**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**Form
      10-K**




(Mark
      one)




þ
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**For
                the fiscal year ended December 31, 2007oro
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
                EXCHANGE ACT OF 1934**For
                the transition period from ___________ to
                ___________




**Commission
      File Number: 001-31593**


**Apollo
      Gold Corporation**


*(Exact
      name of registrant as specified in its charter)*




**Yukon
                Territory**
            
            **Not
                Applicable***(State
                or other jurisdiction of*
              *incorporation
                or organization)*
            
            *(I.R.S.
                Employer*
              *Identification
                No.)*




**5655
      S. Yosemite Street, Suite 200**


**Greenwood
      Village, Colorado 80111-3220**


*(Address
      of Principal Executive Offices Including Zip Code)*


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


**Securities
      registered pursuant to Section 12(b) of the Act:**




**Title
                  of Each
                  Class**
              
              **Name
                  of Each Exchange on Which Registered**Common
                  Shares, no par value
              
              American
                  Stock ExchangeToronto
                  Stock
                  Exchange




**Securities
      registered pursuant to Section 12(g) of the Act:**


None




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




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




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 a check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. þ




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check
      one):




Large
      accelerated filer o     Accelerated
      filer o     Non-accelerated
      filer þ




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




As
      of
      June 30, 2007, the aggregate market value of the registrant’s voting common
      stock held by non-affiliates of the registrant was $42,993,061 based upon the
      closing sale price of the common stock as reported by the American Stock
      Exchange on that date.




As
      of
      March 18, 2008, the registrant had 160,965,258 common shares, no par value
      per
      share, outstanding.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




Portions
      of our definitive Proxy Statement to be filed with the Securities and Exchange
      Commission pursuant to Regulation 14A in connection with the 2008 Annual Meeting
      of Shareholders are incorporated by reference to Part III of this Annual Report
      on Form 10-K.












**REPORTING
      CURRENCY, FINANCIAL AND OTHER INFORMATION**




All
      amounts in this Report are expressed in United States (“U.S.”) dollars. Unless
      otherwise indicated Canadian currency is denoted as “Cdn$.”




Financial
      information is presented in accordance with generally accepted accounting
      principles (“GAAP”) in Canada (“Cdn GAAP”). Differences between accounting
      principles generally accepted in the U.S. (“U.S. GAAP”) and those applied in
      Canada, as applicable to Apollo Gold Corporation, are discussed in Note 24
      to
      the Consolidated Financial Statements.




Information
      in Part I and II of this report includes data expressed in various measurement
      units and contains numerous technical terms used in the gold mining industry.
      To
      assist readers in understanding this information, a conversion table and
      glossary are provided below.




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




**NON-GAAP
      FINANCIAL MEASURES**




In
      this
      Annual Report on Form 10-K, we use the terms “cash operating costs,” “total cash
      costs,” and “total production costs,” each of which are considered non-GAAP
      financial measures as defined in the United States Securities and Exchange
      Commission (the “SEC”) Regulation S-K Item 10 and should not be considered in
      isolation or as a substitute for measures of performance prepared in accordance
      with GAAP. These terms are used by management to assess performance of
      individual operations and to compare our performance to other gold
      producers.




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.




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 7, 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.




**STATEMENTS
      REGARDING FORWARD-LOOKING INFORMATION**





This
      Annual Report on Form 10-K 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 “anticipates,” “expects,”
“intends,” and similar expressions identify forward-looking statements. These
      statements include comments regarding:




·
            future
                timing and operational results and cash flows from the Montana Tunnels
                mine;




-2-




·
            the
                establishment and estimates of mineral reserves and
                resources;




·
            the
                timing of completion of a Black Fox feasibility
                study;




·
            production
                and production costs;




·
            daily
                production and mill throughput
                rates;




·
            cash
                operating costs;




·
            total
                cash costs;




·
            grade
                of ore mined and milled;




·
            grade
                of concentrates produced;




·
            anticipated
                expenditures for development, exploration, and corporate
                overhead;




·
            timing
                and issue of permits;




·
            expansion
                plans for existing properties;




·
            plans
                for Black Fox and Huizopa;




·
            estimates
                of closure costs;




·
            future
                financing of projects at Apollo;




·
            liquidity;




·
            estimates
                of environmental liabilities;




·
            our
                ability to obtain financing to fund our estimated expenditure and
                capital
                requirements;




·
            factors
                impacting our results of
                operations;




·
            the
                impact of adoption of new accounting
                standards.




Although
      we believe that our plans, intentions and expectations reflected in these
      forward-looking statements are reasonable, we cannot be certain that these
      plans, intentions or expectations will be achieved. Our actual results could
      differ materially from those anticipated in these forward-looking statements
      as
      a result of the risk factors set forth below and other factors described in
      more
      detail in this Annual Report on Form 10-K:




·
            unexpected
                changes in business and economic conditions;




·
            significant
                increases or decreases in gold prices and zinc prices;




·
            changes
                in interest and currency exchange rates;




·
            timing
                and amount of production;




-3-




·
            unanticipated
                grade changes;




·
            unanticipated
                recovery or production problems;




·
            changes
                in mining and milling costs;




·
            operational
                problems at our mining property;




·
            metallurgy,
                processing, access, availability of materials, equipment, supplies
                and
                water;




·
            determination
                of reserves;




·
            changes
                in project parameters;




·
            costs
                and timing of development of new reserves;




·
            results
                of current and future exploration activities;




·
            results
                of pending and future feasibility studies;




·
            joint
                venture relationships;




·
            political
                or economic instability, either globally or in the countries in which
                we
                operate;




·
            local
                and community impacts and issues;




·
            timing
                of receipt of government approvals;




·
            accidents
                and labor disputes;




·
            environmental
                costs and risks;




·
            competitive
                factors, including competition for property
                acquisitions;




·
            availability
                of external financing at reasonable rates or at all;
                and




·
            the
                factors discussed in this Annual Report on Form 10-K under the heading
                “Risk Factors.”




Many
      of
      these factors are beyond our ability to control or predict. These factors are
      not intended to represent a complete list of the general or specific factors
      that may affect us. We may note additional factors elsewhere in this Annual
      Report on Form 10-K and in any documents incorporated by reference into this
      Annual Report on Form 10-K. We undertake no obligation to update forward-looking
      statements.




**GLOSSARY
      OF TERMS**




We
      report
      our reserves on two separate standards to meet the requirements for reporting
      in
      both Canada and the United States (“U.S.”). Canadian reporting requirements for
      disclosure of mineral properties are governed by National Instrument 43-101
      (“NI
      43-101”). The definitions given in NI 43-101 are adopted from those given by the
      Canadian Institute of Mining Metallurgy and Petroleum. U.S. reporting
      requirements for disclosure of mineral properties are governing by SEC Industry
      Guide 7. These reporting standards have similar goals in terms of conveying
      an
      appropriate level of confidence in the disclosures being reported, but embody
      differing approaches and definitions.




-4-




We
      estimate and report our resources and reserves according to the definitions
      set
      forth in NI 43-101 and modify and reconcile them as appropriate to conform
      to
      SEC Industry Guide 7 for reporting in the U.S. The definitions for each
      reporting standard are presented below with supplementary explanation and
      descriptions of the parallels and differences.





**NI
                43-101 Definitions****indicated
                mineral resource**
            
            The
                term “indicated mineral resource” refers to that part of a mineral
                resource for which quantity, grade or quality, densities, shape and
                physical characteristics can be established with a level of confidence
                sufficient to allow the appropriate application of technical and
                economic
                parameters, to support mine planning and evaluation of the economic
                viability of the deposit. The estimate is based on detailed and reliable
                exploration and testing information gathered through appropriate
                techniques from locations such as outcrops, trenches, pits, workings
                and
                drill holes that are spaced closely enough for geological and grade
                continuity to be reasonably assumed.**inferred
                mineral resource**
            
            The
                term “inferred mineral resource” refers to that part of a mineral resource
                for which quantity and grade or quality can be estimated on the basis
                of
                geological evidence and limited sampling and reasonably assumed,
                but not
                verified, geological and grade continuity. The estimate is based
                on
                limited information and sampling gathered through appropriate techniques
                from locations such as outcrops, trenches, pits, workings and drill
                holes.**measured
                mineral resource**
            
            The
                term “measured mineral resource” refers to that part of a mineral resource
                for which quantity, grade or quality, densities, shape and physical
                characteristics are so well established that they can be estimated
                with
                confidence sufficient to allow the appropriate application of technical
                and economic parameters to support production planning and evaluation
                of
                the economic viability of the deposit. The estimate is based on detailed
                and reliable exploration, sampling and testing information gathered
                through appropriate techniques from locations such as outcrops, trenches,
                pits, workings and drill holes that are spaced closely enough to
                confirm
                both geological and grade continuity.**mineral
                reserve**
            
            The
                term “mineral reserve” refers to the economically mineable part of a
                measured or indicated mineral resource demonstrated by at least a
                preliminary feasibility study. The study must include adequate information
                on mining, processing, metallurgical, economic, and other relevant
                factors
                that demonstrate, at the time of reporting, that economic extraction
                can
                be justified. A mineral reserve includes diluting materials and allowances
                for losses that might occur when the material is
                mined.




-5-




**mineral
                resource**
            
            The
                term “mineral resource” refers to a concentration or occurrence of
                natural, solid, inorganic or fossilized organic material in or on
                the
                Earth’s crust in such form and quantity and of such a grade or quality
                that it has reasonable prospects for economic extraction. The location,
                quantity, grade, geological characteristics and continuity of a mineral
                resource are known, estimated or interpreted from specific geological
                evidence and knowledge.**probable
                mineral reserve**
            
            The
                term “probable mineral reserve” refers to the economically mineable part
                of an indicated, and in some circumstances a measured mineral resource
                demonstrated by at least a preliminary feasibility study. This study
                must
                include adequate information on mining, processing, metallurgical,
                economic, and other relevant factors that demonstrate, at the time
                of
                reporting, that economic extraction can be justified.**proven
                mineral reserve****1**
            
            The
                term “proven mineral reserve” refers to the economically mineable part of
                a measured mineral resource demonstrated by at least a preliminary
                feasibility study.**qualified
                person****2**
            
            The
                term “qualified person” refers to an individual who is an engineer or
                geoscientist with at least five years of experience in mineral
                exploration, mine development, production activities and project
                assessment, or any combination thereof, including experience relevant
                to
                the subject matter of the project or report and is a member in good
                standing of a self-regulating
                organization.




**SEC
                Industry Guide 7
                Definitions**




**exploration
                stage**
            
            An
                “exploration stage” prospect is one which is not in either the development
                or production stage.**development
                stage**
            
            A
                “development stage” project is one which is undergoing preparation of an
                established commercially mineable deposit for its extraction but
                which is
                not yet in production. This stage occurs after completion of a feasibility
                study.**mineralized
                material****3******
            
            The
                term “mineralized material” refers to material that is not included in the
                reserve as it does not meet all of the criteria for adequate demonstration
                for economic or legal extraction.**probable
                reserve**
            
            The
                term “probable reserve” refers to reserves for which quantity and grade
                and/or quality are computed from information similar to that used
                for
                proven (measured) reserves, but the sites for inspection, sampling,
                and
                measurement are farther apart or are otherwise less adequately spaced.
                The
                degree of assurance, although lower than that for proven reserves,
                is high
                enough to assume continuity between points of
                observation.**production
                stage**
            
            A
                “production stage” project is actively engaged in the process of
                extraction and beneficiation of mineral reserves to produce a marketable
                metal or mineral product.




-6-




**proven
                reserve**
            
            The
                term “proven reserve” refers to reserves for which (a) quantity is
                computed from dimensions revealed in outcrops, trenches, workings
                or drill
                holes; grade and/or quality are computed from the results of detailed
                sampling and (b) the sites for inspection, sampling and measurement
                are
                spaced so closely and the geologic character is so well defined that
                size,
                shape, depth and mineral content of reserves are
                well-established.**reserve**
            
            The
                term “reserve” refers to that part of a mineral deposit which could be
                economically and legally extracted or produced at the time of the
                reserve
                determination. Reserves must be supported by a feasibility study
                done to
                bankable standards that demonstrates the economic extraction. (“Bankable
                standards” implies that the confidence attached to the costs and
                achievements developed in the study is sufficient for the project
                to be
                eligible for external debt financing.) A reserve includes adjustments
                to
                the in-situ tonnes and grade to include diluting materials and allowances
                for losses that might occur when the material is
                mined.




**1** For
          Industry Guide 7 purposes this study must include adequate information
          on
          mining, processing, metallurgical, economic, and other relevant factors
          that
          demonstrate, at the time of reporting, that economic extraction is
          justified.
  **2** Industry
          Guide 7 does not require designation of a qualified person.
  **3** This
          category is substantially equivalent to the combined categories of measured
          and
          indicated mineral resources specified in NI 43-101.


**Additional
                Definitions**




**breccia**
            
            rock
                consisting of angular fragments of other rocks held together by mineral
                cement or a fine-grained matrix**call**
            
            a
                financial instrument that provides the right, but not the obligation,
                to
                buy a specified number of ounces of gold or of pounds of lead or
                zinc at a
                specified price**clasts**
            
            fragments
                of a pre-existing rock or fossil embedded within another
                rock**concentrate**
            
            a
                processing product containing the valuable ore mineral from which
                most of
                the waste mineral has been eliminated**cretaceous**
            
            the
                third and latest of the periods in the Mesozoic era**cut
                off or cut-off grade**
            
            when
                determining economically viable mineral reserves, the lowest grade
                of
                mineralized material that qualifies as ore, i.e. that can be mined
                at a
                profit**diatreme**
            
            an
                upward sloping passage forced through sedimentary rock by volcanic
                activity**doré**
            
            unrefined
                gold bullion bars containing various impurities such as silver, copper
                and
                mercury, which will be further refined to near pure
                gold**fault**
            
            a
                rock fracture along which there has been
                displacement




-7-




**feasibility
                study**
            
            a
                definitive engineering and economic study addressing the viability
                of a
                mineral deposit taking into consideration all associated technical
                factors, costs, revenues, and risks**fold**
            
            a
                curve or bend of a planar structure such as rock strata, bedding
                planes,
                foliation, or cleavage**footwall**
            
            a
                geologic or mining term meaning the rock below a fault or vein, or
                underlying a natural feature, or the mining floor**formation**
            
            a
                distinct layer of sedimentary rock of similar
                composition**geophysicist**
            
            one
                who studies the earth; in particular the physics of the solid earth,
                the
                atmosphere and the earth’s magnetosphere**geotechnical**
            
            the
                study of ground stability**grade**
            
            quantity
                of metal per unit weight of host rock**heap
                leach**
            
            a
                mineral processing method involving the crushing and stacking of
                ore on an
                impermeable liner upon which solutions are sprayed to dissolve metals
                such
                as gold and copper; the solutions containing the metals are then
                collected
                and treated to recover the metals**heterolithic**
            
            having
                more than one, differing kinds of rock components**host
                rock**
            
            the
                rock containing a mineral or an ore body**hydrothermal**
            
            the
                products of the actions of heated water, such as a mineral deposit
                precipitated from a hot solution**induced
                polarization**
            
            a
                method of conducting geophysics and locating drilling
                targets**intercalated**
            
            said
                of layered material that exists or is introduced between layers of
                a
                different character**latitic
                composition**
            
            igneous
                rock composed largely of equal amounts of orthoclase and plagioclase
                feldspar minerals and less than 10% quartz**mafic**
            
            pertaining
                to or composed dominantly of the ferromagnesian rock-forming silicates;
                said of some igneous rocks and their constituent
                minerals**mapping
                or geologic mapping**
            
            the
                recording of geologic information such as the distribution and nature
                of
                rock units and the occurrence of structural features, mineral deposits,
                and fossil localities**mineral**
            
            a
                naturally formed chemical element or compound having a definite chemical
                composition and, usually, a characteristic crystal form**mineralogy**
            
            the
                science of minerals**mineralization**
            
            a
                natural occurrence in rocks or soil of one or more metal yielding
                minerals




-8-




**mining**
            
            the
                process of extraction and beneficiation of mineral reserves to produce
                a
                marketable metal or mineral product. Exploration continues during
                the
                mining process and, in many cases, mineral reserves are expanded
                during
                the life of the mine operations as the exploration potential of the
                deposit is realized.**National
                Instrument 43-101**
            
            Canadian
                standards of disclosure for mineral projects**open
                pit**
            
            surface
                mining in which the ore is extracted from a pit or quarry, the geometry
                of
                the pit may vary with the characteristics of the ore
                body**ore**
            
            mineral
                bearing rock that can be mined and treated profitably under current
                or
                immediately foreseeable economic conditions**ore
                body**
            
            a
                mostly solid and fairly continuous mass of mineralization estimated
                to be
                economically mineable**outcrop**
            
            that
                part of a geologic formation or structure that appears at the surface
                of
                the earth**petrographic**
            
            the
                systematic classification and description of rocks, especially by
                microscopic examinations of thin sections**pluton**
            
            a
                body of igneous rock that has formed beneath the surface of the earth
                by
                consolidation from magma**put**
            
            a
                financial instrument that provides the right, but not the obligation,
                to
                sell a specified number of ounces of gold or of pounds of lead or
                zinc at
                a specified price**pyrite**
            
            common
                sulfide of iron**quartz**
            
            a
                mineral composed of silicon dioxide, SiO2 (silica)**quartz
                monzonite**
            
            a
                course-grained igneous rock made up principally of feldspar minerals
                and
                quartz**reclamation**
            
            the
                process by which lands disturbed as a result of mining activity are
                modified to support beneficial land use.****Reclamation
                activity may include the removal of buildings, equipment, machinery
                and
                other physical remnants of mining, closure of tailings storage facilities,
                leach pads and other mine features, and contouring, covering and
                re-vegetation of waste rock and other disturbed areas.**reclamation
                and closure costs**
            
            the
                cost of reclamation plus other costs, including without limitation
                certain
                personnel costs, insurance, property holding costs such as taxes,
                rental
                and claim fees, and community programs associated with closing an
                operating mine




-9-




**recovery
                rate**
            
            a
                term used in process metallurgy to indicate the proportion of valuable
                material physically recovered in the processing of ore, generally
                stated
                as a percentage of the material recovered compared to the total material
                originally present**SAG**
            
            semi-autogenous
                grinding, a method of grinding rock into fine particles, in which
                the
                grinding media consists of steel balls**SEC
                Industry Guide 7**
            
            U.S.
                reporting guidelines that apply to registrants engaged or to be engaged
                in
                significant mining operations**sedimentary
                rock**
            
            rock
                formed at the earth’s surface from solid particles, whether mineral or
                organic, which have been moved from their position of origin and
                redeposited**skarn**
            
            a
                rock of complex mineral composition**stratigraphy**
            
            the
                branch of geology which studies the formation, composition, sequence
                and
                correlation of the stratified rock as parts of the earth’s
                crust**strike**
            
            the
                direction or trend that a structural surface, e.g. a bedding or fault
                plane, takes as it intersects the horizontal**strip**
            
            to
                remove overburden in order to expose ore**subangular**
            
            somewhat
                angular, free from sharp angles but not smoothly
                rounded**sulfide**
            
            a
                mineral including sulfur (S) and iron (Fe) as well as other elements;
                metallic sulfur-bearing mineral often associated with gold
                mineralization**variogram**
            
            graphical
                representation of the rate of change of grade with distance which
                is
                usedtodefine
                parameters for controlling sample layout and resource
                modeling**vein**
            
            a
                thin, sheet like crosscutting body of hydrothermal mineralization,
                principally quartz**volcanic
                lastics**
            
            volcanic
                rocks containing significant amounts of rock fragments that have
                been
                moved from their place of origin during volcanic
                activity**volcanic
                rock**
            
            originally
                molten rocks, generally fine grained, that have reached or nearly
                reachedtheearth’s
                surface before solidifying





-10-




**CONVERSION
      FACTORS AND ABBREVIATIONS**




For
      ease
      of reference, the following conversion factors are provided:




1
                acre
            
            =
                0.4047 hectare
            
            1
                mile
            
            =
                1.6093 kilometers1
                foot
            
            =
                0.3048 meter
            
            1
                troy ounce
            
            =
                31.1035 grams1
                gram per metric tonne
            
            =
                0.0292 troy ounce/short ton
            
            1
                square mile
            
            =
                2.59 square kilometers1
                short ton (2000 pounds)
            
            =
                0.9072 tonne
            
            1
                square kilometer
            
            =
                100 hectares1
                tonne
            
            =
                1,000 kg or 2,204.6 lbs
            
            1
                kilogram
            
            =
                2.204 pounds or 32.151 troy oz1
                hectare
            
            =
                10,000 square meters
            
            1
                hectare
            
            =
                2.471 acres





The
      following abbreviations could be used herein:




Ag
            
            =
                silver
            
            m
            
            =
                meterAu
            
            =
                gold
            
            m(2)
            
            =
                square meterAu
                g/t
            
            =
                grams of gold per tonne
            
            m(3)
            
            =
                cubic meterg
            
            =
                gram
            
            Ma
            
            =
                million yearsha
            
            =
                hectare
            
            Oz
            
            =
                troy ouncekm
            
            =
                kilometer
            
            Pb
            
            =
                leadkm(2)
            
            =
                square kilometers
            
            t
            
            =
                tonnekg
            
            =
                kilogram
            
            T
            
            =
                tonlb
            
            =
                pound
            
            Zn
            
            =
                zincm
            
            =
                meter





Note:
      All
      units in this report are stated in metric measurements unless otherwise
      noted.




-11-




**PART
      I**




**ITEM
      1.** ***BUSINESS***




**OVERVIEW
      OF APOLLO GOLD**




The
      earliest predecessor to Apollo Gold Corporation was incorporated under the
      laws
      of the Province of Ontario in 1936. In May 2003, it reincorporated under the
      laws of the Yukon Territory. Apollo Gold Corporation maintains its registered
      office at 204 Black Street, Suite 300, Whitehorse, Yukon Territory, Canada
      Y1A
      2M9, and the telephone number at that office is (867) 668-5252. Apollo Gold
      Corporation maintains its principal executive office at 5655 S. Yosemite Street,
      Suite 200, Greenwood Village, Colorado 80111-3220, and the telephone number
      at
      that office is (720) 886-9656. Our internet address is http://www.apollogold.com .
      Information contained on our website is not a part of this Annual Report on
      Form
      10-K.




Apollo
      is
      engaged in gold mining including extraction, processing, refining and the
      production of by-product metals, as well as related activities including
      exploration and development. The Company is the operator of the Montana Tunnels
      mine (“Mine”), which is a 50% joint venture with Elkhorn Tunnels, LLC
      (“Elkhorn”). The Mine is an open pit mine and mill producing gold doré and
      lead-gold and zinc-gold concentrates. See Item 2 “Description of
      Properties” for further information.




Apollo
      has a development project, 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 concessions at the Huizopa exploration project,
      located in the Sierra Madres in Chihuahua, Mexico. The Huizopa project is
      subject to an 80% Apollo/20% Mineras Coronado joint venture
      agreement.




-12-




**BACKGROUND**




**Apollo
      Gold Corporation**




The
      following chart illustrates Apollo’s operations and principal operating
      subsidiaries and their jurisdictions of incorporation. Apollo owns 100% of
      the
      voting securities of each subsidiary.




**APOLLO
      GOLD GROUP**


**(as
      of March 18, 2008)** ****









APOLLO
      GOLD CORPORATION: American Stock Exchange and Toronto Stock Exchange listed
      holding company which owns and operates the Black Fox development
      property.




APOLLO
      GOLD, INC.: Holding company, employs executive officers and furnishes corporate
      services to Apollo Gold Corporation and its subsidiaries.




MONTANA
      TUNNELS MINING, INC.: Owns a 50% interest in and operates the Montana Tunnels
      mine and owns the Diamond Hill mine. The Montana Tunnels mine is subject to
      a
      joint venture agreement with Elkhorn who has a 50% beneficial interest in the
      Mine.




MINE
      DEVELOPMENT FINANCE INC.: Provides intercompany loans and other financial
      services to its affiliated companies.




MINERA
      SOL DE ORO S.A. de C.V.: Holds rights to the Huizopa exploration
      property.




MINAS
      de
      ARGONAUTAS, S. de R.L de C.V.: Conducts exploration at the Huizopa exploration
      property in Mexico.




-13-




**Financial
      Information**




Segmented
      information is contained in Note 22 of the “Notes to the Consolidated Financial
      Statements” contained within this Annual Report on Form 10-K.





**Products**




The
      Montana Tunnels mine produces gold, zinc, silver, and lead in gold doré and
      lead-gold and zinc-gold concentrates. The metals produced are sold to custom
      smelters, refiners and metals traders. The percentage of sales contributed
      by
      each class of product is reflected in the following table.




**Year
                Ended**
              **December
                31,****Product
                Category**
            
            **2007**
            
            **2006**
            
            **2005**Gold
            
            
            32
            %
            
            32
            %
            
            46
            %Zinc
            
            
            40
            %
            
            47
            %
            
            34
            %Silver
                and Lead
            
            
            28
            %
            
            21
            %
            
            20
            %




The
      table
      below summarizes Montana Tunnels’ metals production and average metals prices
      for the periods indicated.




**Year
                Ended December 31,****Production
                Summary**
            
            
            **2007(1)
                (2**
            **)**
            
            **2006(3**
            **)**
            
            **2005**Gold
                ounces
            
            
            16,632
            
            
            4,959
            
            
            44,099Silver
                ounces
            
            
            250,982
            
            
            116,004
            
            
            524,722Lead
                pounds
            
            
            5,590,737
            
            
            1,196,317
            
            
            10,428,061Zinc
                pounds
            
            
            11,874,543
            
            
            3,040,058
            
            
            22,380,136**Average
                metals prices**Gold
                - London Bullion Mkt. ($/ounce)
            
            $
            696
            
            $
            604
            
            $
            445Silver
                - London Bullion Mkt. ($/ounce)
            
            $
            13.40
            
            $
            11.55
            
            $
            7.31Lead
                - LME Cash ($/pound)
            
            $
            1.17
            
            $
            0.58
            
            $
            0.44Zinc
                - LME Cash ($/pound)
            
            $
            1.47
            
            $
            1.49
            
            $
            0.63







**(1)**
              Effective
                  December 31, 2006, the Mine became a 50/50 joint venture; therefore,
                  2007
                  metal production shown in the table above represents Apollo’s 50% share of
                  the joint venture.
  **(2)**
              The
                  Mine recommenced milling operations on March 1, 2007; therefore,
                  production in 2007 is for a ten month
                  period.
  **(3)**
              The
                  Montana Tunnels mine ceased milling operations on May 12, 2006;
                  therefore,
                  no metal products were produced after that date for the remainder
                  of
                  2006.




***Gold***




Montana
      Tunnels produced 16,632, 4,959, and 44,099 ounces of gold during the years
      ended
      December 31, 2007, 2006, and 2005, respectively.




The
      majority of our gold revenue is derived from the sale of gold contained within
      the lead-gold and zinc-gold concentrates. See
      Item
      2 “Description of Properties - Montana Tunnels Mine” for further information. The
      balance of the gold revenue is derived from the sale of refined gold in the
      form
      of doré bars. Because doré is an alloy consisting primarily of gold but also
      containing silver and other metals, bars are sent to refiners to produce bullion
      that meets the required market standard of 99.99% pure gold. Under the terms
      of
      our refining contracts, the bars are refined for a fee, and our share of the
      refined gold and the separately recovered silver is paid to us.




-14-




*Gold
      Uses*




Gold
      has
      two primary uses: product fabrication and bullion investment. Fabricated gold
      has a variety of end uses, including jewelry, electronics, dentistry, industrial
      and decorative uses, medals, medallions and official coins. Gold investors
      purchase gold bullion, official coins and high-carat jewelry.




*Gold
      Supply*




The
      worldwide supply of gold consists of a combination of new production from mining
      and existing stocks of bullion and fabricated gold held by governments,
      financial institutions, industrial organizations and private
      individuals.




*Gold
      Price History*




The
      price
      of gold is volatile and is affected by numerous factors beyond our control
      such
      as the sale or purchase of gold by various central banks and financial
      institutions, inflation or deflation, fluctuation in the value of the US dollar
      and foreign currencies, global and regional demand, and the political and
      economic conditions of major gold-producing countries throughout the
      world.




The
      following table presents the high, low and average afternoon fixing prices
      for
      gold per ounce on the London Bullion Market over the past ten
      years:




**Year**
            
            **High**
            
            **Low**
            
            **Average**1998
            
            
            313
            
            
            273
            
            
            2941999
            
            
            326
            
            
            253
            
            
            2792000
            
            
            313
            
            
            264
            
            
            2792001
            
            
            293
            
            
            256
            
            
            2712002
            
            
            349
            
            
            278
            
            
            3102003
            
            
            416
            
            
            320
            
            
            3642004
            
            
            454
            
            
            375
            
            
            4092005
            
            
            537
            
            
            411
            
            
            4452006
            
            
            725
            
            
            525
            
            
            6042007
            
            
            841
            
            
            608
            
            
            6962008*
            
            
            971
            
            
            847
            
            
            906







*
      Through
      February 29, 2008




***Zinc***




Production
      from the Montana Tunnels mine also includes the extraction, processing and
      sale
      of zinc contained in sulfide concentrates. The mine produced approximately
      11,900,000, 3,000,000, and 22,400,000 pounds of payable zinc in 2007, 2006,
      and
      2005, respectively.




Due
      to
      its corrosion resisting property, zinc is used primarily as the coating in
      galvanized steel. Galvanized steel is widely used in construction of
      infrastructure, housing and office buildings. In the automotive industry, zinc
      is used for galvanizing and die-casting and in the vulcanization of tires.
      Smaller quantities of various forms of zinc are used in the chemical and
      pharmaceutical industries, including fertilizers, food supplements and
      cosmetics, and in specialty electronic applications such as satellite
      receivers.




