The following analysis of the results of operations and financial condition of the company for the period ending May 31, 2009 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, 2009 the Company recorded an operating loss of $225,516 as compared to an operating loss of $331,125 for the twelve months ended May 31, 2008, and recorded a net loss after other items of $460,463 as compared to a net loss of $373,011 for the twelve months ended May 31, 2008. This is a decrease in operating loss of $105,609 and an increase in the net loss of $87,452. The net loss represents $0.02 per common share. The Company incurred $225,516 in operating expenses which consist mainly of: management and consulting fees of $102,865 (2008 - $72,000), mineral property costs of $62,874 (2008 - $153,800), professional fees of $24,339 (2008 - $31,332) and investor relations of $9,750 (2008 - $21,918).

The Company also recorded other items totaling $234,947 for the year ending May 31, 2009 (2008 - $45,183), which is comprised of the following:

• Interest and bank charges of $80,102 which increased by $32,447 due to the increased liabilities.

• Writedown of assets of $240,977, which includes a $200,000 impairment charge on the mortgage investment due to management's evaluation of the realizable value of the asset with consideration of the current market and other conditions. This also includes a charge of $40,977, which is a writedown of the corresponding accrued interest recorded on the mortgage that management has impaired until the investment is liquidated.

• Writedown of liabilities of $45,155 for notes payable which have passed the statute of limitations.

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, 2009     May 31, 2008
                                             --------------   --------------
         Revenues                                       Nil              Nil
         Net Loss                            $      460,463   $      373,011
         Loss per share-basic and diluted    $         0.02   $         0.02
         Total Assets                        $      221,920   $      439,279
         Total Liabilities                   $      804,602   $      630,888
         Cash dividends declared per share              Nil              Nil

Gemco's current assets at May 31, 2009, consisted of $903 in cash which decreased by $2,374 from $3,277 as of May 31, 2008, and $5,448 in deposits relating to the mineral properties. Total assets as of May 31, 2009 were $221,920 with Mineral claims recorded at $99,273, equipment recorded at $41,295 net of depreciation and investments recorded at $75,000 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, 2009 and May 31, 2008.

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 $460,463 consists of mineral property costs, management and consulting fees, investor relations, commissions, professional fees and other items of accrued interest on short term notes and writedown of assets and liabilities as mentioned above. These expenses were recorded primarily as accrued expenses and/or non-cash transactions, as well as a combination of cash payments and an issuance of shares as disclosed in the Statement of Cashflows.

Plan of Operation

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. The use of future proceeds will be to 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

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 objective is to bring one placer project into production commencing in the latter part of 2010. The Company's Mexican subsidiary is coordinating all applicable licensing, permitting and other regulatory requirements necessary to commence such operations while assessing alternative processing facilities and transportation logistics.

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

The 4 Amigos mineral property is located approximately 100 kilometers southeast of Ensenada, Baja California, Mexico. Access to the property is obtained by travelling south on Mexico Route 1 for approximately 120 kilometers to Punta Colonet. The eastern margin of the mineral claim is located 6 kilometers east of Punta Colonet, is centered at 31° 5.73647' N latitude, 116° 1.42187' W longitude and is accessible by unpaved roads east of the town. The 4 Amigosclaim encompasses an area of 1366 acres along a 27 kilometer long section of the Rio San Rafael; a dry arroya river bed with alluvial sediment (<3 meters deep) containing magnetite and ilmenite sand particulate. The surrounding bedrock consists mainly of Cretaceous aged metasediments to the east and igneous intrusives to the central and western reaches of the property with lesser and spotty exposures of Cretaceous aged extrusives.

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 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 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.

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 - Hawk and Joytown Placer Leases

Gemco 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.

