UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

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

APOLLO GOLD CORPORATION

(Exact name of Registrant as Specified in Its Charter)

Yukon Territory, Canada (State or Other Jurisdiction of Incorporation or Organization)		Not Applicable (I.R.S. Employer Identification No.)

5655 South Yosemite St., Suite 200
Greenwood Village, Colorado 80111-3220
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (720) 886-9656

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act).

Yes þ No o

At August 8, 2005, there were 106,556,449 common shares of Apollo Gold Corporation outstanding.

 

 

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION			2
ITEM 1. FINANCIAL STATEMENTS			2
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)			2
Consolidated Balance Sheets — As of June 30, 2005 and as of December 31, 2004			3
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004			4
Consolidated Statements of Shareholders’ Equity for the Year Ended December 31, 2004 and the Six Month Period ended June 30, 2005			5
Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2005 and 2004			6
Notes to Financial Statements			7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			35
ITEM 4. CONTROLS AND PROCEDURES			35
PART II OTHER INFORMATION			37
ITEM 1. LEGAL PROCEEDINGS			37
ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS			37
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			37
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			37
ITEM 5. OTHER INFORMATION			37
ITEM 6. EXHIBITS			37
Subscription for Shares
Registration Rights Agreement
Subscription Details
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO and CFO Pursuant to Section 906

STATEMENTS REGARDING FORWARD LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, business prospects, plans, objectives, goals, strategies, future events, capital expenditure, and exploration and development efforts. Words such as “expects,” anticipates,” “intends,” believes” and similar expressions identify forward looking statements. These statements include comments regarding:

•

estimate of selling price and possible sale of our Nevada Assets;

•

production and production costs;

•

cash operating costs;

•

total cash costs;

•

grade;

•

remediation efforts;

•

exploration;

•

development;

•

cash flows;

•

future financing;

•

expenditures;

•

estimates of environmental liabilities;

•

cash balances;

•

our belief that certain deficiencies in our internal control and procedures have been remediated;

•

our ability to fund our working capital and capital expenditures; and

•

factors impacting our results of operations.

These forward looking statements are subject to numerous risks, uncertainties and assumptions, including unexpected changes in business and economic conditions; significant increases or decreases in gold, silver, or lead prices; timing and amount of production changes in mining and milling costs; results of current and future exploration activities; weather fluctuations; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2004. We disclaim any obligation to update forward looking statements, whether as a result of new information, future events or otherwise.

ACCOUNTING PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION

     Apollo Gold Corporation prepares its consolidated financial statements in accordance with accounting principles generally accepted in Canada and publishes its financial statements in United States dollars. This Quarterly Report on Form 10-Q should be read in conjunction with our consolidated

financial statements and related notes included in this quarterly report, as well as our annual financial statements for the fiscal year ended December 31, 2004 included in our Annual Report on Form 10-K. Certain classifications have been made to the prior period financial statements to conform with the current period presentation.

     Unless stated otherwise, all dollar amounts are expressed in United States dollars.

     References to “we,” “our,” “us,” the “Company” or “Apollo” mean Apollo Gold Corporation and its consolidated subsidiaries, or to any one or more of them, as the context requires.

NON-GAAP FINANCIAL INFORMATION

     Cash operating, total cash and total production costs are non-GAAP financial measures and are used by management to assess performance of individual operations as well as a comparison to other gold producers. We have included cash operating costs information to provide investors with information about the cost structure of our mining operations.

     The term “cash operating costs” is used on a per ounce of gold basis. Cash operating costs per ounce is equivalent to direct operating cost as found on the Consolidated Statements of Operations, less production royalty expenses and mining taxes but includes by-product credits for payable silver, lead and zinc.

     The term “total cash costs” is equivalent to cash operating costs plus production royalties and mining taxes.

     The term “total production costs” is equivalent to total cash costs plus non-cash costs including depreciation and amortization.

     This information differs from measures of performance determined in accordance with generally accepted accounting principles (GAAP) in Canada and the United States and should not be considered in isolation or a substitute for measures of performance prepared in accordance with GAAP. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under GAAP and may not be comparable to similarly titled measures of other companies. See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for a reconciliation of these non-GAAP measures to our Statements of Operations.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

     These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission on March 16, 2005.

