North American Gem Inc V.NAG

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Charles please resign,.... you suck as a CEO. See your report card below.NORTH AMERICAN GEM INC.TSXV: NAGMANAGEMENT DISCUSSION AND ANALYSISFor the six months ended June 30, 2011NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20112OverviewThis discussion covers the operations of North American Gem Inc. and its subsidiaries (“Company”) for thesix months ended June 30, 2011. The following management discussion and analysis should be read inconjunction with the audited financial statements for the year ended December 31, 2010 and unauditedfinancial statements for the six months ended June 30, 2011. These documents are available for viewing onSEDAR at www.sedar.com. All dollar amounts included therein and in the following MD&A are in Canadiandollars.This Management Discussion and Analysis (“MD&A”) was prepared on August 26, 2011.DESCRIPTION OF BUSINESSNorth American Gem Inc. and its subsidiaries are a mineral resource exploration and development companywith its head office in Vancouver, British Columbia, Canada. The Company's primary goal is to explore forcoal in North America. Currently the focus is in Kentucky and Saskatchewan. In addition to coal exploration,the Company also has interests in Copper, Gold, Molybdenum and other base metals in Canada. TheCompany is an exploration and development company and is in its early stages of operating mining facilitiesin Kentucky.The Company’s shares are listed for trading on the TSX Venture Exchange under the trading symbol NAG.OVERALL PERFORMANCE - MINERAL PROPERTY INTERESTSLouise Lake, Smithers, British ColumbiaBy an option agreement dated December 14, 2004 and renegotiated on February 20, 2006, with FirestoneVentures Inc. (“Firestone”), the Company is entitled to acquire up to a 100% interest in eight mineral claimslocated in the Omineca Mining Division, British Columbia. Firestone has an option to acquire a 100%interest under an Option Agreement dated December 20, 2003 with the original vendors.In March 2008 the Company increased its landholdings at the Louise Lake property to 12,291 hectares fromthe original land position of 3,319 hectares, the cost of increased landholdings is permit cost. The propertywas expanded primarily to the north and northwest. The Louise Lake project is now contiguous with aproperty to the northwest held by Teck Cominco Limited.SRK Consulting (Canada) Inc.’s National Instrument 43-101 report entitled "Independent Technical Reportand Resource Estimate for the Louise Lake Property, Omenica Mining Division, British Columbia,” dated July14, 2006 and updated in February 2009, is available at www.sedar.com.The Company completed a 2007 winter drilling program at the Louise Lake project. A total of 21 holes for6,277.6 metres (20,597 feet) of NQ-sized core were drilled. The drill program consisted largely of step-outholes focusing on identifying extensions of the Main zone, a tabular, east-to-west-striking, moderately northdippingporphyry-style copper-molybdenum-gold-silver deposit. The program also included seven interiorholes. All sample analysis was completed by ALS Chemex of North Vancouver, B.C. Canada. Results of thisprogram have delineated the eastern and western limits of the Main zone overlying the Terminator, but havealso indicated the Main zone extends to the north at depth, with increasing copper and gold grades,particularly in northeastern areas.In January 2008 the Company commenced a drill program conducted by Britton Brothers Diamond Drilling ofSmithers B.C. All sample analysis was completed by ALS Chemex of North Vancouver, B.C. The drillprogram consisted of a minimum of 4,400 metres of NQ-sized core in approximately 11 to 13 holes, focusingon the northward extension of the Main zone, a tabular, north-dipping copper-gold-molybdenum-silverdeposit. The deposit extends to a depth of about 270 metres, where it is abruptly truncated by a flat-lyingthrust fault, called the "Terminator."NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20113The program included targeting of the interpreted portion of the deposit underlying the flat-lying Terminatorfault northwest of the Main zone. Results from hole LL-07-15, collared northwest of the Main zone in 2007,revealed low-grade mineralization beneath the Terminator having a similar fabric and geochemical signatureto the Main zone. This represents the first intercept of sub-Terminator mineralization to date, suggesting theunderlying fixed portion of the deposit may occur farther northwest of the Main zone. The 2008 program alsotargeted the northeastern portion of the Main zone near areas of higher-grade gold intercepts returned in2007, including a 26.1-metre intercept grading 0.769 gram per tonne gold and 0.477 per cent copper(Company's news release dated May 10, 2007).A total of 5,042.8 meters in 16 holes was completed at the end of February 2008. The first results obtainedfrom DDH LL-08-25, collared close to DDH LL-07-18B, returned a value of 0.769 gpt gold with 0.48% copperfrom a 26.1-metre intercept directly overlying the "Terminator" (Company’s news release, May 9, 2007). DDHLL-08-25, collared roughly 40 meters southwest of Hole LL-07-18B, returned a 36.2-metre intercept grading0.417% copper with 0.692 gpt gold, also directly overlying the "Terminator" fault. These similar gold gradesand gold: copper ratios indicate an extension of the higher grade gold zone at depth.Hole LL-08-20, collared about 220 meters north-northwest of DDH LL-08-25, targeted the down-dipextension of the Main zone west of the gold enrichment area. It intersected a 74.9-metre intercept of Mainzone-style mineralization, including a 5.5-metre intercept grading 0.350% copper with 0.85 gpt gold directlyoverlying the Terminator.Holes LL-08-29 and LL-08-32, respectively, intersected Main-zone-style mineralization commencing directlybeneath the Terminator and extending downhole to a second flat-lying fault very similar in fabric, interpretedto belong to the same tectonic event. Hole LL-08-29, collared somewhat west of hole LL-08-32, contains a20-metre, subintercept grading 0.297 per cent copper (Cu), 121 parts per million (0.012 per cent)molybdenum (Mo), 0.342 gram per tonne gold (Au) and 1.7 g/t silver (Ag). In both holes, mineralization isabruptly truncated by the sub-Terminator fault.By August 2010, 96 holes in total had been drilled at the Louise Lake property and approximately 3.5 milliondollars in exploration expenditures had been completed by the Company.The project was under the direction of Carl Schulze, BSc, PGeo, in accordance with the regulations ofNational Instrument 43-101.In accordance with accounting guidelines which state that where there is a delay in development whichextends beyond three years and no exploration is currently planned in the foreseeable future that is apresumption of a write-down, management of the Company resolved to write down the value of the project toa nominal value.Delbonita, AlbertaOn March 16, 2005, the Company entered into a purchase agreement for four mineral properties comprising200,000 acres of prospective uranium mineral claims in southern Alberta, known as the Delbonita claims,comprising Willow Creek, Milk River, St. Mary River, and Ravenscrag.Acquisition costs included a payment of $10,000 (paid) and the issuance of 100,000 common shares ofCompany stock (issued at a value of
.11 per share). This acquisition is subject to a 2% NSR with an optionto acquire the first 1% NSR from the vendor by:a) Paying the vendor $25,000 within two years of the date of the agreement;b) Paying the vendor $200,000 within two to five years of the date of the agreement; andc) Paying the vendor $1,000,000 after five years from the date of the agreement.The above option was not exercised by the Company.In addition, the Company acquired an additional 9 mineral claims.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20114This project was written-down to a nominal value due to unfavorable results of exploration done in fiscal year2009.Ranger Lake, OntarioIn May 2007 and further amended on March 12, 2009, the Company entered into a purchase agreement toacquire a 100% interest in the Ranger Lake uranium claims located in the Sault Ste. Marie Mining district ofOntario. The property consists of approximately 19,000 acres.On March 12, 2009, the Company amended the Ranger Lake option agreement, subject to TSX VentureExchange approval (received). The new terms of the agreement were as follows:• Issue 200,000 common shares upon approval by the TSX Venture Exchange of the amendedagreement (issued at a fair value of
.08 per share).• Issue 200,000 common shares by the anniversary date of the original agreement (May 15, 2009) ofthe original agreement (outstanding).• Make payment of $40,000 and issue 50,000 common shares by May 15, 2010 (outstanding).• Make payment of $60,000 by May 15, 2011 at which point all terms of the amended optionagreement will have been fulfilled.During the year ended December 31, 2010, the Company chose to discontinue pursuing its interest in theRanger Lake property. As a result, the Company provided for an impairment charge of $173,113.Whiskey Gap, AlbertaOn October 5, 2005 (amended May 21, 2007), the Company entered into an option agreement to acquire upto an 80% interest in the Whiskey Gap uranium property consisting of 44,000 acres located in southernAlberta.To acquire an 80% interest, the Company was to pay $15,000 cash, issue 300,000 common shares,complete work commitments of $1,250,000 and complete a feasibility study. To date the Company has paidthe $15,000, issued 200,000 common shares, and completed work commitments totalling $650,000.On December 27, 2007 the Company entered into an Option agreement on the Company’s interest in theWhiskey Gap Project with Geo Minerals Ltd. Geo Minerals Ltd. could have earned up to a 40% interest in theWhiskey Gap, should the project reach feasibility. This arrangement, if completed, would therefore have theCompany and Geo Minerals Ltd. with an equal 40% earn in on the Whiskey Gap project with InternationalRanger Corp. holding the remaining 20% of the project’s interest.In order to earn a 40% interest in the Whiskey Gap Project, Geo Minerals Ltd. was to pay the Company$25,000, issue to the Company 300,000 common shares of Geo Minerals Ltd. and incur $800,000 inexploration expenditures before December 31, 2009. To date, Geo Minerals Ltd. has paid the Company$25,000, issued to the Company 150,000 common shares of Geo Minerals Ltd. and incurred $200,000 inexploration expenditures.During the year ended December 31, 2009, the Company wrote off its interest in the Whiskey Gap Propertydue to unfavorable results of exploration and provided for an impairment charge of $623,535.Adamas Property, SaskatchewanIn May 2008 the Company signed an agreement with Adamas Minerals Corp. (Adamas) of Prince Albert,Saskatchewan to grant North American Gem Inc. exclusive rights to coal, oil