10-K 1 form-10k.htm FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-K


(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MAY 31, 2009

OR

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO ______________

Commission file number: 000-51523

GEMCO MINERALS, INC.

(Exact name of registrant as specified in its charter)


FLORIDA		98-0582366

State or other jurisdiction of		I.R.S. Employer Identification No.
incorporation or organization

#203 – 20189 56^TH Ave., Langley, British Columbia V3A 3Y6

(Address of principal executive offices) (Zip Code)

Issuer’s telephone number: 866 848 2940

Securities Registered Under Section 12(b) of the Exchange Act: None

Securities Registered Under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

(Title of class)

Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of the issuer’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed fiscal quarter:( 15,100,260 shares) based on the average bid and asked price as of $0.02 at May 31, 2009: $302,005

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 29,455,839 shares of Common Stock as of August 18, 2009

Documents Incorporated by Reference: None

NOTE REGARDING FORWARD LOOKING STATEMENTS

This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding the market price of gold, availability of funds, government regulations, common share prices, operating costs, capital costs, outcomes of test mining activities and other factors. Forward-looking statements are made, without limitation, in relation to operating plans, property exploration activities, including test mining activities, availability of funds, environmental reclamation, operating costs and permit acquisition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined below, and, from time to time, in other reports we file with the SEC. These factors may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 21E of the Securities Act.

You should carefully read this Form 10-K and the documents incorporated by reference in their entirety. They contain information that you should consider when making your investment decision.

TABLE OF CONTENTS

Part I


		Page
Item 1.	Description of Business	4

Item 1A	Risk Factors	7

Item 1B	Unresolved Staff Comments	10

Item 2.	Description of Property	10

Item 3.	Legal Proceedings	16

Item 4.	Submission of Matters to a Vote of Securities Holders	16

Part II

Item 5.	Market For Common Equity, Related Stockholder Matters and Small Business Issuer Purchase of Equity Securities	17

Item 6.	Selected Financial Data	18

Item 7.	Management’s Discussion and Analysis or Plan of Operation	18

Item 7A	Quantitative and Qualitative Disclosures About Market Risk	28

Item 8.	Financial Statements and Supplementary Data	29

Item 9.	Change in and Disagreements with Accountants on Accounting and Financial Disclosure	49

Item 9A.	Controls and Procedures	49

Item 9B.	Other Information	50

Part III

Item 10.	Directors, Executive Officers, Promoters and Control Persons;	51

Item 10A	Compliance With Section 16(a) of the Exchange Act	52

Item 11.	Executive Compensation	53

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	58

Item 13.	Certain Relationships and Related Transactions	60

Item 14.	Exhibits	61

Item 15.	Principal Accountant Fees and Services	62

Glossary of Exploration Terms

The following terms, when used in this report, have the respective meanings specified below:


Development	Preparation of a mineral deposit for commercial production, including installation of plant and machinery and the construction of all related facilities. The development of a mineral deposit can only be made after a commercially viable mineral deposit, a reserve, has been appropriately evaluated as economically and legally feasible.

Diamond drill	A type of rotary drill in which the cutting is done by abrasion rather than percussion. The cutting bit is set with diamonds and is attached to the end of long hollow rods through which water is pumped to the cutting face. The drill cuts a core of rock, which is recovered in long cylindrical sections an inch or more in diameter.

Exploration	The prospecting, trenching, mapping, sampling, geochemistry, geophysics, diamond drilling and other work involved in searching for mineral bodies.

Geochemistry	Broadly defined as all parts of geology that involve chemical changes or narrowly defined as the distribution of the elements in the earth’s crust; the distribution and migration of the individual elements in the various parts of the earth.

Geology	The science that deals with the history of the earth and its life especially as recorded in the rocks; a chronological account of the events in the earth’s history.

Geophysics	The science of the earth with respect to its structure, components and development.

Mineral	A naturally occurring inorganic element or compound having an orderly internal structure and characteristic chemical composition, crystal form and physical properties.

Mineral	A mineral reserve is that part of a mineral deposit which could be

Reserve	Economically and legally extracted or produced at the time of the reserve determination.

Mineralization	Rock containing an undetermined amount of minerals or metals.

Oxide	Mineralized rock in which some of the original minerals, usually sulphide, have been oxidized. Oxidation tends to make the mineral more porous and permits a more complete permeation of cyanide solutions so that minute particles of gold in the interior of the minerals will be more readily dissolved.

Waste	Material that is too low in grade to be mined and milled at a profit.

PART I

Item 1. Description of Business.

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 56^th 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.

Burns Group

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

Detailed research and the compilation of archived historical reports and maps are also ongoing. The research continues to significantly advance the knowledge and value of the Burns Group gold/silver property.

Other Mineral Properties

In June 2007, Gemco acquired of 66.67% of the outstanding shares of EKG Minerals Inc. (“EKG”). EKG is a British Columbia registered private company which held 100% interest in the 1181.64 hectare (2920 acre) gold/silver ‘Tom’ claim group, also internally referred to as the ‘Snowflake’ property, located north of Oliver, BC. Tenorex GeoServices was contracted in the summer of 2007 to conduct assessment work on the property and a geophysical technical report was submitted to the BC Ministry of Energy and Mines upon completion of several days field work at the property. Physical and technical exploration activities were recorded on the property in 2008. On February 25, 2009 EKG’s interest in the ‘Snowflake’ mineral property was disposed for proceeds of $9,889 ($12,500 CDN).

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. See Page 20.

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.

The Company has expended over $82,000 to date on its Mexico property for costs including; the environmental study, management of the claims, attainment of permits, consulting and regulatory fees. Canamex recently advised it has received the mining permits from the mining office to extract 300,000 tons of material the first year, and two million tons every year thereafter. On final verification, all permits and licenses will be assigned over to Black Stone Industries, and Gemco will release the 300,000 shares from trust. Further, upon Black Stone Industries receiving the final mining permits and 100% control of the Claims a balance of $20,000 will be paid to Canamex for additional costs incurred. On consummation of the above, the Company plans to engage an independent firm to prepare an in-depth 43-101 technical report to meet standards and requirements for raising capital.

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.

Item 1A Risk Factors:

1. We do not have an operating business
Gemco has rights in certain mineral claims located in the Province of British Columbia, Canada. To date we have done limited exploration of the property covered by our mineral claims. We do not have a mine or a mining business of any kind. There is no assurance that we will develop an operating business in the future.