The geology of the Hawk and Joytown properties are similar to that of the Burns Claim Group as they all lie within the same terrane. The rocks found at the here generally consist of foliated, gritty to fine grained quartzites ± sericite and finely laminated siltstone and phyllite ± sericite. Alteration of the country rock is generally chloritic to potassic. Silicification of the country rock is apparent in areas usually adjacent to fault structures. Carbonaceous to calcareous siltstones are also found here. Both the placer properties are located in the vicinity of past producing placer properties and have glacially deposited gravel, sand and clay favourable for placer exploration.

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.

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

Natural Mineral Products

Our wholly owned subsidiary, Firstline Recovery Systems Inc. was handling business development for the magnetite natural mineral product trade named Eco-Blast and/or Talon Blast, an environmentally safe product used in the industrial abrasive industry as outlined above. Although Firstline previously entered into an exclusive supply agreement with Teichert and Son Inc., a California corporation doing business as Teichert Aggregates, and an agreement for sale with R.A. Temple Inc. (Temple), a California corporation, these contracts recently lapsed due to Firstline's inability to obtain the required CARB product approval, negotiate with a U.S. company for a site on which to locate the drying and bagging facility and to arrange sufficient financing to carry out the project. Therefore, Gemco has recently undertaken to negotiate new agreements on similar terms with both Teichert and Temple. Commitments have been attained with both companies and Gemco is coordinating to complete the new agreements within the first four months of the fiscal year.

The exclusive supply agreement with Teichert, originally announced May 27, 2008, 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.

The effective commencement date of production is dependent on the Company first obtaining California Air Regulation Board (CARB) 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, the Company has initiated the CARB test and the Company's management is negotiating with a U.S. company for a site on which to locate the drying and bagging facility.

The agreement for sale with Temple, originally announced December 2, 2008,pertains to the sale of ilmenite and magnetite industrial minerals (the Product) with R.A. Temple Inc. (Temple), a California corporation. The Product is to be sourced from the Company's location in Sacramento, California, under its Exclusive Supply Agreement with Teichert and will be sold under the Company's Black Talon brand name.

Under the Agreement Temple may purchase up to 7,000 tons of ilmenite and magnetite per annum, from the commencement date, on a pre-determined pricing framework for a period of five years. The commencement date of the first shipment was originally scheduled for no later April 1, 2009, and Gemco has attained commitment from Temple to extend the first shipment date from April 1, 2009 until such time that Gemco is scheduled to start production on or before December 1, 2009, which provides time to complete the California Air Regulation Board (CARB) standard approval for the use of this product as a blast medium and to establish a drying, screening and bagging plant at a nearby location.

Liquidity and Capital Resources

Cash and Working Capital

The Company's cash position was $903 as of May 31, 2009, compared to cash of $3,277 as of May 31, 2008, with a working capital deficiency of $798,251 as of May 31, 2009, compared to a working capital deficiency of $627,611 as of May 31, 2008.

The Company's assets are recorded at the lower of cost or market value. The total assets at May 31, 2009 were $221,920 net of amortization. The majority of our assets are long-term in nature and thus considered to be of lower liquidity. However, the Company is pursuing means to liquidate the mortgage held on commercial property at its earliest reasonable opportunity. The Company's cash inflow has been generated mainly from shareholder loans, short-term loans and issuance of common stock with minimal revenues and government incentive programs since inception.

Management continually reviews its overall capital and funding needs to ensure that the capital base can support the estimated needs of the business. These reviews take into account current business needs as well as the Company's future capital requirements. Based upon these reviews, to take advantage of strong market conditions and to fully implement our expansion strategy, management believes that the Company will continue to increase our net capital through the proceeds from sales of our securities. The Company currently maintains minimal cash balances and is funded by management and shareholder loans to satisfy monthly cash requirements in the interim of raising external funding.