shale's and/or all hydrocarbonNORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20115discoveries on a land package on which coal permit applications have been submitted for, West of HudsonBay, Saskatchewan.In 2007, Adamas was exploring a magnetic anomaly thought to be a kimberlite target in proximity to the mostrecent discovery by Goldsource Mines Inc. (TSX-V symbol: GXS) (Goldsource), in western Saskatchewanwhich has been recently shown to have potential for regional coal deposits.During this exploration program Adamas discovered a coal seam in the Cretaceous rock (Mannville GroupRocks) sequence containing coal similar to Goldsource. This 4 meter intercept was sent to Loring Laboratoryout of Calgary, Alberta for assay. This is the same Laboratory that Goldsource had used and was chosen tomaintain assay continuity. Upon the arrival of the sample, it was evident that the coal had suffered someoxidization and degradation due to exposure while remaining out in the core boxes uncovered and exposedto the elements. Coal is considered to be extremely sensitive to oxidization while compared to othercommodities that require no special handling during drilling or storage while in the core boxes. Despite thelikelihood of some grade loss, the samples graded Sub-bituminous A (NI 43-101 compliant) quality over 4meters. This is encouraging as the coal would have likely deteriorated to some degree and suggests that thesample may be of better quality in an unoxidized state.Adamas has collected proprietary aeromagnetics data for the area of interest and it has been made availableto the Company to be used to further evaluate the area for coal deposits and other minerals that may befound therein. Historical data and reports suggest that coal is present to the north edge of the Cretaceousrock sequence along the shores of Wapawekka Lake to the north of the Adamas discovery. The reportsfurther suggest that the Wapawekka out-crop is likely associated with a larger deposit to the south. TheAdamas intercept is directly south of Wapawekka Lake along the low lying basin adjacent to the south eastof the Narrow Hills Uplands.The Company acknowledged that this land package will require a few phases of airborne study to cover theentire area of interest. The Company engaged Dahrouge Geological Consulting Ltd. (Dahrouge) ofEdmonton, Alberta, which has completed the permitting process for five locations on its behalf. Dahrougehas significant experience in exploring for, and developing deposits of thermal coal within the WesternCanada Sedimentary Basin.On August 10, 2009, the Company announced that it received notice from its land manager that the first 5drill locations to the south of the Goldsource Mines "Border Property" had been approved by SaskatchewanEnvironment and private landowners.Fugro Airborne Surveys of Ottawa, Ontario completed the airborne geophysical survey on three selected"Survey Blocks" around the Tobin Lake area for a total of 1,453 line kilometres with traverse line spacing of600 meters. This survey covered a total of 66,347 hectares which was analyzed by Dahrouge for potentialtargets. At this time these new prioritized targets have not been permitted to drill.The Company prioritized this particular region surrounding Tobin Lake based on historic coal occurrenceswithin oil exploration wells. The data collected from the oil exploration wells indicates that the coaloccurrences are less than 100 meters deep, coal less than 100 meters deep allows for cost effective removalwhich was the major factor in prioritizing the Tobin lake area. As with the majority of the Company's landholdings, this region is within the prolific "Durango Trend" as defined by Goldsource Mines Inc.; whichcomprises several coal occurrences between Wapawekka Lake and Goldsource's "Border Property"northeast of Hudson Bay. The surveyed region will also provide year round drilling access to potentialtargets, and a straight forward approval process through private land holders and the Saskatchewan Ministryof Energy and Resources and Ministry of Environment.Jody Dahrouge, a qualified person under National Instrument 43-101, was overseeing this project.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20116Saskatchewan CoalIn 2008, the Company was granted 757 Coal Prospecting Permits covering an area of 1,436,500 acres(581,376 hectares). Three of the permits were acquired by a purchase agreement on May 1, 2008 for $7,500in cash (paid) and issuing 100,000 common shares (issued at
.09 per share) and paying $1,500 cash andissuing 100,000 common shares (issued at
.07 per share) on or before May 1, 2009. The remainingpermits were approved by Saskatchewan Energy and Resources (SER). The capitalized acquisition costs forSaskatchewan Coal consist of coal permitting of $641,680 and consulting fees to obtain permits of $173,849.On February 16, 2009, the Company granted an option to Silver Fields Resources Inc. (TSX-V symbol: SF)(37.5% interest) and WestCan Uranium Corp. (TSX-V symbol: WCU) (37.5% interest) to acquire a 75%interest in Township 55-07-02. Township 55-07-02 consists of 12 Coal Prospecting Permits (CPP) totaling23,040 acres to the northeast of Tobin Lake in Saskatchewan, Canada.Terms of the agreement for Township 55-07-02 are as follows:For Silver Fields Resources Inc. to earn a 37.5% interest and WestCan Uranium Corp. to earn a 37.5%interest (75% interest in total) in Township 55-07-02 they must:• Each pay $7,500 (received $15,000 in total) to the Company upon signing of the agreement(received).• Each issue 200,000 common shares to the Company (received).• Incur exploration expenditures of $200,000 on the property by September 30, 2010. As of thedate of this report, this commitment had not been fulfilled.• Incur additional exploration expenditures of $280,000 on the property by September 30, 2011.• Take the project to completion of a bankable feasibility study within 5 years of the vesting of thisagreement; failure of which the 75% interest in Township 55-07-02 will revert back to theCompany.During the year ended December 31, 2010, Silver Fields Resources Inc. did not fulfill the work requirementsset out in the agreement. During the six months ended June 30, 2011, Silver Fields Resources decided notto pursue further interest in the property. The Company holds 100% of interest of the property.The project was under the direction of Dr. K. W. Geiger, Ph.D., P.Eng., P.Geo, (a director of Silver FieldsResources Inc. and a qualified person), in accordance with the regulations of National Instrument 43-101.Appalachia Coal Property, West Virginia USAOn September 23, 2008, the Company signed a Share Acquisition Agreement with Appalachia Coal Corp(ACC) to acquire 100% of the outstanding shares of ACC. Upon the terms of the agreement, the Companypaid $200,000 to ACC’s shareholders and issued 8,000,000 units, consisting of one common share (issuedat FMV of $ 0.07 per share) and one common share purchase warrant exercisable at an exercise price of
.20 per share for a period of two years from closing (issued at a price of
.031 per warrant) to ACC’sshareholders.During the year ended December 31, 2008, the Company acquired through its wholly owned subsidiaryAppalachia Coal Corp. (ACC) interests in approximately 20,000 acres of coal leases located in PrestonCounty, West Virginia. The following are the specific terms and conditions for each coal lease:• On December 21, 2008, ACC signed a lease agreement to acquire a 50% interest in several parcelslocated in Portland District, Preston County, West Virginia, USA for ten years by paying 6% of thesale price of the coal mined, removed, sold and shipped, payable on 25th day of each calendarmonth.• On November 13, 2008, ACC signed a lease agreement to acquire an interest in Little Clarksburgand Elk Lick coal seams for ten years by paying
.25 times the number of 2,000 pound tons of coalNORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20117sold, payable on 25th day of each calendar month plus, $6,500 USD at the beginning of theagreement.• On November 7, 2008, ACC signed a lease agreement to acquire an interest in Little Clarksburg andElk Lick coal seams for ten years by paying
.75 times the number of 2,000 pound tons of coalsold, payable on 25th day of each calendar month.• On November 7, 2008, ACC signed a lease agreement to acquire an interest in Little Clarksburg andElk Lick coal seams (Little Seams), Harlem and other coal seams (Coal Seams) for ten years bypaying $2.50 times the number of 2,000 pound ton coal sold (Little Seams) and $3.50 times thenumber of 2,000 pound tons of coal sold (Coal Seams), payable on 25th day of each calendarmonth.• On September 22, 2008 ACC signed a lease agreement to acquire a 100% interest in the a propertylocated in Preston County, West Virginia, USA including any replacement or successor claims andall mineral/mining leases and other mining interests derived from any such claims for ten years bypaying 6% of the sale price of the coal mined, removed, sold and shipped, payable on 25th day ofeach calendar month.• On September 18, 2008, ACC signed a lease agreement to acquire a 100% interest in the BirdsCreek property located in Lyon District, Preston County, West Virginia, USA, including anyreplacement or successor claims and all mineral/mining leases and other mining interests derivedfrom any such claims for ten years by paying 6% of the sale price of the coal mined, removed, soldand shipped, payable on 25th day of each calendar month.During the year ended December 31, 2010, management of the Company resolved to write down capitalizedcosts of this project to a nominal value.Kentucky Properties, USIn October 2009, the Company acquired coal leases from Lonesome Pine Leasing LLP (“LPL”) in KnoxCounty, Kentucky totaling 1,700 acres. As per the terms of the agreement, the Lessor granted the Lesseean exclusive and undivided leasehold interest in 5 leases including the coal mining and extraction rights. Inconsideration for the lease acquisition, the Company was to make tonnage royalty payments to the Lessoras specified for each individual lease assigned to the Company and a $1.00/net ton mined override royaltypayment to LPL for all coal mined and extracted from these properties, pay $25,000 USD (paid $26,184) andtransfer 1,600,000 common shares of the Company. These properties are Demps Hollow Property, PatrickEngle Hollow Property, North American Gem #1 Mine and North American Gem #3 Mine as described anddiscussed in the following sections.Safeco Lease/North American Gem Processing FacilityOn September 14, 2009, the Company entered into an open ended lease with Safeco, Inc. of Corbin,Kentucky (the “Safeco”), to operate a coal preparation and rail loading facility in Knox County, Kentucky. Thisfacility serves as the central operation and distribution point for coal produced by the Company’s miningoperations. The facility has equipment in place that is capable of crushing and screening coal. The Companywill have the ability to purchase outside coal to produce custom blended products which will increase marketpotential.The principal terms to lease the facility from the Lessor include:• Safeco will retain ownership and control of the permit and all physical property pertaining to andlocated at the facility as well as the bond required to operate the facility with the exception of bondingrequired for the refuse disposal area.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20118• The Company posted a bond in the amount of $27,400 USD (paid $30,376 CDN) to be placed inescrow for the duration of the lease agreement.• The Company agreed that if the State of Kentucky requires increased bonding to be placed duringthe term of the lease, the Company will post the required amount.• Safeco agreed that any bond(s) posted by the Company will be replaced upon termination of thelease provided that no claim is in effect by the State of Kentucky against said bond(s) for any liabilityincurred by the Company or its designated operator during operation of the facility.• Lessor will assign the designee of the Company as operator of the facility, including operation of therefuse facility upon:i) The Company making tonnage production royalty payments to the Lessor in the amount of $1.50per net ton for each net ton of coal that is processed through the crusher and/or screeningequipment located at the facility, andii) The Company making royalty payments to Safeco in the amount of