2. We have no source of operating revenue and expect to incur significant expenses before establishing an operating company, if we are able to establish an operating company at all.

Currently, we have minimal sources of revenue, and we do not have sufficient working capital to complete our exploration programs and we do not have any commitments to obtain additional financing. Further, we do not have enough working capital to meet all of our contractual commitments to acquire our mineral properties. We have no operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon: further exploration of the Burns Mountain Property and the results of that exploration; our ability to raise the capital necessary to conduct this exploration and preserve our interest in these mineral claims; and our ability to raise capital to develop the Burns Group Property, establish a mining operation, and operate this mine in a profitable manner.

Because we have no operating revenue, we expect to incur operating losses in future periods as we continue to expend funds to explore and develop the Burns Group Property. Failure to raise the necessary capital to continue exploration and development could cause us to go out of business.

3. Our stock price will be heavily influenced by the results of our exploration and future drilling tests on the Burns Group Property .

We cannot predict the results of our exploration and future drilling tests. The results of these tests will dictate further exploration and are likely to affect the trading price of our stock.

4. If we develop other mineral resources, there is no guarantee that production will be profitable.

Even if we find other commercial mineral resources, there is no assurance that we will be able to mine them or that a mining operation would be profitable on any of our properties. No feasibility studies have been conducted as of the date of this report.

5. We must undertake regular ongoing work and/or work on our properties in order to maintain our mineral claims.

We are required to undertake certain work and/or payments on the property as per the guidelines with the Ministry of Energy and Mines of British Columbia, and failure to do so could cause us to lose our mineral title and rights to our mineral claims.

6. Weather interruptions in the Cariboo region may delay our proposed exploration operations.

Weather factors will significantly affect our exploration efforts. Currently, we can only work above ground at the Burns Mountain Property from late May until early November of each year, depending upon how early snowfall occurs. Exploration can continue in winter, however additional costs would be incurred with diminished production.

7. We could encounter regulatory and permitting delays.

We could face delays in obtaining permits to operate on the properties. Such delays could jeopardize financing, if any is available, in which case we would have to delay or abandon work on the properties.

8. Going concern qualification

The Company has included a “going concern” qualification in the Consolidated Financial Statements to the effect that we are an exploration stage company and have no established sources of revenue. In the event that we are unable to raise additional capital and/or locate ore resources, as to which in each case there can be no assurance, we may not be able to continue our operations. In addition, the existence of the “going concern” qualification in our auditor’s report may make it more difficult for us to obtain additional financing. If we are unable to obtain additional financing, you may lose all or part of your investment.

9. There are penny stock securities law considerations that could limit your ability to sell your shares.

Our common stock is considered a “penny stock” and the sale of our stock by you will be subject to the “penny stock rules” of the Securities and Exchange Commission. The penny stock rules require broker-dealers to take steps before making any penny stock trades in customer accounts. As a result, our shares could be illiquid and there could be delays in the trading of our stock which would negatively affect your ability to sell your shares and could negatively affect the trading price of your shares.

10. Our business is affected by changes in commodity prices

Our ability to develop our mineral properties and the future profitability of the Company is directly related to the market price of certain minerals. The sharp rise in commodity prices over the past year has resulted in increased investor interest in mineral exploration companies. The Company has benefited from this trend, but like other companies in this sector, the Company would be negatively affected if commodity prices were to fall.

11. Our business is subject to currency risks

The Company conducts some of its business activities in Canadian dollars. Consequently, the Company is subject to gains or losses due to fluctuations in Canadian currency relative to the U.S. dollar.

Item 1B Unresolved Staff Comments:

As a Smaller Business Issuer, the Company is not required to make this disclosure and voluntarily discloses there are no unresolved Securities and Exchange Commission Staff comments requiring the Company’s filings.

Item 2. Description of Property

Burns Mountain Mineral Claims (Burns Group)

The Burns Group mineral claims are held 100% by Gemco and are being explored for lode gold occurrences of a type similar to those known to occur within the historical Cariboo Gold (Wells – Barkerville) mining camp. Our Burns Group project consists of 10 contiguous mineral claims totaling 12,696 acres (5,134 hectares). The property lies in the Cariboo Mining District, approximately 10 kilometers west of the past producing Cariboo Gold Quartz, Island Mountain and Mosquito Creek gold mines located at the town of Wells, British Columbia.

The Burns Group property is underlain by meta-sedimentary rocks of the Barkerville Terrain and contains known auriferous, fault related, quartz vein structures. The property covers the eastern edge of a “linear” belt which coincides with the limits of the Lightening Creek placer camp. Due to the significant amount of placer gold production from the Stanley/Lightening Creek area, the Burns Group property is considered a key target for tracing the source of the placer gold of the region. Limited historical lode gold production has been reported at workings located on the property. Gemco Minerals Inc. is currently engaged in grassroots exploration activities to better define and locate possible extensions of the known mineralized areas while searching for new discoveries.

Gemco’s exploration approach has been to employ qualified personnel who are familiar with the history and geology of the area to assess the merits of the historical workings as well as conceive new targets for exploration. The company’s GIS staff are currently building a database of historical data and combining it with current exploration findings. Geological, geophysical and geochemical technical works have, to date, defined two areas which warrant a more intensive exploration program. The two areas of current primary interest are the Foster’s East soil grid gold anomalies and the sulphide rich quartz vein structures of the Perkins Gulch area.

There are no parks located on the claims which would interfere with the exploration for or the exploitation of any mineral deposits that might be found here; however, a narrow conditional reserve is located along the old Cariboo Waggon Road gold rush trail from Stanley to Barkerville: the historic trail surface is protected from being “interfered with” along a 200 meter wide zone of the road, or 100 meters on each side of the road from the centerline. A no staking reserve is also located to the northwest of the Burns Group property along Highway 26: the reserve is about 500 meters by 500 meters in size. Gemco Minerals Inc. is not currently aware of any environmental liabilities pertaining to the Mount Burns Claim Group and there are no disputes as to title or liens registered on the property.

As at December 15, 2007 Gemco received its most recent NI43-101 compliant technical report from geologist, Robert Reid, P.Geo and Angelique Justason. In 2000, Mr. Reid was responsible for the Bonanza Ledge gold discovery, a major gold find for International Wayside Ltd., one of the biggest players in the area; and, Ms. Justason was instrumental in defining the perimeter of the deposit using self-potential geophysics in 2000 as well as outlining several other anomalous target areas on the property the following year. Gemco is committed to conduct extensive exploration on the Burns property as the NI43-101 report has identified specific target areas.

