Overview

The following discussion and analysis of the operations, results, and financial position of Gemco Minerals Inc. ("Gemco","We" or the "Company"), for the three months ended August 31, 2009 should be read in conjunction with the August 31, 2009 Consolidated Financial Statements and the related Notes. These documents are available at www.sedar.com. The Company is traded on the Nasdaq OTC Exchange under the symbol GMML. The effective date of this report is October 14, 2009.

Corporate Organization

The Company was incorporated in the State of Florida on August 21, 1997 under the name of Project I Corp. On October 18, 2001 the Company changed its name to Firstline Environmental Solutions Inc. and traded under the symbol FEMS. On July 18, 2002 Firstline Environmental Solutions Inc., conducted a reverse takeover with Firstline Recovery Systems Inc., which is now a wholly owned subsidiary of the Company. On March 24, 2006, the Company changed its name to Gemco Minerals, Inc. and in accordance with the name change, the Company's common stock has assigned 368634 10 1 as its new Cusip Number and effective April 10, 2006, the Company's trading symbol was changed to GMML. Our statutory registered agent's office is located at #210 - 7695 SW - 104 Street, Miami, FL 33156 and our business office is located at #203 - 20189 56th Ave, Langley, BC, V3A 3Y6. Our telephone number is 866-848-2940.

Our Current Business

Mining - Precious Metals

We are engaged in the acquisition and exploration of mineral properties in the Province of British Columbia. Our primary focus is the exploration of our Burns Group Property, located 45 miles east of Quesnel, British Columbia. Our plan of operations is to carry out mineral exploration activities at the Burns Group property as advised by a combination of professional recommendations located in historical documents as well as recent recommendations made in Gemco Minerals Inc. most recently published NI43-101 technical report for the property dated December 15, 2007.

We are an exploration stage company and all of our properties are presently in the exploration stage. To date, we do not have any commercially viable reserves on any of our properties. There is no assurance that a commercially viable mineral deposit exists on any of our mineral properties.

Further exploration will be required before a final evaluation as to the economic and legal feasibility of mining of any of our properties is determined. There is no assurance that further exploration will result in a final evaluation that a commercially viable mineral deposit exists on any of our mineral properties.

We continue to expand our Burns Group property by acquiring strategically located mineral claims adjacent to our existing property. The most recent acquisition occurred in May and June 2006 when Gemco acquired an additional 2,792 acres (1,129 hectares) of mineral tenure to bring the Burns Group property to a total of 12,685 contiguous acres (5,134 hectares).

The Company first commenced its work program on the Burns Group property in June 2006. Trenching, geochemistry and SP geophysical surveys were conducted over soil anomalies near Oregon Gulch. Dip needle and SP geophysical surveys combined with general reconnaissance exploration in the vicinity of the Perkins Showing and Perkins Gulch were also reported. Assessment reports for the 2006 season were submitted to the Ministry of Energy, Mines and Petroleum Resources by Angelique Justason and Brad Davies.
Robert "Ned" Reid, PGeo, and Angelique Justason published Gemco Minerals Inc. NI43-101 technical report titled "Summary of Mineral Exploration Activities at the Mount Burns Claim Group" dated December 15, 2007. On the recommendations of the NI43-101 technical report, Gemco will be conducting a trenching program to define previously outlined geochemical and geophysical anomalies at the Foster's East and Mount Burns grids. Advanced exploration activities, such as drilling, are also planned for the near future while reconnaissance work continues peripheral to the known showings.

In the 2007 and 2008 seasons, Gemco contracted Tenorex GeoServices to begin the expansion of the Burns Grid adjacent several surface workings and the historical Perkins showing where, in 1902, 10 tonnes of rock was processed and produced 311 grams gold as described in Gemco's NI43-101 report published in December 2007. 2.4 line kilometers (Lkm) of self-potential geophysical surveys were conducted over a portion of the 9.0 Lkm of new grid (south of the 2002 grid) in an effort to locate an extension of the known mineralization: an assessment report outlining the findings and subsequent recommendations was submitted to the Ministry of Energy, Mines and Petroleum Resources.

In March 2009, Tenorex GeoServices also conducted a reconnaissance beep mat geophysical survey on over 50 line kilometers of snow packed trails across the property. Prospective conductive targets were mapped and a preliminary technical report is currently being compiled and will be submitted to the Ministry of Energy, Mines and Petroleum Resources.