-15-




**Annual
      Global Supply/ Demand Balance for Zinc, 2002-2007**




**2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003****(000
                tonnes)**Refined
                Consumption
            
            
            11,667
            
            
            11,107
            
            
            10,629
            
            
            10,651
            
            
            9,848Refined
                Production
            
            
            11,609
            
            
            10,704
            
            
            10,255
            
            
            10,357
            
            
            9,870Release
                of Inventoried Stocks
            
            
            10
            
            
            28
            
            
            29
            
            
            12
            
            
            7Increase
                (Decrease) World Stock
            
            
            (48
            )
            
            (375
            )
            
            (345
            )
            
            (282
            )
            
            29LME
                Stocks-
                Total
            
            
            89
            
            
            90
            
            
            394
            
            
            629
            
            
            740-
                Weeks’ consumption
            
            
            0.4
            
            
            0.4
            
            
            1.9
            
            
            3.1
            
            
            3.9Reported
                Stocks-
                Total
            
            
            466
            
            
            514
            
            
            808
            
            
            1,039
            
            
            1,159-
                Weeks’ consumption
            
            
            2.1
            
            
            2.3
            
            
            4.0
            
            
            5.1
            
            
            6.1LME
                Cash Price-
                $/tonne
            
            
            3,250
            
            
            3,273
            
            
            1,380
            
            
            1,048
            
            
            828-
                cents/lb
            
            
            147.4
            
            
            148.5
            
            
            62.6
            
            
            47.5
            
            
            37.6




Data
          Source: Standard Bank Metals Report.


*Zinc
      Price History*




The
      following table sets forth for the periods indicated the London Metals Exchange
      high, low and average settlement prices of zinc in U.S. dollars per
      pound:




**Zinc****Year**
            
            **High**
            
            **Low**
            
            **Average**2001
            
            
            0.48
            
            
            0.33
            
            
            0.402002
            
            
            0.42
            
            
            0.33
            
            
            0.352003
            
            
            0.46
            
            
            0.34
            
            
            0.382004
            
            
            0.56
            
            
            0.42
            
            
            0.562005
            
            
            0.86
            
            
            0.53
            
            
            0.642006
            
            
            1.93
            
            
            1.43
            
            
            1.532007
            
            
            1.84
            
            
            1.00
            
            
            1.472008*
            
            
            1.23
            
            
            0.99
            
            
            1.08







*
      Through
      February 29, 2008




***Silver***




Montana
      Tunnels produced 250,982, 116,004, and 524,722 ounces of silver in the years
      ended December 31, 2007, 2006, and 2005, respectively. The silver production
      is
      derived from the gold doré as well as the lead and zinc concentrates.




Silver
      has traditionally served as a medium of exchange, much like gold. While silver
      continues to be used for currency, the current principal uses of silver are
      for
      industrial uses, primarily for electrical and electronic components,
      photography, jewelry and silverware. Silver’s strength, malleability, ductility,
      thermal and electrical conductivity, sensitivity to light and ability to endure
      extreme changes in temperature combine to make silver a widely used industrial
      metal. Specifically, it is used in photography, batteries, computer chips,
      electrical contacts, and high technology printing. Silver’s anti-bacterial
      properties also make it valuable for use in medicine and in water
      purification.




*Silver
      Price History*




The
      following table sets forth for the periods indicated the London Metals Exchange
      high, low and average settlement prices of silver in U.S. dollars per
      ounce.




**Silver****Year**
            
            **High**
            
            **Low**
            
            **Average**2001
            
            
            4.83
            
            
            4.03
            
            
            4.372002
            
            
            5.13
            
            
            4.22
            
            
            4.602003
            
            
            5.99
            
            
            4.35
            
            
            4.882004
            
            
            8.29
            
            
            5.49
            
            
            6.652005
            
            
            9.22
            
            
            6.39
            
            
            7.312006
            
            
            14.94
            
            
            8.83
            
            
            11.572007
            
            
            15.82
            
            
            11.67
            
            
            13.382008*
            
            
            19.62
            
            
            14.93
            
            
            16.75







*
      Through
      February 29, 2008




-16-




***Lead***




Production
      from Montana Tunnels also includes the extraction, processing and sale of lead
      contained in sulfide concentrates. Montana Tunnels produced approximately
      5,600,000, 1,200,000, and 10,400,000 pounds of payable lead in 2007, 2006 and
      2005, respectively.




The
      primary use of lead is in motor vehicle batteries, but it is also used in cable
      sheathing, solder in printed wiring circuits, shot for ammunition and alloying.
      Lead in chemical form is used in alloys, glass and plastics.




**Annual
      Global Supply/ Demand Balance for Lead, 2002-2007**


**2007**
              
              **2006**
              
              **2005**
              
              **2004**
              
              **2003****(000
                  tonnes)**Refined
                  Consumption
              
              
              8,458
              
              
              8,048
              
              
              7,616
              
              
              7,257
              
              
              6,826Refined
                  Production
              
              
              8,339
              
              
              8,102
              
              
              7,541
              
              
              6,955
              
              
              6,748Release
                  of Stock
              
              
              0
              
              
              10
              
              
              36
              
              
              56
              
              
              60Increase
                  (Decrease) Stock
              
              
              (119
              )
              
              64
              
              
              (39
              )
              
              (246
              )
              
              (18
              )LME
                  Stocks - Total
              
              
              49
              
              
              41
              
              
              44
              
              
              40
              
              
              109-
                  Weeks’ consumption
              
              
              0.3
              
              
              0.3
              
              
              0.3
              
              
              0.3
              
              
              0.8Reported
                  Stocks - Total
              
              
              173
              
              
              378
              
              
              314
              
              
              298
              
              
              407-
                  Weeks’ consumption
              
              
              1.1
              
              
              2.4
              
              
              2.1
              
              
              2.1
              
              
              3.1LME
                  cash price - $/tonne
              
              
              2,595
              
              
              1,288
              
              
              976
              
              
              887
              
              
              516-
                  cents/lb
              
              
              117.7
              
              
              58.4
              
              
              44.3
              
              
              40.2
              
              
              23.4







Data
        Source: Standard Bank Metals Report.




*Lead
      Price History*




The
      following table sets forth for the periods indicated the London Metals Exchange
      high and low settlement prices for lead in U.S. dollars per pound.




**Lead****Year**
            
            **High**
            
            **Low**2001
            
            
            0.24
            
            
            0.202002
            
            
            0.24
            
            
            0.182003
            
            
            0.34
            
            
            0.192004
            
            
            0.45
            
            
            0.292005
            
            
            0.49
            
            
            0.412006
            
            
            0.79
            
            
            0.712007
            
            
            1.80
            
            
            0.782008*
            
            
            1.54
            
            
            1.12





*
      Through
      February 29, 2008




-17-




**Smelting
      and Refining Process**




Our
      lead
      and zinc concentrates are shipped by rail for smelting to Teck Cominco Metals
      Ltd. in Trail, British Columbia, Canada, approximately five hours from the
      Montana Tunnels mine. Our contract with Teck Cominco covers all concentrates
      produced from the Mine - L Pit. See Item 2 “Description of Properties - Montana
      Tunnels Mine” for further information.




We
      have
      an agreement with Johnson Matthey to refine gold doré to a final finished
      product. Johnson Matthey receives $0.75 for each ounce of gold doré it refines,
      in addition to receiving a fee of 0.5% of the payable metal for silver and
      0.1%
      of the payable metal for gold, with a minimum charge of $750 per
      delivery.




**Mineral
      Reserves**




Our
      proven and probable mineral reserves are estimated in conformance with
      definitions set out in NI 43-101 and on a basis consistent with the
      definition of proven and probable mineral reserves set forth in SEC Industry
      Guide 7. See our “Glossary of Terms.”




The
      estimates of our mineral reserves are prepared by Apollo based on information
      compiled and/or validated by Mr. Richard F. Nanna, our employee and Senior
      Vice
      President of Exploration. Mr. Nanna is a professional geologist with 35 years
      of
      experience and a registered Professional Geologist in the State of Washington.
      Mr. Nanna is considered a qualified person under NI 43-101.




Since
      we
      report our mineral reserves to both NI 43-101 and SEC Industry Guide 7
      standards, it is possible for our reserve figure to vary between the two. Where
      such a variance occurs it will arise from the differing requirements for
      reporting mineral reserves. For example, the NI 43-101 has a minimum requirement
      that reserves be supported by a pre-feasibility study, whereas SEC Industry
      Guide 7 requires support from a full feasibility study done to bankable
      standards. The Black Fox Project thus reports reserves under NI 43-101, but
      reports no reserves under SEC Industry Guide 7 as a final bankable
      feasibility study has not been completed. No reconciliation between
      NI 43-101 and SEC Industry Guide 7 is included for Montana Tunnels as
      there are no material differences.




The
      following table sets forth the estimated mineral reserves attributable to the
      interest held by Apollo.




**Proven
      and Probable Reserves - Gold Ounces**




**As
                of December 31,****Mines**
            
            **Apollo
                interest**
            
            **2007**
            
            **2006**
            
            **2005
                (1)**Montana
                Tunnels
            
            
            50
            %
            
            283,664
            
            
            275,850
            
            
            535,900Black
                Fox Project
            
            
            100
            %
            
            1,002,000
            
            
            448,800
            
            
            457,100**Apollo
                Gold - Total**
            
            
            
            
            
            **1,285,664**
            
            
            **724,650**
            
            
            **993,000**







**(1)**
            In
                2005 Apollo’s share of the Montana Tunnels reserves was
                100%.





**Montana
      Tunnels Reserves - Apollo’s Interest**




Apollo’s
      interest in the end-of-year 2007 reserves is 21.0 million tons containing
      283,700 ounces of gold, 434,000 ounces of silver, 211 million pounds of zinc,
      and 73 million pounds of lead. The grade model was modified in 2007 with a
      new
      indicator cut off to reflect higher metal prices. Further, the M Pit was
      redesigned and incorporates new geological information and better access to
      the
      north end of the pit. This combination has resulted in an increase of
      reserves.




-18-




**Montana
      Tunnels Mine Reserve Statement at December 31, 2007** **(1)**


**(Apollo’s
      50% interest)**




**Pit
                (Imperial Summary)**
            
            **Classification**
            
            **Tons**
              **000’s**
            
            **Grade
                oz Au/T**
            
            **Ag
                oz**
              **Ag/T**
            
            **Pb
                %**
            
            **Zn
                %**
            
            **Ounces
                Au**
              **000’s**L
                Pit
            
            
            Proven
            
            
            3,266.0
            
            
            0.0149
            
            
            0.172
            
            
            0.216
            
            
            0.611
            
            
            48.5Mill
                Stockpile
            
            
            Proven
            
            
            333.4
            
            
            0.0085
            
            
            0.304
            
            
            0.182
            
            
            0.413
            
            
            2.8Subtotal
            
            
            Proven
            
            
            3,599.4
            
            
            0.0143
            
            
            0.184
            
            
            0.213
            
            
            0.592
            
            
            51.3L
                Pit
            
            
            Probable
            
            
            12.8
            
            
            0.0128
            
            
            0.166
            
            
            0.220
            
            
            0.499
            
            
            0.2M
                Pit
            
            
            Probable
            
            
            17,365.6
            
            
            0.0134
            
            
            0.212
            
            
            0.165
            
            
            0.485
            
            
            232.2Subtotal
            
            
            Probable
            
            
            17,378.4
            
            
            0.0130
            
            
            0.212
            
            
            0.165
            
            
            0.485
            
            
            232.4Total
            
            
            Proven
                + Probable
            
            
            20,977.8
            
            
            0.0135
            
            
            0.207
            
            
            0.173
            
            
            0.504
            
            
            283.7







**(1)**
            Recovery
                rates are expected to be 77% for gold, 72% for silver, 85% for lead,
                and
                82% for zinc.




The
      past
      three years average metal prices were used for the calculation of the year-end
      2007 reserves, which are as follows:




Gold
                  - $581/oz
              Silver
                  - $10.75/oz
              Lead
                  - $0.73/lb
              Zinc
                  - $1.20/lb




**Black
      Fox Reserves**




The
      probable mineral reserves estimates disclosed below for Black Fox were in a
      NI 43-101 report completed in August 2007.





The
      mineral reserve was calculated based on a gold price of US$525/oz. The average
      total cash cost per ounce of gold production was calculated at $236 per ounce.





**Black
      Fox Probable Reserve Statement** **as of December 31, 2007**




**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**
            
            **Contained**
              **Au
                Ounces**Open
                Pit
            
            
            1.0
            
            
            3,362
            
            
            5.8
            
            
            625,000Underground
            
            
            3.0
            
            
            1,108
            
            
            10.6
            
            
            377,000**Total
                Reserves**
            
            
            
            
            
            
            
            
            
            
            
            **1,002,000**







**(1)**
            Underground
                reserves include dilution of 66,000 tonnes of indicated material
                with an
                average grade of 1.26 g/t Au.





**Black
      Fox Reserves at February 29, 2008**





On
      February 29, 2008, we announced a new reserve of 1,330,000 ounces of gold,
      an
      increase of 328,000 ounces, based on a gold price of $650 per ounce. We expect
      to file a NI 43-101 report within 45 days of February 29, 2008. We expect the
      NI
      43-101 to be a full feasibility study done to a bankable standard (“bankable
      feasibility study”). A bankable feasibility study is a comprehensive analysis of
      a project’s economics (+/- 15% precision) used by the banking industry for
      financing purposes.





-19-





**Black
      Fox Probable Reserve Statement As of February 29, 2008**




**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**
            
            **Contained**
              **Au
                Ounces**Open
                Pit
            
            
            1.0
            
            
            4,350
            
            
            5.2
            
            
            730,000Underground**(1)**
            
            
            3.0
            
            
            2,110
            
            
            8.8
            
            
            600,000**Total
                Reserves**
            
            
            
            
            
            
            
            
            
            
            
            **1,330,000**







**(1)**
            Underground
                reserves assume 95% mining recovery 17% planned dilution and 5% unplanned
                dilution both at 0 grams per tonne
                grade.





**Employee
      Relations**




As
      of
      December 31, 2007, we had approximately 230 employees, including 6 employees
      at
      our principal executive office in Greenwood Village, Colorado.




**Competition**




We
      compete with major mining companies and other natural mineral resource companies
      in the acquisition, exploration, financing and development of new prospects.
      Many of these companies are larger and better capitalized than we are. There
      is
      significant competition for the limited number of gold acquisition and
      exploration opportunities. Our competitive position depends upon our ability
      to
      successfully and economically explore, acquire and develop new and existing
      mineral prospects. Factors that allow producers to remain competitive in the
      market over the long term include the quality and size of their ore bodies,
      costs of operation, and the acquisition and retention of qualified employees.
      We
      also compete with other mining companies for skilled mining engineers, mine
      and
      processing plant operators and mechanics, geologists, geophysicists and other
      technical personnel. This could result in higher turnover and greater labor
      costs.




**Available
      Information**




We
      make
      available, free of charge, on or through our Internet website links to our
      Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
      on
      Form 8-K and amendments to those reports filed or furnished pursuant to Section
      13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
      we
      electronically file such material with, or furnish it to, the SEC. Our internet
      address is www.apollogold.com. Our code of business conduct and ethics is
      located on our website. To the extent permitted, we intend to post on our
      website any amendments to, or waivers from, our code of business conduct and
      ethics. Our internet website and the information contained therein or connected
      thereto are not incorporated into this Annual Report on Form 10-K.




**ITEM
      1A.**  **RISK
      FACTORS**




*In
      addition to historic information, the information in this Annual Report on
      Form
      10-K contains “forward looking” statements about our future business and
      performance. Our actual operating results and financial performance may be
      very
      different from what we expect as of the date of this Annual Report on Form
      10-K.
      The risks below address some of the factors that may affect our future operating
      results and financial performance.*




**We
      have a history of losses.**




With
      the
      exception of the most recent fiscal year during which we had a net income of
      $2,416,000, we have incurred significant losses. Our net losses were $15,587,000
      and $22,208,000 for the years ended December 31, 2006 and 2005, respectively.
      There can be no assurance that we will achieve or sustain profitability in
      the
      future.




-20-




**We
      have experienced operational problems at our Montana Tunnels
      mine.**




Since
      the
      sale of our Florida Canyon and Standard mines in November 2005, all of our
      revenues have been derived from our milling operations at the Montana Tunnels
      mine, which is a low grade mine. Historically, the Montana Tunnels mine has
      been
      unprofitable. During 2004, we experienced problems related to the milling of
      low-grade ore at the Montana Tunnels mine, which negatively affected our
      revenues and earnings. Throughout 2005, we experienced operational problems,
      particularly in the open pit, leading to the suspension of mining on October
      21,
      2005 for safety reasons due to increased wall activity in the open pit. After
      the suspension of mining and until May 12, 2006, we were able to continue to
      produce gold doré, lead-gold and zinc-gold concentrates from milling low grade
      stockpiled ore. However, on May 12, 2006, all operations ceased at the mine
      and
      it was placed on care and maintenance. On July 28, 2006, we entered into a
      joint
      venture agreement with Elkhorn Tunnels, LLC, in respect of the Montana Tunnels
      mine pursuant to which Elkhorn Tunnels made financial contributions in exchange
      for a fifty percent interest in the mine. Mill operations recommenced in March
      2007, however there can be no assurances that we will not encounter additional
      operational problems at our Montana Tunnels mine.




**Our
      earnings may be affected by metals price volatility, specifically the volatility
      of gold and zinc prices.**




We
      historically have derived all of our revenues from the sale of gold, silver,
      lead and zinc, and our development and exploration activities are focused on
      gold. As a result, our future earnings are directly related to the price of
      gold. Changes in the price of gold significantly affect our profitability.
      Gold
      prices historically have fluctuated widely, based on numerous industry factors
      including:




·
            industrial
                and jewelry demand;


·
            central
                bank lending, sales and purchases of
                gold;


·
            forward
                sales of gold by producers and
                speculators;


·
            production
                and cost levels in major gold-producing regions;
                and


·
            rapid
                short-term changes in supply and demand because of speculative or
                hedging
                activities.





Gold
      prices are also affected by macroeconomic factors, including:




·
            confidence
                in the global monetary system;


·
            expectations
                of the future rate of inflation (if any);


·
            the
                strength of, and confidence in, the U.S. dollar (the currency in
                which the
                price of gold is generally quoted) and other
                currencies;


·
            interest
                rates; and


·
            global
                or regional political or economic events, including but not limited
                to
                acts of terrorism.





The
      current demand for, and supply of, gold also affects gold prices. The supply
      of
      gold consists of a combination of new production from mining and existing stock
      of bullion held by government central banks, public and private financial
      institutions, industrial organizations and private individuals. As the amounts
      produced by all producers in any single year constitute a small portion of
      the
      total potential supply of gold, normal variations in current production do
      not
      usually have a significant impact on the supply of gold or on its price.
      Mobilization of gold held by central banks through lending and official sales
      may have a significant adverse impact on the price of gold.




-21-




All
      of
      the above factors are beyond our control and are impossible for us to predict.
      If the market prices for gold, silver, zinc or lead fall below our costs to
      produce them for a sustained period of time, we will experience additional
      losses and we could also be required by our reduced revenue to discontinue
      exploration, development and/or mining at one or more of our
      properties.





**Increased
      costs could affect our financial condition.**




We
      anticipate that costs at our properties including the Montana Tunnels mine,
      Black Fox and Huizopa as well as other properties that we may explore or
      develop, will frequently be subject to variation from one year to the next
      due
      to a number of factors, such as changing ore grade, metallurgy and revisions
      to
      mine plans in response to the physical shape and location of the ore body.
      In
      addition, costs are affected by the price of commodities such as fuel, steel
      and
      electricity. Such commodities are at times subject to volatile price movements,
      including increases that could make production at certain operations less
      profitable or increase costs of construction. A material increase in costs
      at
      any significant location could have a significant effect on a project’s economic
      viability or on our profitability.




**We
      do not currently have and may not be able to raise the funds necessary to
      explore and develop our Black Fox and Huizopa properties.**




We
      do not
      currently have sufficient funds to complete all of our planned development
      activities at Black Fox and our planned exploration activities at Huizopa or
      to
      develop a mine at Black Fox. The development of Black Fox and exploration of
      Huizopa will require significant capital expenditures. Sources of external
      financing may include bank and non-bank borrowings and future debt and equity
      offerings. There can be no assurance that financing will be available on
      acceptable terms, or at all. The failure to obtain financing would have a
      material adverse effect on our growth strategy and our results of operations
      and
      financial condition.




**Substantially
      all of our assets are pledged to secure our indebtedness.**




Substantially
      all of the Montana Tunnels assets and our Black Fox property are pledged to
      secure indebtedness outstanding under the Facility Agreement, dated October
      12,
      2007, by and among Montana Tunnels Mining, Inc., Apollo, Apollo Gold, Inc.,
      a
      wholly owned subsidiary of Apollo, RMB Australia Holdings Limited and RMB
      Resources Inc. Since these assets represent substantially all of our assets,
      we
      will not have access to additional secured lending until this indebtedness
      is
      repaid, which may require us to raise additional funds through unsecured debt
      and equity offerings. Default under our debt obligations would entitle our
      lenders to foreclose on our assets. The
      inability to raise additional working capital or the foreclosure of our assets
      could have a material adverse effect on our financial condition and results
      of
      operations.




**Our
      Huizopa exploration project is subject to political and regulatory
      uncertainty.**




Our
      Huizopa exploration project is located in the northern part of the Sierra Madres
      in the State of Chihuahua, Mexico. There are numerous risks inherent in
      conducting business in Mexico, including political and economic instability,
      exposure to currency fluctuations, greater difficulties in accounts receivable
      collection, difficulties in staffing and managing operations and potentially
      adverse tax consequences. In addition, our ability to explore and develop our
      Huizopa exploration project is subject to maintaining satisfactory relations
      with the Ejido Huizopa, which is a group of local inhabitants who under Mexican
      law are granted rights to conduct agricultural activities and control surface
      access on the property. In 2006, we entered into an agreement with the Ejido
      Huizopa pursuant to which we agreed to make annual payments to the Ejido Huizopa
      in exchange for the right to use the land covering our mining concessions for
      all activities necessary for the exploration, development and production of
      potential ore deposits. There can be no assurances that the Ejido Huizopa will
      continue to honor the agreement. If we are unable to successfully manage our
      operations in Mexico or maintain satisfactory relations with the Ejido Huizopa,
      our development of the Huizopa property could be hindered or terminated and,
      as
      a result, our business and financial condition could be adversely
      affected.




-22-





**Our
      reserve estimates are potentially inaccurate.**




We
      estimate our reserves on our properties as either “proven reserves” or “probable
      reserves.” Our ore reserve figures and costs are primarily estimates and are not
      guarantees that we will recover the indicated quantities of these metals. We
      estimate proven reserve quantities based on sampling and testing of sites
      conducted by us and by independent companies hired by us. Probable reserves
      are
      based on information similar to that used for proven reserves, but the sites
      for
      sampling are less extensive, and the degree of certainty is less. Reserve
      estimation is an interpretive process based upon available geological data
      and
      statistical inferences and is inherently imprecise and may prove to be
      unreliable.




Our
      reserves are reduced as existing reserves are depleted through production.
      Reserves may be reduced due to lower than anticipated volume and grade of
      reserves mined and processed and recovery rates.




Reserve
      estimates are calculated using assumptions regarding metals prices. These prices
      have fluctuated widely in the past. Declines in the market price of metals,
      as
      well as increased production costs, capital costs and reduced recovery rates,
      may render reserves uneconomic to exploit, and lead to a reduction in reserves.
      Any material reduction in our reserves may lead to increased net losses, reduced
      cash flow, asset write-downs and other adverse effects on our results of
      operations and financial condition, including difficulty in obtaining financing
      and a decrease in our stock price. Reserves should not be interpreted as
      assurances of mine life or of the profitability of current or future operations.
      No assurance can be given that the amount of metal estimated will be produced
      or
      the indicated level of recovery of these metals will be realized.




**We
      may not achieve our production estimates.**




We
      prepare estimates of future production for our operations. We develop our
      estimates based on, among other things, mining experience, reserve estimates,
      assumptions regarding ground conditions and physical characteristics of ores
      (such as hardness and presence or absence of certain metallurgical
      characteristics) and estimated rates and costs of mining and processing. In
      the
      past, our actual production from time to time has been lower than our production
      estimates and this may be the case in the future.




Each
      of
      these factors also applies to future development properties not yet in
      production and to the Montana Tunnels mine expansion. In the case of mines
      we
      may develop in the future, we do not have the benefit of actual experience
      in
      our estimates, and there is a greater likelihood that the actual results will
      vary from the estimates. In addition, development and expansion projects are
      subject to unexpected construction and start-up problems and
      delays.




**Our
      future profitability depends in part, on actual economic returns and actual
      costs of developing mines, which may differ significantly from our estimates
      and
      involve unexpected problems, costs and delays.**




We
      are
      engaged in the development of new ore bodies. Our ability to sustain or increase
      our present level of production is dependent in part on the successful
      exploration and development of new ore bodies and/or expansion of existing
      mining operations. Decisions about the development of Black Fox and other future
      projects are subject to the successful completion of feasibility studies,
      issuance of necessary governmental permits and receipt of adequate
      financing.




-23-




Development
      projects have no operating history upon which to base estimates of future cash
      flow. Our estimates of proven and probable ore reserves and cash operating
      costs
      are, to a large extent, based upon detailed geologic and engineering analysis.
      We also conduct feasibility studies that derive estimates of capital and
      operating costs based upon many factors.




It
      is
      possible that actual costs and economic returns may differ materially from
      our
      best estimates. It is not unusual in the mining industry for new mining
      operations to experience unexpected problems during the start-up phase and
      to
      require more capital than anticipated. There can be no assurance that the Black
      Fox property that we are developing will be profitable.




**Mineral
      exploration is speculative and is frequently unsuccessful.**




Mineral
      exploration is highly speculative in nature, capital intensive, involves many
      risks and frequently is nonproductive. There can be no assurance that our
      mineral exploration efforts will be successful. If we discover a site with
      gold
      or other mineralization, it will take a number of years from the initial phases
      of drilling until production is possible, during which time the economic
      feasibility of production may change. Substantial expenditures are required
      to
      establish ore reserves through drilling, to determine metallurgical processes
      to
      extract the metals from the ore and, in the case of new properties, to construct
      mining and processing facilities. As a result of these uncertainties, no
      assurance can be given that our exploration programs will result in the
      expansion or replacement of existing ore reserves that are being depleted by
      current production.




**We
      have a limited operating history on which to evaluate our potential for future
      success.**




We
      were
      formed as a result of a merger in June 2002 and have only a limited operating
      history upon which you can evaluate our business and prospects. During this
      period, we have not generated sufficient revenues to cover our expenses and
      costs.




**The
      market price of our common shares could experience volatility and could decline
      significantly.**




Our
      common shares are listed on the American Stock Exchange and the Toronto Stock
      Exchange. Our share price has declined significantly since 2004, and in 2007
      the
      price of our common shares fluctuated from a low of $0.36 per share to a high
      of
      $0.78 per share. Securities of small-cap companies have experienced substantial
      volatility in the past, often based on factors unrelated to the financial
      performance or prospects of the companies involved. These factors include
      macroeconomic developments in North America and globally and market perceptions
      of the attractiveness of particular industries. Our share price is also likely
      to be significantly affected by short-term changes in gold and zinc prices
      or in
      our financial condition or results of operations as reflected in our quarterly
      earnings reports. As a result of any of these factors, the market price of
      our
      common shares at any given point in time might not accurately reflect our
      long-term value. Securities class action litigation often has been brought
      against companies following periods of volatility in the market price of their
      securities. We could in the future be the target of similar litigation.
      Securities litigation could result in substantial costs and damages and divert
      management’s attention and resources.




**The
      existence of outstanding rights to purchase common shares may impair our share
      price and our ability to raise capital.**




As
      of
      March 18, 2008, approximately 34.3 million of our common shares are issuable
      on
      exercise of warrants, options or other rights to purchase common shares at
      prices ranging from $0.20 to $2.24. In addition, there are approximately 15.3
      million common shares issuable upon the conversion of the $7.7 outstanding
      principal amount of convertible debentures issued February 23, 2007 at the
      option of the holder at a conversion price of $0.50 per share. During the term
      of the warrants, options and other rights, the holders are given an opportunity
      to profit from a rise in the market price of our common shares with a resulting
      dilution in the interest of the other shareholders. Our ability to obtain
      additional equity financing during the period such rights are outstanding may
      be
      adversely affected, and the existence of the rights may have an adverse effect
      on the price of our common shares. The holders of the warrants, options and
      other rights can be expected to exercise them at a time when we would, in all
      likelihood, be able to obtain any needed capital by a new offering of securities
      on terms more favorable than those provided by the outstanding
      rights.




-24-




**If
      we complete additional equity financings, then our existing shareholders may
      experience dilution.**




Any
      additional equity financing that we obtain would involve the sale of our common
      shares and/or sales of securities that are convertible or exercisable into
      our
      common shares, such as share purchase warrants or convertible notes. There
      is no
      assurance that we will be able to complete equity financings that are not
      dilutive to our existing shareholders.




**The
      titles to some of our properties may be uncertain or
      defective.**




Certain
      of our United States mineral rights consist of “unpatented” mining claims
      created and maintained in accordance with the U.S. General Mining Law of 1872.
      Unpatented mining claims are unique U.S. property interests, and are generally
      considered to be subject to greater title risk than other real property
      interests because the validity of unpatented mining claims is often uncertain.
      This uncertainty arises, in part, out of the complex federal and state laws
      and
      regulations that supplement the General Mining Law. Also, unpatented mining
      claims and related rights, including rights to use the surface, are subject
      to
      possible challenges by third parties or contests by the federal government.
      The
      validity of an unpatented mining claim, in terms of both its location and its
      maintenance, is dependent on strict compliance with a complex body of federal
      and state statutory and decisional law. In addition, there are few public
      records that definitively control the issues of validity and ownership of
      unpatented mining claims.




In
      recent
      years, the U.S. Congress has considered a number of proposed amendments to
      the
      General Mining Law. Although no such legislation has been adopted to date,
      there
      can be no assurance that such legislation will not be adopted in the future.
      If
      ever adopted, such legislation could, among other things, impose royalties
      on
      gold production from unpatented mining claims located on federal lands or impose
      fees on production from patented mining claims. If such legislation is ever
      adopted, it could have an adverse impact on earnings from our operations, could
      reduce estimates of our reserves and could curtail our future exploration and
      development activity on federal lands or patented claims.




While
      we
      have no reason to believe that our rights to mine on any of our properties
      are
      in doubt, title to mining properties are subject to potential claims by third
      parties. In September 2006, five of our claims associated with our Black Fox
      Project were listed as reopened for staking on the Ministry of Northern
      Development and Mines (MNDM) website. These claims totaling 185 acres were
      immediately staked by local prospectors. None of our reserves are located on
      these claims. Four of these overstaked claims have since been returned to us.
      We
      are negotiating with the overstaker with respect to the remaining claim;
      however, no guarantee can be made that such negotiations will be successful.
      It
      is our opinion that these claims were erroneously listed as open. We are working
      diligently to resolve this matter.