.50 per net ton for anycoal loaded out of the facility by any means that does not require processing through thecrusher, screens or washing equipment located at the facility, andiii) The Company making royalty payments to Safeco in the amount of
.25 per net ton for anycoal that is processed through the washing equipment after first being processed through thecrushing and screening equipment located at the facility. For further clarity, the fee charged forprocessing through the washing equipment shall be in addition to the fee charged for processingthrough the crusher and/or screen, andiv) Safeco showing proof of active status of the facility including posting all bonds required tooperate the facility, andv) The Company paying to Safeco the amount of $5,000 minimum payment each month during anycalendar month that the royalty payments due through coal production by the washing processand/or loading do not exceed $5,000. In the event that the royalty payment for production orloading exceeds $5,000, no minimum royalty payment is due, andvi) The royalty payments described shall be due before the 25th day of the month followingproduction or shipment in which the production or loading occurs, andvii) The first minimum royalty payment was due on the last day of the second full calendar monthafter the signing of the definitive agreement,viii) The Company agrees to bear the cost to maintain the facility which includes repairs necessarydue to normal operation, andix) Any maintenance, repairs, improvements, additions, or replacements of any equipment at thefacility will become the property of Safeco unless agreed to in writing in a separate agreement byand between the parties.During the year ended December 31, 2010, the Company completed several upgrades at the NorthAmerican Processing Facility which will increase the overall efficiency and coal capacity. Significantupgrades include electrical upgrades, the addition of concrete loading ramps, and the addition of a stackingconveyor which will allow the coal circuit to run longer without interruption.On October 8, 2010, the Company and the Lessor agreed to amend the agreement. With the amendment,the expiry date of the lease is October 8, 2011, provided sixty (60) days written notice has been provided toNORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 20119the other party and which can be extended by 30 days for every $10,000 USD spent on any repairs andmaintenance of the coal processing facility since October 9, 2009.All costs of maintaining the facility are expensed as incurred.On June 8, 2011, the Company entered into a subcontractor agreement with Kentucky Industrial Services(the “Contractor”) for the Contractor to perform coal processing, coal washing, temporary refuse disposal andrail loading operation at the processing facility. The principal terms for the Contractor are as follows:• The Contractor shall pay the minimum rent payment of $5,000 USD on the first of each month.• The Contractor shall pay all operating expenses and has no right of reimbursement against theCompany.• The Contractor shall pay the Company for coal processing, coal washing, temporary refuse disposal,coal tippling and rail loading operations at the following rates during the course of the agreement:• Production royalty payments in the amount of $1.50 per net ton of coal that is processedthrough the crusher and/or screening equipment located at the facility• Royalty payment in the amount of
.50 per net ton of coal loaded out of the facility• Additional royalty payments in the amount of
.25 per net ton of coal processed asdescribed in (a) and subsequently processed in the existing washing equipment located atthe facility.•
.25 per ton of coal shipped by rail or truck from the facility.When the Contractor processes the Company’s coal at the processing facility, the Company shall payproduction royalty payments to Safeco as described in the agreement with Safeco and shall pay theContractor for coal processing, coal washing, temporary refuse disposal, coal tipping and rail loadingoperations at the following rates for processing the Company’s coal:• Production royalty payments in the amount of $3.50 per net ton of coal that is processed through thecrusher and/or screening equipment located at the processing facilities.• Royalty payment in the amount of $1.25 per net ton of coal loaded out of the processing facility,which does not require processing through the crusher, screening or washing equipment located atthe processing facility.• Additional royalty payments in the amount of
.25 per net ton of coal that is processed through thecrusher and/or screening equipment located at the facility and subsequently processed in theexisting washing equipment located at the facility.• Production royalty payments in the amount of $7.50 per net ton of coal that is crushed, screened andwashed the equipment located at the facility.North American Gem #1 MineOn September 2, 2009 and further amended on September 9, 2009 the Company entered into an agreementto acquire two coal leases from Lonesome Pine Leasing LLC (“LPL”). The leases, known as the “Bay’sHollow” leases are located in Whitley County, Kentucky, and included a mining permit ready for production.The terms of the agreement required the Company to purchase Kentucky State Mining Permit #918-0396from Buried Sunshine Transport, Inc (“BST”). The permit was transferred to Engle Hollow Mining, LLC(“EHM”) which was to mine the leases under contract for a price of $40/net ton loaded into trucks to betransported to market. The Company retains the sole and exclusive rights to market the coal produced at the#1 Mine.In consideration for the Leases and Permit, the Company:• Would pay EHM $3.50 USD for each net ton of coal passed through the coal processing facility;• Paid EHM $18,000 USD to begin the process of preparing the processing facilities for operation(paid $19,374 CDN);NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201110• Posted a bond in the amount of $33,800 USD (paid $36,247 CDN) for the purpose of obtainingpermit issuance and transfer from BST to EHM;• Paid $7,200 USD (paid $7,721 CDN) to EHM to transfer the Permit from BST to EHM;• Paid $17,150 for construction and certification (paid $19,142 CDN); and• Paid to Engle Hollow Mining $45,000 USD (paid 48,439 CDN) for funding the purchase of the permit.In January 2010, the Company replaced EHM and retained the services of C & T Excavators, LLC to minethe leases under contract for $18/net ton loaded. The Company also retained the contract services of JCDrilling and Ditching Inc. (“JC”) to provide coal auger mining services for $15/net ton loaded. EHM stillretained ownership of the permit and the Company negotiated a settlement to pay EHM $5/net ton loaded.In addition, LPL, EHM and Myron McCoy acknowledged and confirmed that LPL, EHM and Myron McCoy inthe aggregate owe the Company $58,039. Of the $58,039, $7,699 was withheld in total before any paymentsto EHM/LPL/Myron McCoy and the remaining $50,340 is to be deducted from any payments due to EHM at arate of $2 USD per net ton of coal produced from the #1 Mine. As at December 31, 2010, an amount totaling$53,274 CDN was written off to bad debts. The Company expects to recoup the reminder of the amountowed to the Company from royalties due to LPL for the Powell Leases in the North American Gem Mine #3.The method of mining used by the Company in the #1 Mine is known as contour mining. This type of miningis done on properties that were previously mined prior to the enactment of the Surface Mine Control andReclamation Act of 1977. This law requires that after any surface mining, the land must be restored to theapproximate original contour unless otherwise specified in the permit application and approved by theKentucky Department of Natural Resources (KDNR). When "pre-law" mining was done, the general practicewas to mine along the contour of a slope to the maximum profitable ratio and leave the resulting highwall anda wide, flat bench where the material covering the coal was removed and then graded somewhat flat asopposed to restoring the original slope.The #1 Mine was permitted for the use of augers to enter the coal seam from the exposed wall with minimaladditional excavation and maximum cost effectiveness. This type of mining dramatically reduces the amountof surface disturbance and allows for the recovery of any potential reserves that were previously believed notto be economically viable.During the year ended December 31, 2010, the Company completed production at the North American Gem#1 Mine site in Whitley County, Kentucky and provided a $135,977 depletion charge to write off its interest inthe property.North American Gem #2 MineOn March 31, 2010 the Company announced the signing of a definitive agreement of a fully operationalsurface coal mine located in Knox County, Kentucky. In consideration for the acquisition of the Jamiesonpermit, the Company must pay $150,000 USD in three instalments, with the entire amount due in full whenthe transfer is complete. The Company paid $50,000 USD ($53,125CAD) upon the Company entering intothe agreement, the remaining balance of $100,000 USD was paid according to the following schedule:• $50,000 USD (paid $54,790 CAD) payment upon the submission of the transfer application; and• $50,000 USD (paid $55,252 CAD) payment upon the completion of the transfer application.In relation to the acquisition of the mine permit, the Company acquired the Begley North Leases. Inconsideration