EXHIBIT
10.1

    


    September
30, 2009

    


    Mr. David
Russell, CEO

    Apollo
Gold Corporation

    Denver
CO

    


    Dear
Dave,

    


    As per
our various conversations and discussions, the following are the basic terms
Elkhorn is proposing to purchase of Apollo Gold’s interest in Montana Tunnels
Mining Inc.  If you are in agreement with these terms, we are prepared
to move forward with the preparation of documents to finalize this
transaction.

     

    Elkhorn
Goldfields LLC will purchase Apollo’s entire interest in Montana Tunnels Mining
Inc. (AKA: MTMI) which includes the Elkhorn Tunnels JV, Montana Tunnels Mine,
Diamond Hill Mine, Diamond Hill Mill and any and all ancillary assets from
Apollo Gold for a purchase price of $9,000,000, as of September 30th, 2009,
to be paid on the following terms with the effective date to be October 19,
2009:

     

    
      	
               
      

            	
              1)

            	
              $5,000,000
      paid in cash on the following
schedule:

            


    

    
      	
               
      

            	
              a.

            	
              $250,000
      non-refundable payment paid no later than October 19,
      2009.  This agreement shall be subject to non-disclosure and
      non-binding on either party should this payment not be
    made.

            


    

    
      	
               
      

            	
              b.

            	
              $250,000
      non-refundable payment paid no later than November 25th,
      2009

            


    

    
      	
               
      

            	
              c.

            	
              $250,000
      non-refundable payment paid no later than December 25th,
      2009

            


    

    
      	
               
      

            	
              d.

            	
              $250,000
      paid on January 25th,
      2009

            


    

    
      	
               
      

            	
              e.

            	
              $250,000
      paid on February 25th,
      2010

            


    

    
      	
               
      

            	
              f.

            	
              $250,000
      paid on March 25th,
      2010

            


    

    
      	
               
      

            	
              g.

            	
              $1,500,000
      paid on April 30th,
      2010

            


    

    
      	
               
      

            	
              h.

            	
              $2,000,000
      paid on May 31st,
      2010

            


    

     

    It is
understood and agreed that any missed scheduled payment will result in the
termination of this agreement unless otherwise negotiated.

     

    
      	
               
      

            	
              2)

            	
              $4,000,000
      paid by a 4% NSR

            


    

    
      	
               
      

            	
              a.

            	
              Payments
      commencing coincident with the start of production on standard NSR
      industry terms and continuing to be paid from production until such time
      as a total of $4,000,000 is paid.

            


    

     

    
      	
               
      

            	
              3)

            	
              Upon
      full payment of cash portion of purchase contract, title of all assets
      subject to this agreement shall be conveyed to Elkhorn, subject to the 4%
      NSR interest due to Apollo.

            


    

     

    
      	
               
      

            	
              4)

            	
              Apollo
      shall have a “claw back” right to earn a 50% interest in a new Joint
      Venture to be formed between Elkhorn and Apollo for the purpose of
      exploring and developing additional potential gold and / or other
      associated metal reserve and resources at Montana
      Tunnels.  (Excluded would be the current M-Pit Reserves and
      Resources.)  This provision shall be enacted by Elkhorn, as the
      operator, utilizing Dick Nana as the managing geologist, based on his
      availability, by submitting a proposed exploration budget and plan to
      Apollo within 18 months of this agreement, and upon Apollo’s agreement to
      fund 50% of the proposed program.  Should minerals of value be
      found warranting further exploration and development, Apollo shall have
      the right to fund 50% of the cost through production and in doing so,
      shall have earned a 50% Joint Venture interest in this future
      development.  It is intended that the Joint Venture agreement
      will be structured utilizing the current Elkhorn Tunnels JV Agreement,
      with Elkhorn the operator, and Apollo, the JV partner in this
      enterprise.

            


    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    If you
are in agreement with the basic terms of this agreement, please sign below, and
we will immediately move forward to commence the due diligence process and
arrive at formal agreements documenting this transaction.

     

    
      
        	
                Best
      regards,

              
	 
      
	
                /s/
      Patrick W.M. Imeson

              
	 
      
	
                Patrick
      W.M. Imeson

              
	
                Chairman

              
	 
      
	
                Agreed,

              
	 
      
	
                /s/
      R. David Russell

              
	 
      
	
                R.
      David Russell, CEO

              
	
                Apollo
      Gold Corporation

              


      

    

    



    
      
         


      

      
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