The Company will require additional financing during the current fiscal year due to our current working capital deficiency, our plan of operations for the Burns Mountain Project, our planned exploration activities and our plan to continue to pursue financing. We presently do not have sufficient financing to enable us to proceed with these plans and will require additional financing if we are able to proceed with our exploration plans. Our actual expenditures on these activities will depend on the actual amount of funds that we have available as a result of our financing efforts. There is no assurance that we will be able to raise the necessary financing. See Risk Factors. It is the intent of management and controlling shareholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. Management plans to address the company's net capital deficiency through the combination of raising equity capital and loans with shareholders and third parties, as well as optioning some of the company's mineral claims to other exploration companies.

                                                  Payments due by period
                                             Less                                       More
                                            than 1           1-3           3-5         than 5
Contractual obligations       Total          year           years         years         years
[Long-Term Debt
Obligations]               $         0    $         0    $         0   $         0   $         0
[Capital Lease
Obligations]               $         0    $         0    $         0   $         0   $         0
[Operating Lease
Obligations]               $         0    $         0    $         0   $         0   $         0
[Purchase Obligations]     $         0    $         0    $         0   $         0   $         0
[Other Long-Term
Liabilities Reflected on
the Registrant's Balance
Sheet under GAAP]          $         0    $         0    $         0   $         0   $         0
Total                      $         0    $         0    $         0   $         0   $         0

Cash Used in Operating Activities

Cash used in operating activities during the year ended May 31, 2009 was$171,507, compared to cash used in operating activities of $268,822 for the year ended May 31, 2008. We funded the cash used in operating activities primarily through loans from shareholders and related parties and equity issues of our common shares.

Investing Activities

The Company recorded $11,705 in investing activities in the year ended May 31, 2009 from $12,613 in disposition of mineral claims less a corresponding minority interest transaction of $908, compared to $908 minority interest transaction recorded in the year ended May 31, 2008

The Company anticipates continuing to rely on equity sales of common shares in order to continue to fund its business operations, in addition to the potential liquidation of the mortgage investment. Issuances of additional shares will result in dilution to existing shareholders. The Company does not have any arrangements in place for further sales of our equity securities.

Minority Interest

The Company recorded a non-controlling interest of $908 on the balance sheet and statement of cash flows, which represented the one third book value portion of its subsidiary, EKG Minerals Inc. which wass owned by an arms length party. During the year ended May 31, 2009, the asset of EKG was disposed of to the owner of the one third share in EKG, and he simultaneously relinquished his shares in EKG, and the minority interest was reduced to nil.

Going Concern

Our financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/ or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

In April 2009, the FASB issued FSP No. FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" ("FSP FAS 157-4"). FSP FAS 157-4 provides guidance on estimating fair value when market activity has decreased and on identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. This FSP is effective for interim and annual periods ending after June 15, 2009. The Company does not expect the adoption of FSP FAS 157-4 will have a material impact on its financial condition or results of operation.

In October 2008, the FASB issued FSP No. FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active," ("FSP FAS 157-3"), which clarifies application of SFAS 157 in a market that is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had no impact on the Company's results of operations, financial condition or cash flows.

In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, "Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities." This disclosure-only FSP improves the transparency of transfers of financial assets and an enterprise's involvement with variable interest entities, including qualifying special-purpose entities. This FSP is effective for the first reporting period (interim or annual) ending after December 15, 2008, with earlier application encouraged. The Company adopted this FSP effective January 1, 2009. The adoption of the FSP had no impact on the Company's results of operations, financial condition or cash flows.

In December 2008, the FASB issued FSP No. FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets" ("FSP FAS 132(R)-1"). FSP FAS 132(R)-1 requires additional fair value disclosures about employers' pension and postretirement benefit plan assets consistent with guidance contained in SFAS
157. Specifically, employers will be required to disclose information about how investment allocation decisions are made, the fair value of each major category of plan assets and information about the inputs and valuation techniques used to develop the fair value measurements of plan assets. This FSP is effective for fiscal years ending after December 15, 2009. The Company does not expect the adoption of FSP FAS 132(R)-1 will have a material impact on its financial condition or results of operation.

In September 2008, the FASB issued exposure drafts that eliminate qualifying . . .