for the acquisition, the Company paid a recoupable amount of $25,000 USD (paid) upon theeffective date of the lease agreement, and thereafter upon the first day of the second lease year. Once coalproduction is underway, the Company is required to pay production royalties according to the followingterms,• For all coal sold at a Gross Sale Price of less than $80 USD per ton of 2,000 pounds, the greater ofthe sum equal to 8% of the Gross Sale Price of such coal or the sum of $4 USD for each ton of 2,000pounds of such coal;NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201111• For all coal sold at a Gross Sale Price of $80 USD per ton or more, the royalty rate shall increase by1% for each increase in the Gross Sale Price of $10 USD;• Beginning during the first month of the third lease year, and during each calendar month thereafterfor the life of the lease, if the Company fails to mine at least 5,000 tons of coal per month, theCompany shall pay to the lessor a Deficit Tonnage Royalty $4 USD per ton of the difference betweenthe tons of coal actually mined during that month and the minimum tonnage requirement of 5,000tons.The $25,000 USD ($27,090 CAD) paid for the acquisition of Begley North Leases is recoupable and will berecouped against the above royalty payments.On June 4, 2010, the Company through its subsidiary, North American Gem US, Inc. (NAG US) posted therequired reclamation bond $157,000 USD and submitted the permit transfer application to the KentuckyDepartment of Natural Resources (KDNR) for the transfer of Mine permit #861-0443 in the name ofJamieson Construction, Inc. to NAG US.On June 17, 2010, the application for the transfer of Mine permit #816-0443 in the name of JamiesonConstruction, Inc. to NAG US was administratively accepted by KDNR. The new mine permit number #861-0513 was assigned to NAG US and was recorded as North American Gem #2 Mine in Knox County,Kentucky.On July 27, 2010, the KDNR fully approved the mining application (Mine permit number #861-0513) whichallowed for production to begin at North American Gem #2 Mine in Knox County, Kentucky.On August 4, 2010, the Company through its subsidiary NAG US commenced mining coal at the NorthAmerican Gem #2 Mine.The North American Gem #2 Mine is a surface mining and augering operation.The Company is continuing to work on improving the production numbers at NAG Mine #2. Over the last 12months, the Company has experienced production inconsistencies at NAG Mine 2. Currently, NAG Mine #2is being mined intermittently and the company is working to alleviate the legal issues which have beencontributing to the production inconsistencies.North American Gem #3 MineOn June 9, 2009, the Company (the Lessee) entered into an agreement to acquire certain coal leaseslocated in Knox County, Kentucky from Lonesome Pine Leasing LLC (“LPL”) (the Lessor). The leases arereferred to as the as the “Swan Pond” property (“Powell Lease). The Powell Lease was secured and is partof the Swan Pond property permit.The principal terms set forth in the agreement include:• LPL grantors to the Company the right to acquire an exclusive and undivided leasehold interest inthe Kentucky Property, including coal mining and extraction rights, from LPL, upon:• The Company making tonnage production royalty payments to the LPL in the amount of 8% of theselling price (FOB mine) on all coal mined and extracted from the Powell Lease; and• The Company making tonnage production override royalty payments to the LPL in the amount of$1.00/net ton on all coal mined and extracted from the Kentucky Powell Lease; and• The Company made a onetime payment to the LPL in the amount of$15,000 USD (paid $16,702CAD). The amount was paid to secure the Powell Lease and for all the due diligence related tosecuring the property.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201112On September 23, 2009 and further amended on August 12, 2010, the Company entered into a DefinitiveAgreement to acquire additional coal leases located in Knox County, Kentucky. The leases, referred to asthe “ABGSC Leases” are permitted for mining under permit #861-0502.The ABGSC Leases consist of the following Lessors and terms:Date ofLeaseName ofLessor Term Payments to Lessors Royalty Overide8/9/2009 West 9/17/2009 Expired and replaced with April 12, 2011lease directly with North American Gem USInc.Expired5/14/2009 King 5 years Greater of $3.00 per net ton of 2,000 poundsor 8% of gross selling price per ton$1.50 per net ton5/14/2009 Foley 5 years Greater of $3.00 per net ton of 2,000 poundsor 6% of gross selling price per ton,wheelage rate of
.25 per ton for coalmined and transported by truck acrosssurface owned by Lessor.$1.50 per net tonand 1% paymentson gross sales(FOB Mine) dueto ABGSC5/27/2009 Gray 5 years Wheelage rate of
.35 per net ton of 2,000pounds coalIn consideration of and for the sale of the Permit and Leases:• The American Blue Gem Steam and Coal LLC (“ABGSC”) grants to the Company the right to acquirean exclusive and undivided leasehold interest in the ABGSC Leases, including coal mining andextraction rights, from the Lessor, upon: The Company making one time payments to the Lessor inthe amount of:o $20,000 USD payment upon signature of the Letter of Intent (paid $22,014 CAD);o $40,000 USD payment upon execution of the Definitive Agreement (paid $43,554); ando $40,000 USD (paid $42,485 CAD) upon technical acceptance of “the permit” by the KentuckyDNR.• ABGSC shall be paid a recoupable minimum royalty payment of $10,000 USD per month beginningNovember 8, 2010 and not to exceed 36 months for a maximum of $360,000 after which royalties willonly be paid according to actual coal mined. Vendor minimum royalty payments will be capped at amaximum of $10,000 USD per month until the Company recovers $40,000 USD of purchase moneyfunds described above. This payment can be credited against royalties when and if royalties frommining activities commence and to such an extent as such royalties exceed $10,000 USD per monthpaid to the Vendor.• The Company shall pay necessary expenses for the issuance and transfer of the permit #861-0502to be recouped as follows,o Fees and costs associated with two natural gas pipeline crossings on the Lease, 50% of whichshall be offset from the royalty payments between 13th and 18th month of coal production.o Fees and costs associated with obtaining title opinions for the Leases, 25% of which shall beoffset from the royalty payments over the first six months of production. However, the Companyshall only be liable for up to $3,750 USD, regardless the total fees and costs associated withobtaining title opinion with the leases.o Fees and costs associated with obtaining a KPDES permit were offset against the cost of themining permit transfer. ABGSC paid the costs of the mining permit transfer and the CompanyNORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201113paid the costs of the KPDES permit and any cost for change in operator, with any difference incosts being absorbed by the responsible party.The permit was approved and transferred to NAG US on January 13, 2011.The lease agreement between ABGSC and Archie West expired on September 17, 2009. As a result theCompany via its subsidiary North American Gem US (the Company) entered a coal lease agreement toacquire the West lease in Knox County, Kentucky. In consideration for the lease acquisition, the NAG USmust pay $10,000 (paid $9,390 CAD) as advanced royalty, which is recoupable and will be applied againstthe royalty payment upon coal production. The Company shall make payments to the Lessor as tonnage per2,000 ton of coal as the following rate: the greater of $4.00 per ton or 7.5% of Gross Sales Price for all coalmined and sold from the property. In addition, the Company shall also pay wheelage at
.25 per ton coalhauled across of the leased premises.The Company has already received an access road permit for the Swan Pond lease; however the companyneeded to evaluate another option. An alternate access road was evaluated and it was determined to be amore cost efficient transportation route from the mine site. The Company is currently waiting for the approvalof this new access road permit in order to proceed with the establishment of mining operations at the SwanPond leases.Granny Rose PropertyOn February 2, 2010 and further amended on October 14, 2010, the Company acquired the Granny Roselease in Knox County, Kentucky. This lease contains the highly profitable Blue Gem coal throughout theentire lease with an average seem thickness of 2 feet. It has been estimated that approximately 250 acres ofthe planned permit will be mined using surface mining techniques with an additional approximate 100 acresthat will be mined by highwall and/or auger mining methods.In consideration for the lease acquisition, the Company must pay $100,000 USD (paid $111,095 CAD) as anadvance royalty and issue 250,000 common shares (issued on December 10, 2010 at
.145 per share).The $100,000 USD is recoupable and will be applied against the royalty payment upon coal production. Inaddition, the Company is to make payments to the Lessor as tonnage royalty per 2,000 ton of coal asfollows: $4.00 or 8% of Gross Sales Price whichever is greater per raw ton for all strip and auger coal.Subsequent to the six months ended June 30, 2011, the Company submitted application for mining on theGranny Rose property.Demps Hollow PropertyDuring the year ended December 31, 2010, the Company, due to unfavorable testing and sampling results,terminated the leases previously agreed upon in October 2009 with LPL. As a result, the Company will notmake royalty payments and will no longer transfer 1,600,000 common shares to LPL. The Companyprovided for impairment charge of $26,926 USD to write off this property entirely.Patrick Engle Hollow PropertyIn March of 2010, the company acquired an additional 2,600 acres of coal leases previously assigned to LPLvia South Coast Holdings of Georgia, Inc. (the Lessor) in Knox County, Kentucky. Per the terms of theagreement, the Company had access to all the coal located in and or under the property for which theCompany was required to make annual minimum royalty payments of $5,000 and for each ton of coal minedand removed from the premises, a tonnage royalty equal to 8% of the gross selling price of coal or $3.50 perton of coal mined, sold or removed by the Company.During the year ended December 31, 2010, the Company terminated all of the leases. As a result, theCompany provided for impairment charge of $113,430 USD to write off the property entirely.