The Company and its directors will disclose information as required under the guidelines of National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) with respect to the technical report prepared and submitted to the Company by its geologist, Robert E. (Ned) Reid, P.Geo, and Angelique Justason. Mr. Reid is a registered Professional Geoscientist in good standing in the Association of Professional Engineers and Geoscientists of British Columbia. He is a graduate of the University of British Columbia (1971) and has practiced his profession as an exploration geologist for more than 35 years.

Location and Access

The Burns Group project is located in the Quesnel Highland area of the Interior Plateau in the Province of British Columbia, as depicted in Figure 1 below. The property is situated within NTS area 93H/04, TRIM areas 93H002 and 93H003; centered approximately at 53° 03’ North latitude and 121° 38’ East longitude. The claims are in the Cariboo Mining District.

Figure 1: Burns Group Mineral Property Location Map (drafted by A.Justason Nov.2007)
Access to the northern portion of the property is via Highway 26 (Wells/Barkerville Highway) which transects the northwestern portion of the claims a distance of 10 Km west from the Town of Wells or 70 Km east of Quesnel. Additional access is via the deactivated ‘72F’ forest service road which heads south from the Stanley loop road, and joins into the historic Cariboo Waggon Trail. Though limited, several deactivated forest service roads and numerous ATV accessible trails provide additional access.

BURNS GROUP MINERAL PROPERTY LOCATION MAP

The original tenure area has been converted to “cell” units under the rules and regulations of the Mineral Title Act, hence physical boundaries no longer exist. With conversion to “cell” units the value of exploration and development required to maintain a mineral claim for one year is at least $4 per hectare during the first, second and third anniversary years and $8 per hectare for each subsequent anniversary year.

Exploration History (from Gemco’s 2007 NI43-101 Technical Report, with internal history update for 2008/09)

The following is a general summary of the historical work conducted at Mount Burns and Oregon Gulch (in the vicinity of the Foster’s East grid) as reported by Gemco’s most recent NI43-101 Technical Report and company personnel.

Mount Burns:

The Mount Burns area includes historical workings including numerous shafts, adits and tunnels such as the Burns Long Crosscut, the Standard Mine, the Cohen and the Perkins. Numerous opencuts and trenching occur near or at these workings and reverted crown granted lands occur across the property.

• 1870’s discovery of auriferous quartz veins

• 1878, J.C. Beedy selectively mines veins from surface and processed some ore using a quartz mill at Van Winkle. The veins, oriented 195°-205°/70°W, contained gold in association with pyrite and galena across of about one foot.

• 1880, J. Reid acquired the property after the death of J.C. Beedy; the Reid Adit was driven as a crosscut to intersect the Beedy veins 75 feet below the surface showings. The adit was collared at an elevation of 5062 feet and driven on an azimuth of 108° for a distance of 387 feet. A quartz vein (probably the central vein) about one foot in width, striking 205° and dipping 62°NW was drifted to the north for 20 feet at a distance of 337 feet from the portal. A raise was driven to surface and, probably, some [stoping] was carried out on the vein.

• The Cohen veins, 1500 feet northeast of the Perkins veins were mined prior to 1885. Workings, between elevations of 5250 and 5300 feet, consist of several open cuts with associated shafts and mine dumps. C. Fuller indicated that the shaft on the Cohen Incline was 70-90 feet deep. The open cuts were driven into the hillside along strike of veins less than one foot in width and with orientations 065°/75°SE, 205°/65°W and 190° dipping steeply to the west. The veins contain high grade gold mineralization in association with galena, pyrite and sphalerite.

• Work on the Galena vein, located at an elevation of 5190 feet and about 700 feet northeast of the Perkins veins, was probably also carried out at about his time. The original workings consisted of a mine dump, an open cut driven northwest for eighty feet and a shallow drift of a vein oriented 230°/55°NW for eighty feet.

• 1885, E. Perkins selectively mined the Beedy veins and processed ore using an arrastre for a number of years.

• 1902, C.J. Seymour Baker and A.J.R. Atkins recovered about ten ounces of gold from ten tons of ore treated at the Government Reduction Works near Barkerville.

• 1919, C.J. Fuller and D. Hawes acquired the property after the death of E. Perkins.

• 1932, Burns Mountain Gold Quartz Mining Company Ltd acquired the property and extended the Reid Adit fifty feet and drove the Burns Mountain Adit as a crosscut to intersect the Perkins veins 275 feet below the surface showings. This adit was collared at an elevation of 4844 feet and driven 1743 feet on an azimuth of 327° and 420 feet on an azimuth of 284°. A vein striking 197° and dipping 70°W was intersected 150 feet west of the Perkins showing and on to the north for 127 feet.

• R.E. MacDougall, W.E. North [and] J.J. Gunn [of Wells relocated the ground after the Burns Mountain Quartz Mining Company Ltd. allowed the property to lapse].

• 1946, Cariboo Rainbow Gold Quartz Mines Ltd completed 3500 feet of stripping and trenching using a bulldozer. The stripping showed that the Perkins area consisted of three narrow veins about fifty feet apart over a composite strike of about 400 feet. Shafts are associated with the west and central veins. The northern 150 feet of the central vein is marked by [stopes] caved to surface and was probably the source of most ore mined from the property.

• 1979, L&G Resources Ltd contracted C. Ball to conduct one day of field work on the property (Ball, 1979).

• 1980, Spectrum Industrial Resources Limited: trenched, sampled and mapped the Cohen, Galena and Perkins showings at a scale of 1:200; produced a geological map at a scale of 1:5000; completed about 315 meters of diamond drilling in three holes, one on each showing. Drill hole S80-1 intersected a zone of vein quartz and fracturing (core length of seven meters), thought to be the Perkins structure about twenty meters above the Burns Mountain Adit, but got no gold values.

• About 1990, M. Poshner excavated the main showings. The Perkins area is a trench twenty feet deep and six hundred feet in length. The galena vein is a trench about three hundred feet in length. The Cohen veins are in a stripped area about 600x150 feet in size.

• In 1990, Tom Hatton( Gemco’s President) discovered an 8.5 ounce gold nugget at Burns Creek which was recorded and published in the B.C. mining records.