**We
      may lose rights to properties if we fail to meet payment requirements or
      development or production schedules.**




We
      derive
      the rights to most of our mineral properties from unpatented mining claims,
      leaseholds, joint ventures or purchase option agreements which require the
      payment of maintenance fees, rents, purchase price installments, exploration
      expenditures, or other fees. If we fail to make these payments when they are
      due, our rights to the property may lapse. There can be no assurance that we
      will always make payments by the requisite payment dates. In addition, some
      contracts with respect to our mineral properties require development or
      production schedules. There can be no assurance that we will be able to meet
      any
      or all of the development or production schedules. Our ability to transfer
      or
      sell our rights to some of our mineral properties requires government approvals
      or third party consents, which may not be granted.




-25-




**We
      face substantial governmental regulation.**




*Safety* .
      Our
      U.S. mining operation is subject to inspection and regulation by the Mine Safety
      and Health Administration of the United States Department of Labor (“MSHA”)
      under the provisions of the Mine Safety and Health Act of 1977. The Occupational
      Safety and Health Administration (“OSHA”) also has jurisdiction over safety and
      health standards not covered by MSHA. Our policy is to comply with applicable
      directives and regulations of MSHA and OSHA. We have made and expect to make
      in
      the future, significant expenditures to comply with these laws and
      regulations.




*Current
      Environmental Laws and Regulations.* We must
      comply with environmental standards, laws and regulations that may result in
      increased costs and delays depending on the nature of the regulated activity
      and
      how stringently the regulations are implemented by the regulatory authority.
      The
      costs and delays associated with compliance with such laws and regulations
      could
      stop us from proceeding with the exploration of a project or the operation
      or
      future exploration of a mine. Laws and regulations involving the protection
      and
      remediation of the environment and the governmental policies for implementation
      of such laws and regulations are constantly changing and are generally becoming
      more restrictive. We have made, and expect to make in the future, significant
      expenditures to comply with such laws and regulations.




Some
      of
      our properties are located in historic mining districts with past production
      and
      abandoned mines. The major historical mine workings and processing facilities
      owned (wholly or partially) by us in Montana are being targeted by the Montana
      Department of Environmental Quality (“MDEQ”) for publicly funded cleanup, which
      reduces our exposure to financial liability. We are participating with the
      MDEQ
      under Voluntary Cleanup Plans on those sites. Our cleanup responsibilities
      have
      been completed at the Corbin Flats Facility and at the Gregory Mine site, both
      located in Jefferson County, Montana, under programs involving cooperative
      efforts with the MDEQ. MDEQ is also contemplating remediation of the Washington
      Mine site at public expense under the Surface Mining Control and Reclamation
      Act
      of 1977 (“SMCRA”). In February 2004, we consented to MDEQ’s entry onto the
      portion of the Washington Mine site owned by us to undertake publicly funded
      remediation under SMCRA. In March 2004, we entered into a definitive written
      settlement agreement with MDEQ and the Bureau of Land Management (“BLM”) under
      which MDEQ will conduct publicly funded remediation of the Wickes Smelter site
      under SMCRA and will grant us a site release in exchange for our donation of
      the
      portion of the site owned by us to BLM for use as a waste repository. However,
      there can be no assurance that we will continue to resolve disputed liability
      for historical mine and ore processing facility waste sites on such favorable
      terms in the future. We remain exposed to liability, or assertions of liability,
      that would require expenditure of legal defense costs, under joint and several
      liability statutes for cleanups of historical wastes that have not yet been
      completed.




Environmental
      laws and regulations may also have an indirect impact on us, such as increased
      costs for electricity due to acid rain provisions of the Clean Air Act
      Amendments of 1990. Charges by refiners to which we sell our metallic
      concentrates and products have substantially increased over the past several
      years because of requirements that refiners meet revised environmental quality
      standards. We have no control over the refiners’ operations or their compliance
      with environmental laws and regulations.




-26-




*Potential
      Legislation.* Changes
      to the current laws and regulations governing the operations and activities
      of
      mining companies, including changes to the U.S. General Mining Law of 1872,
      and
      permitting, environmental, title, health and safety, labor and tax laws, are
      actively considered from time to time. We cannot predict which changes may
      be
      considered or adopted and changes in these laws and regulations could have
      a
      material adverse impact on our business. Expenses associated with the compliance
      with new laws or regulations could be material. Further, increased expenses
      could prevent or delay exploration or mine development projects and could
      therefore affect future levels of mineral production.




**We
      are subject to environmental risks.**




*Environmental
      Liability.* We are
      subject to potential risks and liabilities associated with environmental
      compliance and the disposal of waste rock and materials that occur as a result
      of our mineral exploration and production. To the extent that we are subject
      to
      environmental liabilities, the payment of such liabilities or the costs that
      we
      may incur to remedy any non-compliance with environmental laws would reduce
      funds otherwise available to us and could have a material adverse effect on
      our
      financial condition or results of operations. If we are unable to fully remedy
      an environmental problem, we might be required to suspend operations or enter
      into interim compliance measures pending completion of the required remedy.
      The
      potential exposure may be significant and could have a material adverse effect
      on us. We have not purchased insurance for environmental risks (including
      potential liability for pollution or other hazards as a result of the disposal
      of waste products occurring from exploration and production) because it is
      not
      generally available at a reasonable price or at all.




*Environmental
      Permits.* All of
      our exploration, development and production activities are subject to regulation
      under one or more of the various state, federal and provincial environmental
      laws and regulations in Canada, Mexico and the U.S. Many of the regulations
      require us to obtain permits for our activities. We must update and review
      our
      permits from time to time, and are subject to environmental impact analyses
      and
      public review processes prior to approval of the additional activities. It
      is
      possible that future changes in applicable laws, regulations and permits or
      changes in their enforcement or regulatory interpretation could have a
      significant impact on some portion of our business, causing those activities
      to
      be economically reevaluated at that time. Those risks include, but are not
      limited to, the risk that regulatory authorities may increase bonding
      requirements beyond our financial capabilities. The posting of bonds in
      accordance with regulatory determinations is a condition to the right to operate
      under all material operating permits, and therefore increases in bonding
      requirements could prevent our operations from continuing even if we were in
      full compliance with all substantive environmental laws.




**We
      face strong competition from other mining companies for the acquisition of
      new
      properties.**




Mines
      have limited lives and as a result, we may seek to replace and expand our
      reserves through the acquisition of new properties. In addition, there is a
      limited supply of desirable mineral lands available in the United States, Canada
      and Mexico and other areas where we would consider conducting exploration and/or
      production activities. Because we face strong competition for new properties
      from other mining companies, most of which have greater financial resources
      than
      we do, we may be unable to acquire attractive new mining
      properties.




**We
      are dependent on certain key personnel.**




We
      are
      currently dependent upon the ability and experience of R. David Russell, our
      President and Chief Executive Officer; Richard F. Nanna, our Senior Vice
      President-Exploration; and Melvyn Williams, our Chief Financial Officer and
      Senior Vice President-Finance and Corporate Development. We believe that our
      success depends on the continued service of our key officers and there can
      be no
      assurance that we will be able to retain any or all of such officers. We
      currently do not carry key person insurance on any of these individuals, and
      the
      loss of one or more of them could have a material adverse effect on our
      operations.




-27-




**There
      may be certain tax risks associated with investments in our
      company.**




Potential
      investors that are United States taxpayers should consider that we could be
      considered to be a “passive foreign investment company” (a “PFIC”) for U.S.
      federal income tax purposes. Although we believe that we currently are not
      a
      PFIC and do not expect to become a PFIC in the near future, the tests for
      determining PFIC status are dependent upon a number of factors, some of which
      are beyond our ability to predict or control, and we can not assure you that
      we
      will not become a PFIC in the future. If we are or become a PFIC, a U.S.
      taxpayer who disposes of (or is deemed to dispose of) our common shares at
      a
      gain or who receives a so-called “excess distribution” on our common shares
      generally would be subject to a special adverse tax regime. Such gains and
      excess distributions would be allocated ratably to the U.S. taxpayer’s holding
      period. The current year’s allocation would be includible as ordinary income in
      the current year. Prior year’s allocations would be taxed at the highest
      marginal rate applicable to ordinary income for each such year and would be
      subject to interest charges to reflect the value of the U.S. income tax
      deferral. Additional special adverse rules also apply to investors who are
      U.S.
      taxpayers who own our common shares if we are a PFIC and have a non-U.S.
      subsidiary that is also a PFIC. Special estate tax rules could be applicable
      to
      our common shares if we are a PFIC.




**Possible
      hedging activities could expose us to losses.**




In
      connection with our $8.0 million borrowing with RMB Australia Holdings Limited
      in October 2007, we were required to enter into hedges of approximately 65%
      and
      40%, respectively, of our share of lead and zinc production from the Montana
      Tunnels mine during the 12 months following the date of the borrowing. In the
      future, we may enter into precious and/or base metals hedging contracts that
      may
      involve outright forward sales contracts, spot-deferred sales contracts, the
      use
      of options which may involve the sale of call options and the purchase of all
      these hedging instruments. There can be no assurance that we will be able to
      successfully hedge against price, currency and interest rate fluctuations.
      Further, there can be no assurance that the use of hedging techniques will
      always be to our benefit. Some hedging instruments may prevent us from realizing
      the benefit from subsequent increases in market prices with respect to covered
      production. This limitation would limit our revenues and profits. Hedging
      contracts are also subject to the risk that the other party may be unable or
      unwilling to perform its obligations under these contracts. Any significant
      nonperformance could have a material adverse effect on our financial condition
      and results of operations.




**Our
      operations may be adversely affected by risks and hazards associated with the
      mining industry.**




Our
      business is subject to a number of risks and hazards including adverse
      environmental effects, technical difficulties due to unusual or unexpected
      geologic formations, and pit wall failures.




Such
      risks could result in personal injury, environmental damage, damage to and
      destruction of production facilities, delays in mining and liability. For some
      of these risks, we maintain insurance to protect against these losses at levels
      consistent with our historical experience and industry practice. However, we
      may
      not be able to maintain current levels of insurance, particularly if there
      is a
      significant increase in the cost of premiums. Insurance against environmental
      risks is generally too expensive or not available for us and other companies
      in
      our industry, and, therefore, we do not maintain environmental insurance. To
      the
      extent we are subject to environmental liabilities, we would have to pay for
      these liabilities. Moreover, in the event that we are unable to fully pay for
      the cost of remediating an environmental problem, we might be required to
      suspend or significantly curtail operations or enter into other interim
      compliance measures.




-28-




**You
      could have difficulty or be unable to enforce certain civil liabilities on
      us,
      certain of our directors and our experts.**




We
      are a
      Yukon Territory, Canada, corporation. While our principal executive officer
      is
      located in the United States, many of our assets are located outside of the
      United States. Additionally, a number of our directors are residents of Canada.
      It might not be possible for investors in the United States to collect judgments
      obtained in United States courts predicated on the civil liability provisions
      of
      U.S. securities legislation. It could also be difficult for you to effect
      service of process in connection with any action brought in the United States
      upon such directors. Execution by United States courts of any judgment obtained
      against us, or any of the directors, executive officers or experts identified
      in
      this prospectus or documents incorporated by reference herein, in United States
      courts would be limited to the assets, or the assets of such persons or
      corporations, as the case might be, in the United States. The enforceability
      in
      Canada of United States judgments or liabilities in original actions in Canadian
      courts predicated solely upon the civil liability provisions of the federal
      securities laws of the United States is doubtful.




-29-


**ITEM
      2.** ***PROPERTIES***




**Maps
      of Operations and Properties**




The
      maps
      below show the locations of the Montana Tunnels mine, the Black Fox Project
      and
      the Huizopa project in North America. These properties are described in further
      detail below.





Figure
      1
      - Property locations in North America







-30-


**Montana
      Tunnels Mine**




The
      mine
      was originally owned and operated by Pegasus Gold, a mining company incorporated
      in Canada. The mine commenced operations in 1987 and in 1998, Pegasus filed
      for
      bankruptcy. In 2002, Apollo purchased Montana Tunnels Mining, Inc. (“MTMI”),
      from the receiver in the bankruptcy proceeding.




Figure
      2
      - Montana Tunnels mine location in Montana, U.S.









-31-




On
      July
      28, 2006, Apollo entered into a joint venture (“JV Agreement”) with Elkhorn
      Tunnels LLC (“Elkhorn”), in respect of the Mine. The JV Agreement called for
      Elkhorn to contribute $13 million in return for a 50% interest in the Mine.
      Apollo is the operator of the mine.




***Location***




The
      Mine
      is an open pit, poly-metallic mine and mill located about five miles west of
      Jefferson City, Montana. The Mine is located in the historic “Wickes-Corbin”
mining district in Section 8 of Township 7 North, Range 4 West, Jefferson
      County. The Mine’s elevation ranges from 5,200 to 6,300 feet with moderately
      mountainous topography. The Mine is easily accessible by way of interstate
      highway and paved roads. The mine and mill receive power supply from
      Northwestern Energy from overland power lines.




***Production***




At
      Montana Tunnels the mining of the open pit was suspended on October 21, 2005
      for
      safety reasons due to increased wall activity on the eastern side of the open
      pit. Following suspension of mining, the mill continued to process ore from
      stockpiled low grade material and produce gold doré and lead-gold
      and
      zinc-gold concentrates until May 12, 2006 when all operations ceased and the
      property was placed on care and maintenance.




Following
      the signing of the JV Agreement the Mine commenced an open pit wall remediation
      program on August 10, 2006, which called for removal of approximately 7 million
      tons of waste over a six month period and encompassed the laying back of the
      east and south east sectors of the pit wall and rebuilding the access ramp
      to
      the pit bottom. Upon reaching the open pit bottom in January 2007, waste
      material removal commenced to expose the ore body. Mill personnel were hired
      in
      late 2006 and early 2007 to begin maintenance work in preparation for the mill
      start up which occurred on March 1, 2007.




For
      the
      ten months of operation ending December 31, 2007, the mill processed 3,971,000
      tons of ore producing gold doré and lead-gold and zinc-gold concentrates
      containing 37,300 ounces of gold, 659,000 ounces of silver, 12,162,000 pounds
      of
      lead and 28,576,000 million pounds of zinc. Payable metal is shown in the table
      below.




**Montana
      Tunnels Mine Production History**




**Statistics
      for 2007 below are for 100% of the Montana Tunnels mine, Apollo’s share of
      production is 50%**




**Year
                Ended December 31,****Year**
            
            **Milled**
              **Tons**
              **000’s**
            
            **Grade**
              **Au
                oz/T**
            
            **Grade**
              **Ag
                oz/T**
            
            **Grade**
              **Pb**
              **%**
            
            **Grade**
              **Zn**
              **%**2007
            
            
            3,971
            
            
            0.0123
            
            
            0.22
            
            
            0.20
            
            
            0.472006
            
            
            1,427
            
            
            0.0078
            
            
            0.17
            
            
            0.10
            
            
            0.202005
            
            
            4,955
            
            
            0.0129
            
            
            0.19
            
            
            0.15
            
            
            0.34





**Year
                Ended December 31,****Payable
                Metal**
            
            **2007**
            
            **2006**
            
            **2005**Gold
                (oz)
            
            
            33,263
            
            
            4,959
            
            
            44,099Silver
                (oz)
            
            
            501,963
            
            
            116,004
            
            
            524,722Lead
                (lb)
            
            
            11,181,474
            
            
            1,196,317
            
            
            10,428,061Zinc
                (lb)
            
            
            23,749,087
            
            
            3,040,058
            
            
            22,380,136





-32-




**Year
                Ended December 31,****2007(1)**
            
            **2006(2)**
            
            **2005**Total
                Cost/Ton Ore Processed
            
            $
            18.62
            
            $
            7.08
            
            $
            9.46Cash
                Operating Cost/Oz Gold
            
            $
            (124
            )
            $
            643
            
            $
            529Total
                Cash Cost/Oz Gold
            
            $
            (60
            )
            $
            718
            
            $
            563Total
                Production Cost/Oz Gold
            
            $
            10
            
            $
            794
            
            $
            618





**(1)**
            **Only
                10 months of ore processing (March to
                December)**


**(2)**
            **Only
                5 months of ore processing (January to
                May)**





The
      mine
      has produced the following aggregate amounts of the listed metals from its
      inception in 1987 through December 31, 2007:


Payable
                  ProductionGold
              
              
              1,584,000
                  ozsSilver
              
              
              29,613,000
                  ozsLead
              
              
              377,000,000
                  lbs.Zinc
              
              
              1,020,000,000
                  lbs.


***Description
      of Land, Geology, Process and Equipment***




Property
      Ownership Status.




More
      than
      99% of the Montana Tunnels mineable deposit is overlain by private property
      wholly owned by MTMI. One 0.3 acre BLM parcel is controlled by an unpatented
      mining claim. More than 90% of the property located within the permit boundary
      is private property owned by
      MTMI.
      In October 2007 Montana Tunnels purchased an additional private parcel of land
      to secure a 1,000 foot section of the mine access road. Properties controlled
      by
      MTMI in the vicinity of the mine and the permit boundary are summarized in
      the
      table below:





**Property
      Holdings**




**Land
                Type**
            
            **Approx.
                Acres**
            
            **Notes**Fee
                Lands
            
            
            2,633Patented
                Mining Claims
            
            
            2,415
            
            
            139
                claims total; 15 with partial, usually majority ownership.Total
                Private Property Owned
            
            
            5,050Leased
                Patented Claims
            
            
            45
            
            
            Lease
                Agreement on three patented claims west of the pit. 4.5% net smelter
                royaltyUnpatented
                Claims
            
            
            4,620
            
            
            213
                claims; majority are peripheral to land package and outside permit
                boundary; few cover minor BLM fractions between private parcels;
                acreage
                assumes 20-acre claims.Other
                Property Mineral Rights
            
            
            7,200
            
            
            Private
                properties formerly owned by MTMI in which all mineral estate
                retained.




Royalty.





None
      of
      the royalties listed below apply to the currently permitted L Pit
      reserve deposit.
      The design layback of the M Pit encompasses a very small amount of mineralized
      material beneath three leased patented claims in the Clancy Creek area. Ores
      mined from these claims will be minimal and subject to a 4.5% net smelter
      royalty (“NSR”).




-33-





**Royalty
      Agreements**





**Agreement**
            
            **Royalty**
            
            **Description**Louis
                Hill
            
            
            4.5%
                NSR
            
            
            Lease
                Agreement on three patented claims west of the pit.Clara
                Kyler Estate
            
            
            1.5%
                NSR
            
            
            Fee
                land and patented claims south and southeast of tailings
                impoundment.Bar
                Ed Ranch/Estate
            
            
            1.5%
                NSR
            
            
            7,200
                acres of fee lands and patented claims to the north, northeast, and
                south
                of the permit boundary in which MTMI controls the mineral rights
                only.Bar
                Ed Partnership
            
            
            1.5%
                NSR
            
            
            Patented
                claim southeast of permit boundary.Gannon/Lemieux
            
            
            1.5%
                NSR
            
            
            12
                patented claims 0.1 miles south of the Montana Tunnels
                pit.Alfred
                Nugent
            
            
            2%
                NSR
            
            
            7
                patented claims east of the mine site.Dudley
                Billett, Jr.
            
            
            4%
                NSR
            
            
            One
                patented claim east of the tailings impoundment.Molycorp/Anaconda
            
            
            5%
                NSR
            
            
            fractional
                interest in two patented claims one mile east of permit
                boundary.Fife,
                et.al.
            
            
            1.5%
                NSR
            
            
            4
                patented claims 0.75 miles south of the Montana Tunnels
                pit.





Geology.




The
      Montana Tunnels deposit is hosted in the central part of the diatreme, an
      upward-sloping passage forced through sedimentary rock by volcanic activity.
      The
      diatreme is a heterolithic breccia, characterized by a sand-size fragmented
      matrix of quartz latitic composition surrounding subangular to well-rounded
      fragments of Cretaceous Elkhorn Mountains Volcanics, Tertiary Lowland Creek
      Volcanics, and clasts derived from the Cretaceous Butte Quartz Monzonite
      pluton.




There
      are
      two main zones of mineralization at Montana Tunnels: (i) a central, pipe-like
      core of contiguous mineralization, and (ii) discontinuous zones of
      mineralization peripheral to the core deposit, termed fringe mineralization.
      The
      core of the deposit in plan view is oblong in shape and ranges from about 200
      feet to 1000 feet in width, and from 1400 to 2000 feet in length, with a
      vertical extent of at least 2000 feet. The core zone strikes approximately
      N30 E
      and dips steeply (60 degrees to 80 degrees) to the northwest. Metallurgical
      projections are based on historical feed grade versus tails grade trends; mill
      throughput tonnage, ore properties relative to pit location and bench elevation;
      and ore blending requirements.




Process
      and Equipment.




Open
      pit
      mining at Montana Tunnels is conducted 24 hours per day seven days per week.
      Mining is performed by two shovels, twelve 150 ton and two 85 ton haul trucks
      in
      addition to ancillary equipment. When operational, mine production currently
      averages approximately 30,000 tons per day of ore and waste.




When
      in
      full production a primary and secondary crusher is used, in series, to generate
      a coarse ore stockpile ahead of the concentrator. The crusher has an approximate
      capacity of 16,500 tons per day. The grinding circuit consists of a SAG mill,
      ball mill and tertiary crusher (SABC circuit) followed by conventional
      differential flotation. A gravity circuit, in closed loop with the ball mill,
      recovers 10-15% of gold produced by the concentrator. The remainder of the
      mill’s production is in the form of concentrates: a zinc-gold concentrate and a
      lead-gold-silver concentrate. The concentrates are shipped, via rail, to a
      smelter. The original plant was constructed during 1986 and 1987, and is
      currently in good working order.




-34-




At
      the
      same time Apollo entered into the JV Agreement, Apollo also entered into two
      other agreements with Elkhorn Goldfields Inc. (“EGI”), an affiliate of Elkhorn.
      The first agreement is an option agreement pursuant to which EGI was granted
      an
      option to purchase Apollo’s Diamond Hill mine for $0.8 million. The option has
      an exercise term of two years. The underground Diamond Hill gold mine is
      situated 28 miles southeast of Helena, Montana and has been on care and
      maintenance since 2000.





The
      second agreement is a custom milling agreement pursuant to which EGI will have
      the right to have MTMI process the ore from EGI’s Elkhorn mine, located 20 miles
      to the south of the Montana Tunnels mine, through the 1,000 ton per day Diamond
      Hill mill which is situated within the Montana Tunnels mill complex. The custom
      milling agreement also gives EGI a two-year option to purchase the Diamond
      Hill
      mill for $1.0 million.





***Mineral
      Reserves***




The
      table
      below shows the mineral reserves at Montana Tunnels.





**Montana
      Tunnels Mine Reserve Statement at December 31, 2007** **(1)**


**(Apollo’s
      50% interest)**




**Pit
                (Imperial Summary)**
            
            **Classification**
            
            **Tons**
              **000’s**
            
            **Grade
                oz Au/T**
            
            **Ag
                oz**
              **Ag/T**
            
            **Pb
                %**
            
            **Zn
                %**
            
            **Ounces
                Au**
              **000’s**L
                Pit
            
            
            Proven
            
            
            3,266.0
            
            
            0.0149
            
            
            0.172
            
            
            0.216
            
            
            0.611
            
            
            48.5Mill
                Stockpile
            
            
            Proven
            
            
            333.4
            
            
            0.0085
            
            
            0.304
            
            
            0.182
            
            
            0.413
            
            
            2.8Subtotal
            
            
            Proven
            
            
            3,599.4
            
            
            0.0143
            
            
            0.184
            
            
            0.213
            
            
            0.593
            
            
            51.3L
                Pit
            
            
            Probable
            
            
            12.8
            
            
            0.0128
            
            
            0.166
            
            
            0.220
            
            
            0.499
            
            
            0.2M
                Pit
            
            
            Probable
            
            
            17,365.6
            
            
            0.0134
            
            
            0.212
            
            
            0.165
            
            
            0.485
            
            
            232.2Subtotal
            
            
            Probable
            
            
            17,378.4
            
            
            0.0134
            
            
            0.212
            
            
            0.165
            
            
            0.485
            
            
            232.4Total
            
            
            Proven
                + Probable
            
            
            20,977.8
            
            
            0.0135
            
            
            0.207
            
            
            0.173
            
            
            0.504
            
            
            283.7





**(1)**
            Recovery
                rates are expected to be 80% for gold, 71% for silver, 85% for lead,
                and
                84% for zinc.




The
      three
      years average metal prices for 2005 - 2007 were used for the calculation of
      the
      year-end 2007 reserves, which are as follows:


Gold
                  - $581/oz
              Silver
                  - $10.75/oz
              Lead
                  - $0.73/lb
              Zinc
                  - $1.20/lb


***Environmental***




The
      permitted plan of operations allows mining of ore reserves from the L Pit mine
      design. Unstable pit walls in the ramp sector on the east side of the mine
      closed down the open pit in October 2005. A pit wall layback and pit ramp
      reconstruction in the east sector of the open pit was subsequently developed
      using extensive geotechnical analysis to ensure stability and safety for ongoing
      mining operations. A permit revision for the pit wall layback and associated
      changes was approved by the Department of Environmental Quality in December
      2005. This work was initiated in August 2006 following completion of the JV
      Agreement with Elkhorn.




Following
      the closure of the open pit in October 2005, milling of low grade stockpiles
      continued until May 2006 at which time the mill was shut down and the property
      placed on care and maintenance. As a result of the unplanned milling of the
      low
      grade stockpiles, a revision to the operating permit was obtained in the fourth
      quarter of 2006 allowing the Mine to raise the tailings embankment thus
      increasing the tailings capacity to accommodate the mill tailings from the
      L Pit
      ore reserves. The raising of the tailings embankment was completed during
      2007.




-35-




A
      major
      mine plan amendment continues to progress through an Environmental Impact
      Statement permitting process. If approved by the Montana Department of
      Environmental Quality and Bureau of Land Management, the M Pit mine expansion
      amendment would provide approximately 35 million tons of additional ore for
      processing and add approximately seven years to the life of the
      mine.




The
      current bonding requirements for the Montana Tunnels L Pit mine are met by
      the
      following bond instruments:




**Year
                Ended December 31,****Type
                of Bonding**
            
            **2007(1)**
            
            **2006(1)**Partially
                secured surety bond issued by CNA pursuant to the Term Bonding Agreement
                described immediately below
            
            $
            14,988,000
            
            $
            14,988,000Cash
                bond posted directly with the State of Montana
            
            
            129,000
            
            
            129,000Real
                estate bond posted directly with the State of Montana
            
            
            3,576,000
            
            
            3,009,000Total
                Obligated Bonding Requirement Met
            
            $
            18,693,000
            
            $
            18,126,000







**(1)**
            Apollo’s
                share of the amounts shown is 50%.




National
      Fire Insurance Company of Hartford, a unit of Continental Casualty Company
      (“CNA”), provides $14,988,000 of the total reclamation bonding for the Montana
      Tunnels mine plan of operations at a deferred bond premium cost of $14 per
      $1,000 of bonding under a Term Bonding Agreement dated August 1,
      2002.




Bonding
      requirements are subject to adjustment by the State of Montana for various
      reasons from time to time.




***Drilling***




As
      of
      December 31, 2007, the Montana Tunnels mine database contains 896 reverse
      circulation, rotary, core and blasthole drill holes, totaling 470,299 feet
      that
      were drilled from the mid-1970s to the present by numerous mining and
      exploration companies.




From
      2002
      through 2004 thirteen reverse-circulation holes for 11,000 feet were drilled
      to
      increase confidence levels in the M Pit reserve. The drill holes were placed
      as
      mine development phases provided locations to collar specific holes. Results
      from both the 2002 and 2004 drilling programs were favorable, providing a higher
      degree of definition to the current ore reserve and established the geometric
      distribution of the polymetallic grade mineralization in the M Pit design.




The
      Montana Tunnels mine drill hole spacing is generally within the gold variogram
      range of 30 feet to 140 feet in the core.




**Black
      Fox Project**




The
      Black
      Fox property was formerly known as the Glimmer mine. In April 1996, Exall
      Resources Ltd. (“Exall”) purchased 60% of the property from Hemlo Gold Inc., and
      Glimmer Resource Inc. (“Glimmer”) held the remaining 40%.




-36-




In
      September 2002, we purchased all of the real estate and related assets of the
      Glimmer Mine from Exall and Glimmer. The mine, which ceased operations in May
      2001, was renamed Black Fox. Apollo paid Exall and Glimmer an aggregate purchase
      price consisting of Cdn$3 million in cash and an aggregate of 2,080,000 of
      our
      common shares. Pursuant to the terms of the acquisition, an additional Cdn$3
      million was payable to Exall and Glimmer. This additional sum of Cdn$3 million
      was paid on January 6, 2006.




From
      1997
      until 2001, the mine produced approximately 210,000 ounces of gold.




Figure
      3
      - Black Fox Project location along Destor-Porcupine Fault Zone in Province
      of
      Ontario, Canada









***Location***




The
      Black
      Fox Project is located approximately five miles east of the township of Matheson
      and 40 miles east of Timmins, Ontario, Canada. The property encompasses over
      2,702 acres within the Hislop and Beatty Townships. Access and surface rights
      are owned solely by Apollo. The property is easily accessible by interstate
      highway and power is supplied by Hydro One.




Black
      Fox
      sits astride the Destor-Porcupine Fault Zone (DPFZ), which is a deep break
      in
      the Precambrian rocks of the Abitibi Greenstone Belt. This fault system hosts
      many of the deposits in the Timmins area. The system regionally strikes
      east-west and dips variably to the south. Black Fox lies on the southern limb
      of
      a large scale fold on a flexure in the DPFZ Fault where the strike changes
      from
      east-west to southeast. Folded and altered ultra mafic and mafic are the host
      rocks for mineralization. Gold occurs as free gold in quartz veining and
      stockworks in altered ultra mafics and in gold associated with pyrite in altered
      tholeiitic basalts.




Property,
      plant and equipment at the mine consists of an administration office, change
      house facilities, core sheds and surface infrastructure for the mine (pumps,
      heating, etc.), all of which are in good working condition.




The
      Black
      Fox Project consists of Apollo owned lands of 2,236 acres, 319 acres of leased
      properties and 147 acres of mining claims.




-37-




None
      of
      the currently defined resources or reserves are subject to production royalties.
      However, Apollo owns properties totaling 1,414 acres that are subject to net
      smelter return royalties, ranging from 2.0% to 3.25%, if there is production
      in
      the future from any reserves found on that property.




***Exploration
      and Development 2003-2006***




In
      2003,
      we commenced a drilling program which was concluded at the beginning of 2006
      at
      which time we had completed 453 surface core holes and 386 underground core
      holes for a total of 839 holes giving a total of 206,000 meters.