An internal report was also made by Tenorex GeoServices summarizing the professional recommendations of various geologists working on the property from 2000 through to 2007 in an effort to define a strategic and focused field program for the Burns Group Gold Property. With this report and the recommendations presented within the NI43-101 technical report an aggressive and detailed exploration program was outlined, and includes the following:

· Continue expansion of the geo-grid on Mount Burns

· Establish survey control on the property

· Trail upgrade and maintenance program

· Detailed geologic mapping

· 50 line kilometers of self-potential geophysical surveying

· Beep mat reconnaissance surveys of key areas at previously defined airborne geophysical anomalies in addition to surveying all roads and trails

· Follow up on geophysical surveys with trenching and channel sampling projects

· Conduct a surface diamond drill hole program in key target areas

· Expand grassroots prospecting to the more remote perimeter of the property

· Compile all historical and current exploration / mining data into an online interactive map-server application for use by company geologists and the public

On May 15, 2009, the Company received its permit MX 11-143 approval #09-1101731-0515 to carry out the above noted exploration activities on the Burns property Fosters east grid adjacent to the Oregon Gultch to extend the grid, with 400m trenching, SP geophysics, advanced geological surveying and mapping and geochem for additional lab analysis. The Company's annual assessment fees for the 5,134 hectare Burns property are $8 per hectare per annum. Gemco has always performed work programs in excess of the annual $41,072, as summarized above and in detail in its 43-101 technical report. All of Gemco's mineral tenures with the British Columbia Mineral Titles Branch are in status of good standing.

Placer Leases

Gemco also has 100% interest in two placer properties in the Cariboo region:
namely the Hawk LPM (lease of placer minerals) located four kilometers from Barkerville and the Joytown LPM which is located near the headwaters of Cunningham Creek. The Company has not carried out nor planned any exploration work on these properties and they were written down to $Nil value at May 31, 2009.

Mexico Placer Property

In May 2006, Gemco entered into a 50/50 joint venture partnership with Mexican registered Canamex Corporation. Canamex has been in the precious metal extraction research industry over the last twelve years. Gemco's initial joint venture with Canamex involved testing on a 250 hectare placer claim for its industrial minerals and gold values. The property has access and foreshore rights to the Pacific Ocean and is located on the Baja Peninsula of Mexico.

In January 2007, Canamex assigned its interest to two additional placer claims in the Ensenada region of Baja California in the Exchange for 3% of the net sales of all industrial minerals extracted and a 3% net smelter royalty. As further consideration, 300,000 common shares were issued and held in trust, which are to be released upon verifying the claims can be brought to a commercially viable and completion of legal assignment of property rights. These properties consist of over 600 hectares, are approximately 27 kms in length of a dry arroyo with varying widths and several meters in depth. Preliminary testing showed estimates of a potential recovery of 5 million tonnes of alluvial magnetite and ilmenite mineral product.

In June 2007, the Company mandated Mr. Jaime Noguera Perez of Estero Servicios Ambientales Engineering (Estero) to conduct a works program to collect, review and evaluate existing geological information, conduct all field work, geological mapping, sourcing all information on applicable regulations and requirements for permits to extract up to 300,000 tons of material the first year of operation and up to two million tons per year thereafter. In August 2007, the Company received a progress report from Estero indicating that all field work has been completed and Estero began preparing an executive report for submission to the Mining office in Mexico City for final approval and attainment of permits to undertake mining operations. Gemco 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.

Natural Mineral Products

The Company continues in the business development for the magnetite natural mineral product trade named "Eco-Blast", as well as its Ilmenite "Talon Blast Abrasive" mineral product. These are environmentally safe products used in the industrial abrasive industry as outlined further below. Recent environmental regulations throughout North America have restricted the use of traditional abrasives like silica-sand and some slags. This is particularly true in the blast cleaning (sand blasting) market where 5 million tons of abrasives are used each year. Magnetite and Ilmenite have emerged as less health damaging and more environmentally friendly alternatives to the traditional non-recyclable abrasives. The specific particle size of natural magnetite product performs optimally in blast cleaning applications and can be recycled. ECO-Blast and Talon Blast Abrasive are the branded blast abrasives of the Company using magnetite and Ilmenite blends.

Tests have shown these products to be effective replacements for more traditional blast mediums in terms of cost and performance and significantly superior in terms of environmental impact and recyclability. Powertech Labs Inc. conducted an analysis on the magnetite product, which approved the product for use by the BC Ministry of Environment and Parks. A number of comparison demonstration tests were also conducted by Ross-Rex Industries Inc. using Talon blast and competitive/alternative products and the results have been very positive as posted on Gemco's website.

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.

These rights allow the Company 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, the Company is required to purchase a minimum tonnage per contract year in order to maintain fixed pricing terms.

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.

Temple has supplied both blast abrasives and equipment to the metal finishing and water-jet cutting industry in the western region of the United States for over 28 years. As part of the Agreement, the Company also grants Temple exclusive distributorship for the Product in the State of Nevada and Northern California.