• Firstline Recovery Systems Inc. purchased ‘Burns 1’ mineral claim from Doug Merrick of Wells, B.C. in 1998 and staked more property in 1999. Firstline carried out some surface prospecting, completed an orientation – type soil geochemistry survey of about 150 samples covering the area between the Perkins, Cohen and Galena showings and ran several magnetometer and VLF geophysical survey lines across the Perkins and Galena showings. Vein structures show a distinct VLF signature.

• In 2002, 7.74 line kilometers of existing grid was surveyed by Angelique Justason to search for self potential geophysical signatures in the vicinity of the historical Cohen, Beedy and Galena showings. The resulting data was analyzed and presented to the previous owner in the form of a preliminary map and personal communications.

• In 2005, Gemco Minerals Inc. acquired the Mount Burns Claim Group

• In 2006, a small 0.95 line kilometer self potential survey occurred near Dry-up Gulch.

• 2007 saw a 4.3 line kilometer expansion of the 2002 Burns grid located at the Perkins/Beedy and Galena showing

• In 2007, Gemco obtained mineral rights to the Standard Mine site when a legacy claim at L62-64 expired

• In 2008, an expansion of the Burns grid was prepared and a SP geophysical survey was conducted

• In spring 2009, over 50 line kilometers of trail was surveyed for conductive anomalies using GDD Instrumentation’s ‘Beep Mat’, a small electromagnetic geophysical tool.

Oregon Gulch:

The Jones and Foster ledges in Oregon Gulch consist of upper, lower and eastern adits, the Foster shaft as well as several open cuts.

• 1870’s, discovery of veins with gold

• 1877, trenches on veins between elevations of 4560 and 4570 feet; Foster shaft collared at about 4585 feet [and located] above the west branch of Oregon Gulch, driven 352° for 217 feet and followed by an additional 80 feet of crosscutting and drifting; several veins oriented 190°/70°W and less than a foot in width were found containing pyrite, galena and sphalerite. The veins are parallel in strike to a prominent fault dipping moderately east in underground workings.

• 1933, Foster Ledge Gold Mines Ltd drove the lower and eastern adits; lower adit driven 065° for 75 feet and 123° for 170 feet; at 32 feet back of the face a vein was drifted on for 43 feet to the northeast; the vein is less than 0.5 feet in width, oriented 025/80NE, and barren looking but contained some gold. Eastern adit driven 343° for 168 feet and 324° for 83 feet; at 23 feet back of the face a crosscut was driven on 058° for 60 feet and then 290° for 50 feet; veins less than 0.5 feet in width and oriented 202°/70°W and [218°/62°NW] were found at a distance of 70 feet and 118 feet respectively, from the portal; a fault several feet in width striking 165°-170° and dipping 60°-70°W was located at a face.

• In 1983 a ground magnetometer survey was conducted by D. Plenderleith for Gold Point Resources Ltd. (Davies, 2006).

• 1987 saw 63.0 line kilometers of cut line put in on an older property adjacent to and covering Gemco Minerals Inc. current tenure 506325. Approximately 5 line kilometers of that grid covers current tenure and it appears that the 1987 0+00 baseline is the baseline of Gemco’s current ‘Foster’s East’ grid. The 63.0 line kilometer grid saw soil sampling, VLF-EM and ground magnetometer surveys completed: details are reported in Borovic’s 1988 assessment report #18011.

• Firstline Recovery Systems Inc. acquires mineral tenures and begins work in 1998.

• 1999 involved field reconnaissance and prospecting over the Oregon Gulch area. Soil samples mark mineralized structures. More claims staked.

• 2004 saw a busy field season with a 13.07 km ‘Foster’s East’ grid established and a total of 766 soil samples (Reid, 2005) taken and submitted for multi-element ICP and fire assay for gold and silver. The assays from EcoTech Laboratory Ltd. returned anomalous gold-in-soils values which outlined several linear gold-in-soils anomalies as discussed in Firstline Recovery Systems Inc. 2004 assessment report #27684.

• Firstline Recovery Systems converted of all their mineral tenures into cells in the spring of 2005 (pers. comm., Hatton, 2006).

• Gemco Minerals Inc. acquired Mount Burns claim group from Firstline Recovery Systems Inc. in the summer of 2005.

• In 2006, a self potential geophysical survey of 1.1 line kilometers of the Foster’s East grid showed correlation with 2004 exploration program and provided further targets for the company

• Spring 2009 saw a small Beep Mat geophysical survey conducted on foot/snowshoe between the east edge of the Foster’s East grid and Highway 26.

Physiography and Geology (from Gemco’s 2007 NI43-101 Technical Report)

The project area lies in the forested mountain region located southwest of the Jack of Clubs Lake and is situated within the Quesnel Highlands on the eastern margin of the Interior Plateau. Elevations range from 1200 meters in the Stanley – Lightening Creek area to approximately 1680 meters at the mountain tops. Mountain summits are generally rounded, having been glaciated by continental ice sheets during the Pleistocene Epoch. Glacial till is the most widespread surficial deposit in the area. Areas of rock exposure are generally limited to fault related bluffs and, to some extent, mountain summits and road cuts. Drainage of the area is mostly within mossy draws which in several places lead into gold bearing placer creeks: these placer bearing creeks have been extensively worked and hydrauliced in the past. Less destructive means of placer exploration operations continue today. The area is in a moist climatic belt, subject to heavy snowfall in winter and generally rainy conditions in summer. The District of Wells can see winter accumulations of snow from about eight to over twenty feet. The area is usually snow free from late May to early November, providing Gemco Minerals Ltd. a four or five month window for an exploration season where the ground can be readily accessed. The Wells area is generally well forested; hillside slopes are dominated by spruce, pine, sub-alpine fir, accompanied by alders and other deciduous foliage on lower, wetter slopes flanking river valleys. At the Mount Burns Claim Group alone, it is estimated...that greater than 75% of the pine trees are presently dead standing due to the destructive nature of the pine beetle on the trees of the area over the past 6 years. Prior to 2002, no pine beetle kill was observed in the immediate area (pers.comm. A. Justason, 2006).

The petrology at the Mount Burns Claim Group is somewhat defined though detailed structural understanding of the property is not yet completely clear. The majority of the property is covered in glacial drift which limits outcrop exposures to the prominent north-south trending bluffs, the tops of ridges and divides, the steep slopes of hydrauliced creeks, road cuts and already worked, stripped and/or trenched ground. Some areas of glacial drift are defined in historic placer records as being up to 120 feet thick in places and sporadic with no consistent depth which could be in direct relationship with the ancient kettle topography of the last glacial retreat.