***Mineral
      Reserves***




The
      probable mineral reserves estimates disclosed below for Black Fox were in a
      NI 43-101 report completed in August 2007 and were calculated based on a
      gold price of $525 per ounce. The average total cash cost per ounce of gold
      production was calculated at $236 per ounce.





**Black
      Fox Probable Reserve Statement as of December 31, 2007**




**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**
            
            **Contained**
              **Au
                Ounces**Open
                Pit
            
            
            1.0
            
            
            3,362
            
            
            5.8
            
            
            625,000Underground
            
            
            3.0
            
            
            1,108
            
            
            10.6
            
            
            377,000**Total
                Reserves**
            
            
            
            
            
            
            
            
            
            
            
            **1,002,000**





**(1)**
            Underground
                reserves include dilution of 66,000 tonnes of indicated material
                with an
                average grade of 1.26 g/t Au.





The
      reserve estimates were based on information from 1,826 drill holes totaling
      324,625 meters. All assays over 170 grams of gold per tonne (5.5 oz of gold
      per
      ton) were capped at this level, representing 0.25% of the assays.





***Combined
      Open Pit and Underground Economics***





The
      pre-feasibility study economics, using reserves only, assuming a gold price
      of
      US$525 per ounce and assuming
      a milling capacity of 1,500 tonnes per day showed a Net Present Value (“NPV”) of
      US$104 million at a 4% **** discount
      rate and an Internal Rate of Return (“IRR”) of 33%. The total cash cost per
      ounce of gold produced was calculated at $236 per ounce. Various gold prices
      with associated NPV’s at a 4% discount rate and IRR’s are as
      follows:





**NPV
      Values & IRR’s (Pre-Tax)**





**Gold
                Price**
              **US
                $ / oz**
            
            **NPV
                @ 4%**
              **US
                $ millions**
            
            **IRR**
              **%**$
                525
            
            
            104
            
            
            33$
                600
            
            
            159
            
            
            55$
                650
            
            
            196
            
            
            76





**Criteria
      used in the Economic Analysis:**


Production
                  rate
              
              1,500
                  tonnes per dayPlant
                  gold recovery
              
              96
                  %


**Results:**


Total
                  Cash Cost (1)
              
              $236
                  per ounce gold


-38-


**(1)**
            See
                note on non-GAAP financial measures in Item 6 “Selected Financial Data”
                below.




Open
                  pit mining cost ($1.60/tonne of material)
              
              $28.33
                  per tonne ore milledUnderground
                  mining cost
              
              $31.75
                  per tonne ore milledMining
                  general and administrative
              
              $
                  3.41 per tonne ore milledToll
                  mill (only for associated tonnes)
              
              $32.57
                  per tonne ore milledOwner
                  milling
              
              $13.26
                  per tonne ore milledGeneral
                  and administrative cost
              
              $
                  3.90 per tonne ore milledTotal
                  Operating Cost
              
              $56.11
                  per tonne ore milled


Note:
      Based on Life of Mine (“LOM”) costs for open pit and underground mining as well
      as toll and owner operated milling.





**Capital
      Costs (LOM and sustaining capital)**


Processing
                  plant and infrastructure
              
              $
                  71.0 millionPre-stripping
                  open pit
              
              $
                  8.0 millionOpen
                  pit equipment
              
              $
                  8.0 millionUnderground
                  equipment
              
              $
                  15.0 millionUnderground
                  mine development
              
              $
                  19.0 millionTotal
                  Capital (LOM and sustaining capital)
              
              $121.0
                  million





The
      pre-feasibility study assumed that mining would commence in 2009 with ore being
      toll treated initially and then treated by an on-site mill from 2012 onwards.





***Recommendations***





Contained
      within the August 2007 NI 43-101 there were two main recommendations made by
      SRK
      Consulting (US), Inc.(“SRK”):




1.
            Continue
                with the advanced feasibility level studies for the project including
                commissioning the bankable feasibility project as soon as
                possible;


2.
            Continue
                to core drill specific areas of the ore body to further upgrade and
                extend
                the geological modeling for the
                project;





The
      report further stated, “At the time of this report, SRK has provided Apollo a
      listing of approximately 62 drill holes of additional required drilling. The
      main focus of this campaign would be to target infill areas of known
      mineralization in order to convert inferred resource into indicated category
      and
      subsequently incorporate into a reserve.”





Following
      a review of the NI 43-101 Apollo implemented the recommended drilling program
      at
      Black Fox starting August 2007.





***Exploration
      and Development 2007***





During
      2007 a further 66 holes were added to the surface and underground drilling
      programs. As of December 31, 2007, Apollo had completed a total of 504 surface
      diamond drill holes, totaling 149,548 meters as well as 396 underground holes
      totaling 78,644 meters giving a to-date total for both of 228,192
      meters.




-39-




Apollo’s
      drilling supplemented the data from the 286 surface and 707 underground drill
      holes drilled by the previous owners. A table of total drill holes is shown
      below.




**Black
      Fox Project Drill Hole Database**




**Company**
            
            **Period**
            
            **Location**
            
            **Number**
            
            **Meters**Noranda
            
            
            1989-1994
            
            
            Surface
            
            
            143
            
            
            28,015Exall
            
            
            1995-1999
            
            
            Surface
            
            
            143
            
            
            21,520Exall
            
            
            1996-2001
            
            
            Underground
            
            
            707
            
            
            61,115Apollo
            
            
            2002-2006
            
            
            Surface
            
            
            454
            
            
            136,390Apollo
            
            
            2004-2006
            
            
            Underground
            
            
            371
            
            
            75,704Apollo
            
            
            2007
            
            
            Surface
            
            
            50
            
            
            13,158Apollo
            
            
            2007
            
            
            Underground
            
            
            25
            
            
            2,940Totals
            
            
            
            
            
            
            
            
            1,893
            
            
            338,842





Following
      the recommendation of the August 2007 NI 43-101 we commenced an infill drilling
      program in August 2007 consisting of 66 core drill holes, 41 surface holes
      and
      25 underground core holes. This drill program was completed in December 2007
      and
      the results and assays of which were included within a new reserve statement
      announced by us on February 29, 2008 showing an increase in the gold reserve
      of
      328,000 ounces to a total gold reserve of 1,330,000 ounces. We expect to file a
      NI 43-101 report within 45 days of February 29, 2008. We expect the NI 43-101
      to
      be a full feasibility study done to a bankable standard (“bankable feasibility
      study”). A bankable feasibility study is a comprehensive analysis of a project’s
      economics (+/- 15% precision) used by the banking industry for financing
      purposes.





Permitting
      of the project began in 2005 and progressed well during 2007 with the concept
      of
      a combined open pit and underground operation with a 1,500 tonnes per day
      on-site mill. The
      permitting assumes that mining would commence in late 2008 or early 2009 with
      ore being toll treated initially and then treated by the on-site mill from
      2012
      onwards.





**Black
      Fox Reserves at February 29, 2008**





On
      February 29, 2008, we announced a new reserve statement that incorporates the
      results of the infill drilling program. We expect to file a NI 43-101 report
      within 45 days of February 29, 2008. We expect the NI 43-101 to be a full
      feasibility study done to a bankable standard. The probable mineral reserve
      was
      calculated based on a gold price of US$650/oz.





**Black
      Fox Probable Reserve Statement as of February 29, 2008**




**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**
            
            **Contained**
              **Au
                Ounces**Open
                Pit
            
            
            1.0
            
            
            4,350
            
            
            5.2
            
            
            730,000Underground**(1)**
            
            
            3.0
            
            
            2,110
            
            
            8.8
            
            
            600,000**Total
                Reserves**
            
            
            
            
            
            
            
            
            
            
            
            **1,330,000**





**(1)**
            Underground
                reserves assume 95% mining recovery 17% planned dilution and 5% unplanned
                dilution both at 0 grams per tonne
                grade.




***Bonding***
  We
        met
        the bonding requirement of Cdn$644,650, established by the Province of Ontario,
        for the Black Fox Project through a letter of credit issued by TD Canada
        Trust
        secured by a pledged deposit account of Cdn$644,650.


-40-


The
      obligations to reimburse TD Canada Trust for any drawing under the letter of
      credit are secured by Apollo’s maintenance of an amount equal to the amount
      available for drawing in a deposit account pledged to TD Canada Trust. The
      annual letter of credit fee is 1% of the amount available for drawing. Interest
      is earned on the deposit account at a rate established by TD Canada Trust from
      time to time.




**Exploration
      Stage Properties**




***Huizopa***




We
      own
      Mexican subsidiaries which own 100% of the concessions at the Huizopa
      exploration project. Pursuant to an agreement with the previous owner (the
      “Previous Owner”) of one of those Mexican subsidiaries, we have a joint venture
      with the Previous Owner with Apollo holding an 80% interest and the Previous
      Owner holding a 20% free carry interest. If our 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
      Huizopa project is located in the northern part of the Sierra Madres in the
      state of Chihuahua, Mexico, near the border with the State of Sonora, and
      encompasses a block of mining concession claims of approximately 170 sq. km.
      During 2007, we acquired new claims to the east of our holdings that expanded
      our land position from 128 sq. km. to 170 sq. km.




Huizopa
      is located about 17 km southwest of the Dolores project and approximately 33
      km
      to the northeast of the Mulatos project. Mulatos and Dolores are both
      multi-million ounce gold-silver deposits owned by other companies that are
      currently in development. Sporadic shallow underground mining limited to a
      few
      high-grade zones was done in the past but no mining has taken place at Huizopa
      since 1936. The property is very remote and will be accessed initially by
      helicopter. To maintain the exploration and exploitation rights for the “Rosa”
and “Donna” concessions, we were required to pay $0.1 million in April 2007 and
      $1.5 million (plus applicable taxes in Mexico) in October 2007. These
      concessions represent approximately 17% of the Huizopa property. These payments
      were made ahead of schedule on February 28, 2007 when the Company issued
      1,000,000 shares and paid $2.55 million in settlement of these contractual
      land
      payments and certain other claims on its Huizopa properties.




The
      geology is characterized by a series of parallel, low sulfidation gold-silver,
      quartz veins hosted by Tertiary-age volcanic rocks. Silver to gold ratios in
      the
      veins and from the material on historic mine dumps indicate the Huizopa area
      hosts an extensive gold-bearing hydrothermal system. Two major parallel quartz
      vein systems with north trending structures contain many single vein outcrops
      7
      to 10 meters thick suggesting a series of stacked veins. Strike lengths are
      over
      2.0 km on the property with untested down dip potential. The stratigraphy of
      the
      Huizopa area has two sections of relatively mafic lava flows with intercalated
      volcanic clastics. The dominant strike azimuths of faults are 340o and 160o with
      dips ranging from vertical to 33o. Most of these structures, including the major
      faults with associated thick gouge or breccia zones, dip eastward. These east
      dipping faults are the faults associated with quartz veins, brecciation, and
      mineralization.




Initial
      favorable geochemical sampling and field studies by the Previous Owner in
      December 2003 were confirmed by us when we reviewed the data and conducted
      a
      field evaluation in 2004.




We
      established an extensive remote field camp at the project and refurbished an
      existing airstrip. The camp is supplied by fixed wing aircraft and helicopter.




-41-




Mapping
      of the mining concession began in June 2004 and have been ongoing through 2007.
      The results were compiled and transferred to new topography maps and air photos
      as well as the Mexican government’s Chabacan topographical sheet which has been
      enlarged from 1:50,000 scale to 1:10,000. Geologic mapping suggests that the
      faults that host gold-silver mineralization may be more numerous and more
      continuous than earlier field work indicated. Petrographical examination
      revealed the presence of native gold, silver, and electrum in many samples
      and
      widespread vein features indicative of repeated boiling and explosive
      brecciation. Overall vein textures are consistent with high-level exposures
      of
      epithermal quartz-adularia and/or fault breccia veins.




In
      2006,
      a geophysical program was initiated on the property and the process to select
      initial drilling targets commenced in 2007. High quality drill targets were
      selected and a contract signed with a drilling contractor to commence helicopter
      supported core drilling in 2008. This initial drilling program commenced in
      February 2008 and is for 30 to 40 shallow core drill holes.





In
      the
      first quarter of 2006, Apollo entered into an agreement with the Ejido Huizopa
      (the “Ejido”), which is a group of local inhabitants who, under Mexican law, are
      granted rights to conduct agricultural activities and control surface access
      on
      the property. Pursuant to the agreement, and in consideration for certain
      payments to the Ejido, the Company has a right to use Ejido land covering the
      Company’s mining concessions in Huizopa for all activities necessary for the
      exploration, development, and production of potential ore deposits in our
      Huizopa project area. The Company may, in the future, apply for a change of
      use
      of land without any additional obligations to the Ejido. In addition, the
      Company may traverse adjoining and nearby Ejido land outside the boundaries
      of
      the Huizopa mining concessions for the purpose of constructing, operating,
      and
      maintaining improvements or facilities necessary for the Huizopa
      project.




In
      2007
      engineering, permitting and right of way issues were addressed in contemplation
      of the construction of a dirt road in 2008 to allow easier access to the site.
      Following construction of the road we anticipate that a second drill program,
      which will not require helicopter assistance, could commence consisting of
      both
      core drilling and reverse circulation drilling.




**Diamond
      Hill**




The
      Diamond Hill mine, which has been on care and maintenance since 2000, is owned
      by Montana Tunnels Mining, Inc. The mine is an underground gold mine and is
      located approximately 28 miles southeast of Helena, Montana, in Broadwater
      County and on the east flank of the Elkhorn Mountains, within the Hassel Mining
      District. The Diamond Hill mine was in production from 1996 to 2000, during
      which time, 775,000 tons of ore were mined at an average grade of 0.233 ounces
      of gold per ton.





On
      July
      28, 2006, Apollo entered into an agreement with Elkhorn Goldfields Inc. (“EGI”),
      an affiliate of Elkhorn. The agreement is an option agreement pursuant to which
      EGI was granted an option to purchase the Diamond Hill mine for $0.8 million.
      The option has an exercise term of two years.





The
      Diamond Hill mine covers over 2,590 acres of patented and unpatented claims.
      We
      have 100% ownership of the main patented claims that contain the current
      deposits, subject to a 0.5 to 1% net smelter return and a 10% net profits
      royalty. We also have 50% ownership of four additional patented claims, which
      are peripheral to the main land package. As of December 31, 2007, we hold 103
      unpatented claims and lease 19 unpatented claims. The current mine permit covers
      270 acres with most of the disturbance within a 27 acre area.




-42-




The
      Diamond Hill ore bodies and mine workings are in solid unfractured rock and
      accordingly are amenable to low cost sublevel open stoping methods. Ore was
      transported to the Montana Tunnels mill facility by truck where it was processed
      in a separate circuit designed for Diamond Hill ore. Most of the gold was
      recovered into a high grade pyrite concentrate and sold to Japanese smelters.
      The deposit is classed as a skarn hosted sulfide deposit where the predominant
      ore mineralogy is gold associated with pyrite and lesser other metal
      sulfides.




The
      bonding requirements for Diamond Hill, totaling approximately $623,000, are
      incorporated as part of the bonding at Montana Tunnels.




**ITEM
      3.** ***LEGAL
      PROCEEDINGS***




In
      May
      2006, a purported class action lawsuit was filed in U.S. District Court Missoula
      Division of Montana by 14 former employees at our Montana Tunnels mine alleging
      (i) violations of the Worker Adjustment and Retraining Notification Act of
      1988
      (the “WARN Act”) and the Montana Wage Act and (ii) breach of contract. The
      allegations relate to the termination of the employees following the cessation
      of mining in October 2005. Specifically, the plaintiffs allege that we gave
      deficient WARN Act notice and are seeking damages for back pay and benefits.
      During 2007 a negotiated settlement was tentatively reached between the Company
      and the plaintiffs and is expected to be finalized in 2008.




We
      are
      also engaged in routine litigation incidental to our business. No material
      legal
      proceedings, involving us or our business are pending, or, to our knowledge,
      contemplated, by any governmental authority. We are not aware of any material
      events of noncompliance with environmental laws and regulations.




**ITEM
      4.** ***SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS***




No
      matters were submitted to a vote of security holders during the fourth quarter
      of 2007.




-43-


**PART
      II**




**ITEM
      5.** ***MARKET
      FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASE OF EQUITY SECURITIES***




Our
      common shares are listed on the American Stock Exchange under the trading symbol
      “AGT” and on the Toronto Stock Exchange under the trading symbol “APG.” As of
      March 18, 2008, 160,965,258 common shares were outstanding, and we had
      approximately 10,000 shareholders of record. On March 18, 2008, the closing
      price per share for our common shares as reported by the American Stock Exchange
      was $0.65 and as reported by the Toronto Stock Exchange was
      Cdn$0.65.




The
      following table sets forth, for the periods indicated, the reported high and
      low
      market closing prices per share of our common shares:




**American
                Stock**
              **Exchange**
            
            **Toronto
                Stock**
              **Exchange****High**
            
            **Low**
            
            **High**
            
            **Low****($)**
            
            **(Cdn$)****2007**First
                Quarter
            
            $
            0.74
            
            $
            0.44
            
            $
            0.85
            
            $
            0.52Second
                Quarter
            
            
            0.52
            
            
            0.40
            
            
            0.59
            
            
            0.42Third
                Quarter
            
            
            0.56
            
            
            0.39
            
            
            0.56
            
            
            0.42Fourth
                Quarter
            
            
            0.61
            
            
            0.45
            
            
            0.60
            
            
            0.44**2006**First
                Quarter
            
            $
            0.75
            
            $
            0.28
            
            $
            0.88
            
            $
            0.32Second
                Quarter
            
            
            0.85
            
            
            0.41
            
            
            0.97
            
            
            0.47Third
                Quarter
            
            
            0.50
            
            
            0.35
            
            
            0.58
            
            
            0.40Fourth
                Quarter
            
            
            0.51
            
            
            0.30
            
            
            0.58
            
            
            0.36





We
      have
      not declared or paid cash dividends on our common shares since our inception
      and
      we expect for the foreseeable future to retain all of our earnings from
      operations for use in expanding and developing our business. Future dividend
      decisions will consider our then current business results, cash requirements
      and
      financial condition.




**ITEM
      6.** ***SELECTED
      FINANCIAL DATA***




The
      following table sets forth selected historical consolidated financial data
      for
      Apollo Gold Corporation as of December 31, 2007, 2006, 2005, 2004, and 2003,
      derived from our audited financial statements. The data set forth below should
      be read in conjunction with, and is qualified in its entirety by reference
      to,
      our financial statements and notes thereto included elsewhere in this Annual
      Report on Form 10-K and with “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations.”




-44-


**Summary
      of Financial Condition**


**(In
      thousands of U.S. dollars, except per share data)**




**Canadian
                GAAP**
            
            **Years
                Ended December 31,****2007(1)**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003****Statements
                of Operations Data**Revenue
                from sale of minerals
            
            $
            38,474
            
            $
            10,177
            
            $
            43,254
            
            $
            38,254
            
            $
            30,858Direct
                operating costs
            
            
            26,336
            
            
            15,361
            
            
            48,357
            
            
            52,473
            
            
            34,184Exploration
                and business development
            
            
            2,430
            
            
            1,033
            
            
            918
            
            
            1,051
            
            
            2,117Operating
                income (loss)
            
            
            4,413
            
            
            (12,823
            )
            
            (13,790
            )
            
            (26,586
            )
            
            (17,105
            )Income
                (loss) from continuing operations
            
            
            2,416
            
            
            (15,237
            )
            
            (15,961
            )
            
            (27,295
            )
            
            (15,790
            )(Loss)
                income from discontinued operations
            
            
            -
            
            
            (350
            )
            
            (6,247
            )
            
            (3,712
            )
            
            1,700Net
                income (loss)
            
            
            2,416
            
            
            (15,587
            )
            
            (22,208
            )
            
            (31,007
            )
            
            (14,090
            )Net
                income (loss) per share, basic and dilutedContinuing
                operations
            
            
            0.02
            
            
            (0.13
            )
            
            (0.16
            )
            
            (0.34
            )
            
            (0.29
            )Discontinued
                operations
            
            
            -
            
            
            (0.00
            )
            
            (0.06
            )
            
            (0.05
            )
            
            0.03Total
            
            $
            0.02
            
            $
            (0.13
            )
            $
            (0.22
            )
            $
            (0.39
            )
            $
            (0.26
            )




**Balance
                Sheets Data**
            
            **At
                December 31,**Total
                assets
            
            $
            75,073
            
            $
            51,804
            
            $
            62,545
            
            $
            97,635
            
            $
            96,577Long-term
                debt, including current portion
            
            
            13,313
            
            
            8,900
            
            
            7,272
            
            
            6,750
            
            
            2,332Total
                shareholders’ equity
            
            
            42,873
            
            
            28,243
            
            
            32,441
            
            
            47,221
            
            
            57,857








**U.S.
                GAAP**
            
            **Years
                Ended December 31,****2007(1)**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003****Statements
                of Operations Data**Revenue
                from sale of minerals
            
            $
            38,474
            
            $
            10,177
            
            $
            43,254
            
            $
            38,254
            
            $
            30,858Direct
                operating costs
            
            
            26,336
            
            
            15,361
            
            
            48,357
            
            
            52,473
            
            
            34,184Exploration
                and business development
            
            
            2,430
            
            
            4,206
            
            
            6,051
            
            
            11,456
            
            
            5,760Operating
                loss
            
            
            (5,964
            )
            
            (15,813
            )
            
            (22,183
            )
            
            (36,302
            )
            
            (22,574
            )Loss
                from continuing operations
            
            
            (13,898
            )
            
            (11,813
            )
            
            (19,826
            )
            
            (38,792
            )
            
            (21,021
            )(Loss)
                income from discontinued operations
            
            
            -
            
            
            (350
            )
            
            (4,907
            )
            
            308
            
            
            (1,395
            )Net
                loss
            
            
            (13,898
            )
            
            (12,163
            )
            
            (24,733
            )
            
            (38,484
            )
            
            (22,416
            )Net
                loss per share, basic and dilutedContinuing
                operations
            
            
            (0.10
            )
            
            (0.10
            )
            
            (0.19
            )
            
            (0.49
            )
            
            (0.38
            )Discontinued
                operations
            
            
            -
            
            
            (0.00
            )
            
            (0.05
            )
            
            0.00
            
            
            (0.03
            )Total
            
            $
            (0.10
            )
            $
            (0.10
            )
            $
            (0.24
            )
            $
            (0.49
            )
            $
            (0.41
            )




**Balance
                Sheets Data**
            
            **At
                December 31,**Total
                assets
            
            $
            29,119
            
            $
            19,042
            
            $
            39,331
            
            $
            77,749
            
            $
            87,391Long-term
                debt, including current portion
            
            
            15,376
            
            
            9,664
            
            
            8,785
            
            
            9,071
            
            
            2,332Total
                shareholders’ equity
            
            
            8,771
            
            
            6,940
            
            
            7,714
            
            
            25,014
            
            
            43,311







**(1)**
            Effective
                December 31, 2006, the Montana Tunnels Mine is a 50/50 joint venture;
                therefore, metal sales, revenue and costs shown for the year ended
                December 31, 2007 in the tables above represent Apollo’s 50% share of the
                joint venture.




-45-


**Summary
      Operational Statistics**




**Year
                Ended December 31,****2007(1)**
            
            **2006(2)**
            
            **2005****Production
                Summary**Gold
                (ounces)
            
            
            16,632
            
            
            4,959
            
            
            44,099Silver
                (ounces)
            
            
            250,982
            
            
            116,004
            
            
            524,722Lead
                (pounds)
            
            
            5,590,737
            
            
            1,196,317
            
            
            10,428,061Zinc
                (pounds)
            
            
            11,874,543
            
            
            3,040,058
            
            
            22,380,136Total
                revenues ($millions)
            
            
            38,474
            
            
            10,177
            
            
            43,254**Costs
                Per Ounce on a By-Product Basis**Cash
                operating costs per ounce of gold
            
            $
            (124
            )
            $
            643
            
            $
            529Total
                cash costs per ounce of gold
            
            $
            (60
            )
            $
            718
            
            $
            563Total
                production costs per ounce of gold
            
            $
            10
            
            $
            794
            
            $
            618**Total
                Cash Costs Per Ounce on a Co-Product Basis**Total
                cash costs per ounce of gold
            
            $
            486
            
            $
            678
            
            $
            500Total
                cash costs per ounce of silver
            
            $
            9.02
            
            $
            12.81
            
            $
            8.38Total
                cash costs per ounce of lead
            
            $
            0.83
            
            $
            0.58
            
            $
            0.50Total
                cash costs per ounce of zinc
            
            $
            0.85
            
            $
            1.62
            
            $
            0.75







**(1)**
            Effective
                December 31, 2006, the Montana Tunnels Mine is a 50/50 joint venture;
                therefore, production and costs shown for the year ended December
                31, 2007
                in the table above represent Apollo’s 50% share of the joint venture.
                Costs per ounce for the year ended December 31, 2007 only includes
                the ten
                months of March through December as milling was restarted on March
                1, 2007
                after being shut down since May 12,
                2006.


**(2)**
            Costs
                per ounce are through May 2006. The Montana Tunnels mine ceased milling
                operations on May 12, 2006; therefore, no metal products were produced
                after that date during the remainder of
                2006.




The
      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.




This
      information differs from measures of performance determined in accordance with
      Canadian and U.S. GAAP 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
      7 “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.




**ITEM
      7.** ***MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS***




The
      following discussion and analysis should be read in conjunction with the
      accompanying consolidated financial statements and related notes. The financial
      statements have been prepared in accordance with generally accepted accounting
      principles in Canada (“Canadian GAAP”). For a reconciliation to generally
      accepted accounting principles in the U.S. (“U.S. GAAP”), see Note 24 to the
      attached consolidated financial statements. Unless stated otherwise, all dollar
      amounts are reported in U.S. dollars.




In
      this
      Annual Report on Form 10-K, the terms “cash operating cost”, “total cash cost”
and “total production cost” are non-GAAP financial measures and are used on a
      per ounce of gold sold basis. Cash operating cost is equivalent to direct
      operating cost for the period as found on the Consolidated Statements of
      Operations, less production royalties expenses and mining taxes but includes
      by-product credits for payable silver, lead and zinc production. Total cash
      cost
      is equivalent to cash operating cost plus production royalties and mining taxes.
      Total production cost is equivalent to total cash cost plus non-cash costs
      including depreciation and amortization.




-46-




Certain
      of the comparative figures have been reclassified to conform to the 2007
      presentation.




**RECONCILIATION
      OF CASH OPERATING AND TOTAL PRODUCTION COSTS PER OUNCE**




**Year
                Ended December 31,****2007(1)(2)**
            
            **2006(1)**
            
            **2005****($
                in thousands, except per ounce data)**Gold
                ounces sold
            
            
            16,632
            
            
            4,959
            
            
            44,099Direct
                operating costs
            
            $
            25,095
            
            $
            10,469
            
            $
            48,357Less:
                Mining and property taxes
            
            
            1,079
            
            
            375
            
            
            1,482By-product
                credits
            
            
            26,086
            
            
            6,907
            
            
            23,531Cash
                operating cost
            
            
            (2,070
            )
            
            3,187
            
            
            23,344**Cash
                operating cost per ounce**
            
            
            **(124**
            **)**
            
            **643**
            
            
            **529**Cash
                operating cost
            
            
            (2,070
            )
            
            3,187
            
            
            23,344Add:
                Mining and property taxes
            
            
            1,079
            
            
            375
            
            
            1,482Total
                cash cost
            
            
            (991
            )
            
            3,562
            
            
            24,826**Total
                cash cost per ounce**
            
            
            **(60**
            **)**
            
            **718**
            
            
            **563**Total
                cash cost
            
            
            (991
            )
            
            3,562
            
            
            24,826Add:
                Depreciation & amortization
            
            
            1,162
            
            
            376
            
            
            2,417Total
                production cost
            
            
            171
            
            
            3,938
            
            
            27,243**Total
                production cost per ounce**
            
            
            **10**
            
            
            **794**
            
            
            **618**





**(1)**
            Effective
                December 31, 2006, the Montana Tunnels Mine is a 50/50 joint venture;
                therefore, gold ounces sold and costs shown for the year ended December
                31, 2007 in the table above represent Apollo’s 50% share of the joint
                venture.


**(2)**
            Costs
                and costs per ounce for the year ended December 31, 2007 in the table
                above only include the ten months of March through December as milling
                was
                restarted on March 1, 2007 after being shut down since May 12,
                2006.




We
      have
      included cash operating cost, total cash cost and total production cost
      information to provide investors with information about the cost structure
      of
      our mining operations. We use this information for the same purpose and for
      monitoring the performance of our operations. This information differs from
      measures of performance determined in accordance with Canadian and U.S. GAAP
      and
      should not be considered in isolation or as a substitute for measures of
      performance prepared in accordance with Canadian and U.S. 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.




**BACKGROUND
      AND RECENT DEVELOPMENTS**




We
      are
      principally engaged in gold mining including extraction, processing, refining
      and the production of other co-product metals, as well as related activities
      including exploration and development of mineral deposits principally in North
      America. We are the operator of the Montana Tunnels mine (the “Mine”), which is
      a 50% joint venture with Elkhorn Tunnels, LLC (“Elkhorn”). The Mine is an open
      pit mine and mill located near Helena, Montana, which produces gold doré and
      lead-gold and zinc-gold concentrates.




We
      own a
      development property, the Black Fox Project, which is located near the township
      of Matheson in the Province of Ontario, Canada. We also own Mexican subsidiaries
      which own concessions at the Huizopa exploration property located in the Sierra
      Madres in Chihuahua, Mexico.




-47-


**Corporate**





On
      February 23, 2007, the Company completed a private placement of $8.6 million
      aggregate principal amount of Series 2007-A convertible debentures with each
      $1,000 principal amount of the convertible debentures including 2,000 common
      share purchase warrants. The convertible debentures are convertible at the
      holder’s option at $0.50 per common share at any time until they mature. The
      Company has the option to force conversion of the convertible debentures under
      certain circumstances. The convertible debentures mature on February 23, 2009
      and bear interest at a rate of 12% per annum during the first year and 18%
      per
      annum during the second year, payable annually beginning on February 23, 2008.
      The accompanying warrants, each of which is exercisable for one common share
      of
      the Company, have an exercise price of $0.50 per share and a term of two
      years.