Results of Operations - Gemco Minerals Inc. Three Months Ended August 31, 2009

During the three months ended August 31, 2009 the Company recorded an operating loss of $91,363 as compared to an operating loss of $77,960 for the three months ended August 31, 2008, and recorded a net loss after other items of $125,047 as compared to a net loss of $93,339 for the three months ended August 31, 2008. This is an increase in operating loss of $13,403 and an increase in the net loss of $31,708. The net loss represents $nil per common share. The Company incurred $91,363 in operating expenses which consist mainly of: mineral property costs of $24,767 (2008 - $11,228), management and consulting fees of $20,249 (2008 - $48,000), investor relations of $12,000 (2008 - $9,750) and professional fees of $16,316 (2008 - $3,500). The Company also recorded other items totaling $33,684 for the three months ended August 31, 2009, which is an increase of $18,305 compared to the $15,379 in other items for the three months ending August 31, 2008. This included interest and bank charges of $32,004. Other items also included $1,680 for a loss on investment and $12,191 for the interest generated on the mortgage investment, with a corresponding writedown for impairment, as described in Note 4 of the financial statements.

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

As of August 31, 2009, Gemco had total liabilities of $1,081,129, which is an increase of $228,703 as compared to $852,426 liabilities recorded at May 31, 2009. The increase in liabilities is due primarily to issuance of a long-term note payable in July 2009. The Company's current liabilities remained relatively the same as the prior year end and consist of $42,380 in accounts payable, $34,355 due to related parties, $33,474 due to shareholders and $746,067 in notes payable, of which $476,636 are due to related parties. The Company issued a two year promissory note in July 2009 and now has a long-term liability in the amount of $224,854.

The Company's current assets at August 31, 2009, consisted of $69,887 in cash which increased by $68,984 from $903 as at May 31, 2009, as well as note receivable of $5,448 and deposits in the amount of $44,971 for payments made on manufacture of industrial mineral processing equipment. Total assets as of August 31, 2009 were $141,111 with investments of $20,805 as disclosed in Note 5 of the financial statements.

Selected Annual Information

The following are highlights of financial data on the Company for the most
recently completed three financial years:



                               Fiscal Year Ended May 31,
                           2009           2008          2007
Loss before Income Tax   $ 723,003     $ (373,011 )   $ (97,937 )
Net Loss                   723,003       (373,011 )     (97,937 )
Loss Per Share               (0.03 )        (0.02 )       (0.01 )
Total Assets                 6,351        439,279       174,319
Total Liabilities          852,426        630,888       573,237

The Company's assets are recorded at the lower of cost or market value. The total assets at August 31, 2009 were $141,111. The Company had a working capital deficiency of $735,970 at August 31, 2009 compared to a working capital deficiency of $846,074 as of May 31, 2009. The reduction in the working capital deficiency is due primarily to the issuance of a long-term note payable as discussed above. The Company's cash inflow has been generated mainly from shareholder loans, related party and short-term loans and subscription 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 cannot currently meet its cash requirements without, future sale of shares or its current management and/or advances or loans from controlling shareholders or corporate officers to provide sufficient working capital to preserve the integrity of the corporate entity during the development phase. There is no assurance that the Company will be able to obtain additional funding through the sales of additional shares or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company. It is the intent of management and controlling shareholders to generate sufficient working capital necessary to support and preserve the integrity of the corporate entity.

Forward-Looking Statements

From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause a deviation or divergence from the anticipated results or expectations contained in the forward looking statements and the Company's actual results. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include but are not limited to the following: lack of operating capital, revenue and capital resources; reliance upon joint venture members to provide technical and financial expertise to operations; the ability of the Company to access an economically viable energy deposit; the ability of the Company to recover natural resources, if found, and to deliver them to a refiner or distributor in an economically viable manner.

Risks and Uncertainties

Mining - The Company is engaged in mineral exploration and development, which involves a high degree of risk, and few properties are ultimately developed into producing mines. There is no assurance that the Company's future exploration and development activities will result in any discoveries of commercial bodies of ore. Whether an ore body will be commercially viable depends on a number of factors including the particular attributes of the deposit such as size, grade and proximity to infrastructure, as well as mineral prices and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in a mineral deposit being unprofitable.

Cash Flows and Funding - The Company periodically requires equity financing to maintain its working capital position. There is no assurance that the Company will be able to obtain financing, as required, in the future.

Environmental and Permitting - Mineral exploration and development is subject to extensive regulation concerning environmental protection and there is no assurance the Company will be able to obtain all necessary permits and approvals in order to carry out its exploration activities.