The rocks found at the property generally consist of foliated, gritty to fine grained quartzites ± sericite and finely laminated siltstone and phyllite ± sericite. Alteration of the country rock is spotty and generally chloritic. Silicification of the country rock is apparent in areas usually adjacent to fault structures. Carbonaceous to calcareous siltstones have also been observed. Holland’s description of the local area’s geology is believed… to be the most prolific; and, taken partially out of context, is quoted as follows:


	“The Stanley area is underlain by a succession of metamorphosed sedimentary rocks belonging to the Precambrian Richfield formation...The area straddles the regional anticlinal axis which has been mapped previously (Johnston and Uglow, 1926 p. 31) as running between Mount Amador and Mount Nelson”. [NOTE:Struik has moved the anticlinal axis slightly to the southwest and has differentiated the main units as the Eaglesnest succession and Harveys Ridge succession within the Paleozoic Snowshoe Group of the Barkerville Terrane].

	“Quartzite, in almost bewildering variety, is the predominating rock in the area. It displays variations in colour from white and light grey, through medium grey, brown, to black; in granularity from fine quartzite to coarse grits with interbeds of metamorphosed pebble conglomerate; in composition through admixture with varying amounts of dark argillaceous material; and in fissility either through variations in amount of mica developed in the rock or through the rock’s relation to the axial plane and minor folds. Individual beds, ranging from a fraction of an inch to several tens of feet in thickness, are interbedded with others which may vary in colour, granularity, and general composition.”

	“Dominantly argillaceous rocks are considerably less common than quartzites. They are present as black slate and dark schistose quartzitic argillite, grey argillaceous schists, and as thin partings and interbeds of dark argillaceous material in a dominantly quartzitic succession. The grey colours of most quartzites are due to the variable content of dark argillaceous and, in some instances, graphitic material.”

	“For the most part the rocks are not calcareous. The few thin limestone beds could not be traced for any great distance and their correlation was not possible. Many of the rocks have a low to moderate amount of carbonate mineral which, when determined, was found to be ankerite.”

	“Green chloritic schists, some weathering brown and some exceedingly brightly coloured, are also present. Some chloritic schists contain thin layers and lenses of grey or white limestone. In several places pale, greenish-grey quartzite schists are exposed; their green caste evidently is a result of the development of small amounts of chlorite.”

“The rocks represent a sedimentary succession that has been subjected to regional metamorphism. Cleavage, in varying degrees of perfection, is developed in all rocks and is the result of the oriented development mainly of sericite and less commonly of chlorite. The perfection of the cleavage depends primarily on the initial composition of the rock and the amount of argillaceous material that was available to form mica. To a lesser extent the position of the rock in relation to the axial plane of a fold contributes to the degree to which the cleaner, more massive quartzites are cleaved.”

In respect to cleavage, the term, “flaggy quartzite” is mentioned by Holland, Johnston and Uglow. This terminology was a bit of a mystery to Mr.Reid, until examination, but now believes this term applies to rocks that are cleaved into relatively flat slabs, or “flagstone” like material. Mr.Reid, in his traverses, did not find a sufficient amount to be of commercial interest.

Deposit Types (from Gemco’s 2007 NI43-101 Technical Report)

There are currently four “types” of gold bearing “deposits” within the Cariboo Gold Mining District:


	1.	Placer Deposits.

	2.	Pyritic quartz veins in brittle rocks associated with northerly trending faults.

	3.	Pyritic replacement deposits usually associated with folds in limestone and in close proximity to northerly striking faults

	4.	Pyrite with barite and sericite in a hydrothermal event (Bonanza Ledge).

At the Burns Group property, the exploration focus is mainly on the north trending faults and proximal quartz veining. The north striking faults are an important control for the gold vein mineralization (Hall, 1999). Favorable stratigraphy for replacement deposits does exist at the Burns Group mineral claims and, though, exploration does focus on proximal veining to faults, Gemco Minerals Inc. is also exploring for replacement type deposits. The main commodities historically found and presently looked for by Gemco Minerals Inc. are gold and silver. Other commodities, to a lesser extent, include lead and zinc.

Quartz veining within the “camp” has historically been designated as either “A” veins (those being sub-parallel the north westerly trending strata and are usually of greater extent) “B” veins, which within the mines are either transverse (right angles to stratigraphy), or oblique, which cut stratigraphy but are at right angles to the northerly trending faults. The “B” veins have been interpreted as tension fracture filling possibly following the Riedel shear model. Skerl (1948) states that “continued movement [along the northerly trending faults] opened up both groups of these fractures enabling mineral solutions to invade the broken zones near both the north – south and the “bedded” faults and produce auriferous quartz-pyrite veins. Some mineralization took place within the faults themselves.”

Gemco Minerals Inc Exploration on the Property

Gemco commenced exploration on the Burns Mountain mineral claim group in June 2006 and has continued thereon. A crew was first deployed on the property with an excavator and supporting equipment, to conduct trenching and channel sampling in the anomalous area of the Foster’s East soil grid. Additional reconnaissance exploration was conducted and included a dip needle survey, self potential geophysical surveys, prospecting and rock geochemistry. Also in 2006, technical reports were submitted to the BC Ministry of Energy, Mines and Petroleum Resources for assessment purposes. The most recent works on the property include the expansion of the Burns grid in preparation for further self potential geophysical surveying as well as trenching and sampling of previous self potential geophysical anomalies on that grid. Ground truthing and historical research in an effort to build the company’s GIS database and to expand the targeted areas of interest. Further, trail upgrade and drill pad construction at Foster’s East and Perkins Gulch will be conducted and geological mapping and prospecting is ongoing.

Other Properties

On Gemco’s two placer properties, firstly, the Hawk LPM (lease of placer minerals) is located near Barkerville, British Columbia and is recognized as a deep ground area, which will require extensive testing. Secondly, the Joytown LPM which is strategically located near the head of the historically famous Cunningham Creek. The previous property operator undertook some testing and found gold values that warrant a more extensive testing program. Both of these properties will require extensive testing prior to further mining activities.

Item 3. Legal Proceedings

The Company is currently named as a defendant or Respondent in two legal proceedings.