On
      October 12, 2007, the Company entered into a credit facility agreement for
      $8.0
      million. The credit facility, which was drawn on October 18, 2007 for the full
      amount of the facility, matures September 30, 2008 and bears interest at LIBOR
      plus 1.25%, repayable in four quarterly payments. The loan is secured by all
      of
      the assets of Montana Tunnels Mining, Inc. and Black Fox. The quarterly
      repayments are as per the following schedule: (i) 15% of the aggregate principal
      amount outstanding (“Principal Outstanding”) on December 31, 2007; (ii) 33% of
      the Principal Outstanding on March 31, 2008; (iii) 50% of the Principal
      Outstanding on June 30, 2008 and; (iv) 100% of the Principal Outstanding on
      September 30, 2008. As at December 31, 2007 the facility amount outstanding
      is
      $6.7 million.





On
      October 15, 2007, in order to meet certain loan criteria, Apollo entered into
      certain option contracts to buy and sell 2,267 tonnes (approximately 5,000,000
      lbs) of lead and 3,418 tonnes (approximately 7,500,000 lbs) of zinc which
      equates to approximately 65% and 40% respectively of Apollo's share of lead
      and
      zinc production from the Mine during the 12-month term of the facility. The
      lead
      and zinc option contracts are in the form of a no premium collar (buy a put,
      sell a call) at the following prices: Lead - put $1.40 per lb, call $1.90 per
      lb.; Zinc - put $1.20 per lb, call $1.54 per lb. No gold or silver production
      was hedged.





On
      October 31, 2007, the Company completed an offering of 7,454,545 flow-through
      shares at Cdn$0.55 per share for net proceeds of Cdn$3.8 million. The
      underwriter received a 5.5% fee of Cdn$0.2 million and 372,727 compensation
      warrants. Each compensation warrant is immediately exercisable at Cdn$0.55
      per
      common share of the Company and expires on April 30, 2009.





In
      December 2007, the Company repaid in full the remaining outstanding principal
      of
      $8.7 million of Series 2004-B convertible debentures upon maturity.





**Montana
      Tunnels**





At
      the
      Montana Tunnels mine the open pit remediation program was completed in February
      2007 and the mill resumed operations on March 1, 2007.





The
      remediation, which lasted from September 2006 to February 2007, required the
      removal of 8.4 million tons of waste material, at a total cost of $15.5 million.
      These costs, plus working capital of $2.5 million, were funded $14.25 million
      by
      Elkhorn, our joint venture partner, $1.25 million by us and $2.5 million from
      a
      working capital loan to the joint venture from Teck Cominco Metals Ltd. (“Teck
      Cominco”), our smelter contractor. Montana Tunnels repaid the loan in full to
      Teck Cominco on July 19, 2007.




-48-





During
      2007, approximately 14,024,000 tons were mined, of which 4,750,000 tons were
      ore. The mill commenced production on March 1, 2007 and processed 3,971,000
      tons
      of ore at an average throughput of 13,000 tons per day for the year and
      therefore there is an ore stockpile at the mill site of approximately 800,000
      tons of ore. Payable production was 33,000 ounces of gold, 502,000 ounces of
      silver, 11,181,000 lbs of lead and 23,749,000 lbs of zinc. Apollo’s share of
      this production is 50%. The project to increase mill throughput by over 1,000
      tons per day, by re-commissioning a larger primary crusher (last utilized in
      2005), which was scheduled for completion at the end of August 2007, was only
      completed in October 2007.


**Grade:**
              
              
              
              
              
              **Recoveries:**Au
                  ounces per ton
              
              
              0.0124
              
              
              Au
              
              
              76.0
              %Ag
                  ounces per ton
              
              
              0.2221
              
              
              Ag
              
              
              75.1
              %Pb
                  %
              
              
              0.1984
              
              
              Pb
              
              
              86.6
              %Zn
                  %
              
              
              0.4686
              
              
              Zn
              
              
              87.5
              %





Total
      cash costs for 2007 on a by-product basis were minus $60 per ounce of gold
      and
      on a co-product basis they were $486 per ounce of gold, $9.02 per ounce of
      silver, $0.83 per lb of lead and $0.85 per lb of zinc.





During
      2007, the joint venture spent $3.1 million on capital expenditures, which
      included $1.4 million for the expansion of the tailings dam, $0.7 million for
      a
      reconditioned CAT 992D Loader and $0.3 million for the upgrade of the primary
      crushing circuit. Apollo’s share of these capital expenditures is
      50%.





**Black
      Fox**





On
      August
      13, 2007, we filed an NI 43-101 which demonstrated the continued expansion
      of
      Black Fox since the previously published NI 43-101 dated August 14, 2006. The
      new mineral reserve estimate was prepared by SRK Consulting (US), Inc.
      (“SRK”) .





**Black
      Fox - Probable Reserves**





**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**
            
            **Contained**
              **Au
                Ounces**Open
                Pit
            
            
            1.0
            
            
            3,362
            
            
            5.8
            
            
            625,000Underground
            
            
            3.0
            
            
            1,108
            
            
            10.6
            
            
            377,000**Total
                Reserves**
            
            
            
            
            
            
            
            
            
            
            
            **1,002,000**







**(1)**
            Underground
                reserves include dilution of 66,000 tonnes of indicated material
                with an
                average grade of 1.26 g/t Au.





The
      mineral reserve was calculated based on a gold price of US$525/oz. The average
      total cash cost per ounce of gold was calculated at $236 per ounce.





During
      the preparation of the NI 43-101 filed on August 13, 2007, SRK and Apollo
      identified a potential infill drilling program of approximately 60 holes. The
      infill drilling program, completed in December 2007, consisted of 66 holes,
      41
      drilled from the surface and 25 from our underground drift on the 235 meter
      level, with 60% of the holes encountering mineralization in excess of 2 grams
      per tonne.




On
        February 29, 2008, we announced a new reserve statement that incorporates
        the
        results of the infill drilling program, which shows a new reserve of 1,330,000
        ounces of gold, an increase of 328,000 ounces, based on a gold price of $650
        per
        ounce. We expect to file a NI 43-101 report within 45 days of February 29,
        2008.
        We expect the NI 43-101 to be a full feasibility study done to a bankable
        standard (“bankable feasibility study”). A bankable feasibility study is a
        comprehensive analysis of a project’s economics (+/- 15% precision) used by the
        banking industry for financing purposes. The table below summarizes the Black
        Fox Total Mineral Reserve.


-49-





**Black
      Fox Probable Reserve Statement as of February 29, 2008**




**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**
            
            **Contained**
              **Au
                Ounces**Open
                Pit
            
            
            1.0
            
            
            4,350
            
            
            5.2
            
            
            730,000Underground**(1)**
            
            
            3.0
            
            
            2,110
            
            
            8.8
            
            
            600,000**Total
                Reserves**
            
            
            
            
            
            
            
            
            
            
            
            **1,330,000**





Since
      we
      report our mineral reserves to both NI 43-101 and SEC Industry Guide 7
      standards, it is possible for our reserve figure to vary between the two. Where
      such a variance occurs it will arise from the differing requirements for
      reporting mineral reserves. For example, the NI 43-101 has a minimum requirement
      that reserves be supported by a pre-feasibility study, whereas SEC Industry
      Guide 7 requires support from a full feasibility study done to bankable
      standards. The Black Fox Project thus reports reserves under NI 43-101, but
      reports no reserves under SEC Industry Guide 7 as a final bankable
      feasibility study has not been completed.




**Huizopa
      Project**




During
      the first quarter 2007, the Company made payments ahead of schedule in
      settlement of certain claims and the outstanding land payments on its Huizopa
      properties. These payments resulted in Apollo’s 100%-owned Mexican subsidiaries
      owning 100% of all mining concessions known as Huizopa.




**BUSINESS
      STRATEGY AND DEVELOPMENT**




**2008
      Forecasted Highlights:**




We
      have
      three properties: the Montana Tunnels mine (of which Apollo has a 50% interest),
      the Black Fox Project and the Huizopa project. Below is a summary of our
      expectations for these three properties in 2008.




**Montana
      Tunnels mine** - The
      mine is a 50/50 joint venture with Elkhorn. During 2008, the mine is expected
      to
      mine 600,000 tons waste material and 6,200,000 tons of ore for a total of
      6,800,000 tons mined giving a stripping ratio of 0.1:1. The mill is expected
      to
      mill at 14,000 tons per day for an annual total of 5,100,000 tons of ore and
      to
      produce the following payable metals during 2008: 45,000 ozs of gold, 350,000
      ozs of silver, 14,000,000 lbs of lead and 35,000,000 lbs of zinc. Apollo’s share
      of this production is: 22,500 ozs of gold, 175,000 ozs of silver, 7,000,000
      lbs
      of lead and 17,500,000 lbs of zinc. We expect our share of capital expenditures
      to be approximately $0.6 million.





**Black
      Fox Project** - We
      published a reserve statement on February 29, 2008 showing an increase of
      probable gold reserves from 1,002,000 to 1,330,000 ounces. We expect to file
      a
      NI 43-101 report within 45 days of February 29, 2008 based on a combined open
      pit and underground mining operation along with an on site mill. We expect
      the
      NI 43-101 to be a full feasibility study done to a bankable standard (“bankable
      feasibility study”). A bankable feasibility study is a comprehensive analysis of
      a project’s economics (+/- 15% precision) used by the banking industry for
      financing purposes. Permitting of the operation is ongoing and should be
      completed mid 2008.




-50-





Following
      completion of the feasibility study a production decision will be made during
      the second quarter of 2008.





**Huizopa
      project** - In
      February 2008, a 30 to 40 core hole drilling program commenced which should
      be
      completed in the second quarter of 2008. Construction of a dirt road to the
      camp
      site is expected to be completed during the first half of 2008 allowing us
      to
      commence a second drilling program which would not need to be helicopter
      assisted. The cost of the first drilling program and the completion of the
      road
      are expected to be $2.5 million.





**APOLLO
      GOLD CORPORATION**




***Results
      of Operations Year Ended December 31, 2007 Compared to Year Ended December
      31,
      2006***




**Revenue
      from the Sale of Minerals.**





Revenues
      from Montana Tunnels for the year ended December 31, 2007 increased 278% to
      $38.5 million, compared to $10.2 million for the year ended December 31, 2006.
      The increase in revenue is due to milling higher grade ores, higher metal prices
      in 2007 and the fact that the mill was shut down from May 12, 2006 through
      February 28, 2007. These factors were partially offset because, effective
      December 31, 2006, the Mine is a 50/50 joint venture, and therefore Apollo’s
      share of revenue is 50%.




Revenues
      from gold for the year ended December 31, 2007 were $12.4 million, compared
      to
      $3.3 million for the year ended December 31, 2006. The average price received
      for gold for the years ended December 31, 2007 and 2006 was  $740  and  $659
      per
      ounce, respectively.




Revenues
      from silver, zinc and lead for the year ended December 31, 2007 increased from
      $6.9 million in 2006 to $26.1 million, an increase of 278%.




For
      the
      year ended December 31, 2007, 32% of the total revenue was derived from sales
      of
      gold, 40% from the sales of zinc, and 28% from sales of silver and lead,
      compared to 32% from sales of gold, 47% from the sales of zinc, and 21% from
      sales of silver and lead for 2006.




Gold
      production increased from 4,959 ounces in 2006 to 16,632 ounces for the year
      ended December 31, 2007. This increase is due to resumption of the milling
      operations on March 1, 2007 at Montana Tunnels and an increase in the grade
      of
      the ore processed.




**Operating
      Expenses.**




*Direct
      Operating Costs.* For the
      year ended December 31, 2007, direct operating costs, which include mining
      costs, processing costs, smelting and refining charges, and care and maintenance
      costs, increased 71% to $26.3 million, from $15.4 million for the year ended
      December 31, 2006.  The
      increase in costs is due to the following factors: (1) in 2006 mining was
      suspended until August, while mining occurred during all of 2007 and (2) the
      resumption of milling operations at Montana Tunnels on March 1, 2007 after
      being
      shut down since May 2006. These factors were partially offset because, effective
      December 31, 2006, the Mine became a 50/50 joint venture, and therefore Apollo’s
      share of direct operating costs is 50%.




*Depreciation
      and Amortization.* Depreciation and amortization expenses were $1.4 million for the year ended
      December 31, 2007, compared to $1.6 million for 2006. The decrease in
      depreciation and amortization is a result of the Mine becoming a 50/50 joint
      venture effective December 31, 2006, and therefore Apollo’s share of
      depreciation and amortization at the Mine is 50%. This decrease was partially
      offset due to the increase in mining activities.




-51-




*General
      and Administrative Expenses.* General
      and administrative expenses for the year ended December 31, 2007 were $4.6
      million compared to $4.0 million for the year ended December 31, 2006.
      Stock-based compensation expense recorded during 2007 was $1.0 million, an
      increase of $0.5 million over 2006.




*Accretion
      Expense.* Accretion expense, relating to accrued site closure costs at the Montana Tunnels
      mine was $0.5 million for the year ended December 31, 2007, compared to $0.9
      million for the year ended December 31, 2006. Effective December 31, 2006,
      the
      Mine is a 50/50 joint venture, and therefore Apollo’s share of the accretion
      expense is 50%.




*Amortization
      of deferred gain.* Amortization of deferred gain, relating to the transfer of assets and
      liabilities to the Montana Tunnels joint venture, was $1.2 million for the
      year
      ended December 31, 2007. As the Montana Tunnels joint venture became effective
      December 31, 2006, there was no gain amortized in 2006.




*Exploration
      and Business Development.* Expenses
      for exploration and development, consisting of exploration related expenses
      at
      our exploration properties,  totaled
      $2.4 million and $1.0 million for the years ended December 31, 2007 and 2006,
      respectively. The increase in exploration expenses is due to increased activity
      at our Huizopa property and the settlement of certain claims in relation to
      the
      Huizopa property.




*Total
      Operating Expenses.* As a
      result of these expense components, our total operating expenses for the year
      ended December 31, 2007 increased 48% to $34.1 million from $23.0 million for
      the year ended December 31, 2006. Most of this increase in costs is due to
      the
      resumption of mining and milling operations at the Montana Tunnels
      mine.




**Other
      Income (Expense).**




*Interest
      Income, Interest Expense and Financing Costs.* We
      realized interest income of $0.7 million for the year ended December 31, 2007
      compared to interest income of $0.4 million for the year ended December 31,
      2006
      due to higher cash balances throughout the year. We incurred interest expense
      of
      $5.7 million during 2007 and $2.7 million during 2006. The increase in interest
      expense is due to the accretion on the convertible debentures issued in February
      2007. Financing costs of $0.7 million were recorded in 2007 in conjunction
      with
      the convertible debentures issued February 2007.




*Realized
      and Unrealized Gains on Derivative Instruments.* For
      the
      year ended December 31, 2007, we realized gains of $0.4 million from lead and
      zinc derivative instruments and recorded $2.1 million in unrealized gains for
      the fair value of lead and zinc derivative instruments maturing in 2008. We
      held
      no derivative instruments in 2006.




*Foreign
      Exchange Loss and Other.* We
      realized foreign exchange loss and other expenses of $0.2 million and $0.2
      million during the years ended December 31, 2007 and 2006, respectively, from
      cash balances not held in United States dollars.




*Income
      Tax Recovery.* We
      recorded a $1.4 million recovery of income taxes in connection with the
      flow-through equity offering in October 2007, but recorded no other recovery
      for
      income taxes as the net loss carry forwards are fully offset by a valuation
      allowance.




-52-


**Income
      (Loss) from Continuing Operations.**




As
      a
      result of the foregoing, the Company had income from continuing operations
      of
      $2.4 million, or $0.02 per share, for the year ended December 31, 2007, as
      compared to a loss of $15.2 million or $0.13 per share, for the year ended
      December 31, 2006 .




**Loss
      from Discontinued Operations.**




For
      the
      year ended December 31, 2007, there was no gain or loss from discontinued
      operations as compared to a loss of $0.4 million for the year ended December
      31,
      2006.




**Net
      Income (Loss) for the Year.**




For
      the
      year ended December 31, 2007, we recorded net income of $2.4 million, or $0.02
      per share, as compared to a net loss of $15.6 million, or $0.13 per share,
      for
      the year ended December 31, 2006.




***Results
      of Operations Year Ended December 31, 2006 Compared to Year Ended December
      31,
      2005***




**Revenue
      from the Sale of Minerals.**





Revenues
      from continuing operations for the year ended December 31, 2006 decreased 76%
      to
      $10.2 million, compared to $43.3 million for the year ended December 31, 2005.
      This decrease is due to the cessation of milling operations on May 12, 2006
      at
      Montana Tunnels.




Revenues
      from gold for the year ended December 31, 2006 were $3.3 million, compared
      to
      $19.7 million for the year ended December 31, 2005. The average price received
      for gold for the years ended December 31, 2006 and 2005 was  $659  and  $447
      per
      ounce, respectively.




Revenues
      from silver, zinc and lead for the year ended December 31, 2006 decreased 71%
      to
      $6.9 million from $23.5 million during 2005.




For
      the
      year ended December 31, 2006, 32% of the total revenue was derived from sales
      of
      gold, 47% from the sales of zinc, and 21% from sales of silver and lead,
      compared to 46% from sales of gold, 34% from the sales of zinc, and 20% from
      sales of silver and lead for 2005.




Gold
      production decreased to 4,959 ounces for the year ended December 31, 2006,
      compared to 44,099 ounces in 2005. This significant drop in production was
      caused directly by the open pit at Montana Tunnels being shut for safety reasons
      in October 2005 and, as a result, the mill operated for the first several months
      of 2006 on low grade ore stockpiles. Once these stockpiles were depleted the
      mill was shut down on May 12, 2006.




**Operating
      Expenses.**




*Direct
      Operating Costs.* For the
      year ended December 31, 2006, direct operating costs, which include mining
      costs, processing costs, smelting and refining charges, and care and maintenance
      costs, decreased 68% to $15.4 million, from $48.4 million for the year ended
      December 31, 2005. The decrease in costs is a result of the cessation of all
      production operations at the Montana Tunnels mine from May 12, 2006 until August
      2006 when remediation of the pit and other pre-commercial mining activities
      recommenced following the signing of the JV Agreement with Elkhorn. During
      the
      year ended December 31, 2006, direct operating costs were $10.5 million while
      the mill was still in production through May and $0.6 million while on care
      and
      maintenance in June and July.




-53-




*Depreciation
      and Amortization.* Depreciation and amortization expenses were $1.6 million for the year ended
      December 31, 2006, compared to $2.6 million for 2005. The decrease is the result
      of reduced mining activities during 2006 while the mine was temporarily on
      care
      and maintenance.




*General
      and Administrative Expenses.* General
      and administrative expenses for the year ended December 31, 2006 decreased
      to
      $4.0 million compared to $8.2 million for the year ended December 31, 2005.
      This
      decrease in expenses is due to reduced numbers of personnel and related costs
      at
      the corporate office level, as well as a decrease in most outside services
      costs, such as legal and accounting .




*Accretion
      Expense.* Accretion expense was $0.9 million, relating to accrued site closure costs
      at
      the Montana Tunnels mine for the year ended December 31, 2006, the same as
      in
      2005.




*Exploration
      and Business Development.* The cost
      of exploration, consisting of drilling and related expenses, totaled $1.0
      million and $0.9 million for the years ended December 31, 2006 and 2005,
      respectively. Costs incurred at Black Fox for drilling and development were
      capitalized under Canadian GAAP.




*Total
      Operating Expenses.* As a
      result of these expense components, our total operating expenses for the year
      ended December 31, 2006 decreased 60% to $23.0 million from $57.0 million for
      the year ended December 31, 2005. The decrease is due to the cessation of
      operations at Montana Tunnels in May 2006 and the reduction of staff at the
      corporate level.




**Other
      Income (Expense).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $0.4 million during both of the years ended December
      31, 2006 and 2005. We incurred interest expense of $2.7 million during 2006
      and
      $2.5 million during 2005. Most of the interest expense is due to the accretion
      on the convertible debentures issued in November 2004.




*Foreign
      Exchange Loss and Other.* We
      realized foreign exchange losses of $0.2 million and $35,000 during the years
      ended December 31, 2006 and 2005, respectively, from cash balances not held
      in
      United States dollars. This increase is a result of having a slightly higher
      cash balance in Canadian dollars and fluctuating exchange rates during
      2006.




**Loss
      from Continuing Operations.**




As
      a
      result of the foregoing, the Company incurred a loss from continuing operations
      of $15.2 million, or $0.13 per share, for the year ended December 31, 2006,
      as
      compared to a loss of $16.0 million or $0.16 per share, for the year ended
      December 31, 2005.




**Loss
      from Discontinued Operations.**




For
      the
      year ended December 31, 2006, loss from discontinued operations was $0.4
      million, compared to a loss of $6.2 million, or $0.06 per share, for the year
      ended December 31, 2005.




*Florida
      Canyon Mine and Standard Mine.* The
      Florida Canyon and Standard mines were sold on November 18, 2005 and therefore
      had no activity during the year ended December 31, 2006. For the year ended
      December 31, 2005, revenues at these two mines were $18.6 million and operating
      costs were $24.8 million.




-54-




**Net
      Loss for the Year.**




For
      the
      year ended December 31, 2006, we incurred a net loss of $15.6 million, or $0.13
      per share, as compared to a net loss of $22.2 million, or $0.22 per share,
      for
      the year ended December 31, 2005.




**Summary
      of Quarterly Results**




**2007
                Quarter Ended In**
            
            **2006
                Quarter Ended In****Dec(1)(2)**
            
            **Sept(1)(2)**
            
            **June(1)(2)**
            
            **March(1)(3)**
            
            **Dec(4)**
            
            **Sept(5)**
            
            **June(6)**
            
            **March(7)****($
                in thousands, except per share and total cash cost per ounce
                data)**Revenue
                from the sale of minerals
            
            $
            10,880
            
            $
            11,863
            
            $
            12,841
            
            $
            2,890
            
            $
            -
            
            $
            372
            
            $
            3,667
            
            $
            6,138Operating
                income (loss)
            
            
            641
            
            
            3,227
            
            
            3,716
            
            
            (3,171
            )
            
            (2,661
            )
            
            (4,714
            )
            
            (2,029
            )
            
            (3,419
            )Income
                (loss) from continuing operations for the period
            
            
            2,510
            
            
            2,117
            
            
            2,436
            
            
            (4,647
            )
            
            (3,347
            )
            
            (5,370
            )
            
            (2,568
            )
            
            (3,952
            )Net
                income (loss)
            
            
            2,510
            
            
            2,117
            
            
            2,436
            
            
            (4,647
            )
            
            (3,447
            )
            
            (5,370
            )
            
            (2,568
            )
            
            (4,202
            )Net
                income (loss) per share, basic and diluted
            
            
            0.02
            
            
            0.01
            
            
            0.02
            
            
            (0.03
            )
            
            (0.03
            )
            
            (0.04
            )
            
            (0.02
            )
            
            (0.04
            )Gold
                production in ounces
            
            
            5,233
            
            
            4,755
            
            
            5,483
            
            
            1,161
            
            
            -
            
            
            581
            
            
            1,165
            
            
            3,213Total
                cash cost per ounce of gold - by-product basis
            
            $
            315
            
            $
            (215
            )
            $
            (237
            )
            $
            (270
            )
            $
            N/A
            
            $
            N/A
            
            $
            737
            
            $
            932Total
                cash cost per ounce of gold - co-product basis
            
            $
            632
            
            $
            459
            
            $
            406
            
            $
            418
            
            $
            N/A
            
            $
            N/A
            
            $
            788
            
            $
            730





**(1)**
            Effective
                December 31, 2006, the Montana Tunnels Mine is a 50/50 joint venture;
                therefore, revenue, costs, and gold production shown for quarters
                during
                the year ended December 31, 2007 in the tables above represent Apollo’s
                50% share of the joint venture.


**(2)**
            Normal
                mine and milling operations during the
                quarter.


**(3)**
            Remediation
                of the open pit completed in January 2007. Milling commenced on March
                1,
                2007. Cash costs per ounce of gold represent March 2007
                only.


**(4)**
            Remediation
                of the open pit continued.


**(5)**
            No
                production, gold ounces represent adjustments from smelter. Remediation
                of
                the open pit commenced in September 2006.


**(6)**
            Milled
                low grade ore stockpiles until the mill was shutdown on May 12, 2006,
                no
                mining operations during the quarter.


**(7)**
            Milled
                low grade ore stockpiles, no mining operations during the
                quarter.





**Financial
      Condition, Liquidity and Capital Resources**




To
      date,
      we have funded our operations through issuances of debt and equity securities,
      joint venture contributions from Elkhorn Tunnels, LLC and cash generated by
      the
      Montana Tunnels joint venture. At December 31, 2007, we had cash and cash
      equivalents of $4.9 million, compared to $4.5 million at December 31,
      2006.  The
      increase in cash from December 31, 2006 is the result of cash provided by
      operating activities of $7.5 million, primarily from the Montana Tunnels joint
      venture, and cash provided by financing activities of $12.3 million, primarily
      from proceeds from the issuance of debt and equity, offset by repayment of
      the
      2004 Series-B convertible debentures and capital expenditures. The cash inflows
      from operating and financing activities were offset by cash used in investing
      activities of $19.3 million.




In
      2007,
      cash used in investing activities totaled $19.3 million. Capital expenditures
      were $8.3 million, which included $5.1 million for further development of the
      Black Fox Project, $2.0 million for payments to increase our investment at
      our
      Huizopa property and $1.2 million for our share of capital expenditures at
      Montana Tunnels. Our share of capitalized deferred stripping costs at Montana
      Tunnels was $6.8 million. We added $3.1 million to restricted cash, $2.1 million
      of which was for our share of the Montana Tunnels reclamation bonding
      requirement and $1.0 million on deposit as partial security of the $8.0 million
      credit facility. Additionally, we purchased long-term investments of $1.5
      million.




-55-




During
      the year ended December 31, 2007, financing activities provided a net $12.3
      million in cash. Financing inflows included (a) issuance of the Series 2007-A
      convertible debentures and note warrants for net proceeds of $8.1 million
      completed in February 2007, (b) an $8.0 million credit facility (October 2007)
      which used the Montana Tunnels property and the Black Fox property as
      collateral, (c) issuance of flow-through shares in October 2007 for net proceeds
      of $4.0 million (Cdn$3.8 million) and (d) proceeds of $1.6 million from warrants
      exercised. Financing outflows included repayment of $8.7 million principal
      of
      Series 2004-B convertible debentures and repayments of notes payable and other
      debt totaling $3.7 million which included $1.3 million in principal payments
      for
      the October 2007 credit facility.




We
      estimate that with our year end cash balance of $4.9 million, as supplemented
      by
      our share of the projected cash flow from the joint ventured Montana Tunnels
      mine, we will have sufficient funds to repay current debt of $7.6 million,
      finance the current 2008 work programs of $3.6 million at Black Fox and $2.5
      million for exploration at Huizopa, as well as corporate overhead. However,
      we
      will continue to explore financing opportunities to further develop the Black
      Fox Project and expand our exploration program at the Huizopa project, which
      may
      include Canadian flow-through share financing for use at the Black Fox Project.
      The availability, amount, terms and timing of this financing are not certain
      at
      this time.




Our
      ability to raise capital is highly dependent upon the commercial viability
      of
      our projects and the associated prices of the metals we produce. Because of
      the
      significant impact that changes in the prices of gold and zinc have on our
      financial condition, declines in these metals prices may negatively impact
      short-term liquidity and our ability to raise additional funding for long-term
      projects. In the event that cash balances decline to a level that cannot support
      our operations, our management will defer certain planned capital expenditures
      and exploration activities as needed to conserve cash for operations. There
      can
      be no assurance that we will be successful in generating adequate funding for
      planned capital expenditures, environmental remediation and reclamation
      expenditures and for exploration expenditures.




**Table
      of Contractual Obligations**




**Payment
                Due by Period****Contractual
                Obligations****(as
                of December 31, 2007)**
            
            **Total**
            
            **Less**
              **Than**
              **1 Year**
            
            **1-3**
              **Years**
            
            **3-5**
              **Years**
            
            **More
                than**
              **5
                Years****(Thousands)**Convertible
                debenture
            
            $
            8,380
            
            $
            -
            
            $
            8,380
            
            $
            -
            
            $
            -Interest
                on convertible debenture
            
            
            2,711
            
            
            1,203
            
            
            1,508
            
            
            -
            
            
            -Capital
                lease obligations
            
            
            866
            
            
            699
            
            
            167
            
            
            -
            
            
            -Operating
                lease obligations
            
            
            183
            
            
            101
            
            
            82
            
            
            -
            
            
            -Purchase
                obligations
            
            
            21
            
            
            21
            
            
            -
            
            
            -
            
            
            -Notes
                payable and other current debt
            
            
            7,776
            
            
            7,617
            
            
            159
            
            
            -
            
            
            -Other
                long-term liabilities reflected on the balance sheet**(1)**
            
            
            13,281
            
            
            -
            
            
            -
            
            
            -
            
            
            13,281




**(1)**
              Other
                  long-term liabilities represent asset retirement obligations. Asset
                  retirement obligations include several estimates about future reclamation
                  costs, mining schedules, timing of the performance of reclamation
                  work and
                  the quantity of ore reserves which in turn determine the ultimate
                  closure
                  date, which in turn impacts the discounted amounts of future asset
                  retirement liabilities. The discounted value of these projected
                  cash flows
                  is recorded as “Accrued site closure costs” of $9.4 million as shown on
                  the balance sheet as of December 31, 2007 (full value is $17.8
                  million
                  before removing 50% joint venture interest). The amount shown above
                  is
                  undiscounted to show full expected cash requirements to Apollo
                  (full value
                  is $24.8 million before removing 50% joint venture interest). As
                  of
                       December 31, 2007, restricted cash of $6.7 million ($12.1
                  million before
                  removing 50% joint venture interest) has been placed in trust as
                  security
                  relating to the asset retirement
                  obligation.


-56-




**Off
      Balance Sheet Arrangements**




We
      have
      no off balance sheet arrangements as of December 31, 2007.




**Environmental
      Compliance**




Our
      current and future exploration and development activities, as well as our future
      mining and processing operations, are subject to various federal, state and
      local laws and regulations in the countries in which we conduct our activities.
      These laws and regulations govern the protection of the environment,
      prospecting, development, production, taxes, labor standards, occupational
      health, mine safety, toxic substances and other matters. We expect to be able
      to
      comply with those laws and do not believe that compliance will have a material
      adverse effect on our competitive position. We intend to obtain all licenses
      and
      permits required by all applicable regulatory agencies in connection with our
      mining operations and exploration activities. We intend to maintain standards
      of
      environmental compliance consistent with regulatory requirements.