APOLLO GOLD CORPORATION

CONSOLIDATED BALANCE SHEETS
(In thousands of United States Dollars)
(Unaudited)

		June 30,				December 31,
		2005				2004
						(Restated -
						Note 3(b))
Assets
Current
Cash and cash equivalents		$	4,876			$	6,886
Accounts receivable			1,870				2,963
Prepaids			115				109
Inventories			1,736				2,192
Current assets held for sale (Note 4)			8,084				10,510
Total Current Assets			16,681				22,660
Property, plant and equipment			39,747				37,599
Restricted certificate of deposit			5,171				4,371
Deferred financing costs			1,037				901
Non-current assets held for sale (Note 4)			27,414				32,104
Total Assets		$	90,050			$	97,635
Liabilities
Current
Accounts payable		$	5,303			$	5,942
Accrued liabilities			2,469				1,860
Notes payable			538				789
Property and mining taxes payable			1,196				1,070
Current liabilities held for sale (Note 4)			3,786				8,224
Total Current Liabilities			13,292				17,885
Notes payable and long-term liability			110				423
Convertible debentures			6,146				5,538
Accrued site closure costs			12,147				11,753
Non-current liabilities held for sale (Note 4)			14,913				14,815
Total Liabilities			46,608				50,414
Continuing operations (Note 1)
Shareholders’ Equity
Share capital (Note 5)			148,078				141,795
Issuable common shares			231				231
Equity component of convertible debentures			1,809				1,815
Note warrants			781				781
Contributed surplus			10,318				9,627
Deficit			(117,775	)			(107,028	)
Total Shareholders Equity			43,442				47,221
Total Liabilities and Shareholders Equity		$	90,050			$	97,635

The accompanying notes are an integral part of these interim consolidated financial statements.

APOLLO GOLD CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of United States Dollars, except for share and per share amounts)
(Unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2005				2004				2005				2004
						(Restated -								(Restated -
						Notes 3(b) and 7)								Notes 3(b) and 7)
Revenue
Revenue from sale of minerals		$	10,581			$	6,525			$	22,913			$	18,149
Operating Expenses
Direct operating costs			12,622				13,472				26,111				27,188
Depreciation and amortization			614				630				1,334				1,233
General and administrative expenses			1,216				1,508				2,866				3,238
Stock-based compensation			152				72				354				99
Accretion expense — accrued site closure costs			197				40				394				81
Exploration and business development			318				120				558				259
			15,119				15,842				31,617				32,098
Operating (Loss)			(4,538	)			(9,317	)			(8,704	)			(13,949	)
Other Income (Expenses)
Interest income			69				103				173				251
Interest expense			(485	)			(39	)			(1,193	)			(83	)
Gain on sale of property, plant and equipment			—				—				1,365				—
Foreign exchange loss and other			(7	)			(300	)			(33	)			(488	)
(Loss) from continuing operations			(4,961	)			(9,553	)			(8,392	)			(14,269	)
(Loss) income from discontinued operations (Note 4)			(1,538	)			648				(2,355	)			232
Net (loss) for the period		$	(6,499	)		$	(8,905	)		$	(10,747	)		$	(14,037	)
Basic and diluted net (loss) per share from:
Continuing operations		$	(0.05	)		$	(0.12	)		$	(0.09	)		$	(0.18	)
Discontinued operations			(0.02	)			0.01				(0.02	)			0.00
		$	(0.07	)		$	(0.11	)		$	(0.11	)		$	(0.18	)
Weighted average number of shares outstanding			98,777,880				79,482,734				96,828,366				77,068,637

The accompanying notes are an integral part of these interim consolidated financial statements.

APOLLO GOLD CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands of United States Dollars)
(Unaudited)