On the 15th of April, 2008 an action was commenced by a shareholder of Akal Forest Products Ltd. against a group of defendants, including Gemco Minerals Inc. In that action the plaintiff alleges that Gemco Minerals Inc. entered into a non-arms length transaction with Corey Hunter Babcock, an officer and director of Akal Forest Products Ltd. pursuant to which transaction Gemco sold to Babcock a number of shares in Gemco Minerals Inc. That sale was secured by a mortgage and assignment of rents against Lands owned by Akal Forest Products Ltd.

Counsel was retained and a statement of defense was filed by Gemco Minerals Inc. denying that Gemco Minerals Inc. was anything other than a bona fide purchaser for value in that transaction.

On or about April 28, 2008 an interlocutory order, without notice, was granted by the Supreme Court of British Columbia restraining both Mr. Babcock and Gemco from transferring, mortgaging, or hypothecating any of the shares issued by Gemco to Mr. Babcock in relation the aforementioned mortgage and assignment of rents.

On the 22nd of July 2008, the first mortgage holder of the Akal Forest Products Ltd. Lands commenced a foreclosure proceeding in the Supreme Court of B.C. against Akal Forest Products Ltd. In that action Gemco Minerals Inc. is named as a third mortgage holder and Respondent in relation to the mortgage and assignment of rents granted by Akal Forest Products Ltd. as security for the Babcock purchase of Gemco shares. Counsel was retained to protect the interests of Gemco in relation to its charges on the Akal Lands.

The Company’s mortgage was due on demand as of February 5, 2009, and is now in default. The Company took legal action and was awarded a court ordered conduct of sale by the Kamloops Supreme Court, whereby the Company proceeded with listing the property for disposal to the benefit of all secured on the property.

During the course of the listing, many proposals were discussed and although there were no written offers, a build-to-suit program was being negotiated with a potential tenant. However, the second mortgage holder concurrently petitioned the court for Conduct of Sale, without notification, and was awarded the Conduct of Sale to obtain an unconditional offer. The second mortgage holder is proceeding to list the property for sale.

Item 4. Submissions of Matters to a Vote of Security Holders

Within the current fiscal year, no matters have been submitted to a vote of security holders aside from the Consent Action of the majority shareholders of the Company on July 6, 2008 to change its auditors to Moore & Associates, Chartered.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Overview

Our common shares are quoted on the OTCBB (Over the Counter Bulletin Board) exchange sponsored by the NASDAQ (National Association of Securities Dealers) under the symbol GMML and the registrar and transfer agent for our common shares is, Interwest Transfer Co. The following table indicates the high and low bid prices of our common shares during the periods indicated:


QUARTER ENDED	HIGH BID		LOW BID

Aug 31, 2007	$	0.25	$	0.10
Nov 30, 2007	$	0.09	$	0.07
Feb 28, 2008	$	0.13	$	0.05
May 31, 2008	$	0.10	$	0.06
Aug 31, 2008	$	0.08	$	0.03
Nov 30, 2008	$	0.07	$	0.02
Feb 28, 2009	$	0.06	$	0.01
May 31, 2009	$	0.02	$	0.01

The source of the high and low bid information is the NASD OTC Bulletin Board. The market quotations provided reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.

As of May 31, 2009, the Company had 25,630,839 common shares issued and outstanding that were held by approximately 78 registered holders and an unknown number of additional holders whose stock is held in “street name.”

The Company has not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to pay dividends on our common shares, our intention is to retain future earnings for use in our operations and the expansion of our business.

Purchase Warrants

As at May 31, 2009, the Company had 150,000 share purchase warrants outstanding.

On January 31, 2008, 150,000 warrants were issued as part of a debt conversion agreement with a principal shareholder. Each warrant is convertible into one common share, exercisable within two years at a price of $0.30 USD per share.


	Name	No. of Warrants		Exercise Price		Expiry Date

1	Great West Mgmt		150,000	$	0.30		January 31, 2010


	Total		150,000

Securities Authorized for Issuance Under Equity Compensation Plans.

The Company does not currently have an equity compensation plan as tabulated in the table below outlining the Equity Compensation Plans as at May 31, 2009 year end.


Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance

Equity compensation plans approved by security holders		0		0		0

Equity compensation plans not approved by security holders		0		0		0

Total		0		0		0

Item 6 – Selected Financial Data

As a smaller reporting Company, the Company is not required to include this Item.

Item 7. Management’s Discussion and Analysis or Plan of Operation

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

As of May 31, 2009, Gemco had total liabilities of $804,602 consisting of $42,315 in accounts payable and accrued liabilities, $33,474 due to shareholders, $251,763 in notes payable and $477,050 due to related parties. Liabilities increased approximately $173,714 from 2008 due primarily to the following: an increase in amounts due to related parties of $192,325 from a combination of amounts loaned to the Company as well as wages and expenses accrued and interest generated on the loans.

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 Amigos mineral 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.

Our plan of operations for these projects will be continually evaluated and 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.

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

LOCATION MAP OF THE AMIGOS PROPERTY

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 Amigos claim 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.

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; for costs including; the environmental study, management of the claims, attainment of permits, consulting and regulatory fees. Canamex recently advised it has received the mining permits from the mining office to extract 300,000 tons of material the first year, and two million tons every year thereafter. On final verification of such documents, all permits and licenses will be assigned over to Black Stone Industries, and Gemco will release the 300,000 shares to Canamex from trust. Further, upon Black Stone Industries receiving the final mining permits and control of the Claims, a balance of $20,000 will be paid to Canamex for additional costs incurred. On consummation of the above, the Company plans to engage an independent firm to prepare an in-depth 43-101 technical report at an estimated cost of $80,000 including required exploration works on the property.

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.

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.

GEMCO MINERALS INC MINERAL AND PLACER HOLDINGS LOCATION MAP

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

Natural Mineral Products

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
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 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.

Recent Accounting Pronouncements

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 special purpose entities from the guidance of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and FASB Interpretation 46 (revised December 2003), “Consolidation of Variable Interest Entities an interpretation of ARB No. 51,” as well as other modifications. While the proposed revised pronouncements have not been finalized and the proposals are subject to further public comment, the Company anticipates the changes will not have a significant impact on the Company’s financial statements. The changes would be effective March 1, 2010, on a prospective basis.

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial position and results of operations if adopted.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its consolidated financial position, results of operations or cash flows.

In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding the use of a “simplified” method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of “plain vanilla” share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company’s election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies.

Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for “plain vanilla” share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning March 1, 2009. It is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities—Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entities first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS No. 159 beginning March 1, 2008 and is currently evaluating the potential impact the adoption of this pronouncement will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company will adopt this statement March 1, 2008, and it is not believed that this will have an impact on the Company’s consolidated financial position, results of operations or cash flows.

Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, the reported amount of revenues and expenses during the reporting period and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, particularly those related to the determination of the estimated Canadian exploration tax credit receivable. To the extent actual results differ from those estimates, our future results of operations may be affected.

Item 7A Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 8. Financial Statements

The financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.


Consolidated Balance Sheet	F1

Consolidated Statement of Operations	F2

Consolidated Statement of Cash Flows	F3

Consolidated Statement of Changes in Stockholders’ Deficiency	F4 - F5

Notes to Consolidated Financial Statements	F6 - F14


MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Gemco Minerals, Inc.
(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of Gemco Minerals, Inc. (An Exploration Stage Company) as of May 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years ended May 31, 2009, 2008 and since inception on August 21, 1997 through May 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conduct our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gemco Minerals, Inc. (An Exploration Stage Company) as of May 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years ended May 31, 2009, 2008 and since inception on August 21, 1997 through May 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has generated minimal revenues since inception and has never paid and dividends, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


*/s/ Moore & Associates, Chartered*

Moore & Associates, Chartered
Las Vegas, Nevada
August 7, 2009

6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501

GEMCO MINERALS INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)


	May 31			May 31,
	2009			2008

				(Restated - Note 11)
Assets
Current:
Cash	$	903		$	3,277
Deposits		5,448			—

Total Current Assets		6,352			3,277

Investment (Note 3)		75,000			275,000
Mineral Claims (Note 5)		99,273			111,886
Equipment, net (Note 4)		41,295			49,116

		215,569			436,002

Total Assets	$	221,920		$	439,279


Liabilities
Current:
Accounts payable	$	42,315		$	38,322
Due to related parties (Note 6(a))		35,254			70,894
Due to shareholders (Note 6(b))		33,474			28,529
Notes payable - related parties (Note 7)		441,796			249,471
Notes payable (Note 8)		251,763			243,671

Total Liabilities		804,602			630,888

Non-Controlling Interest		—			908
Stockholders’ Deficit
Common Stock
Authorized - 50,000,000 Common shares with par value of $0.001
Issued and Outstanding - 25,630,839 and 23,015,839 shares, respectively		25,631			23,016
Additional paid-in capital		2,404,178			2,342,043
Subscriptions payable (Note 9(h))		—			20,000
Other accumulated comprehensive loss		(93,365	)		(118,912	)
Deficit, accumulated during the exploration stage		(2,919,126	)		(2,458,663	)

Total Shareholder’s Deficit		(582,682	)		(192,516	)

Total Liabilities and Shareholders’ Deficit	$	221,920		$	439,279

(The Accompanying Notes are an Integral part of the Financial Statements)

F-1

GEMCO MINERALS INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. dollars)


	Year ended May 31 2009			Year ended May 31 2008			Period from August 21, 1997 (date of inception) through May 31, 2009

				(Restated - Note 11)			(Restated - Note 11)

Revenue	$	—			—			61,770


Operating Expenses
Depreciation		7,821			11,178			254,547
General and administrative		217,695			319,946			2,130,845

Total operating expenses		225,516			331,124			2,385,392

Loss before Other Items		(225,516	)		(331,124	)		(2,323,622	)

Interest and bank charges		(80,102	)		(47,655	)		(656,891	)
Loss on disposal of assets		—			2,472			(44,737	)
Writedown of assets		(240,977	)		(14,503	)		(384,405	)
Writedown of liabilities		45,155			—			410,908
Loss on disposal of shares		—			—			(1,685	)
Other income		40,977			14,503			78,009

Total other income (expense)		(234,947	)		(45,183	)		(598,800	)

Loss before Minority Interest and Income Taxes	$	(460,463	)	$	(376,307	)	$	(2,922,422	)


Minority interest		—			3,296			3,296
Provision for income taxes		—			—			—

Net Loss for the period	$	(460,463	)	$	(373,011	)	$	(2,919,126	)


Net loss per share -
Basic and fully diluted	$	(0.02	)	$	(0.02	)


Weighted-average number of shares		23,002,030			20,721,000

(The Accompanying Notes are an Integral part of the Financial Statements)

F-2

GEMCO MINERALS INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars)


	Year ended May 31 2009			Year ended May 31 2008			Period from August 21, 1997 (date of inception) through May 31, 2009

				(Restated - Note 11)			(Restated - Note 11)

Operating Activities
Net loss for the period	$	(460,463	)	$	(373,011	)	$	(2,919,126	)

Adjustments to reconcile net loss to net cash used in operating and financing activities:

Depreciation		7,821			11,178			254,547
Shares issued for services		39,750			60,000			473,960
Shares issed for debt consideration		5,000			—			5,000
Loss on disposal and writedown of assets		200,000			—			376,134
Writedown of liabilities		(45,155	)		—			(410,908	)

Changes in operating assets and liabilities
Deposits		(5,448	)		—			(5,448	)
Accounts payable and accrued liabilities		3,993			(37,497	)		292,694
Due to related parties		82,995			70,510			284,168

Net cash provided by (used in) operating activities		(171,507	)		(268,822	)		(1,648,978	)

Investing Activities
Disposition of investments		—			—			(99,272	)
Disposition/(Acquisition) of mineral claims		12,613			—			(36,281	)
Minority interest in subsidiary		(908	)		908			(423,083	)

Net cash provided by investing activities		11,705			908			(558,635	)

Financing Activities
Notes Payable		53,247			228,627			1,974,801
Advances from related parties		73,689			31,398			28,030
Advances from shareholders		4,945			(32,108	)		134,051
Proceeds from share subscriptions		—			60,000			165,000

Net cash provided by investing activities		131,881			287,918			2,301,882

Foreign exchange included in other comprehensive loss		25,547			(31,480	)		(93,365	)

Net Increase (Decrease) in Cash		(2,374	)		(11,476	)		903
Cash, beginning		3,277			14,753			—

Cash, ending	$	903		$	3,277		$	903

Supplemental disclosure of non-cash transactions:
Shares issued for services	$	39,750		$	20,050		$	473,960
Shares issued for settlement of debt	$	—		$	206,390		$	1,465,849
Shares issued for investment	$	—		$	—		$	275,000
Shares issued to acquire asset	$	—		$	—		$	15,000