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201114Gilliam Hill South PropertyOn April 14, 2010, the Company acquired additional multi-seam coal leases in Knox County, Kentucky,which will be known as the Gilliam Hill South Property. The agreement for the acquisition of the Gilliam HillSouth Property was signed in July, 2010.Begley South LeaseDuring the year ended December 31, 2010, the Company acquired additional coal leases in Knox County,Kentucky, known as the Begley South Lease or the Gilliam Hill South Property. These leases are adjacent tothe North American Gem #2 mine and contain the readily marketable Blue Gem coal throughout the entirelease area with an average seam thickness of 2 feet. In addition to the Blue Gem seam, the Jellico and Deanseams have been confirmed on the lease as well.In consideration for the acquisition of the Begley South Lease, the Company must pay a recoupable amountof $25,000 USD (paid $27,090 CAD) upon the effective date of the lease agreement, and thereafter upon thefirst day of the second and third lease year. Once coal production is underway, the Company is required topay production royalties according to the following terms,• For all coal sold at a Gross Sale Price of less than $80 USD per ton of 2,000 pounds, the greater ofthe sum equal to 8% of the Gross Sale Price of such coal or the sum of $4 USD for each ton of 2,000pounds of such coal;• For all coal sold at a Gross Sale Price of $80 USD per ton or more, the royalty rate shall increase by1% for each increase in the Gross Sale Price of $10 USD;• Beginning during the first month of the fourth lease year, and during each calendar month thereafterfor the life of the lease, if the Company fails to mine at least 5,000 tons of coal per month, theCompany shall pay to the lessor a Deficit Tonnage Royalty of $4 USD per ton of the differencebetween the tons of coal actually mined during that month and the minimum tonnage requirement of5,000 tons.The $25,000 USD ($27,090 CAD) paid for the acquisition of Begley South Leases was recoupable and willbe used to recoup against the above royalty payments.During the six months ended June 30, 2011, management decided not to pursue further interests in BegleySouth Property and wrote off the property entirely by providing an impairment charge of $ $37,820.Jones LeaseOn May 13¸ 2010, the Company acquired approximately 800 acres of coal leases in Knox County, Kentuckywhich will be known as the Brian Jones lease. The Brian Jones lease is located centrally to the Company’soperations in Kentucky and contains the readily marketable Blue Gem coal. In addition to the Blue Gemseam, the Jellico and Moss seams have also been confirmed on this acquisition as well.In consideration for the Brian Jones Lease, the Company must pay an advance royalty $50,000 USD (paid$54,115 CAD). $25,000 USD of the $50,000 USD is recoupable and can be applied against the royaltypayments due from coal production during the first five years of lease. Once coal production commences, theCompany is required to pay minimum of $4 USD per 2,000 pounds or 8% per ton, whichever is greater of theaverage Gross Sale Price for all coal mined. In addition, the Company must pay a wheelage rate at
.25per ton coal transport, shipped, conveyed, or hauled across any portion of the leased premises.Exploration is ongoing at the Brian Jones lease and the Gilliam Hill South lease. Once exploration has beencompleted a comprehensive engineering report will be compiled for evaluation.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201115Kentucky PropertiesOn February 9, 2010, the Company announced the appointment of Mr. William J. Grable to the AdvisoryBoard. Mr. Grable brings 35 years of experience in every aspect of the Coal, Limestone, and Sand miningindustries to the Company. Mr. Grable’s experience will help expedite the permitting process as well asprovide invaluable insight as the Company continues to increase its mining operations in the State ofKentucky. He is the former Commissioner of the Department for Surface Mining Reclamation andEnforcement, under Governor Wilkinson. He also served 8 years as an advisor on energy to GovernorPatton during his appointment as Executive Director of the Kentucky Coal Council and has advised the U.S.Department of Energy as a member of the Southern States Energy Board when attending the SouthernGovernors’ Association.Ms. Deborah Moses, PEng, PLS, REM, of Engineering Consulting Services Inc. (ECSI) is the qualifiedperson for the Company’s coal operations in Kentucky.RESULTS OF OPERTIONSThe net loss for the six months ended June 30, 2011 was $1,184,392 (2010 - $2,187,513). The majorcomponents of the Company’s net loss for the six months ended June 30, 2011 were amortization $4,577(2010 - $Nil), business development $166,915 (2010 - $303,013), consulting $154,935 (2010 - $191,686),insurance $32,163 (2010 - $13,885), investor communications $11,655 (2010 - $24,511), office andmiscellaneous $54,019 (2010 - $118,040), professional fees $56,212 (2010 - $70,867), rent $42,672 (2010 –$31,499), transfer agent and regulatory fees $25,488 (2010 - $25,124), wages and salaries $279,109 (2010 -$243,540), stock based compensation $272,483 (2010 – $696,593), and impairment of mineral properties$44,312 (2010 - $223,693). The Company also recognized interest income of $1,730 (2010 – $1,312),foreign exchange gain $155 (2010 –$9,718), and tax interest penalty of $1,384 (2010 – $675). Furthermore,for the six months ended June 30, 2011, the Company generated revenue of $20,988 (2010 - $Nil) from coalproduction in Kentucky, incurred cost of coal sold of $71 (2010 - $Nil), cost of coal mining of $1,615 (2010 -$Nil), processing facility costs of $37,794 (2010 - $Nil) and recognized depletion expenses of $2,841 (2010 –$Nil).Business development expenses of $166,915 (2010 - $303,013) consist of expenses relating to attendingand securing a presence at trade shows, travel relating to promoting the Company and its projects andinvestigating new and potential projects for the Company. Business development expenses also includemeals and entertainment expenses relating to the promotion of the Company and its various projects. Thereis a decrease in business development expenses over the previous year and this relates to managements’effort to reduce advertising and travel expenditures in order to increase shareholder value. The largestportion of business development expenses for the period was related to advertising costs of $46,654 (2010-$131,724) targeted at creating more investor and shareholder awareness, travel and accommodationexpenses of $87,715 (2010- $115,525), related to maintaining the current projects, investigating new projectsand promoting the Company and meals and entertainment expenses of $32,546 (2010 - $21,427).Consulting expenses $154,935 (2010 - $191,686) consist of expenses of $22,750 (2010 - $15,000) paid to adirector of the Company as discussed under the heading “Related Party Transactions” and of generalconsulting expenses $132,185 (2010 - $184,186) as the Company uses the services of individuals toevaluate and provide information and general management on current and prospective projects. Thesegeneral consulting expenses cannot be directly attributed to any particular project and have therefore beenexpensed as general consulting. Consulting expenses decreased from the current period as managementincreased its efforts to efficiently investigate, manage and administer new and existing projects.Investor communications expenses of $11,655 (2010 - $24,511) related to the Company using the newswireservices to disseminate new releases on behalf the Company and to outsourced services used to createmore shareholder and potential investor awareness about the Company and its projects. The decrease ininvestor communications services from the same period last year relates to management’s decision todecrease the use of outsourced services.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201116Salaries and benefits of $279,109 (2010 - $243,540) relate to expenses paid for management andadministration and support. The increase in salaries and benefits expenses from the previous period lastyear is attributed to the increased requirements of the administration and support for the operational activitiesof the Company.For the six months ended June 30, 2011, general and administrative expenses totaled $842,188 (2010 -$1,022,165) reflecting a decrease of approximately $179,977. The general and administrative expensesreflect the normal corporate business cycle and are commensurate with the Company’s operations in thecurrent period. The Company also recognized stock based compensation costs of $272,483 (2010 –$696,593) by using the Black–Scholes model. Any significant increase in costs relate to the Company’sadditional efforts to provide greater administrative support to management’s ongoing efforts to seek newproperties, monitor exploration expenditures, and increase shareholder value.The Company does not forecast any significant changes to its administrative cash-based expenditures in thenext fiscal year. However, should the Company not receive sufficient funding to support its proposed futureactivities; it will review all future expenditures and take appropriate action.SUMMARY OF QUARTERLY FINANCIAL RESULTSThree months endedIFRS Canadian GAAP30-Jun-11 31-Mar-11 31-Dec-10 30-Sep-10 30-Jun-10 31-Mar-10 30-Dec-09 30-Sep-09Revenue $12,965 $7,975 $70,116 $21,213 $331,993 $55,177 $- $-Net loss for the period (489,812) (659,737) (6,516,798) (655,553) (1,649,392) (411,840) (377,543) (1,028,382)Loss per share (0.00) (0.00) (0.04) (0.00) (0.01) (0.02) (0.01) (0.01)Fluctuations in the Company’s expenditures reflect the seasonal variations of exploration and the ability ofthe Company to raise capital for its projects. Variations in losses occur during quarters where higherprofessional fees were incurred or payables associated with the previous business were written-off,recognized deferred income taxes and the impairment of mineral property due to the decrease of the fairmarket value. Also as the Company attends to more projects, administrative expenses also increase tosupport the operation of these projects.Variations between the quarter ended June 30, 2011 and March 31, 2011 were primarily due to increase ofmineral interest impairment charge to $40,280 (March 31, 2011 – 3,671).Variations between the quarter ended March 31, 2011 and December 31, 2010 were primarily due todecrease of mineral interest impairment charge of $3,671.Variations between the quarter ended December 31, 2010 and September 30, 2010 were primarily due tostock base compensation expenses of $302,568 and mineral interest impairment charge of $5,254,490.Variations between the quarter ended September 30, 2010 and June 30, 2010 were primarily due to stockbase compensation expenses of $628,485 and mineral interest impairment charge of $211,105 beingrecognized in the previous period.Variations between the quarter ended June 30, 2011 and June 30, 2010 were primarily due to decreasedstock base compensation expenses of $628,485 and decreased mineral interest impairment charge by$183,413.Variations between the quarter ended June 30, 2010 and December 31, 2009 were primarily due toincreased cost of coal sold of $225,631.Variations between the quarter ended December 31, 2009 and September 30, 2009 were primarily due toincreased stock base compensation expenses of $49,672 and business development of $38,132.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201117Variations between the quarter ended September 30, 2009 and June 30, 2009 were primarily due todecreased mineral interest impairment charge of $567,575.LIQUIDITY AND SOLVENCYAlthough the Company received some revenue from coal production in Kentucky, the Company continues todepend on its ability to procure sufficient funding through share offerings, debt, and financial support fromrelated parties, to support current and future expenditures. At June 30, 2011, the Company had workingcapital deficit of $548,206 (December 31, 2010 - $295,165 net working capital deficit) and a cumulativedeficit of $19,823,143 (December 31, 2010 - $18,638,751). The cash component of working capital at June30, 2011 was $721,643 (December 31, 2010 - $47,546).During the six months ended June 30, 2011, a total of 1,400,000 stock options were exercised at prices of