														Equity
														Component
		Share Capital								Issuable				of
		Number of								Common				Convertible				Note				Contributed
		Shares				Amount				Shares				Debentures				Warrant				Surplus				Deficit				Total
Balance, December 31, 2003			73,539,790			$	120,881			$	231			$	—			$	—			$	12,766			$	(51,988	)		$	81,890
Cumulative effect of change in accounting policy (Note 3(b))			—				—				—				—				—				—				(24,033	)			(24,033	)
Adjusted balance, December 31, 2003			73,539,790				120,881				231				—				—				12,766				(76,021	)			57,857
Units issued for cash			8,299,999				4,873				—				—				—				622				—				5,495
Conversion of special warrants			2,326,666				1,449				—				—				—				50				—				1,499
Flow-through common shares			714,283				515				—				—				—				—				—				515
Warrants exercised			5,399,848				12,695				—				—				—				(4,083	)			—				8,612
Options exercised			399,054				966				—				—				—				(647	)			—				319
Shares reacquired and cancelled			(20,500	)			(48	)			—				—				—				—				—				(48	)
Shares issued for Huizopa interest			48,978				88				—				—				—				—				—				88
Shares issued for 2003 share-based compensation			265,000				376				—				—				—				(376	)			—				—
Bridge loan compensation warrants			—				—				—				—				—				275				—				275
Equity component of convertible debentures			—				—				—				1,815				—				63				—				1,878
Note warrant			—				—				—				—				781				27				—				808
Debenture compensation warrants			—				—				—				—				—				163				—				163
Stock-based compensation			—				—				—				—				—				767				—				767
Net loss (Note 3(b))			—				—				—				—				—				—				(31,007	)			(31,007	)
Balance, December 31, 2004			90,973,118				141,795				231				1,815				781				9,627				(107,028	)			47,221
Unit issued for cash			4,199,998				2,567				—				—				—				194				—				2,761
Shares issued for Huizopa interest restructuring			1,000,000				410				—				—				—				—				—				410
Shares issued for cash			10,000,000				3,183				—				—				—				—				—				3,183
Conversion of convertible debentures			33,333				23				—				(6	)			—				—				—				17
Engagement fee shares and warrants			350,000				100				—				—				—				143				—				243
Stock-based compensation			—				—				—				—				—				354				—				354
Net loss			—				—				—				—				—				—				(10,747	)			(10,747	)
Balance, June 30, 2005			106,556,449			$	148,078			$	231			$	1,809			$	781			$	10,318			$	(117,775	)		$	43,442

The accompanying notes are an integral part of these interim consolidated financial statements.

APOLLO GOLD CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of United States Dollars)
(Unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2005				2004				2005				2004
						(Restated -								(Restated -
						Note 7)								Note 7)
Operating Activities of Continuing Operations
Loss from continuing operations for the period		$	(4,961	)		$	(9,553	)		$	(8,392	)		$	(14,269	)
Items not affecting cash Depreciation and amortization			614				630				1,334				1,233
Amortization of deferred financing costs			79				—				159				—
Stock-based compensation			152				72				354				99
Accretion expense — accrued site closure costs			197				40				394				81
Accretion expense — convertible debentures			474				—				1,159				—
Gain on sale of property, plant and equipment			—				—				(1,365	)			—
Net change in non-cash operating working capital items			551				1,344				1,639				1,432
			(2,894	)			(7,467	)			(4,718	)			(11,424	)
Investing Activities of Continuing Operations
Property, plant and equipment expenditures			(1,658	)			(4,871	)			(3,699	)			(7,295	)
Short-term investments			—				466				—				(1,591	)
Proceeds from disposal of property, plant and equipment			1,991				—				1,991				—
Restricted certificate of deposit and other assets			(439	)			(236	)			(851	)			(448	)
			(106	)			(4,641	)			(2,559	)			(9,334	)
Financing Activities of Continuing Operations
Proceeds on issuance of shares			3,183				299				5,944				8,860
Convertible debentures interest paid			(265	)			—				(530	)			—
Acquisition and cancellation of shares			—				—				—				(48	)
Payments of notes payable			(328	)			(445	)			(564	)			(836	)
			2,590				(146	)			4,850				7,976
Net (decrease) in cash from continuing operations			(410	)			(12,254	)			(2,427	)			(12,782	)
Net increase (decrease) in cash from discontinued operations (Note 4)			2,761				(6,458	)			417				(8,058	)
Cash and cash equivalents, beginning of period			2,525				23,704				6,886				25,832
Cash and cash equivalents, end of period		$	4,876			$	4,992			$	4,876			$	4,992
Supplemental Cash Flow Information:
Interest paid		$	303			$	97			$	625			$	207

     During the three months ended June 30, 2005, the company issued 1,000,000 shares to Argonaut Mines LLC (“Argonaut”) in connection with the restructuring of the Huizopa interest in Mexico. Share capital and property, plant and equipment both increased by $410 as a result of this transaction.