As
      of
      December 31, 2007, we have accrued $18.0 million (Apollo’s share is  $9.4  million)
      related to reclamation, severance and other closure requirements at our
      properties, an increase of  $2.4
      million from December 31, 2006. These liabilities are covered by a combination
      of surety bonds, restricted cash and property totaling $18.7  million
      at December 31, 2007. We have accrued what management believes is the present
      value of our best estimate of the liabilities as of December 31, 2007; however,
      it is possible that our obligations may change in the near or long term
      depending on a number of factors.





**CRITICAL
      ACCOUNTING POLICIES**




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make a variety of estimates and
      assumptions that affect (i) the reported amounts of assets and liabilities
      and
      disclosure of contingent assets and liabilities as of the date of the financial
      statements and (ii) the reported amounts of revenues and expenses during the
      reporting periods covered by the financial statements.




Our
      management routinely makes judgments and estimates about the effect of matters
      that are inherently uncertain. As the number of variables and assumptions
      affecting the future resolution of the uncertainties increase, these judgments
      become even more subjective and complex. We have identified certain accounting
      policies that we believe are most important to the portrayal of our current
      financial condition and results of operations. Our significant accounting
      policies are disclosed in Note 3 to the Consolidated Financial Statements
      included in this Annual Report on Form 10-K.




**Principles
      of consolidation**




The
      financial statements of entities which are controlled by the Company through
      voting equity interests, referred to as subsidiaries, are consolidated. 
All intercompany balances and transactions are eliminated upon
      consolidation.  Variable Interest Entities (“VIEs”), which include, but are
      not limited to, special purpose entities, trusts, partnerships, and other legal
      structure, as defined by the Accounting Standards Board in Accounting Guideline
      (“AcG”) 15, “Consolidation of Variable Interest Entities” (“AcG-15”), are
      entities in which equity investors do not have the characteristics of a
“controlling financial interest” or there is not sufficient equity at risk for
      the entity to finance its activities without additional subordinated financial
      support.  VIEs are subject to consolidation by the primary beneficiary who
      will absorb the majority of the entities’ expected losses and/or expected
      residual returns.  The Company did not hold any VIE’s as at December 31,
      2007 and 2006.




-57-




The
      Company’s 50% interest in the joint venture at the Montana Tunnels mine, which
      is subject to joint control, is consolidated on a proportionate basis whereby
      the Company includes in these consolidated financial statements its
      proportionate share of the assets, liabilities, revenues and expenses of the
      joint venture.




**Revenue
      Recognition**




Revenue
      from the sale of gold and co-products is recognized when the following
      conditions are met: persuasive evidence of an arrangement exists; delivery
      has
      occurred in accordance with the terms of the arrangement; the price is fixed
      or
      determinable and collectability is reasonably assured. Revenue for gold bullion
      is recognized at the time of delivery and transfer of title to counter-parties.
      Revenue for lead and zinc concentrates is determined by contract as legal title
      to the concentrate transfers and include provisional pricing arrangements
      accounted for as an embedded derivative instrument under Statement of Financial
      Accounting Standards (“SFAS”) No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      as
      amended.




**Stripping
      Costs**




Stripping
      costs incurred during the production phase of a mine are variable production
      costs that are included in the costs of the inventory produced during the period
      that the stripping costs. EIC-160, *Stripping
      Costs Incurred in the Production Phase of a Mining Operation,* which
      requires stripping costs that represent a betterment to the mineral property
      to
      be capitalized and amortized in a rational and systematic manner over the
      reserves that directly benefit from the specific stripping activity. The Company
      adopted EIC-160 as of January 1, 2007 retrospectively without restatement.
      During the year ended December 31, 2007, the Company capitalized $6.8 million
      in
      deferred stripping costs and recorded amortization thereon in the amount of
      $2.0
      million. Deferred stripping costs are amortized using the units-of-production
      method over the expected life of the operation based on the estimated
      recoverable gold equivalent ounces.




**Depreciation
      and Depletion**




Depreciation
      is based on the estimated useful lives of the assets and is computed using
      straight-line and unit-of-production methods. Depletion is computed using the
      unit-of-production method. The units-of-production method under Canadian GAAP
      is
      based on proven and probable ore reserves and a portion of resources expected
      to
      be converted to reserves based on past results. As discussed above, our
      estimates of proven and probable ore reserves and resources may change, possibly
      in the near term, resulting in changes to depreciation, depletion and
      amortization.




**Impairment
      of Long-Lived Assets**




We
      review
      the net carrying value of all facilities, including idle facilities, on a
      periodic basis. We estimate the net realizable value of each property based
      on
      the estimated undiscounted future cash flows that will be generated from
      operations at each property, the estimated salvage value of the surface plant
      and equipment and the value associated with property interests. These estimates
      of undiscounted future cash flows are dependent upon the estimates of metal
      to
      be recovered from proven and probable ore reserves and mineral resources
      expected to be converted into mineral reserves (see discussion above), future
      production cost estimates and future metals price estimates over the estimated
      remaining mine life. If undiscounted cash flows are less than the carrying
      value
      of a property, an impairment loss is recognized based upon the estimated
      expected future cash flows from the property discounted at an interest rate
      commensurate with the risk involved.




-58-




**Environmental
      Matters**




When
      it
      is probable that costs associated with environmental remediation obligations
      will be incurred and they are reasonably estimable, we accrue such costs at
      the
      most likely estimate. Accruals for estimated losses from environmental
      remediation obligations generally are recognized no later than completion of
      the
      remedial feasibility study for such facility and are charged to provisions
      for
      closed operations and environmental matters. We periodically review our accrued
      liabilities for such remediation costs as evidence becomes available indicating
      that our remediation liability has potentially changed. Costs of future
      expenditures for environmental remediation are not discounted to their present
      value unless subject to a contractually obligated fixed payment schedule. Such
      costs are based on our current estimate of amounts that are expected to be
      incurred when the remediation work is performed within current laws and
      regulations. Recoveries of environmental remediation costs from other parties
      are recorded as assets when their receipt is deemed probable.




**Changes
      in Accounting Pronouncements**




Effective
      January 1, 2007, we adopted CICA Sections 1530, *Comprehensive
      Income* ,
      3251, *Equity* ,
      3855, *Financial
      Instruments - Recognition and Measurement* ,
      3861, *Financial
      Instruments - Disclosure and Presentation* ,
      and
      3865, *Hedges* .
      These
      new CICA Sections provide comprehensive requirements for the recognition and
      measurement of financial instruments, transaction costs incurred on financial
      instruments, as well as standards on when and how hedge accounting may be
      applied. CICA Section 1530 also introduces a new component of equity referred
      to
      as comprehensive income. We have adopted these standards retrospectively without
      restatement.




In
      accordance with CICA Section 3855, we now classify all financial instruments
      as
      either held-to-maturity, available-for-sale, held-for-trading, loans and
      receivables, or other financial liabilities. Financial assets held to maturity,
      loans and receivables and financial liabilities other than those held for
      trading, are measured at amortized cost. Available-for-sale instruments are
      measured at fair value with unrealized gains and losses recognized in other
      comprehensive income. Instruments classified as held for trading are measured
      at
      fair value with unrealized gains and losses recognized in the statement of
      operations. Transaction costs are expensed as incurred.




Upon
      adoption of this new standard, we designated cash and cash equivalents as
      held-for-trading, which are measured at fair value. Derivative instruments
      are
      classified as held for trading, which are measured at fair value. Accounts
      receivable and other are classified as loans and receivables, which are measured
      at amortized cost. Long-term investments and restricted certificates of deposit
      are classified as available for sale, and are measured at fair value. Accounts
      payable and accrued liabilities, property and mining taxes payable, convertible
      debentures, notes payable and other current debt, and accrued site closure
      costs
      are classified as other liabilities, which are measured at amortized cost.




In
      addition, we adopted a policy to expense debt financing costs when they are
      incurred and as a result we recorded a non-cash adjustment to increase opening
      deficit by $0.3 million to eliminate the opening balance of deferred financing
      costs that were capitalized and amortized under our previous accounting
      policy.




Comprehensive
      income is the change in shareholders’ equity during a period from transactions
      and other events and circumstances from non-owner sources. The adoption of
      CICA
      Section 1530 had no impact on our financial statements.




-59-




**Recent
      Accounting Pronouncements**




In
      June
      2007, the CICA issued Section 3031 - *Inventories* ,
      to
      replace the former Section 3030 - *Inventories* .
      Section
      3031 applies to interim and annual financial statements relating to fiscal
      years
      beginning on or after January 1, 2008. Section 3031 establishes standards for
      the measurement and disclosure of inventories. It provides the Canadian
      equivalent to International Accounting Standard IAS 2 - *Inventories* .
      The
      main features of the new Section 3031 are:




·  Measurement
      of inventories at the lower of cost and net realizable value, with guidance
      on
      the determination of cost, including allocation of overheads and other costs
      to
      inventory.




·  Cost
      of
      inventories of items that are not ordinarily interchangeable, and goods or
      services produced and segregated for specific projects, assigned by using a
      specific identification of their individual costs.




·  Consistent
      use (by type of inventory with similar nature and use) of either first-in,
      first-out (FIFO) or weighted average cost formula to measure the cost of other
      inventories.




·  Reversal
      of previous write-downs to net realizable value when there is a subsequent
      increase in the value of inventories.





We
      do not
      expect the adoption of Section 3031 on January 1, 2008, to have a material
      impact on our financial condition or operating results.





**RELATED
      PARTY TRANSACTIONS**




The
      Company had the following related party transactions for the three years ended
      December 31, 2007, 2006, and 2005, respectively.




**2007**
            
            **2006**
            
            **2005****(Thousands)**Legal
                fees paid to two law firms, a partner of each firm is a director
                of the
                Company
            
            $
            381
            
            $
            118
            
            $
            335Consulting
                services paid to a relative of an officer and director of the
                Company
            
            
            9
            
            
            14
            
            
            18





These
      transactions are in the normal course of business and are measured at the
      exchange amount which is the consideration established and agreed to by the
      related parties. Also, a director of the Company participated in the October
      2007 flow-through share offering and purchased 54,545 flow-through shares in
      connection with the offering.




**ITEM
      7A.** ***QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK***




Our
      exposure to market risk includes, but is not limited to, the following risks:
      changes in interest rates on our investment portfolio, changes in foreign
      currency exchange rates, commodity price fluctuations and equity price
      risk.




**Interest
      Rate Risk**




We
      currently have minimal debt and thus no material interest rate exposure related
      to debt. We typically invest excess cash in high quality short-term debt
      instruments. The rates received on such investments fluctuate with changes
      in
      economic conditions. As a result, our investment income may fall short of
      expectations during periods of lower interest rates. We estimate that given
      the
      cash balances expected during 2008, a one percent change in interest rates
      would
      not materially impact our annual income. We may in the future actively manage
      our exposure to interest rate risk.




-60-




**Foreign
      Currency Exchange Rate Risk**




While
      the
      majority of our transactions are denominated in U.S. dollars, certain purchases
      of labor, operating supplies and capital assets are denominated in Canadian
      dollars and Mexican pesos. The appreciation of non-US dollar currencies against
      the US dollar increases the costs of goods and services purchased in non-US
      dollar terms, which can adversely impact our net income and cash flows.
      Conversely, a depreciation of non-US dollar currencies against the US dollar
      usually decreases the costs of goods and services purchased in US dollar terms.




The
      value
      of cash and cash equivalent investments denominated in foreign currencies also
      fluctuates with changes in currency exchange rates. Appreciation of non-US
      dollar currencies results in a foreign currency gain on such investments and
      a
      decrease in non-US dollar currencies results in a loss.





**Commodity
      Price Risk**




We
      are
      engaged in gold mining and related activities, including exploration,
      extraction, processing and reclamation. Gold is our primary product and, as
      a
      result, changes in the price of gold could significantly affect our results
      of
      operations and cash flows. We have entered into derivative contracts to protect
      the selling price for certain anticipated lead and zinc production through
      September 30, 2008 and we may in the future more actively manage our exposure
      through additional hedging programs.




**Equity
      Price Risk**




We
      have
      in the past and may in the future seek to acquire additional funding by sale
      of
      common shares. Movements in the price of our common shares have been volatile
      in
      the past and may be volatile in the future. As a result, there is a risk that
      we
      may not be able to sell new common shares at an acceptable price should the
      need
      for new equity funding arise.




**ITEM
      8.** ***FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA***




The
      following Consolidated Financial Statements of Apollo Gold Corporation, Report
      of Independent Registered Chartered Accountants, and Comments by Independent
      Registered Chartered Accountants on Canada-United States of America Reporting
      Differences are filed as part of this Item 8 and are included in this Form
      10-K.




**Page**Report
                of Independent Registered Chartered
                Accountants
            
            
            F-2Comments
                by Independent Registered Chartered Accountants on
                Canada-United States of America Reporting Differences
            
            
            F-2Consolidated
                Balance Sheets as of December 31, 2007 and
                2006
            
            
            F-3Consolidated
                Statements of Operations and Comprehensive
                Income (Loss) for the Years Ended December 31, 2007, 2006, and
                2005
            
            
            F-4Consolidated
                Statements of Shareholders’ Equity for the
                Years Ended December 31, 2007, 2006, and 2005
            
            
            F-5Consolidated
                Statements of Cash Flows for the Years Ended
                December 31, 2007, 2006, and 2005
            
            
            F-6Notes
                to the Consolidated Financial
                Statements
            
            
            F-7




-61-





**ITEM
      9.** ***CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE***




There
      have been no disagreements with Deloitte & Touche LLP, our independent
      registered chartered accountants, regarding any matter of accounting principles
      or practices or financial statement disclosure.




**ITEM
      9A.** ***CONTROLS
      AND PROCEDURES***





**Disclosure
      Controls and Procedures**




During
      the fiscal period covered by this report, we carried out an evaluation, under
      the supervision of our management, including the Chief Executive Officer and
      Chief Financial Officer, of the effectiveness of the design and operation of
      our
      disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e)
      and
      15d-15(e) under the Exchange Act. Based upon such evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures are effective to ensure that information required to
      be
      disclosed by Apollo in reports that it files or submits under the Exchange
      Act
      is recorded, processed, summarized and reported within the required time periods
      and are designed to ensure that information that is required to be disclosed
      in
      its reports is accumulated and communicated to our management, including Chief
      Executive Officer and Chief Financial Officer, as appropriate to allow timely
      decisions regarding required disclosure.




**Changes
      in Internal Control**




As
      previously disclosed in our past filings with the SEC, we had identified
      material weaknesses in our internal control over financial reporting for the
      year ended December 31, 2006. A material weakness is a significant deficiency,
      or combination of significant deficiencies, that results in more than a remote
      likelihood that a material misstatement of the annual or interim financial
      statements will not be prevented or detected. In January 2006, a major
      restructuring and streamlining at the corporate office significantly changed
      the
      design and structure of the internal controls and procedures at the corporate
      level. The weakness that we were addressing related to the lack of appropriate
      review of non-routine or complex accounting matters, related accounting entries,
      and appropriate documentation, disclosure and application of Canadian and U.S.
      GAAP, primarily due to a lack of sufficient personnel with a level of technical
      accounting expertise commensurate with our reporting requirements. In addition,
      related to the reduction in staffing at the Montana Tunnels mine in mid October
      2005, and an additional reduction in staffing in early May 2006, at which time
      the mine ceased production operations, our controls at that location were not
      operating as previously designed related to segregation of duties over
      procurement, inventory control and accounting duties.





To
      address these material weaknesses, staffing additions and other changes,
      enhancements and improvements to our internal controls were made during the
      first two quarters of 2007, including increased involvement by corporate
      management in the oversight and management of the Montana Tunnels mine. We
      have
      completed our evaluation of these staffing additions and other changes,
      improvements and enhancements as of the date of this Annual Report of Form
      10-K
      for the year ended December 31, 2007 and concluded that the material weaknesses
      previously reported have been eliminated.





There
      was
      no change in the Company’s internal control over financial reporting identified
      in connection with the evaluation required by paragraph (d) of Rule 13a-15
      under
      the Exchange Act that occurred during the last fiscal quarter of 2007 that
      has
      materially affected, or that is reasonably likely to materially affect, the
      Company’s internal control over financial
      reporting.




-62-





**ITEM
      9A(T).**





**MANAGEMENT’S
      REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**





The
      management of Apollo Gold Corporation is responsible for establishing and
      maintaining adequate internal control over financial reporting. Internal control
      over financial reporting is a process designed by, or under the supervision
      of,
      the Company’s principal executive and principal financial officers and effected
      by the Company’s board of directors, management and other personnel, to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles. Because of its inherent limitations,
      internal control over financial reporting may not prevent or detect
      misstatements. Also, projections of any evaluation of effectiveness to future
      periods are subject to risk that controls may become inadequate because of
      changes in conditions, or that the degree of compliance with the policies or
      procedures may deteriorate.





The
      Company’s management assessed the effectiveness of the Company’s internal
      control over financial reporting as of December 31, 2007. In making this
      assessment, the Company’s management used the criteria set forth by the
      Committee of Sponsoring Organizations of the Treadway Commission (COSO) in *Internal
      Control-Integrated Framework* .
      Based
      upon its assessment, management concluded that, as of December 31, 2007,
      the Company’s internal control over financial reporting was
      effective.





This
      Annual Report on Form 10-K does not include an attestation report of the
      Company’s independent registered chartered accountants regarding internal
      control over financial reporting. Management’s report was not subject to
      attestation by the Company’s independent registered chartered accountants
      pursuant to temporary rules of the Securities and Exchange Commission that
      permit the Company to provide only management’s report in this Annual Report on
      Form 10-K.





**ITEM
      9B.** ***OTHER
      INFORMATION***





None.




-63-


**PART
      III**




**ITEM
      10.** ***DIRECTORS,
      EXECUTIVE OFFICERS ***AND
      CORPORATE GOVERNANCE******




Information
      regarding directors of Apollo is incorporated by reference to the section
      entitled “Proposal #1 - Election of Directors” in our definitive proxy statement
      to be filed with the Securities and Exchange Commission pursuant to Regulation
      14A in connection with the 2008 annual meeting of shareholders (the “Proxy
      Statement”). Reference is made to the information set forth under the section
      entitled “Executive Officers” in the Proxy Statement which information is
      incorporated by reference in this Annual Report on Form 10-K.




**ITEM
      11.** ***EXECUTIVE
      COMPENSATION***




Reference
      is made to the information set forth under the section entitled “Compensation
      Table for Named Executive Officers” in the Proxy Statement, which information is
      incorporated by reference in this Annual Report on Form 10-K.




**ITEM
      12.** ***SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ***AND
      RELATED SHAREHOLDER MATTERS******




Reference
      is made to the information set forth under the section entitled “Beneficial
      Ownership Table” in the Proxy Statement, which information is incorporated by
      reference in this Annual Report on Form 10-K.




**ITEM
      13.** ***CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS ***AND
      DIRECTOR INDEPENDENCE******




Reference
      is made to the information contained under the section entitled “Interests of
      Insiders and Others in Material Transactions” contained in the Proxy Statement,
      which information is incorporated by reference in this Annual Report on Form
      10-K.




**ITEM
      14.** ***PRINCIPAL
      ACCOUNTANT FEES AND SERVICES***




Reference
      is made to the information contained under the section entitled “Report of the
      Audit Committee” contained in the Proxy Statement, which information is
      incorporated by reference in this Annual Report on Form 10-K.




-64-


**PART
      IV**




**ITEM
      15.** ***EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K***




(a)  Documents
      filed as part of this Annual Report on Form 10-K or incorporated by
      reference:




(1)  Our
      consolidated financial statements are listed on the “Index to Financial
      Statements” on Page F-1 to this report.




(2)  Financial
      Statement Schedules (omitted because they are either not required, are not
      applicable, or the required information is disclosed in the Notes to the
      Consolidated Financial Statements or related notes).




(3)  The
      following exhibits are filed with this Annual Report on Form 10-K or
      incorporated by reference.





**Exhibit****No.**
            
            **Exhibit
                Name**3.1
            
            Certificate
                of Continuance filed May 28, 2003, filed with the SEC on June 23,
                2003 as
                Exhibit 3.12 to the Registration Statement on Form 10 (File No.
                001-31593).3.2
            
            By-Laws
                of the Registrant, as amended to date, filed with the SEC on June
                23, 2003
                as Exhibit 3.13 to the Registration Statement on Form 10 (File No.
                001-31593).4.1
            
            Sample
                Certificate of Common Shares of the Registrant, filed with the SEC
                on June
                23, 2003 as Exhibit 4.1 to the Registration Statement on Form 10
                (File No.
                001-31593).4.2
            
            Subscription
                Agreement, dated December 31, 2004, by and among Apollo Gold Corporation
                and certain investors, filed with the SEC on January 5, 2005 as Exhibit
                4.1 to the Current Report on Form 8-K.4.3
            
            Form
                of Registration Rights Agreement, dated December 31, 2004, by and
                among
                Apollo Gold Corporation and certain investors, filed with the SEC
                on
                January 5, 2005 as Exhibit 4.2 to the Current Report on Form
                8-K.4.4
            
            Form
                of Flow Through Subscription Agreement, dated October 30, 2006, by
                and
                among Apollo Gold Corporation and certain investors, filed with the
                SEC on
                November 1, 2006 as Exhibit 4.1 to the Current Report on Form
                8-K.4.5
            
            Form
                of Flow Through Unit Warrant, dated October 30, 2006, filed with
                the SEC
                on November 1, 2006 as Exhibit 4.2 to the Current Report on Form
                8-K.4.6
            
            Form
                of Broker Warrant, dated October 30, 2006, filed with the SEC on
                November
                1, 2006 as Exhibit 4.3 to the Current Report on Form
                8-K.4.7
            
            Form
                of Purchase Agreement, dated October 30, 2006, by and among Apollo
                Gold
                Corporation and certain investors, filed with the SEC on November
                1, 2006
                as Exhibit 4.4 to the Current Report on Form 8-K.4.8
            
            Form
                of U.S. Unit Warrant, dated October 30, 2006, filed with the SEC
                on
                November 1, 2006 as Exhibit 4.5 to the Current Report on Form
                8-K.




4.9
            
            Form
                of Compensation Warrant, dated October 30, 2006, filed with the SEC
                on
                November 1, 2006 as Exhibit 4.6 to the Current Report on Form
                8-K.




-65-




**Exhibit****No.**
            
            **Exhibit
                Name**4.10
            
            Shareholder
                Rights Plan Agreement, dated January 17, 2007, by and between Apollo
                Gold
                Corporation and CIBC Mellon Trust Company filed with the SEC on January
                19, 2007 as Exhibit 4.1 to the Current Report on Form
                8-K4.11
            
            Form
                of Subscription Agreement, dated February 23, 2007, by and among
                Apollo
                Gold Corporation and certain investors, filed with the SEC on February
                26,
                2007 as Exhibit 4.1 to the Current Report on Form 8-K.4.12
            
            Form
                of Convertible Debenture, dated February 23, 2007, filed with the
                SEC on
                February 26, 2007 as Exhibit 4.2 to the Current Report on Form
                8-K.4.13
            
            Form
                of Purchase Warrant, dated February 23, 2007, filed with the SEC
                on
                February 26, 2007 as Exhibit 4.3 to the Current Report on Form
                8-K.4.14
            
            Form
                of Compensation Warrant, dated February 23, 2007, filed with the
                SEC on
                February 26, 2007 as Exhibit 4.4 to the Current Report on Form
                8-K.4.15
            
            Form
                of Registration Rights Agreement, dated February 23, 2007, by and
                among
                Apollo Gold Corporation and certain investors, filed with the SEC
                on
                February 26, 2007 as Exhibit 4.5 to the Current Report on Form
                8-K.4.16
            
            Underwriting
                Agreement, dated October 31, 2007, between Apollo Gold Corporation
                and
                Haywood Securities Inc., filed with the SEC on November 1, 2007 as
                Exhibit
                1.1 to the Current Report on Form 8-K.4.17
            
            Form
                of Subscription Agreement, dated October 31, 2007, among Apollo Gold
                Corporation and certain investors, filed with the SEC on November
                1, 2007
                as Exhibit 4.2 to the Current Report on Form 8-K.4.18
            
            Form
                of Registration Rights Agreement, dated October 31, 2007, among Apollo
                Gold Corporation and certain investors, filed with the SEC on November
                1,
                2007 as Exhibit 4.3 to the Current Report on Form 8-K.4.19
            
            Compensation
                Option Certificate, dated October 31, 2007, issued by Apollo Gold
                Corporation to Haywood Securities Inc., filed with the SEC on November
                1,
                2007 as Exhibit 4.1 to the Current Report on Form 8-K.10.1
            
            Amended
                and Restated Employment Agreement dated May, 2003, by and between
                Apollo
                Gold Corporation and R. David Russell, filed with the SEC on June
                23, 2003
                as Exhibit 10.1 to the Registration Statement on Form 10 (File No.
                001-31593).10.2
            
            Amended
                and Restated Employment Agreement dated May, 2003, by and between
                Apollo
                Gold Corporation and Richard F. Nanna, filed with the SEC on June
                23, 2003
                as Exhibit 10.2 to the Registration Statement on Form 10 (File No.
                001-31593).10.3
            
            Employment
                Agreement between Apollo Gold Corporation and Melvyn Williams, effective
                as of February 16, 2004, as amended, filed with the SEC on September
                24,
                2004 as Exhibit 10.3 to the Current Report on Form 8-K.10.4
            
            Form
                of Amendment No. 1, dated January 23, 2006, to Amended and Restated
                Employment Agreement, by and between Apollo Gold Corporation and
                each of
                R. David Russell, Melvyn Williams and Richard F. Nanna, filed with
                the SEC
                on January 27, 2006 as Exhibit 10.2 to the Current Report on Form
                8-K.10.5
            
            Form
                of Amended and Restated Employment and Severance Agreement, dated
                January
                23, 2006, by and between Apollo Gold Corporation and each of Donald
                O.
                Miller, James T. O’Neil, David K. Young and Donald W. Vagstad, filed with
                the SEC on January 27, 2006 as Exhibit 10.1 to the Current Report
                on Form
                8-K.10.6
            
            Apollo
                Gold Corporation Stock Option Incentive Plan, as amended and restated
                May
                24, 2006, filed with the SEC on April 27, 2006 as Schedule B to Apollo
                Gold Corporation’s Proxy Statement on Schedule
                14A.




-66-


**Exhibit****No.**
            
            **Exhibit
                Name**10.7
            
            Apollo
                Gold Corporation Plan of Arrangement Stock Option Incentive Plan,
                filed
                with the SEC on June 23, 2003, as Exhibit 10.7 to the Registration
                Statement on Form 10 (File No. 001-31593).10.8
            
            Apollo
                Gold, Inc. and Affiliated Companies Company Retirement Plan (Employee
                Savings Plan), filed with the SEC on June 23, 2003 as Exhibit 10.12
                to the
                Registration Statement on Form 10 (File No. 001-31593).10.9
            
            Form
                of Indemnification Agreement, dated various dates, between Apollo
                Gold
                Corporation and Richard F. Nanna, filed with the SEC on September
                24, 2004
                as Exhibit 10.1 to the Current Report on Form 8-K.10.10
            
            Form
                of Indemnification Agreement, dated various dates, by and among Apollo
                Gold, Inc.; Apollo Gold Exploration, Inc.; Apollo Gold Finance Inc.;
                and
                Donald W. Vagstad, filed with the SEC on September 24, 2004 as Exhibit
                10.2 to the Current Report on Form 8-K.10.11
            
            Form
                of Amended and Restated Indemnification Agreement, dated November
                18,
                2005, by and among Apollo Gold, Inc.; Apollo Gold Finance, Inc.;
                Montana
                Tunnels Mining, Inc. and each of R. David Russell, Melvyn Williams,
                David
                K. Young, Donald O. Miller, James T. O’Neil, Jr., G. Michael Hobart, W.S.
                Vaughan, and Charles Stott, filed with the SEC on March 31, 2006
                as
                Exhibit 10.20 to the Annual Report on Form 10-K.10.12
            
            Term
                Bonding Agreement dated August 1, 2002 among National Fire Insurance
                Company of Hartford, Apollo Gold Corporation, Apollo Gold, Inc. and
                Montana Tunnels Mining, Inc., filed with the SEC on June 23, 2003
                as
                Exhibit 10.11 to the Registration Statement on Form 10 (File No.
                001-31593).10.13
            
            Stock
                Purchase Agreement among Jipangu Inc., Jipangu International Inc.,
                Apollo
                Gold, Inc. and Apollo Gold Corporation made as of October 17, 2005,
                filed
                with the SEC on October 28, 2005 as Exhibit 10.1 to the Current Report
                on
                Form 8-K.10.14
            
            Promissory
                Note by Apollo Gold Corporation as Maker and Jipangu Inc. as Holder,
                dated
                October 17, 2005, filed with the SEC on October 28, 2005 as Exhibit
                10.2
                to the Current Report on Form 8-K.10.15
            
            General
                Security Agreement by Apollo Gold Corporation as Debtor in favor
                of The
                Canada Trust Company, dated as of January 4, 2006, filed with the
                SEC on
                January 13, 2006 as Exhibit 10.1 to the Current Report on Form
                8-K.10.16
            
            Mine
                Development and Operating Agreement, dated July 28, 2006, between
                Montana
                Tunnels Mining, Inc. and Elkhorn Tunnels, LLC, filed with the SEC
                on
                August 2, 2006 as Exhibit 10.1 to the Current Report on Form
                8-K.10.17
            
            Form
                of Amendment, dated January 8, 2007, to Mine Development and Operating
                Agreement, dated July 28, 2006, between Montana Tunnels Mining, Inc.
                and
                Elkhorn Tunnels, LLC, filed with the SEC on January 9, 2007 as Exhibit
                10.1 to the Current Report on Form 8-K.10.18
            
            Option
                Agreement, dated July 28, 2006, between Montana Tunnels Mining, Inc.
                and
                Elkhorn Goldfields, Inc., filed with the SEC on August 2, 2006 as
                Exhibit
                10.2 to the Current Report on Form 8-K.10.19
            
            Mill
                Operating and Option Agreement, dated July 28, 2006, between Montana
                Tunnels Mining, Inc. and Elkhorn Goldfields, Inc., filed with the
                SEC on
                August 2, 2006 as Exhibit 10.3 to the Current Report on Form
                8-K.10.20
            
            Promissory
                Note, dated August 1, 2006, issued by Montana Tunnels Mining, Inc.
                to
                Great American Group, filed with the SEC on August 2, 2006 as Exhibit
                10.4
                to the Current Report on Form 8-K.10.21
            
            Master
                Lease Agreement, dated as of November 21, 2006, between Apollo Gold
                Corporation and Marquette Equipment Finance, LLC, filed with the
                SEC on
                December 7, 2006 as Exhibit 10.1 to the Current Report on Form 8-K.