.10 per option for total proceeds of $140,000.On January 28, 2011, the Company closed a non-brokered private placement and raised $647,500. A total of6,475,000 non-flow-through units at a price of
.10 per unit were issued. Each unit consists of one commonshare and one non-transferable share purchase warrant. Each warrant will entitle the holder to purchase oneadditional common share of the Company at a price of
.12 per share for the first year,
.15 per share untilexpiration on the second year. The Company paid share issuance costs of $44,500 in cash and 445,000warrants with a fair value of $15,306. Each warrant will entitle the holder to purchase one additional commonshare of the Company at a price of
.10 per share for the first year,
.12 per share until expiration on thesecond year.On April 18, 2011, the Company closed the non-brokered private placement announced March 29, 2011.The Company raised $1,183,350 at a price of
.075 per share. A total of 5,940,000 units were issued asnon-flow-through units consisting of one common share and one share purchase warrant. One warrant willentitle the holder to purchase one additional common share of the company at a price of
.10 per share inthe first year,
.12 per share in the second year, and
.15 per share in the third year. A total of 9,838,000units were issued as flow-through units consisting of one common share and one-half of one share purchasewarrant. One whole warrant will entitle the holder to purchase one additional common share of the companyat a price of
.10 per share in the first year,
.12 per share in the second year, and
.15 per share in thethird year.As of June 30, 2011 and the date of this report, the total unexercised stock options outstanding were17,240,000, the total unexercised warrants outstanding were 38,195,728 and the total outstanding commonshares were 194,096,888.OFF-BALANCE SHEET ARRANGEMENTSThe Company has no off-balance sheet arrangements.RELATED PARTY TRANSACTIONSThe amounts due to/from related parties are amounts due to/from a director and companies with commondirectors. The balances are unsecured, non-interest bearing and have no specific terms for repayment.Accordingly, the fair value cannot readily be determined.These transactions are in the normal course of operations and have been valued in these financialstatements at the exchange amount which is the amount of consideration established and agreed to by therelated parties.During the six months ended June 30, 2011, rents and office and administrative fees were paid or accruedamong the companies with the common directors.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201118Due from related partiesJune 30, 2011 December 31, 2010 January 1, 2010- $ - - $ - - $ -8,703 9,287 14,95012,195 1,680 149,294Loan receivable from a company with directors in common - - 232,46620,898 10,967 396,710Amount due from a director for management fees paid in advance (recorded inprepaid expense)Amount due from companies with directors in commonDuring the six months ended June 30, 2011, the Company paid to a director for salaries in advance. As atJune 30, 2011, the amount due from the director is $8,703. As at June 30, 2011, the amount due tocompanies with directors in common is $87,592, and the amount due from a company with directors incommon is $12,195.Due to related partiesJune 30, 2011 December 31, 2010 January 1, 2010- $ - - $ - - $ -Solitaire Mineral Corp.- company with common directors 87,592 - -Zone Resources Inc. - company with common directors - 9,324 -Soldi Ventures Inc - company with common directors - 12,088 -87,592 21,412 -During the year six months ended June 30, 2011 and 2010, rents and office and administrative fees werepaid or accrued among companies with the common directors and directors and officers of the Company.June 30, 2011 June 30, 2010-$- -$-Expenses paid or accrued to a company with commondirectors:Rent and general administrative expenses 3 9,328 15,500Expenses paid or accrued to certain Directors and Officersof the Company:Consulting fees 2 2,750 15,000Mining consulting 6 0,000 30,000Professional fees 3 5,889 27,230Stock based compensation 6 0,862 203,385Total 2 18,829 291,115The detailed stock based compensation for officers and directors are as follows,June 30, 2011 June 30, 2010Number ofOptionsOptionValuationNumber ofOptionsOptionValuation- $ - - $ -Peter Dickie, Director 150,000 12,979 100,000 10,939Doug McFaul, CFO 150,000 12,979 330,000 45,940Charles Desjardins, CEO and Director 325,000 28,289 825,000 110,601Bruce Lock, CFO and Director (resigned) - - 100,000 15,218Zara Kanji-Aquino 75,000 6,615 150,000 20,687Total 60,862 203,385During the six months ended June 30, 2011, the Company paid or accrued $39,328 from the relatedcompanies for rent and general administrative expenses. During the six months ended June 30, 2011, theCompany paid $22,750 consulting fees to an officer/director of the Company.On April 12, 2009, the Company entered into a contract with an officer/director of the subsidiary of theCompany to pay compensation and benefits $10,000 CDN per month beginning May 1, 2009. During the sixmonths ended June 30, 2011, the Company paid $60,000 to him for his mining consulting services.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201119During the six months ended June 30, 2011, the Company paid $35,889 accounting fees to anofficer/director of the subsidiary of the Company.June 30, 2011 June 30, 2010-$- -$-Rent and general administrative expenses collected or accrued from related partiesSolitaire Mineral Corp.- company with common directors 9 ,000 16,169Zone Resources Inc. - company with common directors 1 8,000 15,000Soldi Ventures Inc - company with common directors 3 3,000 7,50060,000 38,669During the six months ended June 30, 2011, the Company collected or accrued $60,000 from the relatedcompanies.PROPOSED TRANSACTIONSThe Company had no proposed transactions.CRITICAL ACCOUNTING ESTIMATESDuring the six months ended June 30, 2011, the Company had no critical accounting estimates. For detaileddescriptions of significant accounting policies, readers are directed to the financial statements for the sixmonths ended June 30, 2011 and the audited financial statements for the year ended December 31, 2010Note 2, available at www.sedar.com.CHANGES IN ACCOUNTING POLICIESNew Accounting PronouncementsThe Company has not yet adopted certain new standards, amendments, and interpretations to existingstandards, which has been published but are only effective for accounting periods beginning on or afterJanuary 1, 2012.IFRS 9, Financial Instruments, Classification and Measurement, is effective for the Company’s annualreporting period beginning January 1, 2013. The Company anticipates that the adoption of this standard willhave no material impact except for additional disclosures.International Financial Reporting Standards (“IFRS”)Effective January 1, 2011, Canadian publicly listed entities were required to prepare their financialstatements in accordance with IFRS. Due to the requirement to present comparative financial information,the effective transition date is January 1, 2010.As a result, the Company has prepared this unaudited interim consolidated financial statements for the sixmonths ended June 30, 2011in accordance with IFRS. IFRS represents standards and interpretationsapproved by the International Accounting Standards Board (“IASB”), and are comprised of IFRSs,International Accounting Standards (“IASs”), and interpretations issued by the IFRS Interpretation Committee(“IFRSCs”) or the former Standing Interpretations Committee (“SICs”). The Company’s unaudited interimconsolidated financial statements as at and for the six months ended June 30, 2011 have been prepared inaccordance with IAS 34 – Interim Financial Reporting and on the basis of IFRS standards and interpretationsexpected to be effective or available for early adoption as at the Company’s first IFRS annual reporting date,NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201120December 31, 2011, with significant accounting policies as described in Note 2 of the Company’s unauditedinterim consolidated financial statements as at and for the six months ended June 30, 2011.The Company’s unaudited interim consolidated financial statements as at and for the six months ended June30, 2011 have been prepared in accordance with existing IFRS standards with restatements of comparativebalance sheet as at December 31, 2010 and January 1, 2010 and statements of comprehensive loss for thesix months ended June 30, 2010 as previously reported and prepared in accordance with Canadian GAAP.The Company has now substantially completed its IFRS changeover plan, with just the post-implementationphase remaining.The following outlines the remaining items of the Company’s transition project, IFRS transitional impacts andthe on-going impact of IFRS on our financial results.Notes 2 and 18 to the consolidated interim financial statements provide more detail on key Canadian GAAPto IFRS differences, accounting policy decisions and IFRS 1, First-Time Adoption of International FinancialReporting Standards (“IFRS 1”), optional exemptions for significant or potentially significant areas that havehad an impact on the Company’s financial statements on transition to IFRS or may have an impact on futureperiods.Transitional Financial ImpactEquity ImpactAs a result of accounting policy choices selected and changes that were required to be made under IFRS,the Company has reclassified various equity accounts. However, as there have been no adjustments toequity balances, no reconciliation of the statement of equity has been presented.Comprehensive Loss ImpactThere have been no adjustments to comprehensive loss due to transition to IFRS. Hence, no reconciliationof comprehensive loss has been presented.Cash Flow ImpactThe transition from Canadian GAAP to IFRS resulted in reclassifications of various amounts, within operatingactivities, on the statements of cash flows; however, as there have been no adjustments to net cash flows,no reconciliation of the statement of cash flows has been presented.INTERNAL CONTROL ACTIVITIESFor all changes to policies and procedures that have been identified, the effectiveness of internal controlsover financial reporting and disclosure controls and procedures have been assessed and any changes havebeen implemented. In addition, controls over the IFRS changeover process have been implemented, asnecessary. The Company has identified and implemented the required accounting process changes thatresulted from the application of IFRS accounting policies and these changes were not significant. TheCompany has completed the design and implementation of the changes to internal controls over financialreporting resulting from the application of IFRS accounting policies. The existing control framework has beenapplied to the IFRS changeover process. All accounting policy changes, transitional exemption elections andtransitional financial position impacts were subject to review by the Company’s expert advisers, seniormanagement and the Audit Committee of the Board of Directors.Information Technology and SystemsThe IFRS transition project did not have a significant impact on information systems for the transitionperiods, nor is it expected that significant changes are required in the post-transition periods.