     During the three months ended June 30, 2004, the company issued 48,978 shares to meet the earn-in requirements of the Huizopa joint venture agreement. Share capital and property, plant and equipment both increased by $88 as a result of this transaction.

     During the six months ended June 30, 2004, property, plant and equipment totaling $340 was acquired under a capital lease arrangement.

          The accompanying notes are an integral part of these interim consolidated financial statements.

APOLLO GOLD CORPORATION

Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

1.

CONTINUING OPERATIONS

These consolidated financial statements are prepared on the basis of a going concern which assumes that Apollo Gold Corporation (“Apollo” or the “Company”) will realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. To date, Apollo has funded its operations primarily through issuances of debt and equity securities. The Company’s ability to continue as a going concern is dependent on its ability to successfully operate its mines to generate cash flow. The Company expects that these activities in the aggregate will be sufficient to fund the operations for the next twelve months. However, the Company does not expect that these funds are sufficient for the Company to complete the planned underground drilling program at the Black Fox Project, produce a bankable feasibility study in 2006 and commence an exploration program at its Huizopa project. Therefore, in May 2005 the Company adopted a plan to dispose of its Nevada assets (the “Nevada Assets”) (Florida Canyon Mine, Standard Mine and four exploration properties) (see Note 4). The Company expects to use a portion of the proceeds to secure the Company’s convertible debentures, currently secured by the Nevada Assets, with the balance used to supplement the funding of the Company’s general and administrative expenses, Montana Tunnels, the development of Black Fox and exploration at Huizopa. In conjunction with this plan the company has signed a non-binding letter of intent. External financing would be required to further develop and construct the Black Fox project. The availability, amount, terms and timing of this financing are not certain at this time.

2.

NATURE OF OPERATIONS

Apollo is engaged in gold mining including extraction, processing, refining and the production of other by-product metals, as well as related activities including exploration and development. The Company currently owns and operates the Montana Tunnels Mine, an open pit mine and mill, producing gold doré and lead-gold and zinc-gold concentrates located in the State of Montana. The Company also owns the Diamond Hill Mine, currently under care and maintenance, also located in the State of Montana.

Apollo has a development property, the Black Fox Project, which is located near the Township of Matheson in the Province of Ontario, Canada. Apollo also owns Mexican subsidiaries which own or have the right to acquire concessions at the Huizopa exploration project, located in the Sierra Madre gold belt in Chihuahua, Mexico. Pursuant to an agreement with the previous owner of one of those Mexican subsidiaries (the “Previous Owner”), if Apollo exercises its right to acquire those concessions at the Huizopa project on which it currently holds an option, one of Apollo’s Mexican subsidiaries and a Mexican company owned by the Previous Owner will enter into a joint venture agreement governing activities at the Huizopa project going forward, pursuant to which Apollo can elect to ultimately retain up to an 80% interest in the Huizopa project. If Apollo’s Mexican subsidiary chooses not to go forward with the Huizopa project, it is obligated to transfer a controlling interest in the subsidiary that holds the option back to the Previous Owner, and to transfer 91% of the concessions it owns at the Huizopa Project back to the Previous Owner.

The Company’s assets held for sale, the Nevada Assets (Note 4), include the Florida Canyon Mine, an open pit heap leach operation located in the State of Nevada; the Standard Mine, an open pit heap leach operation situated 8 kilometers south of the Florida Canyon Mine, which shares common facilities, such as warehousing, administration and the gold recovery plant with the Florida Canyon Mine; and four exploration properties located near the Florida Canyon Mine. Mining activities at the Florida Canyon Mine were temporarily suspended on March 1, 2005,

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

although gold production continues from the leach pad. The Standard Mine was developed during 2004 and 2005 and entered into commercial production on June 1, 2005.

3.

ACCOUNTING POLICIES

(a)

These unaudited consolidated interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and except as described in Note 9, conform in all material respects with accounting principles generally accepted in the United States (“U.S. GAAP”). The accounting policies followed in preparing these financial statements are those used by the Company as set out in the audited financial statements for the year ended December 31, 2004,except as disclosed in (b) below. Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with Canadian GAAP have been omitted. These interim financial statements should be read together with the Company’s audited financial statements for the year ended December 31, 2004.