-67-




**Exhibit****No.**
            
            **Exhibit
                Name**10.22
            
            Lease
                Schedule No. 001, dated as of November 21, 2006, between Apollo Gold
                Corporation and Marquette Equipment Finance, LLC, filed with the
                SEC on
                December 7, 2006 as Exhibit 10.2 to the Current Report on Form
                8-K.10.23
            
            Security
                Agreement, dated as of November 21, 2006, between Apollo Gold Corporation
                and Marquette Equipment Finance, LLC, filed with the SEC on December
                7,
                2006 as Exhibit 10.3 to the Current Report on Form 8-K.10.24
            
            Facility
                Agreement, dated October 12, 2007, among Montana Tunnels Mining,
                Inc.,
                Apollo Gold Corporation, Apollo Gold, Inc., RMB Australia Holdings
                Limited
                and RMB Resources Inc., filed with the SEC on October 18, 2007 as
                Exhibit
                10.1 to the Current Report on Form 8-K.10.25
            
            Employment
                Agreement between Apollo Gold Corporation and Montana Tunnels Mining,
                Inc.
                and Timothy G. Smith, effective as of February 15,
                2004.*10.26
            
            Employment
                Agreement by and between Apollo Gold Corporation and Brent E. Timmons,
                effective as of April 1, 2007.*21.1
            
            List
                of subsidiaries of the Registrant*23.1
            
            Consent
                of Deloitte & Touche LLP*23.2
            
            Consent
                of SRK Consulting (US), Inc. *31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act*31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act*32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act*





*
      Filed
      herewith.




-68-


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed March 18, 2008
      on
      its behalf by the undersigned, thereunto duly authorized.


APOLLO GOLD CORPORATIONBy:
            /s/
              *R.
              David Russell*R.
                David Russell
              *President
                and Chief Executive Officer*




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed by the following persons on behalf of the Registrant, in the capacities
      and on the dates indicated.




**Signature**
            
            **Title**
            
            **Date**/s/*R.
                David Russell*
            
            President
                and Chief Executive Officer, andR.
                David Russell
            
            Director (Principal
              Executive Officer)
            
            March
                18, 2008/s/*Charles
                E. Stott*
            
            Chairman
                of the Board of Directors
            
            March
                18, 2008Charles
                E. Stott/s/*G.
                Michael Hobart*
            
            Director
            
            March
                18, 2008G.
                Michael Hobart/s/*Robert
                W. Babensee*
            
            Director
            
            March
                18, 2008Robert
                W. Babensee/s/*W.
                S. Vaughan*
            
            Director
            
            March
                18, 2008W.
                S. Vaughan/s/*Marvin
                K. Kaiser*
            
            Director
            
            March
                18, 2008Marvin
                K. Kaiser/s/*David
                W. Peat*
            
            Director
            
            March
                18, 2008David
                W. Peat/s/*Melvyn
                Williams*
            
            Chief
              Financial Officer and Senior Vice President
              -
            
            March
                18, 2008Melvyn
                Williams
            
            Finance
                and Corporate Development (Principal Financial and Accounting
                Officer)




-69-


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**





Report
                of Independent Registered Chartered
                Accountants
            
            F-2Comments
                by Independent Registered Chartered Accountants on
                Canada-United States of America Reporting Differences
            
            F-2Consolidated
                Balance Sheets as of December 31, 2007 and
                2006
            
            F-3Consolidated
                Statements of Operations and Comprehensive
                Income (Loss) for the Years Ended December 31, 2007, 2006, and
                2005
            
            F-4Consolidated
                Statements of Shareholders’ Equity for the
                Years Ended December 31, 2007, 2006, and 2005
            
            F-5Consolidated
                Statements of Cash Flows for the Years Ended
                December 31, 2007, 2006, and 2005
            
            F-6Notes
                to the Consolidated Financial
                Statements
            
            F-7





F-1




**REPORT
      OF INDEPENDENT REGISTERED CHARTERED
      ACCOUNTANTS**





To
      the
      Board of Directors and Shareholders of Apollo Gold Corporation





We
      have
      audited the accompanying consolidated balance sheets of Apollo Gold Corporation
      (the “Company”) as at December 31, 2007 and 2006, and the consolidated
      statements of operations and comprehensive income (loss), shareholders’
equity, and cash flows for each of the three years in the period ended December
      31, 2007. These financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these financial
      statements based on our audits.




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




In
      our
      opinion, these consolidated financial statements present fairly, in all material
      respects, the financial position of the Company as at December 31, 2007 and
      2006, and the results of its operations and its cash flows for each of the
      three
      years in the period ended December 31, 2007 in accordance with Canadian
      generally accepted accounting principles.




The
      Company is not required to have, nor were we engaged to perform, an audit of
      its
      internal control over financial reporting. Our audits included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on Company’s internal control over financial reporting.
      Accordingly, we express no such opinion.




/s/ ***Deloitte
      & Touche LLP***


Independent
      Registered Chartered Accountants


Vancouver,
      Canada


March
      18,
      2008




**COMMENTS
      BY INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS ON
      CANADA-UNITED STATES OF AMERICA REPORTING DIFFERENCES**




The
      standards of the Public Company Accounting Oversight Board (United States)
      require the addition of an explanatory paragraph (following the opinion
      paragraph) when there are changes in accounting principles that have a material
      effect on the comparability of the Company’s financial statements such as the
      changes described in Note 3 to the consolidated financial statements. The
      standards of the Public Company Accounting Oversight Board (United States)
      also
      require the addition of an explanatory paragraph when the financial statements
      are affected by conditions and events that cast substantial doubt on the
      Company’s ability to continue as a going concern, such as those described in
      Note 1 to the consolidated financial statements. Although we conducted our
      audits in accordance with both Canadian generally accepted auditing standards
      and the standards of the Public Company Accounting Oversight Board (United
      States), our report to the Board of Directors and Shareholders dated March
      18,
      2008 is expressed in accordance with Canadian reporting standards which do
      not
      require a reference to such changes in accounting principles or permit such
      a
      reference to such conditions and events in the auditors’ report when these
      matters are properly accounted for and adequately disclosed in the consolidated
      financial statements.




/s/ ***Deloitte
      & Touche LLP***


Independent
      Registered Chartered Accountants


Vancouver,
      Canada


March
      18,
      2008




F-2


**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      BALANCE SHEETS**





**December
                31,****2007**
            
            **2006****ASSETS**
            
            **(In
                thousands of**CURRENT
            
            **U.S.
                Dollars)**Cash
                and cash equivalents
            
            $
            4,852
            
            $
            4,512Derivative
                instruments (Note 5)
            
            
            2,101
            
            
            -Restricted
                certificates of deposit (Note 8)
            
            
            1,000
            
            
            -Accounts
                receivable and other
            
            
            1,846
            
            
            728Note
                receivable
            
            
            -
            
            
            1,865Prepaids
            
            
            509
            
            
            236Inventories
                (Note 6)
            
            
            2,169
            
            
            660Total
                current assets
            
            
            12,477
            
            
            8,001Long-term
                investments (Note 5)
            
            
            1,467
            
            
            -Property,
                plant and equipment (Note 7)
            
            
            48,378
            
            
            38,868Deferred
                stripping costs (Note 3(i))
            
            
            4,787
            
            
            -Restricted
                certificates of deposit (Note 8)
            
            
            6,715
            
            
            4,605Other
                long-term assets
            
            
            84
            
            
            65Future
                income tax assets (Note 15)
            
            
            1,165
            
            
            -Deferred
                financing costs (Note 3(s))
            
            
            -
            
            
            265TOTAL
                ASSETS
            
            $
            75,073
            
            $
            51,804**LIABILITIES**CURRENTAccounts
                payable
            
            $
            2,748
            
            $
            1,710Accrued
                liabilities
            
            
            2,940
            
            
            1,254Property
                and mining taxes payable
            
            
            957
            
            
            442Notes
                payable and other current debt (Note 9)
            
            
            7,617
            
            
            671Convertible
                debenture (Note 10)
            
            
            -
            
            
            7,660Total
                current liabilities
            
            
            14,262
            
            
            11,737Accrued
                long-term liabilities
            
            
            289
            
            
            370Notes
                payable (Note 9)
            
            
            159
            
            
            569Convertible
                debenture (Note 10)
            
            
            5,537
            
            
            -Accrued
                site closure costs (Note 12)
            
            
            9,442
            
            
            7,135Deferred
                gain (Note 4)
            
            
            2,511
            
            
            3,750TOTAL
                LIABILITIES
            
            
            32,200
            
            
            23,561Continuing
                operations (Note 1)Commitments
                and contingencies (Note 18)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 13)
            
            
            166,424
            
            
            159,029Equity
                component of convertible debentures (Note 10)
            
            
            2,238
            
            
            1,809Note
                warrants (Note 10)
            
            
            2,292
            
            
            1,062Contributed
                surplus
            
            
            14,591
            
            
            11,166Deficit
            
            
            (142,672
            )
            
            (144,823
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            42,873
            
            
            28,243TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            75,073
            
            $
            51,804




APPROVED
                ON BEHALF OF THE BOARD/s/*Charles
                E. Stott*Charles
                E. Stott, Director/s/*David
                W. Peat*David
                W. Peat, Director




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




F-3




**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
      (LOSS)**





**Year
                Ended December 31,****2007**
            
            **2006**
            
            **2005****(In
                thousands of U.S. dollars, except**
              **for
                share and per share amounts)**Revenue
                from sale of minerals
            
            $
            38,474
            
            $
            10,177
            
            $
            43,254Operating
                expensesDirect
                operating costs
            
            
            26,336
            
            
            15,361
            
            
            48,357Depreciation
                and amortization
            
            
            1,380
            
            
            1,647
            
            
            2,551General
                and administrative expenses
            
            
            4,647
            
            
            4,004
            
            
            8,185Accretion
                expense - accrued site closure costs
            
            
            507
            
            
            948
            
            
            881Amortization
                of deferred gain (Note 4)
            
            
            (1,239
            )
            
            -
            
            
            -Loss
                (gain) on sale of property, plant and equipment
            
            
            -
            
            
            7
            
            
            (3,848
            )Exploration
                and business development
            
            
            2,430
            
            
            1,033
            
            
            91834,061
            
            
            23,000
            
            
            57,044Operating
                income (loss)
            
            
            4,413
            
            
            (12,823
            )
            
            (13,790
            )Other
                income (expenses)Interest
                income
            
            
            701
            
            
            421
            
            
            397Interest
                expense (Note 14)
            
            
            (5,738
            )
            
            (2,677
            )
            
            (2,533
            )Financing
                costs
            
            
            (693
            )
            
            -
            
            
            -Realized
                gain on investments - derivative instruments
            
            
            395
            
            
            -
            
            
            -Unrealized
                gains on investments - derivative instruments
            
            
            2,101
            
            
            -
            
            
            -Foreign
                exchange loss and other
            
            
            (157
            )
            
            (158
            )
            
            (35
            )Income
                (loss) from continuing operations before income taxes
            
            
            1,022
            
            
            (15,237
            )
            
            (15,961
            )Income
                tax recovery (Note 15)
            
            
            1,394
            
            
            -
            
            
            -Income
                (loss) from continuing operations
            
            
            2,416
            
            
            (15,237
            )
            
            (15,961
            )Loss
                from discontinued operations (Note 23)
            
            
            -
            
            
            (350
            )
            
            (6,247
            )Net
                income (loss) and comprehensive income (loss)
            
            $
            2,416
            
            $
            (15,587
            )
            $
            (22,208
            )Basic
                and diluted net income (loss) per share from:Continuing
                operations
            
            $
            0.02
            
            $
            (0.13
            )
            $
            (0.16
            )Discontinued
                operations
            
            
            -
            
            
            (0.00
            )
            
            (0.06
            )$
            0.02
            
            $
            (0.13
            )
            $
            (0.22
            )Basic
                weighted-average number of shares outstanding
            
            
            145,645,178
            
            
            123,621,267
            
            
            101,811,291Diluted
                weighted-average number of shares outstanding (Note 16)
            
            
            146,427,970
            
            
            123,621,267
            
            
            101,811,291




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




F-4


**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’
EQUITY**





**Number
                of Shares**
            
            **Share
                Capital**
            
            **Equity
                Component of Convertible Debentures**
            
            **Note
                Warrants**
            
            **Contributed**
              **Surplus**
            
            **Deficit**
            
            **Total****(In
                thousands of U.S. dollars, except for number of
                shares)**Balance,
                December 31, 2004
            
            
            90,973,120
            
            $
            142,026
            
            $
            1,815
            
            $
            781
            
            $
            9,627
            
            $
            (107,028
            )
            $
            47,221Units
                issued for cash (Note 13(c)(i))
            
            
            4,199,998
            
            
            2,587
            
            
            -
            
            
            -
            
            
            194
            
            
            -
            
            
            2,781Shares
                issued for increase in Huizopa interest(Note
                13(c)(ii))
            
            
            1,000,000
            
            
            410
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            410Shares
                issued for cash (Note 13(c)(iii))
            
            
            10,000,000
            
            
            3,183
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,183Conversion
                of convertible debentures
            
            
            33,333
            
            
            23
            
            
            (6
            )
            
            -
            
            
            -
            
            
            -
            
            
            17Engagement
                fee shares and warrants (Note 13(c)(iv))
            
            
            350,000
            
            
            100
            
            
            -
            
            
            -
            
            
            143
            
            
            -
            
            
            243Completion
                fee shares (Note 13(c)(v))
            
            
            900,000
            
            
            197
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            197Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            597
            
            
            -
            
            
            597Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (22,208
            )
            
            (22,208
            )Balance,
                December 31, 2005
            
            
            107,456,451
            
            
            148,526
            
            
            1,809
            
            
            781
            
            
            10,561
            
            
            (129,236
            )
            
            32,441Units
                issued for cash (Note 13(b)(i))
            
            
            11,650,000
            
            
            3,488
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,488Shares
                issued for 2005 stock-based compensation (Note 13(b)(ii))
            
            
            2,290,408
            
            
            955
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            955Reduction
                of exercise price of Note Warrants (Note 10(b))
            
            
            -
            
            
            -
            
            
            -
            
            
            305
            
            
            -
            
            
            -
            
            
            305Note
                warrants exercised
            
            
            600,000
            
            
            264
            
            
            -
            
            
            (24
            )
            
            -
            
            
            -
            
            
            240Shares
                issued for services (Note 13(b)(iii))
            
            
            1,325,000
            
            
            668
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            668Flow-through
                units issued for cash (Note 13(b)(iv))
            
            
            2,222,221
            
            
            746
            
            
            -
            
            
            -
            
            
            27
            
            
            -
            
            
            773Units
                issued for cash (Note 13(b)(v))
            
            
            16,688,206
            
            
            4,357
            
            
            -
            
            
            -
            
            
            156
            
            
            -
            
            
            4,513Options
                exercised
            
            
            50,000
            
            
            25
            
            
            -
            
            
            -
            
            
            (5
            )
            
            -
            
            
            20Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            427
            
            
            -
            
            
            427Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (15,587
            )
            
            (15,587
            )Balance,
                December 31, 2006
            
            
            142,282,286
            
            
            159,029
            
            
            1,809
            
            
            1,062
            
            
            11,166
            
            
            (144,823
            )
            
            28,243Change
                in accounting policy (Note 3(s))
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (265
            )
            
            (265
            )Balance
                (as adjusted) January 1, 2007
            
            
            142,282,286
            
            
            159,029
            
            
            1,809
            
            
            1,062
            
            
            11,166
            
            
            (145,088
            )
            
            27,978Shares
                issued for services
            
            
            120,000
            
            
            52
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            52Shares
                issued for Huizopa settlement (Note 13 (a)(i))
            
            
            1,000,000
            
            
            540
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            540Shares
                issued for Black Fox mineral rights (Note 13(a)(ii))
            
            
            1,057,692
            
            
            527
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            527Flow-through
                shares issued for cash and related compensation warrants (Note
                13(a)(iii))
            
            
            7,454,545
            
            
            3,857
            
            
            -
            
            
            -
            
            
            58
            
            
            -
            
            
            3,915Income
                tax benefits renounced to shareholders of flow-through units issued
                in
                2006
            
            
            -
            
            
            (234
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (234
            )Equity
                component of convertible debentures (Note 10(a))
            
            
            -
            
            
            -
            
            
            2,292
            
            
            -
            
            
            -
            
            
            -
            
            
            2,292Note
                warrants (Note 10(a))
            
            
            -
            
            
            -
            
            
            -
            
            
            2,292
            
            
            -
            
            
            -
            
            
            2,292Debenture
                compensation warrants (Note 10(a))
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            467
            
            
            -
            
            
            467Note
                warrants exercised (Note 10(b))
            
            
            3,933,600
            
            
            2,506
            
            
            -
            
            
            (1,062
            )
            
            129
            
            
            -
            
            
            1,573Conversion
                of debentures (Note 10(a))
            
            
            400,000
            
            
            147
            
            
            (54
            )
            
            -
            
            
            -
            
            
            -
            
            
            93Redemption
                of debentures (Note 10(b))
            
            
            -
            
            
            -
            
            
            (1,809
            )
            
            -
            
            
            1,809
            
            
            -
            
            
            -Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            962
            
            
            -
            
            
            962Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,416
            
            
            2,416Balance,
                December 31, 2007
            
            
            156,248,123
            
            $
            166,424
            
            $
            2,238
            
            $
            2,292
            
            $
            14,591
            
            $
            (142,672
            )
            $
            42,873




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




F-5


**APOLLO
      GOLD CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**Year
                Ended December 31,****2007**
            
            **2006**
            
            **2005****(In
                thousands of U.S. dollars)**OPERATING
                ACTIVITIESNet
                income (loss) for the year
            
            $
            2,416
            
            $
            (15,587
            )
            $
            (22,208
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            1,380
            
            
            1,647
            
            
            2,551Amortization
                of deferred stripping costs
            
            
            2,001
            
            
            -
            
            
            -Amortization
                of deferred financing costs
            
            
            -
            
            
            319
            
            
            319Financing
                costs
            
            
            174
            
            
            -
            
            
            -Loss
                from discontinued operations
            
            
            -
            
            
            350
            
            
            6,247Reduction
                in exercise price of Note Warrants
            
            
            -
            
            
            305
            
            
            -Stock-based
                compensation
            
            
            962
            
            
            427
            
            
            597Shares
                issued for services and settlement of claims
            
            
            592
            
            
            668
            
            
            -Accretion
                expense - accrued site closure costs
            
            
            507
            
            
            948
            
            
            881Accretion
                expense - convertible debentures
            
            
            3,517
            
            
            1,059
            
            
            1,085Foreign
                exchange loss and other
            
            
            174
            
            
            80
            
            
            404Realized
                gains on derivative instruments
            
            
            (395
            )
            
            -
            
            
            -Unrealized
                gains on derivative instruments
            
            
            (2,101
            )
            
            -
            
            
            -Loss
                (gain) on sale of property, plant and equipment
            
            
            -
            
            
            7
            
            
            (3,848
            )Amortization
                of deferred gain
            
            
            (1,239
            )
            
            -
            
            
            -Income
                taxes
            
            
            (1,394
            )
            
            -
            
            
            -Net
                change in non-cash operating working capital items (Note
                20)
            
            
            891
            
            
            (1,482
            )
            
            1,845Discontinued
                operations
            
            
            -
            
            
            (350
            )
            
            848Net
                cash provided by (used in) operating activities
            
            
            7,485
            
            
            (11,609
            )
            
            (11,279
            )INVESTING
                ACTIVITIESProperty,
                plant and equipment expenditures
            
            
            (8,281
            )
            
            (5,417
            )
            
            (5,487
            )Purchase
                of long-term investments
            
            
            (1,500
            )
            
            -
            
            
            -Proceeds
                from sale of derivative instruments
            
            
            395
            
            
            -
            
            
            -Deferred
                stripping costs
            
            
            (6,787
            )
            
            -
            
            
            -Proceeds
                from disposal of property, plant and equipment
            
            
            -
            
            
            92
            
            
            4,526Restricted
                certificates of deposit and other assets
            
            
            (3,110
            )
            
            9,007
            
            
            (12,671
            )Proceeds
                from disposition of discontinued operations
            
            
            -
            
            
            -
            
            
            14,000Discontinued
                operations
            
            
            -
            
            
            -
            
            
            1,022Net
                cash (used in) provided by investing activities
            
            
            (19,283
            )
            
            3,682
            
            
            1,390FINANCING
                ACTIVITIESProceeds
                on issuance of shares and warrants
            
            
            3,954
            
            
            8,773
            
            
            5,944Proceeds
                from exercise of warrants and options
            
            
            1,573
            
            
            260
            
            
            -Proceeds
                on issuance of convertible debentures and note warrants,
                net
            
            
            8,062
            
            
            -
            
            
            -Proceeds
                from notes payable and other current debt
            
            
            9,250
            
            
            -
            
            
            -Repayment
                of convertible debentures
            
            
            (8,731
            )
            
            -
            
            
            -Repayments
                of notes payable
            
            
            (3,692
            )
            
            (1,357
            )
            
            (752
            )Funding
                by joint venture partner, Elkhorn Tunnels, LLC
            
            
            1,865
            
            
            4,635
            
            
            -Discontinued
                operations
            
            
            -
            
            
            -
            
            
            (2,030
            )Net
                cash provided by financing activities
            
            
            12,281
            
            
            12,311
            
            
            3,162Effect
                of exchange rate changes on cash
            
            
            (143
            )
            
            1
            
            
            (32
            )NET
                INCREASE (DECREASE) IN CASH
            
            
            340
            
            
            4,385
            
            
            (6,759
            )CASH
                AND CASH EQUIVALENTS, BEGINNING OF YEAR
            
            
            4,512
            
            
            127
            
            
            6,886CASH
                AND CASH EQUIVALENTS, END OF YEAR (Note 20)
            
            $
            4,852
            
            $
            4,512
            
            $
            127SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            1,973
            
            $
            1,299
            
            $
            1,204Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -





See
      Note
      20 for additional supplemental cash flow information.





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




F-6


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial
      Statements**


**Years
      ended December 31, 2007, 2006 and 2005**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**




**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 the Company has funded its
      operations through issuance of debt and equity securities, joint venture
      contributions from Elkhorn Tunnels, LLC (“Elkhorn”) and cash generated by the
      Montana Tunnels joint venture (Note 4). The Company’s ability to continue as a
      going concern is dependent on its ability to generate cash flow from the Montana
      Tunnels joint venture and/or continue to issue debt and equity
      securities.




If
      the
      Company is unable to generate cash flow from the Montana Tunnels joint venture
      and/or secure additional financing, it may be unable to continue as a going
      concern and material adjustments would be required to the carrying value of
      assets and liabilities and balance sheet classifications used.




**2.**
            **NATURE
                OF OPERATIONS**




Apollo
      is
      engaged in gold mining including extraction, processing, refining and the
      production of other co-product metals, as well as related activities including
      exploration and development. The Company is the operator of the Montana Tunnels
      mine (the “Mine”), which is a 50% joint venture with Elkhorn. The Mine is an
      open pit mine and mill located in the State of Montana that produces gold
      doré and
      lead-gold and zinc-gold concentrates. The Company also owns the Diamond Hill
      mine, which is also located in the State of Montana and is currently under
      care
      and maintenance.


Apollo
      has a development property, the Black Fox development project (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 concessions
      at
      the Huizopa exploration project (the “Huizopa Project”), located in the Sierra
      Madres in Chihuahua, Mexico. The Huizopa Project is subject to an 80% Apollo/20%
      Mineras Coronado joint venture agreement.




**3.**
            **SIGNIFICANT
                ACCOUNTING POLICIES**




The
      consolidated financial statements of Apollo are prepared by management in
      accordance with Canadian generally accepted accounting principles (“Canadian
      GAAP”) and except as described in Note 24, conform in all material respects with
      accounting principles generally accepted in the United States (“U.S. GAAP”). The
      principal accounting policies followed by the Company, which have been
      consistently applied, are summarized as follows:




***(a)***
            Principles
                of consolidation




The
      financial statements of entities which are controlled by the Company through
      voting equity interests, referred to as subsidiaries, are consolidated. 
All intercompany balances and transactions are eliminated upon
      consolidation.  Variable Interest Entities (“VIEs”), which include, but are
      not limited to, special purpose entities, trusts, partnerships, and other legal
      structures, as defined by the Accounting Standards Board in Accounting Guideline
      (“AcG”) 15, “Consolidation of Variable Interest Entities” (“AcG-15”), are
      entities in which equity investors do not have the characteristics of a
“controlling financial interest” or there is not sufficient equity at risk for
      the entity to finance its activities without additional subordinated financial
      support.  VIEs are subject to consolidation by the primary beneficiary who
      will absorb the majority of the entities’ expected losses and/or expected
      residual returns.  The Company did not hold any VIE’s as at December 31,
      2007 and 2006.




F-7


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**




**3.**
            **SIGNIFICANT
                ACCOUNTING POLICIES
                (continued)**




The
      Company’s 50% interest in the joint venture at the Montana Tunnels mine, which
      is subject to joint control, is consolidated on a proportionate basis whereby
      the Company includes in these consolidated financial statements its
      proportionate share of the assets, liabilities, revenues and expenses of the
      joint venture.




***(b)***
            Measurement
                uncertainties




The
      preparation of financial statements in conformity with Canadian GAAP requires
      the Company’s management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and disclosure of contingent assets
      and liabilities at the date of the consolidated financial statements and the
      reported amounts of revenues and expenses during the reporting period.
      Significant estimates used herein include those relating to gold and other
      metal
      prices, recoverable proven and probable reserves, deferred stripping, available
      resources, available operating capital, stock-based compensation and required
      reclamation costs. These estimates each affect management’s evaluation of asset
      impairment and the recorded balances of property, plant and equipment,
      reclamation and site closure costs and the future tax asset valuation allowance.
      It is reasonably possible that actual results could differ in the near term
      from
      those and other estimates used in preparing these financial statements and
      such
      differences could be material.




***(c)***
            Foreign
                currency transactions




Transactions
      denominated in Canadian dollars have been translated into U.S. dollars at the
      approximate rate of exchange prevailing at the time of the transaction. Monetary
      assets and liabilities denominated in foreign currencies have been translated
      into U.S. dollars at the year-end exchange rate. Exchange gains and losses
      are
      included in operating results.




***(d)***
            Cash
                and cash equivalents




Cash
      and
      cash equivalents are comprised of cash and term deposits. The original maturity
      dates of term deposits are not in excess of 90 days.




***(e)***
            Long-term
                investments




The
      Company accounts for its investments in auction rate securities as
      available-for-sale securities (see Note 3(s)). The Company has recorded an
      other
      than temporary impairment on its auction rate securities in the consolidated
      statement of operations of $33,000 during the year ended December 31, 2007,
      and
      as such, no amounts have been recorded in other comprehensive
      income.




***(f)***
            Inventories




Metals
      inventories are stated at the lower of weighted-average production cost and
      net
      realizable value determined by using the first-in, first-out method. Materials
      and supplies are valued at the lower of average direct cost of acquisition
      and
      replacement cost.




Ore
      stockpiles represent ore that has been mined and is available for further
      processing. Work-in-process inventories, including ore stockpiles, are valued
      at
      the lower of average production cost and net realizable value, after a
      reasonable allowance for further processing and sales costs.




F-8


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**3.**
            **SIGNIFICANT
                ACCOUNTING POLICIES
                (continued)**




***(g)***
            Property,
                plant and equipment




Mine
      development costs are capitalized after proven and probable reserves have been
      identified. Amortization is calculated using the units-of-production method
      over
      the expected life of the mine based on the estimated recoverable gold equivalent
      ounces or value of metals over proven and probable reserves and a portion of
      resources expected to be converted to reserves based on past
      results.




Buildings
      and equipment are recorded at acquisition cost and amortized over the remaining
      proven and probable reserves of the mine site on a units-of-production basis.
      Equipment that is mobile is amortized on a straight-line basis over the
      estimated useful life of the equipment of five to ten years. Repair and
      maintenance costs are expensed as incurred.




Financing
      and acquisition costs including interest and fees are capitalized to the extent
      that expenditures are incurred for the acquisition of assets and mineralized
      properties and related development activities. Capitalization ceases when the
      asset or property is substantially complete and ready to produce at commercial
      rates.




***(h)***
            Mineral
                rights




Mineral
      rights include the cost of obtaining unpatented and patented mining claims
      and
      the cost of acquisition of properties. Significant payments related to the
      acquisition of land and mineral rights are capitalized. If a mineable ore body
      is discovered, such costs are amortized when production begins using the
      units-of-production method based on proven and probable reserves. If no mineable
      ore body is discovered or such rights are otherwise determined to have no value,
      such costs are expensed in the period in which it is determined the property
      has
      no future economic value.




***(i)***
            Stripping
                costs




Stripping
      costs incurred during the production phase of a mine are variable production
      costs that are included in the costs of the inventory produced during the period
      that the stripping costs are incurred. EIC-160, *Stripping
      Costs Incurred in the Production Phase of a Mining Operation,* requires
      stripping costs that represent a betterment to the mineral property to be
      capitalized and amortized in a rational and systematic manner over the reserves
      that directly benefit from the specific stripping activity. The Company adopted
      EIC-160 as of January 1, 2007 retrospectively without restatement and during
      the
      year ended December 31, 2007, the Company capitalized $6.8 million in deferred
      stripping costs and recorded amortization thereon in the amount of $2.0 million.
      Deferred stripping costs are amortized using the units-of-production method
      over
      the expected life of the operation based on the estimated recoverable gold
      equivalent ounces.




***(j)***
            Exploration
                expenditures




Exploration
      expenditures are expensed as incurred during the reporting period.




***(k)***
            Property
                evaluations




The
      Company evaluates the carrying amounts of its mining properties and related
      buildings, plant and equipment at least annually or when events or changes
      in
      circumstances indicate that the carrying amount may not be recoverable.
      Annually, or if the Company has reason to believe that an impairment may exist,
      estimated future undiscounted cash flows are prepared using estimated
      recoverable ounces of gold (considering current proven and probable reserves
      and
      mineral resources expected to be converted into mineral reserves) and
      corresponding co- product
      credits along with estimated future metals prices and estimated operating and
      capital costs. The inclusion of mineral resources is based on various
      circumstances, including but not limited to the existence and nature of known
      mineralization, location of the property, results of recent drilling and
      analysis to demonstrate the ore is commercially recoverable. If the future
      undiscounted cash flows are less than the carrying value of the assets, the
      assets will be written down to fair value, determined using discounted cash
      flows, and the write-off charged to earnings in the current period.