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201121Post ImplementationThe post-implementation phase will involve continuous monitoring of changes in IFRS in future periods.The IASB continues to amend and add to current IFRS standards and interpretations with several projectsunderway. Accordingly, the accounting policies adopted by the Company for the Company’s first IFRSannual consolidated financial statements for the year ending December 31, 2011 may differ from thesignificant accounting policies used in the preparation of the Company’s unaudited interim consolidatedfinancial statements as at and for the six months ended June 30, 2011. However, as of the date of thisdocument, the Company does not expect any of the IFRS standard developments to have a significantimpact on its 2011 year end consolidated financial statements.FINANCIAL INSTRUMENTSThe Company’s financial instruments include:Cash is classified as held for trading.Receivables, entitled refunds, accounts payable, accrued liabilities and amount due from and to relatedparties are classified as loans and receivables or other financial liabilities, respectively and are measured atamortized cost, using the effective interest rate method less any impairment loss.Marketable securities are classified as available for sale and measured at fair value determined by themarket prices. Gains and losses are recognized directly in other comprehensive income until the financialassets are derecognized, at which time the cumulative gain or loss previously recognized in accumulatedother comprehensive income is recognized in net income for the year.The Company does not use any derivative or hedging instruments.Fair valuesPer IFRS 7, a three-level hierarchy that reflects the significance of inputs used in making fair valueadjustments is required. The three levels of fair value hierarchy are as follows:a) Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;b) Level 2 – Inputs other than quoted prices that are observable for assets or liabilities, either directly orindirectly; andc) Level 3 – Input for assets or liabilities that are not based on observable market data.The following table outlines the Company’s financial assets and liabilities measured at fair value by level withthe fair value hierarchy described above. Assets and liabilities are classified in their entirety based on thelowest level of input that is significant to the fair measurement.As at June 30, 2011 and 2010 the Company’s financial instruments measured at fair value are as follows:June 30, 2011 December 31, 2010Assets Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 TotalCash and cash equivalents $ 765,643 $ - $ - $ 765,643 $ 47,546 $ - $ - $ 47,546Marketable securities 8,575 - - 8,575 12,150 - - 12,150The Company’s marketable securities are valued using quoted market prices in active markets, andtherefore are classified as Level 1.Financial Instrument RisksThe Company's financial instruments are exposed to certain financial risks, including credit risk, interest raterisk, market risk, liquidity risk and currency risk.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201122a) Credit riskThe Company is exposed to credit risk by holding cash and cash equivalents. This risk is minimized byholding the investments in large Canadian financial institutions or with Canadian governments. TheCompany is also exposed to credit risk through its amounts receivable and reclamation bonds. The creditrisks of reclamation bonds are minimized by holding the bonds under various trust accounts. The Company’svarious refundable credits are due from Canadian governments.b) Interest rate riskThe Company is exposed to interest rate risk because of fluctuating interest rates. Fluctuations in marketrates do not have a significant impact on the Company's operations due to the short term to maturity and nopenalty cashable feature of its cash equivalents.c) Market riskThe Company is exposed to market risk because of the fluctuating values of its publicly traded marketablesecurities and other company investments. The Company has no control over these fluctuations and doesnot hedge its investments.Based on the June 30, 2011 portfolio values, every 10% increase or decrease in the share prices of thesecompanies, would have impacted other comprehensive gain, up or down, by approximately $790 beforetaxes.d) Liquidity riskLiquidity risk is the risk that the Company is unable to meet its financial obligations as they come due. TheCompany manages this risk by careful management of its working capital to ensure its expenditures will notexceed available resources.e) Currency riskCurrency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange ratesand the degree of volatility of these rates. The Company does not use derivative instruments to reduce itsexposure to foreign currency risk.All sales revenues for the Company are denominated in US dollars. The Company may also becomeexposed to currency fluctuations on mineral acquisition and deferred exploration costs and expenses, as wellas purchases of certain equipment or facilities for its new and existing mines which are denominated in USdollars. These potential currency risks could have a significant impact on the cost of developing its minesand on the profitability of the Company.As at December 31, 2010, the Company was exposed to currency risk through the following monetary assetsand liabilities in US dollars:Cash $ 4,633Amountts receivable 50,095Accounts payable and accrued liabilities (113,737)$ (59,009)Foreign exchange rate at June 30, 2011 0.9643Based on the net exposures at June 30, 2011, and assuming that all other variables remain constant, a 10%depreciation or appreciation of the Canadian dollar against the US dollar would not have a significant impacton the Company’s net earnings.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201123SHAREHOLDER RIGHTS PLANThe Rights Plan is designed to ensure the fair and equal treatment of shareholders in connection with anytakeover bid for outstanding common shares of the Company. The Rights Plan seeks to provideshareholders with adequate time to properly assess a take-over bid without undue pressure. It also providesthe Board with adequate time to fully assess an unsolicited take-over bid, to allow competing bids to emerge,and, if applicable, to explore other alternatives to the take-over bid to maximize shareholder value. TheRights Plan is not intended to prevent or deter take-over bids that offer fair treatment and value toshareholders, but is designed to encourage offers that represent fair value to all shareholders.The Rights Plan became effective as of May 21, 2008. The Company is not adopting a Rights Plan inresponse to any proposal to acquire control of the Company.RISKS AND UNCERTAINTIESThe Company believes that the following risks and uncertainties may materially affect its success.Commodity PricesThe profitability of any mining operations in which the Company has an interest will be significantly affectedby changes in the market price of the particular commodity. Metal and other mineral prices fluctuate on adaily basis and are affected by numerous factors beyond the Company’s control. The level of interest rates,the rate of inflation, central bank sales, world supply of other minerals and stability of exchange rates, amongother factors, can cause significant fluctuations in mineral prices. Such external factors are in turn influencedby changes in international investment patterns and monetary systems and political developments. The priceof minerals has historically fluctuated widely and, depending on the price of minerals, revenues from miningoperations may not be sufficient to offset the costs of such operations.Lack of Cash Flow and Requirements for New CapitalThe Company’s current operations do not generate any positive cash flow. The Company has limitedfinancial resources and the mining claims the Company holds impose financial obligations on the Company.There can be no assurance that additional funding will be available to allow the Company to fulfill suchobligations.Further exploration and development of the various mineral properties in which the Company holds interestsdepends upon the Company’s ability to obtain financing through the joint venturing of projects, debtfinancing, equity financing or other means. Failure to obtain additional financing on a timely basis couldcause the Company to forfeit all or part of its interests in some or all of its mineral property interests andreduce or terminate its operations.Exploration RisksExploration for metals and other minerals is speculative in nature, involves many risks and is frequentlyunsuccessful. Any exploration program entails risks relating to the location of economic ore bodies,development of appropriate metallurgical processes, receipt of necessary governmental approvals andconstruction of mining and processing facilities at any site chosen for mining. The commercial viability of amineral deposit is dependent on a number of factors including the price of the commodities, exchange rates,the particular attributes of the deposit, such as its size, grade and proximity to infrastructure, as well as otherfactors including financing costs, taxation, royalties, land tenure, land use, water use, power use, import andexport costs and environmental protection. The effect of these factors cannot be accurately predicted.There can be no assurance that the current or proposed exploration or development programs on themineral property interests will result in the discovery of economic mineralization or will result in a profitablecommercial mining operation.