In the opinion of management, all adjustments considered necessary for fair presentation have been included in these financial statements. Interim results are not necessarily indicative of the results expected for the fiscal year.

Certain of the comparative figures have been reclassified to conform with the current period presentation. In particular, the assets and liabilities of the Nevada Assets as at December 31, 2004 and their results of operations and cash flows for the three and six months ended June 30, 2004 (Note 4) have been classified as held for sale and discontinued operations, respectively.

(b)

On March 30, 2005, the Financial Accounting Standards Board (“FASB”) ratified the consensus of the Emerging Issues Task Force (“EITF”) Issue 04-6 that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred.

In the first quarter of 2005 and prior periods, Apollo deferred or accrued stripping costs incurred during production, as appropriate, and charged these costs to operations on the basis of the estimated average stripping ratio for Montana Tunnels. Commencing in the second quarter of 2005, Apollo changed its accounting policy under Canadian GAAP and U.S. GAAP with respect to stripping costs to be consistent with the consensus reached by the EITF, on the basis that the consensus results in a more reliable, relevant and consistent application of GAAP. This change has been applied retrospectively by restating prior periods. The effect of this change was to increase the deficit at January 1, 2004 by $24,033,000 and to increase the net loss for the year ended December 31, 2004 by $12,818,000 ($0.16 per share) and the net loss for the three months ended March 31, 2005 by $515,000 ($0.01 per share). The net loss for the three months and six months ended June 30, 2004 increased by $3,834,000 ($0.05 per share) and $7,349,000 ($0.10 per share), respectively, as a result of this change.

4.

ASSETS HELD FOR SALE

During the second quarter, the Company adopted a plan to dispose of the Nevada Assets. When management identifies an asset held for sale, the Company estimates the net selling price of such

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

asset. At June 30, 2005, the Nevada Assets were classified as held for sale and the Company recorded an impairment of $4.6 million for the period then ended.

The following tables present summarized financial information related to discontinued operations:

		June 30, 2005				Dec 31, 2004
ASSETS
Cash and cash equivalents		$	(195	)		$	61
Broken ore on leach pad — current			7,168				8,960
Other non-cash current assets			1,111				1,489
Current assets held for sale			8,084				10,510
Broken ore on leach pad — long-term			4,817				4,824
Property, plant and equipment			21,223				20,945
Restricted certificate of deposit			5,938				4,995
Deferred loss on commodity contracts (Note 7)			—				1,340
Less: impairment			(4,564	)			—
Non-current assets held for sale			27,414				32,104
Total assets held for sale			35,498				42,614
LIABILITIES
Current liabilities held for sale			3,786				8,224
Notes payable			—				376
Accrued site closure costs			14,913				14,439
Non-current liabilities held for sale			14,913				14,815
Total liabilities held for sale			18,699				23,039
Net assets held for sale		$	16,799			$	19,575

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

4.

ASSETS HELD FOR SALE (Continued)

		Three months ended								Six months ended
		June 30,								June 30,
		2005				2004				2005				2004
Revenue from sale of minerals (Note 7)		$	4,733			$	6,751			$	8,095			$	15,106
Direct operating costs			4,059				6,608				7,893				13,559
Depreciation and amortization			263				652				777				1,369
Accretion expense			240				306				457				610
Royalty expenses			78				164				166				374
Exploration and business development			189				—				189				—
Impairment			4,564				—				4,564				—
			9,393				7,730				14,046				15,912
Operating loss			(4,660	)			(979	)			(5,951	)			(806	)
Interest expense			(24	)			(58	)			(57	)			(124	)
Gain on sale of property, plant and equipment			3,146				—				3,615				—
Realized and unrealized gain on commodity contracts (Note 7)			—				1,685				38				1,162
(Loss) income from discontinued operations		$	(1,538	)		$	648			$	(2,355	)		$	232
Net cash provided by (used in) operating activities		$	1,476			$	(1,551	)		$	486			$	(1,936	)
Net cash provided by (used in) investing activities			2,220				(4,342	)			1,321				(4,874	)
Net cash (used in) financing activities			(935	)			(565	)			(1,390	)			(1,248	)
Net cash inflow (outflow) from discontinued operations		$	2,761			$	(6,458	)		$	417			$	(8,058	)

5.