(The Accompanying Notes are an Integral part of the Financial Statements)

F-3

GEMCO MINERALS INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Period from August 21, 1997 (date of inception) through May 31, 2009

(Expressed in U.S. dollars)


	Common Shares Shares			Amount			Additional paid-in capital, and Contributed surplus			Shares Subscribed Payable	Deficit accumulated during the exploration stage			Other Comprehensive (Loss) Gain			Total

											(Restated - Note 11)						(Restated - Note 11)
Balance at August 21, 1997		—		$	—		$	—			$	—		$	—		$	—

Common shares issued for incorporation, organizational,and business plan development services on Oct 31/99 at par value		5,000,000		$	5,000													5,000
Net loss for the period												(5,000	)		—			(5,000	)

Balance at May 31, 1999 and 2000		5,000,000			5,000			—				(5,000	)		—			—

Surrender and cancellation of common shares on Jun 25/00 at par value		(3,315,000	)		(3,315	)												(3,315	)
Common shares issued to acquire EchoDrive project on Jun 25/00 at $0.005 per share		16,000,000			16,000			59,000										75,000

Net income for the year												3,315			—			3,315
Balance at May 31, 2001		17,685,000			17,685			59,000				(1,685	)		—			75,000

Net loss for the year												(274,113	)					(274,113	)

Balance at May 31, 2002		17,685,000			17,685			59,000				(275,798	)		—			(199,113	)

Surrender of common shares on cancellation of EchoDrive project Jul 18/02 at $0.005 per share		(16,000,000	)		(16,000	)		(59,000	)									(75,000	)
Common shares issued to acquire Firstline Recovery Systems Inc. Nov 18/02 at par value		5,025,000			5,025													5,025
Common shares issued in settlement of debt on Nov 18/02 at $0.01 per share		951,000			951			89,984										90,935
Common shares issued for services rendered on Nov 18/02 at $0.06 per share		1,657,500			1,658			97,792										99,450
Translation adjustment															(21,246	)		(21,246	)
Net loss for the year												(455,330	)					(455,330	)

Balance at May 31, 2003		9,318,500		$	9,319		$	187,776			$	(731,128	)	$	(21,246	)	$	(555,279	)

Common shares issued in settlement of debt on Dec 31/03 at $0.18 per share		3,540,844			3,541			623,183										626,724
Translation adjustment															43,099			43,099
Net loss for the year												(435,501	)					(435,501	)

Balance at May 31, 2004		12,859,344			12,860			810,959				(1,166,629	)		21,853			(320,957	)

Common shares issued for services rendered on Nov 16/04 at $0.05 per share		2,000,000			2,000			98,000										100,000
Translation adjustment															(15,208	)		(15,208	)
Net loss for the year												(399,073	)					(399,073	)

Balance at May 31, 2005		14,859,344			14,860			908,959				(1,565,702	)		6,645			(635,238	)

Common shares issued in settlement of debt on Jun 14/05 at $0.16 per share		2,147,471			2,147			338,760										340,907
Common shares issued for services rendered on Apr 20/06 at $0.10 per share		1,480,000			1,480			146,520										148,000
Common shares subscribed in flow through offering on May 31/06 at $0.25 per share		120,000			120			29,880										30,000
Translation adjustment															(80,835	)		(80,835	)
Net loss for period												(422,013	)					(422,013	)

Balance at May 31, 2006		18,606,815		$	18,607		$	1,424,119			$	(1,987,715	)	$	(74,190	)	$	(619,179	)

F-4

(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

Period from August 21, 1997 (date of inception) through May 31, 2009

(Expressed in U.S. dollars)


	Common Shares Shares		Amount		Additional paid-in capital, and Contributed surplus			Shares Subscribed Payable			Deficit accumulated during the exploration stage			Other Comprehensive(Loss) Gain			Total

											(Restated - Note 11)						(Restated - Note 11)
Common shares issued in settlement of debt on Jan 26/07 at $0.25 per share		767,560		768		191,123												191,890
Common shares issued for services rendered on Jan 26/07 at $0.22 per share		92,000		92		19,958												20,050
Common shares issued for mineral asset on Jan 26/07 at $0.30 per share		50,000		50		14,450												14,500
Common shares subscribed in flow-through offering on Jan 26/07 at $0.25 per share		420,000		420		104,580												105,000
Translation adjustment															(13,242	)		(13,242	)
Net loss for the year (Restated - Note 11)												(97,937	)					(97,937	)
Balance at May 31, 2007		19,936,375		19,936		1,754,230						(2,085,652	)		(87,432	)		(398,918	)

Common shares issued to acquire EKG Minerals Inc. on Jun 6/07 at $0.10 per share		150,000		150		14,850												15,000
Common shares subscribed for cash on Nov 16/07 at $0.08 per share		500,000		500		39,500												40,000
Common shares issued in settlement of debt on Jan 31/08 at $0.20 per share		1,004,464		1,004		199,888												200,893
Common shares issued for investment on Feb 3/08 at $0.37 per share		750,000		750		274,250												275,000
Common shares issued for services rendered on Feb 28/08 at $0.16 per share		375,000		375		59,625												60,000
Common shares issued for mineral asset (in-trust) on Feb 28/08 at $nil per share		300,000		300		(300	)											—
Share subscriptions payable		—		—					20,000									20,000
Translation adjustment															(31,480	)		(31,480	)
Net loss for the period												(373,011	)					(373,011	)

Balance at May 31, 2008		23,015,839		23,016		2,342,043			20,000			(2,458,663	)		(118,912	)		(192,516	)


Share subscriptions payable, shares issued on Aug 20/08 at $0.20 per share		100,000		100		19,900			(20,000	)								—
Common shares issued for services rendered on Aug 20/08 at $0.15 per share		265,000		265		39,485												39,750
Common shares issued in consideration for loan on May 26/09 at $0.02 per share		250,000		250		4,750												5,000
Common shares issued in-trust as security for loan on May 26/09 at $nil per share		2,000,000		2,000		(2,000	)											—
Translation adjustment															25,547			25,547
Net loss for the period												(460,463	)					(460,463	)

Balance at May 31, 2009		25,630,839		25,631		2,404,178			—			(2,919,126	)		(93,365	)		(582,682	)

(The Accompanying Notes are an Integral part of the Financial Statements)

F-5