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201124Lack of Operating History and Operational ControlThe Company currently has one producing property and operates at a loss. The Company’s commercialviability is largely dependent on the successful commercial development of its mineral property interests.Political Regulatory RisksAny changes in government policy may result in changes to laws affecting ownership of assets, miningpolicies, monetary policies, taxation, rates of exchange, environmental regulations, labour relations,repatriation of income and return of capital. This may affect both the Company's ability to undertakeexploration and development activities in respect of present and future properties in the manner currentlycontemplated, as well as its ability to continue to explore, develop and operate its mineral property interests.The possibility that future governments may adopt substantially different policies, which might extend toexpropriation of assets, cannot be ruled out.Environmental RisksWith respect to environmental regulation, environmental legislation is evolving in a manner which will requirestricter standards and enforcement, increased fines and penalties for non-compliance, more stringentenvironmental assessments of proposed projects and a heightened degree of responsibility for companiesand their officers, directors and employees. There can be no assurance that future changes to environmentalregulation, if any, will not adversely affect the Company's operations. Environmental hazards that have beencaused by previous or existing owners or operators of the mineral property interests, may contraveneexisting or future regulatory standards.CompetitionThe Company competes with numerous other individuals and companies possessing greater financialresources and technical facilities in the search for and acquisition of attractive mineral properties.Management; Dependence on Key PersonnelInvestors will be relying on the good faith, experience and judgment of the Company’s management andadvisors in supervising and providing for the effective management of the business and the operations of theCompany. The Company may need to recruit additional qualified personnel to supplement existingmanagement.The Company is dependent on a relatively small number of key personnel the loss of any one of whom couldhave an adverse effect on the Company. In addition, while certain of the Company’s officers and directorshave experience in the exploration and operation of mineral producing properties; the Company will remainhighly dependent upon contractors and third parties in the performance of its exploration and developmentactivities. There can be no guarantee that such contractors and third parties will be available to carry outsuch activities on behalf of the Company or be available upon commercially acceptable terms. Certaindirectors and officers of the Company are associated with other natural resource exploration companies andmay from time to time be in a conflict of interest.Title MattersThe Company has investigated its rights to explore, exploit and develop its mineral property interests and, tothe best of its knowledge, those rights are in good standing. No assurance can be given that suchexploration and mining authorities will not be challenged or impugned by third parties and are not subject toprior unregistered agreements, transfers or claims affecting title. In addition, the Company's propertyinterests do comprehensively extend to all claim units in all areas and there is a risk that commerciallyexploitable mineral deposits are located on adjoining properties which are not owned by the Company.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201125Aboriginal Land ClaimsNo assurance can be given that aboriginal land claims will not be asserted over the mineral propertyinterests in the future, in which event the Company's operations and title to its mineral property interests maypotentially be seriously adversely affected.Currency RiskCurrency fluctuations may affect the cash flow that the Company may realize from its operations, sinceminerals are sold in a world market in U.S. dollars. The Company’s costs are incurred in US and Canadiandollars.LitigationIn addition to the above claims, the nature of the Company’s business subjects it to regulatory investigations,claims and lawsuits in the ordinary course of business. There is no assurance that the foregoing matters orany other investigations, claims and lawsuits, will not have an adverse effect on the Company.FORWARD LOOKING STATEMENTSThis MD&A may include certain "forward-looking statements" within the meaning of applicable Canadiansecurities legislation. All statements, other than statements of historical facts, included in this MD&A thataddress activities, events or developments that the Corporation expects or anticipates will or may occur inthe future, including such things as future business strategy, competitive strengths, goals, expansion andgrowth of the Company’s businesses, operations, plans and other such matters are forward-lookingstatements.When used in this MD&A, the words "estimate", "plan", "anticipate", "expect", ‘‘intend’’, "believe" and similarexpressions are intended to identify forward-looking statements. These statements involve known andunknown risks, uncertainties and other factors which may cause the actual results, performance orachievements of the Company to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements. Such factors include, among others,risks related to joint venture operations, actual results of current exploration activities, changes in projectparameters as plans continue to be refined, unavailability of financing, fluctuations in precious and/or basemetals prices and other factors.Although the Company has attempted to identify important factors that could cause actual results to differmaterially, there may be other factors that cause results not to be as anticipated, estimated or intended.These factors include, but not limited to: general economic and business conditions, fluctuations in worldwideprices and demand for minerals; the actual results of current exploration activities; conclusions or economicevaluations; changes in project parameters as plans continue to be refined; possible variations in grade andor recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labourdisputes or other risks of the mining industry; delays in obtaining government approvals or financing orincompletion of development or construction activities.While these forward-looking statements and any assumptions upon which they are based are made in goodfaith and reflect our current judgment regarding the direction of the Company’s business, there can be noassurance that such statements will prove to be accurate as actual results and future events could differmaterially from those anticipated in such statements. Except as required by applicable law, including thesecurities laws of the Canada, the Company do not intend to update any of the forward-looking statements toconform these statements to actual results. Accordingly, readers should not place undue reliance on forwardlookingstatements.NORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201126OTHER MATTERSLegal proceedings and Contingent liabilities:On March 23, 2010, JSE Enterprises, LLC (“JSE”) a Kentucky company claimed that the Company owedJSE $96,000 US dollars for the receipt of JSE goods, services, equipment and benefits in improvement ofmine located in Rockholds, Whitely County, Kentucky. The Company maintains the position that attempts tocollect the indebtedness will be defended as there was no contract between the Company and JSE. Theoutcome of this action is not determinable at this time. Any amount paid as a result of this action will berecorded in the period of resolution.On April 18, 2011, the Company through its subsidiary, North American Gem US, Inc. (NAG US) respondedto a lawsuit by Kentucky Mining Partners, LLC (KMP) issued on March 17th 2011 in the Eastern District ofKentucky, United States District Court (Federal Court). KMP was hired by NAG US as a contingent laborer tomine the Jamieson property in Kentucky. The Company maintains that KMP's claims of a joint ventureagreement with NAG US will be defeated by KMP's actions and KMP's request for a new independentcontractor agreement. The outcome of this action is not determinable.On June 21, 2011, ABGCS claimed the Company defaulted on the $10,000 monthly royalty payment andhence violated the definitive agreement entered in September 2009. The Company maintains that the leasesand permit are not in good standing and ABGCS’s negligent permitting of the property has causedunnecessary delays and expenses to the Company’s mining activities. However, the Company wished toexplore a mutual beneficial remedy to honor the existing valid leases. The outcome of this dispute is notdeterminable at this time.Flow-through Shares Subscription Commitments:The Company entered into Flow-through Share Subscription Agreements in the year ended December 31,2009 whereby it was committed to incur on or before December 31, 2010 a total of $444,840 of qualifyingCanadian Exploration Expenses (“CEE”) as described in the Income Tax Act of Canada. As at December 31,2010, the Company has unfulfilled Canadian Exploration Expenditure commitments of $431,278. TheCompany has agreed to indemnify shareholders for taxes and penalties related to the unspent portion of thecommitment. An amount totaling $194,750 has been accrued related to the indemnification. In addition, PartXII.6 tax penalties of $53,757 have been accrued on the unfulfilled commitments.OUTLOOKThe Company's primary focus for the foreseeable future will be on reviewing its financial position, continuingexploration activities on its mineral properties and financing new business ventures in the mineral resourceindustry.ADDITIONAL INFORMATIONAdditional information related to the Company is available for view on SEDAR at www.sedar.com, on theCompany’s website at www.northamericangem.com, or by requesting further information from theCompany’s head office in Vancouver BC Canada.Current Directors of the Company are as follows:Charles Desjardins, CEODoug McFaul, CFODave BissoondattPeter DickieBoard of Advisors:Mr. Adam Noel, P.EngMr. Alan A. Johnson, B.Sc., P. GeolMr. William GrableNORTH AMERICAN GEM INC.MANAGEMENT DISCUSSION AND ANALYSISSix Months Ended June 30, 201127North American Gem Inc.P.O. Box 10325430-609 Granville StreetVancouver, BCCanada V7Y 1G5Telephone: [phone]Toll Free: 1-866-683-5445Facsimile: 604-687-9631Website: www.northamericangem.comE-mail: [e-mail]

[Georgeboy11]

Porsche, it'll be interesting to see what type of response you would receive if you posted the same thought on the v.ZNR bb!  Heck, I'll give it a shot there for y'a!  George

[sly5am]

Jeez.. could ya at least highlight the important stuff?? i dont wanna read all dat stuff..