SHARE CAPITAL

(a)

Shares issued in 2005

(i)

On January 7, 2005, the Company completed the second tranche of a private placement of 4,199,998 units with a purchase price of $0.75 for net proceeds of $2.8 million, net of expenses $0.3 million and fair value of broker’s compensation warrants of $0.2 million. Each unit is comprised of one common share of the Company and 0.75 share purchase warrant, with each whole share purchase warrant exercisable into one common share of the Company for two years at an exercise price of $1.00 per share. In connection with the first and second tranches, 1,250,000 broker compensation warrants were issued. (See Note 5(b) for a description of the broker compensation warrants.)

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

5.

SHARE CAPITAL (Continued)

	(ii)		During the three months ended June 30, 2005, the Company restructured its existing earn-in joint venture arrangement with Argonaut at the Huizopa project in Mexico and issued 1,000,000 common shares to Argonaut in consideration for such restructuring. The shares issued were valued at $410,000 and recorded as property, plant and equipment within the balance sheet. Following this restructuring, the Company’s Mexican subsidiary owns Argonaut’s former subsidiary which has a contractual interest in two of the concessions at the project and the Company no longer has any earn-in requirement for the project, although it will still be responsible for the underlying payments to the landowner at the project, and the payments and performance or obligations required to maintain those concessions.
	(iii)		On June 3, 2005, the Company completed the issuance to Jipangu Inc. (“Jipangu”) of 10,000,000 common shares at $0.32 (Cdn$0.40) per share for proceeds of $3.2 million, net of expense of $32,000.
	(iv)		The Company issued to BMO Nesbitt Burns Inc. (“BMO”) on June 30, 2005, as an engagement fee to act as a financial adviser to the Company with respect to the sale of the Nevada Assets, 350,000 common shares of the Company and 1,250,000 common share purchase warrants of the Company, with each warrant immediately exercisable into one common share of the company at an exercise price of Cdn$0.40 and an expiry date of June 30, 2007. In addition, the Company has agreed to issue BMO 900,000 common shares of the Company upon closing if the Company completes or agrees to complete the sale of the Nevada Assets to Jipangu during the BMO engagement or within the following 12 months.

The 1,250,000 common share purchase warrants were fair valued using an option pricing model with the following assumptions: no dividends are paid, a volatility of the Company’s share price of 78%, an expected life of the warrants of two years, and an annual risk-free rate of 3.6%.

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

     5. SHARE CAPITAL (Continued)

(b)

Warrants

The following summarizes outstanding warrants as at June 30, 2005:

		Number of				Exercise				Expiry
Warrants		Shares				Price				Date
653,277			653,277			$	1.67			September 26, 2005
63,969			63,969				1.67			October 27, 2005
1,000,000			1,000,000				0.80			October 19, 2006
1,400,133			1,400,133				0.80			November 4, 2006
3,000,000			3,000,000				2.10			December 23, 2006
6,224,999			6,224,999				1.00			December 31, 2006
3,149,998			3,149,998				1.00			January 7, 2007
1,250,000			1,250,000				0.33			June 30, 2007
5,253,600			5,253,600				0.80			November 4, 2007
1,396,000			1,396,000				0.80			November 4, 2007
23,391,976			23,391,976

In addition, 1,250,000 broker compensation warrants were issued and were immediately exercisable on January 7, 2005. The broker compensation warrants were issued in connection with the first and second tranches of the private placement described in Note 5(a)(i). Each broker compensation warrant is exercisable at $0.75 into one common share of the Company and 0.75 of a share purchase warrant, with each whole share purchase warrant exercisable into one common share of the Company at $1.00 per common share. The broker compensation warrants expire on January 7, 2007. The share purchase warrants are exercisable for two years from the date of issue.

(c)

Options

A summary of information concerning outstanding stock options at June 30, 2005 is as follows:

										Performance-based
		Fixed Stock Options								Stock Options
						Weighted								Weighted
		Number of				Average				Number of				Average
		Common				Exercise				Common				Exercise
		Shares				Price				Shares				Price
Balances, December 31, 2004			2,196,300			$	2.10				1,904,756			$	0.80
Options granted			2,639,700				0.64				—				—
Options cancelled			(495,500	)			(1.62	)			—				—
Balances, June 30, 2005			4,340,500			$	1.27				1,904,756			$	0.80

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

5.

