans are being made for exploration here. Furthermore, no known reserves are known to exist at the Hawk and Joytown property.

Figure 4: Gemco Minerals Inc Mineral and Placer Holdings Location Map (drafted by Tenorex GeoServices Feb.09)

Our wholly owned subsidiary, "Firstline Recovery Systems Inc." (Firstline) continues in the business development for its magnetite natural mineral product trade named "Eco-Blast", an environmentally safe product used in the industrial abrasive industry as outlined in Item 1. Firstline recently entered into an Exclusive Supply Agreement with Teichert and Son Inc., a California corporation doing business as Teichert Aggregates (Teichert). This contract pertains to the exclusive distribution rights of the minerals known as Ilmenite and Magnetite. Teichert produces Ilmenite and Magnetite as a by-product from its aggregate mining operations, and currently has an estimated 25,000 tons stored on-site in Central California.

These rights allow Firstline to distribute and sell this product as a blast medium in the industrial abrasive industry in both Western U.S. and Canada. The Term of the Agreement is for a period of 5 years with an option for an additional 5 years, if agreeable by both parties. As part of the Agreement, Firstline has agreed to purchase a minimum tonnage per contract year in order to maintain fixed pricing terms. The effective commencement date of production is dependent on Firstline first obtaining California Air Regulation Board approval for the use of these products as a blast medium and then establishing a drying, screening and bagging plant at a nearby location. In conjunction with Teichert, Firstline has initiated the CARB test and Firstline management is negotiating with a U.S. company for a site on which to locate the drying and bagging facility.

Liquidity and Capital Resources

Cash and Working Capital

The Company's had a cash position of $3,277 as of May 31, 2008, compared to cash of $14,753 as of May 31, 2007, with a working capital deficiency of $627,611 as of May 31, 2008, compared to a working capital deficiency of $558,484 as of May 31, 2007.

. . .