SHARE CAPITAL (Continued)

(i)

Fixed stock option plan

The following table summarizes information concerning outstanding and exercisable fixed stock options at June 30, 2005:

Options Outstanding										Options Exercisable
														Weighted
						Weighted								Average
						Average								Exercise
Number						Exercise Price				Number				Price per
Outstanding				Expiry Date		per Share				Exercisable				Share
	1,273,900			February 18, 2013		$	2.24				1,273,900			$	2.24
	2,600			March 28, 2013			2.34				2,600				2.34
	100,000			November 13, 2013			1.67				50,000				1.67
	347,000			March 10, 2014			2.05				173,500				2.05
	111,800			May 19, 2014			1.44				55,900				1.44
	42,800			August 10, 2014			0.95				—				—
	1,200			November 10, 2014			0.60				—				—
	2,361,200			March 10, 2015			0.65				—				—
	100,000			April 6, 2015			0.39				—				—
	4,340,500					$	1.27				1,555,900			$	2.17

(ii)

Performance-based stock option plan

As at June 30, 2005, the 1,904,756 performance-based stock options were fully vested and have an expiry date of June 25, 2007.

(d)

Stock-based compensation

The fair value of each option granted is estimated at the time of grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows:

		Six months ended June 30,
		2005				2004
Risk free interest rate			3.7	%			3.0	%
Dividend yield			0	%			0	%
Volatility			73	%			54	%
Expected life in years			5				5

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

6.

INCOME TAXES

The Company did not record a recovery for income taxes for the period ended June 30, 2005 as the net loss carry forwards are fully offset by a valuation allowance.

7.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Commodity contracts

In 2003 the Company entered into commodity contracts with Standard Bank London Limited for gold in the aggregate amount of 100,000 ounces involving the use of combinations of put and call options. As of June 30, 2005 there were no ounces remaining on these contracts. The contracts gave the holder the right to buy, and the Company the right to sell, stipulated amounts of gold with a put option strike price of $295 per ounce and a call option strike price of $345 per ounce.

The Company incorrectly accounted for the above commodity contracts with Standard Bank London Limited as hedges during each of the quarters ended March 31, June 30 and September 30, 2004, respectively. Quarterly losses for 2004 have been restated to reflect the correct accounting treatment for these commodity contracts and the adoption of EITF 04-6 (Note 3(b)). The previously reported and restated information as at and for the three and six month periods ended June 30, 2004 is disclosed below:

		Three months ended								Six months ended
		June 30, 2004								June 30, 2004
		As reported				As restated				As reported				As restated
Statement of Operations
Revenue from discontinued operations (Note 4)		$	6,580			$	6,751			$	15,035			$	15,106
Realized and unrealized gain on commodity contracts (Note 4)			—				1,685				—				1,162
Net loss			(10,761	)			(8,905	)			(15,270	)			(14,037	)
Deficit			(91,291	)			(90,058	)			(91,291	)			(90,058	)
Basic and diluted loss per share			(0.14	)			(0.11	)			(0.20	)			(0.18	)

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

8.

SEGMENTED INFORMATION

Apollo operates the Montana Tunnels Mine in the United States and the Black Fox development project in Canada. The reportable segments have been determined at the level where decisions are made on the allocation of resources and capital and where performance is measured. The Nevada Assets have been reported as discontinued operations (Note 4). The accounting policies for these segments are the same as those followed by the Company as a whole.

Amounts as at June 30, 2005 are as follows:

		Montana								Corporate
		Tunnels				Black Fox				and Other				Total
Cash and cash equivalents		$	26			$	57			$	4,793			$	4,876
Other non-cash current assets			3,617				83				21				3,721
			3,643				140				4,814				8,597
Property, plant and equipment			15,433				23,049				1,265				39,747
Restricted certificate of deposit			4,440				551				180				5,171
Deferred costs and losses			—				—				1,037				1,037
Total assets of continuing operations		$	23,516			$	23,740			$	7,296			$	54,552
Current liabilities		$	6,854			$	364			$	2,288			$	9,506
Notes payable and convertible debentures			100				—				6,156				6,256
Accrued site closure costs			12,147				—				—				12,147
Total liabilities of continuing operations		$	19,101			$	364			$	8,444			$	27,909

Amounts as at December 31, 2004 are as follows (restated — Note 3(b)):

		Montana								Corporate
		Tunnels				Black Fox				and Other				Total
Cash and cash equivalents		$	(260	)		$	53			$	7,093			$	6,886
Other non-cash current assets			4,985				151				128				5,264
			4,725				204				7,221				12,150
Property, plant and equipment			17,239				19,560				800				37,599
Restricted certificate of deposit			3,752				562				57				4,371
Deferred costs and losses			—				—				901				901
Total assets of continuing operations		$	25,716			$	20,326			$	8,979			$	55,021
Current liabilities		$	6,943			$	481			$	2,237			$	9,661
Notes payable			423				—				5,538				5,961
Accrued site closure costs			11,753				—				—				11,753
Total liabilities of continuing operations		$	19,119			$	481			$	7,775			$	27,375

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

8.

SEGMENTED INFORMATION (Continued)

Amounts for the three and six month periods ended June 30, 2005 and 2004, respectively, are as follows:

		Three Months Ended June 30, 2005
		Montana								Corporate
		Tunnels				Black Fox				and Other				Total
Revenue from sale of minerals		$	10,581			$	—			$	—			$	10,581
Direct operating costs			12,622				—				—				12,622
Depreciation and amortization			582				—				32				614
General and administrative expenses			—				—				1,216				1,216
Stock-based compensation			—				—				152				152
Accretion expense			197				—				—				197
Exploration and business development			—				—				318				318
			13,401				—				1,718				15,119
Operating loss			(2,820	)			—				(1,718	)			(4,538	)
Interest income			—				—				69				69
Interest expense			(15	)			—				(470	)			(485	)
Foreign exchange loss and other			—				—				(7	)			(7	)
Loss from continuing operations		$	(2,835	)		$	—			$	(2,126	)		$	(4,961	)
Investing activities
Property, plant and equipment expenditures		$	60			$	1,519			$	489			$	2,068

		Six Months Ended June 30, 2005
		Montana								Corporate
		Tunnels				Black Fox				and Other				Total
Revenue from sale of minerals		$	22,913			$	—			$	—			$	22,913
Direct operating costs			26,111				—				—				26,111
Depreciation and amortization			1,270				—				64				1,334
General and administrative expenses			—				—				2,866				2,866
Stock-based compensation			—				—				354				354
Accretion expense			394				—				—				394
Exploration and business development			—				—				558				558
			27,775				—				3,842				31,617
Operating loss			(4,862	)			—				(3,842	)			(8,704	)
Interest income			—				—				173				173
Interest expense			(38	)			—				(1,155	)			(1,193	)
Gain on sale of property, plant and equipment			1,365				—				—				1,365
Foreign exchange loss and other			—				—				(33	)			(33	)
Loss from continuing operations		$	(3,535	)		$	—			$	(4,857	)		$	(8,392	)
Investing activities
Property, plant and equipment expenditures		$	91			$	3,489			$	529			$	4,109

APOLLO GOLD CORPORATION
Notes to the Consolidated Financial Statements
Six month period ended June 30, 2005
(Stated in United States Dollars; tabular amounts in thousands, except for share and per share amounts)
(Unaudited)

8.

SEGMENTED INFORMATION (Continued)

		Three Months Ended June 30, 2004 (Restated - Note 3(b))
		Montana								Corporate
		Tunnels				Black Fox				and Other				Total
Revenue from sale of minerals		$	6,525			$	—			$	—			$	6,525
Direct operating costs			13,472				—				—				13,472
Depreciation and amortization			601				—				29				630
General and administrative expenses			—				—				1,508				1,508
Stock-based compensation			—				—				72				72
Accretion expense			40				—				—				40
Exploration and business development			—				—				120				120
			14,113				—				1,729				15,842
Operating income (loss)			(7,588	)			—				(1,729	)			(9,317	)
Interest income			—				—				103				103
Interest expense			(39	)			—				—				(39	)
Foreign exchange loss and other			—				—				(300	)			(300	)
Loss from continuing operations		$	(7,627	)		$	—			$	(1,926	)		$	(9,553	)
Investing activities
Property, plant and equipment expenditures		$	412			$	4,242			$	233			$	4,887