F-9


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**3.**
              **SIGNIFICANT
                  ACCOUNTING POLICIES
                  (continued)**


***(l)***
            Derivative
                instruments




Apollo
      generally avoids gold hedging. Apollo’s policy is to provide shareholders with
      leverage to changes in the gold price by selling our gold production at market
      prices. We have, however, entered into derivative contracts to protect the
      selling price for certain anticipated lead and zinc production (see Note
      9).




The
      Company has not applied hedge accounting to this transaction. As a result,
      the
      Company accounts for these contracts as investments and records the changes
      in
      unrealized gains and losses in the statement of income each period. The fair
      value of these derivatives is recorded as a current asset or current liability
      at each balance sheet date.




***(m)***
            Reclamation
                and closure costs




The
      Company recognizes liabilities for statutory, contractual or legal obligations
      associated with the retirement of property, plant and equipment, when those
      obligations result from the acquisition, construction, development or normal
      operation of the assets. Initially, a liability for an asset retirement
      obligation is recognized at its fair value in the period in which it is
      incurred. Upon initial recognition of the liability, the corresponding asset
      retirement cost is added to the carrying amount of that asset and the cost
      is
      amortized as an expense over the economic life of the related asset. Following
      the initial recognition of the asset retirement obligation, the carrying amount
      of the liability is increased for the passage of time and adjusted for changes
      to the amount or timing of the underlying cash flows needed to settle the
      obligation.




The
      present value of the reclamation liabilities may be subject to change based
      on
      management’s current estimates, changes in remediation technology or changes to
      the applicable laws and regulations by regulatory authorities, which affects
      the
      ultimate cost of remediation and reclamation.




***(n)***
            Revenue
                recognition




Revenue
      from the sale of gold and co-products is recognized when the following
      conditions are met: persuasive evidence of an arrangement exists; delivery
      has
      occurred in accordance with the terms of the arrangement; the price is fixed
      or
      determinable and collectability is reasonably assured. Revenue for gold bullion
      is recognized at the time of delivery and transfer of title to counter-parties.
      Revenue for lead and zinc concentrates is determined by contract as legal title
      to the concentrate transfers and include provisional pricing arrangements
      accounted for as an embedded derivative instrument under Statement of Financial
      Accounting Standards (“SFAS”) No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      as
      amended.




***(o)***
            Stock
                incentive plans




The
      Company accounts for stock options using the fair value based method of
      accounting for all stock-based awards. The Company uses the Black-Scholes option
      pricing model to estimate fair value and records stock-based compensation in
      operations over the vesting periods of the awards. If and when the stock options
      are ultimately exercised, the applicable amounts of additional contributed
      surplus are transferred to share capital.




F-10


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**3.**
            **SIGNIFICANT
                ACCOUNTING POLICIES
                (continued)**




***(p)***
            Income
                taxes




The
      Company accounts for income taxes whereby future income tax assets and
      liabilities are computed based on differences between the carrying amount of
      assets and liabilities on the balance sheet and their corresponding tax values
      using the enacted income tax rates at each balance sheet date. Future income
      tax
      assets also result from unused loss carryforwards and other deductions. The
      valuation of future income tax assets is reviewed annually and adjusted, if
      necessary, by use of a valuation allowance to reflect the estimated realizable
      amount. Although the Company has tax loss carryforwards (see Note 15), there
      is
      uncertainty as to utilization prior to their expiry. Accordingly, the future
      income tax asset amounts have been fully offset by a valuation allowance with
      the exception of $1.2 million recorded as a future income tax asset for the
      future renouncement of exploration costs in connection with the October 2007
      flow-through share offering (Note 15).




***(q)***
            Income
                (loss) per share




The
      basic
      income (loss) per share is computed by dividing the net income (loss) by the
      weighted average number of common shares outstanding during the year. The fully
      diluted income (loss) per share reflects the potential dilution of common share
      equivalents, such as outstanding stock options and share purchase warrants,
      in
      the weighted average number of common shares outstanding during the year, if
      dilutive. For this purpose, the “treasury stock method” is used for the assumed
      proceeds upon the exercise of stock options and warrants that are used to
      purchase common shares at the average market price during the year.




***(r)***
            Comparative
                figures




Certain
      of the prior year’s figures have been reclassified to conform to the current
      year’s presentation. In particular, for the years ended December 31, 2006 and
      2005, $0.4 million and $0.6 million of stock-based compensation, respectively,
      charged to operations have been reclassified to general and administrative
      expenses rather than disclosed separately.




***(s)***
            Changes
                in accounting pronouncements




Effective
      January 1, 2007, the Company adopted CICA Sections 1530, *Comprehensive
      Income* ,
      3251, *Equity* ,
      3855, *Financial
      Instruments - Recognition and Measurement* ,
      3861, *Financial
      Instruments - Disclosure and Presentation* ,
      and
      3865, *Hedges* .
      These
      new CICA Sections provide comprehensive requirements for the recognition and
      measurement of financial instruments, transaction costs incurred on financial
      instruments, as well as standards on when and how hedge accounting may be
      applied. CICA Section 1530 also introduces a new component of equity referred
      to
      as comprehensive income. The Company has adopted these standards retrospectively
      without restatement.




In
      accordance with CICA Section 3855, the Company now classifies all financial
      instruments as either held-to-maturity, available-for-sale, held-for-trading,
      loans and receivables, or other financial liabilities. Financial assets held
      to
      maturity, loans and receivables and financial liabilities other than those
      held
      for trading, are measured at amortized cost. Available-for-sale instruments
      are
      measured at fair value with unrealized gains and losses recognized in other
      comprehensive income. Instruments classified as held for trading are measured
      at
      fair value with unrealized gains and losses recognized in the statement of
      operations. Transaction costs are expensed as incurred.




Upon
      adoption of this new standard, the Company has designated its cash and cash
      equivalents as held-for-trading, which are measured at fair value. Derivative
      instruments are classified as held for trading, which are measured at fair
      value. Accounts receivable and other are classified as loans and receivables,
      which are measured at amortized cost. Long-term investments and restricted
      certificates of deposit are classified as available for sale, and are measured
      at fair value. Accounts payable and accrued liabilities, property and mining
      taxes payable, convertible debentures, notes payable and other current debt,
      and
      accrued site closure costs are classified as other liabilities, which are
      measured at amortized cost.




F-11


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**3.**
            **SIGNIFICANT
                ACCOUNTING POLICIES
                (continued)**




In
      addition, the Company adopted a policy to expense debt financing costs when
      they
      are incurred and as a result the Company recorded a non-cash adjustment to
      increase opening deficit by $0.3 million to eliminate the opening balance of
      deferred financing costs that were capitalized and amortized under the Company’s
      previous accounting policy.




Comprehensive
      income is the change in shareholders’ equity during a period from transactions
      and other events and circumstances from non-owner sources. The adoption of
      CICA
      Section 1530 had no impact on the Company.




***(t)***
            Recent
                accounting pronouncements




In
      March
      2007, the CICA issued Section 3862 - *Financial
      Instruments - Disclosures* ,
      which
      replaces Section 3861 and provides expanded disclosure requirements that provide
      additional detail by financial asset and liability categories .
      The
      CICA also issued Section 3863 -  *Financial
      Instruments* *-* *Presentation* ,
      to
      enhance financial statement users’ understanding of the significance of
      financial instruments to an entity’s financial position, performance and cash
      flows. Sections 3862 and 3863 applies to interim and annual financial statements
      to fiscal years beginning on or after October 1, 2007, and are not expected
      to
      have a material impact on the Company’s financial condition or operating
      results.





In
      June
      2007, the CICA issued Section 3031 - *Inventories* ,
      to
      replace the former Section 3030 - *Inventories* .
      Section
      3031 applies to interim and annual financial statements relating to fiscal
      years
      beginning on or after January 1, 2008. Section 3031 establishes standards for
      the measurement and disclosure of inventories. It provides the Canadian
      equivalent to International Accounting Standard IAS 2 - *Inventories* .
      The
      main features of the new Section 3031 are:





·Measurement
      of
      inventories at the lower of cost and net realizable value, with guidance on
      the
      determination of cost, including allocation of overheads and other costs to
      inventory.




· Cost
      of
      inventories of items that are not ordinarily interchangeable, and goods or
      services produced and segregated for specific projects, assigned by using a
      specific identification of their individual costs.




·Consistent
      use
      (by type of inventory with similar nature and use) of either first-in, first-out
      (FIFO) or weighted average cost formula to measure the cost of other
      inventories.




·Reversal
      of
      previous write-downs to net realizable value when there is a subsequent increase
      in the value of inventories.





The
      Company does not expect the adoption of Section 3031 on January 1, 2008, to
      have
      a material impact on its financial condition or operating results.





In
      December 2006, the CICA issued Section 1535 - *Capital
      Disclosures* ,
      which
      is effective for interim and annual financial statements beginning on or after
      October 1, 2007. This Section establishes standards for disclosing information
      about an entity’s capital and how it is managed. Under this standard, the
      Company will be required to disclose the following, based on the information
      provided internally to the Company’s key management personnel:


·Qualitative information about its objectives, policies and
          processes for managing capital.
  F-12


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**





**3.**
            **SIGNIFICANT
                ACCOUNTING POLICIES
                (continued)**




·Summary
      quantitative data about what it manages as capital.




·Whether
      during
      the period it complied with any externally imposed capital requirement to which
      it is subject.




·When
      the
      Company has not complied with such externally imposed capital requirements,
      the
      consequences of such non-compliance.





The
      Company does not expect the adoption of Section 1535 on January 1, 2008, to
      have
      a material impact on its financial condition or operating results.





The
      CICA
      amended section 1400 - *General
      Standards of Financial Statement Presentation* to
      include requirements for management to assess and disclose an entity’s ability
      to continue as a going concern. The amendment applies to interim and annual
      financial statements on or after January 1, 2008, and is not expected to have
      a
      material impact on the Company’s financial condition or operating
      results.





**4.**
            **MONTANA
                TUNNELS JOINT VENTURE AGREEMENT AND RELATED
                AGREEMENTS**




***(a)***
            Joint
                Venture Agreement at Montana
                Tunnels




On
      July
      28, 2006, Apollo entered into a JV Agreement with Elkhorn in respect of the
      Montana Tunnels mine. Elkhorn contributed $13 million in return for a 50%
      interest in the Mine and Montana Tunnels Mining, Inc. (“MTMI”) contributed all
      of its assets and liabilities related to the Mine into the joint venture for
      a
      50% interest in the Mine. Effective December 31, 2006, the Mine became a 50/50
      joint venture. MTMI is the operator of the Mine. A separate committee consisting
      of two designees from each of MTMI and Elkhorn oversees the joint
      venture.




Elkhorn
      receives 55% and Apollo receives 45% of the positive free cash flow, as defined
      in the JV agreement, from the Mine until such time as Elkhorn has received
      cash
      flow of $13 million (at which time Apollo will have received $10.6 million).
      At
      that time, Apollo will become entitled to 60% and Elkhorn 40% of the positive
      free cash flow from the Mine, until both parties have received an equal amount
      (at which time Apollo and Elkhorn will have each received $17.7 million).
      Thereafter, the sharing will be 50/50. Additionally, Elkhorn is entitled to
      a
      10% interest distribution (reduced from 12% effective April 1, 2007) charged
      to
      the joint venture as interest expense (Note 14) on its initial contribution
      of
      $13 million until it has received cash flow of $13 million. The interest
      distribution is based on the declining balance of this cash flow of $13 million
      and, as of December 31, 2007, Elkhorn had received cash flow of $4.7
      million.




Apollo
      accounts for its 50% interest in the Montana Tunnels joint venture using the
      proportionate consolidation method. As of December 31, 2006, the Company
      recorded a deferred gain on the transfer of assets and liabilities to the joint
      venture of $3.8 million. The deferred gain is amortized using the
      units-of-production method over the expected life of the operation based on
      the
      estimated recoverable gold equivalent ounces. Amortization of the deferred
      gain
      was $1.2  million
      for the year ended December 31, 2007.




Apollo’s
      50% share of the assets and liabilities of the Montana Tunnels joint venture
      is
      as follows:




F-13


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**





**4.**
            **MONTANA
                TUNNELS JOINT VENTURE AGREEMENT AND RELATED
                AGREEMENTS****(continued)**




**December
                31,**
              **2007**
            
            **December
                31,**
              **2006**Cash
                and cash equivalents
            
            $
            306
            
            $
            (64
            )Other
                non-cash current assets
            
            
            3,190
            
            
            2,5703,496
            
            
            2,506Property,
                plant and equipment
            
            
            9,167
            
            
            7,151Deferred
                stripping costs
            
            
            4,787
            
            
            -Restricted
                certificates of deposit
            
            
            5,435
            
            
            3,430Total
                assets
            
            $
            22,885
            
            $
            13,087Current
                liabilities
            
            $
            3,573
            
            $
            1,819Notes
                payable
            
            
            145
            
            
            527Accrued
                site closure costs
            
            
            8,314
            
            
            6,127Total
                liabilities
            
            $
            12,032
            
            $
            8,473





Apollo’s
      50% share of the results of operations and cash flows of the Montana Tunnels
      joint venture for the year ended December 31, 2007 is as follows:





**Year
                ended December 31,**
              **2007**Revenue
                from sale of minerals
            
            $
            38,474Direct
                operating costs
            
            
            26,324Depreciation
                and amortization
            
            
            1,276Accretion
                expense - accrued site closure costs
            
            
            46028,060Operating
                income
            
            
            10,414Interest
                income
            
            
            219Interest
                expense
            
            
            (946
            )Income
                from continuing operations
            
            $
            9,687Net
                cash provided by operating activities
            
            $
            12,165Net
                cash used in investing activities
            
            $
            (10,032
            )Net
                cash used in financing activities
            
            $
            (1,763
            )





***(b)***
            Additional
                Agreements with Elkhorn Goldfields
                (“EGI”)





At
      the
      same time Apollo entered into the JV Agreement, Apollo also entered into two
      other agreements with EGI, an affiliate of Elkhorn. The first agreement is
      an
      option agreement pursuant to which EGI was granted an option to purchase
      Apollo’s Diamond Hill mine for $0.8 million. The option has an exercise term of
      two years, expiring on July 31, 2008. The second agreement is a mill operating
      and option agreement pursuant to which EGI will have the right to have the
      Company process the ore from EGI’s Elkhorn mine through the 1,000 ton per day
      Diamond Hill mill which is situated within the Montana Tunnels mill complex.
      The
      milling agreement also provides EGI a two-year option to purchase the Diamond
      Hill mill for $1.0 million.




F-14


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**5.**
            **DERIVATIVE
                INSTRUMENTS AND LONG-TERM
                INVESTMENTS**




Fair
      value of derivative instruments and long-term investments as of December 31,
      2007 consists of:




**Cost**
              **Basis**
            
            **Unrealized
                Gain (Loss)**
            
            **Fair
                Value**Derivative
                financial instruments - lead and zinc (Note 9)
            
            $
            -
            
            $
            2,101
            
            $
            2,101Long-term
                investments: Auction rate securities (Note 3(e))
            
            $
            1,500
            
            $
            (33
            )
            $
            1,467





There
      were no derivative instruments or long-term investments at December 31,
      2006.




**6.**
            **INVENTORIES**




Inventories
      consist of:




**2007**
            
            **2006**Concentrate
                inventory
            
            $
            341
            
            $
            -Doré
                inventory
            
            
            56
            
            
            -Stockpiled
                ore inventory
            
            
            749
            
            
            -Materials
                and supplies
            
            
            1,023
            
            
            660$
            2,169
            
            $
            660





**7.**
            **PROPERTY,
                PLANT AND EQUIPMENT**




The
      components of property, plant and equipment at December 31 are as
      follows:




**2007**
            
            **2006****Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net
                Book**
              **Value**
            
            **Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net
                Book**
              **Value**Mine
                assetsBuilding,
                plant and equipment
            
            $
            6,955
            
            $
            3,423
            
            $
            3,532
            
            $
            6,106
            
            $
            2,441
            
            $
            3,665Mining
                properties and development costs
            
            
            38,758
            
            
            2,075
            
            
            36,683
            
            
            31,440
            
            
            1,627
            
            
            29,81345,713
            
            
            5,498
            
            
            40,215
            
            
            37,546
            
            
            4,068
            
            
            33,478Mineral
                rights
            
            
            8,163
            
            
            -
            
            
            8,163
            
            
            5,390
            
            
            -
            
            
            5,390Total
                property, plant and equipment
            
            $
            53,876
            
            $
            5,498
            
            $
            48,378
            
            $
            42,936
            
            $
            4,068
            
            $
            38,868Leased
                assets included above in Building, plant and equipment
            
            $
            1,857
            
            $
            472
            
            $
            1,385
            
            $
            1,488
            
            $
            165
            
            $
            1,323





**8.**
            **RESTRICTED
                CERTIFICATES OF DEPOSIT**




As
      at
      December 31 restricted certificates of deposit are as follows:




**2007**
            
            **2006**Restricted
                certificates of deposit, current - Debt covenants (a)
            
            $
            1,000
            
            $
            -Restricted
                certificates of deposit, non-currentRestricted
                certificates of deposit - Site closure obligations - Montana Tunnels
                (b)
            
            
            6,057
            
            
            4,052Restricted
                certificates of deposit - Site closure obligations - Black Fox and
                other
            
            
            658
            
            
            553$
            6,715
            
            $
            4,605




F-15


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**8.**
            **RESTRICTED
                CERTIFICATES OF DEPOSIT
                (continued)**




***(a)***
            Restricted
                certificates of deposit - Debt
                Covenants




The
      restricted certificates of deposit - debt covenants represents short-term
      certificates of deposit designated as partial security for the credit facility
      agreement (Note 9) and which is required to be held until the credit facility
      is
      repaid in 2008.




***(b)***
            Restricted
                certificates of deposit - Site closure obligation - Montana
                Tunnels




The
      restricted certificates of deposit represents cash that has been placed in
      trust
      as security to the State of Montana relating to the site closure obligations
      of
      the Montana Tunnels mine (see Note 12).




The
      Company has entered into an agreement with CNA, an insurer, to complete the
      bonding requirements at MTMI. CNA committed to an approximate $15 million
      15-year term bonding (Apollo share is $7.5 million) facility which is not
      cancelable, unless MTMI fails to meet its requirements under the arrangement.
      The agreement obligates MTMI to make current payments of $366,000 monthly
      (Apollo share is $183,000) until the balance in the trust account is equal
      to
      the penal sum of the CNA bond. The monthly payments are adjusted annually in
      August of each year and are dependent upon the average gold price for the
      previous twelve months. At December 31, 2007, the restricted certificates of
      deposit for bonding requirements at Montana Tunnels is $10.9  million
      (Apollo share is $5.4 million) (2006 - $7.5 million, Apollo share was $3.7
      million).




**9.**
            **NOTES
                PAYABLE AND OTHER CURRENT
                DEBT**




The
      notes
      payable are secured by certain machinery and equipment and bear interest at
      various rates between 5.7%  and
      28.2%
      (2006 - 5.7% and 28.2%). Notes payable and the credit facility described below
      are repayable as follows at December 31, 2007:




**Notes
                Payable**
            
            **Credit
                Facility**
            
            **Total**2008
            
            $
            947
            
            $
            6,670
            
            $
            7,6172009
            
            
            114
            
            
            -
            
            
            1142010
            
            
            45
            
            
            -
            
            
            45Total
            
            
            1,106
            
            
            6,670
            
            
            7,776Less
                current portion
            
            
            (947
            )
            
            (6,670
            )
            
            (7,617
            )Long-term
                portion
            
            $
            159
            
            $
            -
            
            $
            159





On
      October 12, 2007, the Company entered into a credit facility agreement for
      $8.0
      million. The credit facility, which was drawn on October 18, 2007 for the full
      amount of the facility, matures on September 30, 2008 and bears interest at
      LIBOR plus 1.25%, and is repayable in four quarterly payments. The loan is
      secured by all of the assets of Montana Tunnels Mining, Inc and the Black Fox
      property. The quarterly payments are according to the following schedule: (i)
      15% of the aggregate principal amount outstanding ("Principal Outstanding")
      on
      December 31, 2007; (ii) 33% of the Principal Outstanding on March 31, 2008;
      (iii) 50% of the Principal Outstanding on June 30, 2008 and; (iv) 100% of the
      Principal Outstanding on September 30, 2008.





The
      credit facility agreement required the Company to use proceeds from the loan
      as
      follows: (i) first, for repayment of the 2004 Debentures, and (ii) second,
      once
      the 2004 Debentures have been repaid in full or converted in full to common
      shares of the Company, for general working capital purposes.


F-16


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**





**9.**
            **NOTES
                PAYABLE AND OTHER CURRENT DEBT
                (continued)**




As
      a
      requirement of the credit facility, the Company entered into certain option
      contracts to buy and sell 2,267 tonnes (approximately 5,000,000 lbs) of lead
      and
      3,418 tonnes (approximately 7,500,000 lbs) of zinc which equates to
      approximately 65% and 40% respectively of Apollo's share of lead and zinc
      production from the Montana Tunnels Mine during the 12-month term of the
      facility. The lead and zinc option contracts are in the form of a no premium
      collar (buy a put, sell a call) at the following prices: Lead - put $1.40 per
      lb, call $1.90 per lb.; Zinc - put $1.20 per lb, call $1.54 per lb. No gold
      or
      silver production was hedged.





The
      Company has not applied hedge accounting to this transaction. As a result,
      the
      Company accounts for these contracts as investments and records the changes
      in
      unrealized gains and losses in the statement of income each period. The fair
      value of these derivatives is recorded as a current asset or current liability
      at each balance sheet date.





**10.**
            **CONVERTIBLE
                DEBENTURES**




***(a)***
            Series
                2007-A Convertible Debentures




On
      February 23, 2007, the Company completed a private placement of $8.6 million
      aggregate principal amount of Series 2007-A convertible debentures (“2007
      Debentures”). Each $1,000 of principal amount of 2007 Debentures included 2,000
      common share purchase warrants (“2007 Debenture Warrants”) (Note 13(d)). The
      2007 Debentures mature on February 23, 2009 and bear interest at a rate of
      12%
      per annum during the first year and 18% per annum during the second year,
      payable annually beginning on February 23, 2008. During 2007, $0.2 million
      principal amount of 2007 Debentures were converted. An additional $0.7 million
      principal amount has been converted subsequent to December 31,
      2007.




The
      2007
      Debentures are convertible, at the option of the holder, at any time prior
      to
      maturity into common shares of the Company at a price of $0.50 per common share.
      The Company has the option to force conversion of the 2007 Debentures under
      certain circumstances. The Debentures are classified as a compound financial
      instrument for accounting purposes. The 2007 Debenture Warrants have an exercise
      price of $0.50 per common share and have a term of two years from the date
      of
      grant.




On
      the
      date of issuance of the 2007 Debentures, the gross proceeds of $8.6 million
      was
      allocated to the relative fair values of the Debentures ($3.2 million), the
      holder’s option to convert the principal balance into common shares ($2.7
      million) (the “Conversion Option”), and the 2007 Debenture Warrants ($2.7
      million). The $3.2 million fair value of the 2007 Debentures is classified
      as a
      liability, while the $5.4 million allocated to the Conversion Option and the
      2007 Debenture Warrants is classified as separate components within
      shareholders’ equity.




Over
      their two-year term, the 2007 Debentures are accreted to their face value
      through a periodic charge to accretion expense with a corresponding credit
      to
      the liability component. The accretion expense is based on the effective
      interest method. For the year ended December 31, 2007, the Company recorded
      accretion expense of $2.5 million related to the 2007 Debentures, which is
      included in interest expense.




In
      addition to the 2007 Debenture Warrants, the agents were granted 1,201,200
      compensation warrants with substantially the same terms and conditions as the
      2007 Debenture Warrants.




The
      Company incurred transaction costs of $1.3 million (including the fair value
      of
      the agents’ compensation warrants of $0.5 million). These costs were allocated
      to 2007 Debenture issuance costs of $0.5 million
      and to equity issuance costs of $0.8 million, based on their relative fair
      values of the debt and equity components. Financing costs associated with the
      issuance of the 2007 Debentures are expensed as incurred.




F-17


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**10.**
            **CONVERTIBLE
                DEBENTURE****(continued)**




The
      fair
      values of the Conversion Option, the 2007 Debenture Warrants, and the
      compensation warrants were determined using the Black-Scholes option pricing
      model assuming no expected dividends, a volatility of the Company’s share price
      of 70%, an interest rate of 4.1%, and an expected life of two
      years.




***(b)***
            Series
                2004-B Convertible Debentures




On
      November 4, 2004, the Company completed a $10.5 million offering consisting
      of
      $8.8 million special notes and $1.7 million special warrants. These special
      notes were converted into $8.8 million convertible secured debentures (the
“2004
      Debentures”) and 5,253,750 warrants (the “Note Warrants”). The 2004 Debentures
      matured on December 16, 2007 and bore interest at a rate of 12% per annum.
      The
      Note Warrants expired on November 4, 2007 and were each exercisable for one
      common share of the Company at a price of $0.40 per common share, except as
      noted. Approximately 3.9 million Note Warrants were exercised during the year
      ended December 31, 2007 for proceeds of $1.6 million.




The
      2004
      Debentures were convertible, at the option of the holder into common shares
      of
      the Company at a price of $0.75 per common share. Since redemption could be
      made
      either by cash or by common shares at the option of the Company, the 2004
      Debentures were classified as a compound financial instrument for accounting
      purposes.




The
      value
      of the 2004 Debentures was comprised of a $5.6 million fair value of the 2004
      Debentures, $2.2 million fair value of the holder’s option to convert the
      principal balance into common shares, and $0.9 million fair value of the Note
      Warrants. These components were measured at their respective fair values on
      the
      date that the 2004 Debentures and Note Warrants were issued. The $5.6 million
      fair value of the 2004 Debentures were classified as a liability and the $3.1
      million combined fair value of the conversion option and Note Warrants were
      classified in shareholders’ equity. Over the three-year term of the 2004
      Debentures, the fair value of the 2004 Debentures was accreted to their face
      value. The periodic accretion of the 2004 Debentures was charged to accretion
      expense. For the year ended December 31, 2007, the Company recorded accretion
      of
      $2.1 million (2006 - $2.1 million) related to the 2004 Debentures as a charge
      to
      accretion expense with a corresponding credit to the liability component of
      the
      2004 Debentures based on a straight line method which approximates the effective
      interest method.




The
      Company incurred equity issuance costs of $0.4 million and deferred financing
      costs of $0.8 million. Deferred financing costs were previously amortized over
      the term of the 2004 Debentures. Effective January 1,


2007,
      the
      Company expensed the remaining $265,000 as a result of change in accounting
      policy (See Note 3(s)). During both 2006 and 2005, $319,000 of deferred
      financing costs was charged to operations.




On
      January 6, 2006, Apollo pledged the Company’s Black Fox property as substitute
      collateral for the 2004 Debentures, which were previously secured by $11.0
      million restricted cash. Related to this transfer of collateral the Company
      agreed to reduce the exercise price on 5,013,600 of the Note Warrants
      attached to the 2004 Debentures from $0.80 to $0.40 per common share. The
      reduction in the exercise price applied to all warrants attached to the 2004
      Debentures except for the 240,000 warrants held by the Company’s insiders, which
      remained exercisable at $0.80 per common share. The Company recorded a financing
      cost of $0.3 million for the reduction in exercise price of the Note Warrants
      for the year ended December 31, 2006.




F-18


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**11.**
            **EMPLOYEE
                BENEFIT PLAN**




The
      Company maintains a defined contribution 401(k) plan for all U.S. employees.
      Employee benefits under the plan are limited by federal regulations. All U.S.
      employees are eligible to participate on their date of hire. The Company
      currently matches 50% of the first 6% invested beginning three months after
      hire
      date. The Company match was reinstated in August 2006 after being discontinued
      in September 2004. The vesting schedule is typically two years.




The
      amounts charged to earnings for the Company’s defined contribution plan totaled
      $88,000, $10,000, and $nil for the years ended December 31, 2007, 2006 and
      2005,
      respectively.




**12.**
            **ACCRUED
                SITE CLOSURE COSTS**




All
      of
      the Company’s operations are subject to reclamation and closure requirements.
      Although the ultimate amount of site restoration costs is uncertain, on a
      regular basis, the Company monitors these costs and together with third party
      engineers prepares internal estimates to evaluate its bonding requirements.
      The
      estimates prepared by management are then reconciled with legal and regulatory
      requirements.




At
      December 31, 2007, the accrued site closure liabilities amounted to
      $9.4  million
      (2006 - $7.1 million). The liabilities are covered by a combination of surety
      bonds, restricted certificates of deposit and property which in aggregate are
      valued at approximately $10.6 million.




In
      view
      of the uncertainties concerning future removal and site restoration costs,
      as
      well as the applicable laws and regulations, the ultimate costs to the Company
      could differ materially from the amounts estimated by management. Future
      changes, if any, due to their nature and unpredictability, could have a material
      impact and would be reflected prospectively, as a change in accounting
      estimate.




The
      following table summarizes the effect to the Company’s accrued site closure
      costs:




Balance,
                December 31, 2004
            
            $
            11,753Accretion
            
            
            881Balance,
                December 31, 2005
            
            
            12,634Accretion
            
            
            948Increase
                in reclamation assets
            
            
            375Decrease
                in reclamation assets
            
            
            (695
            )Montana
                Tunnels Joint Venture - allocation to Elkhorn
            
            
            (6,127
            )Balance,
                December 31, 2006
            
            
            7,135Accretion
            
            
            507Increase
                in reclamation assets
            
            
            1,800Balance,
                December 31, 2007
            
            $
            9,442




As
      of
      December 31, 2007, the total, undiscounted amount of the estimated future
      obligations associated with the retirement of the Company’s properties is
      estimated to be $13.3 million. The $9.4 million (2006 - $7.1 million) fair
      value
      of these obligations was determined using credit adjusted risk-free discount
      rates of 7.5% to 9.0% and expected payment of obligations over twelve
      years.




F-19


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**13.**
            **SHARE
                CAPITAL**




***(a)***
            Shares
                issued in 2007




*(i)*  On
      February 28, 2007, the Company issued 1,000,000 common shares of the Company
      at
      $0.54 per share in connection with the settlement of certain claims in relation
      to the Huizopa property.




*(ii)*  On
      September 4, 2007, the Company issued 1,057,692 common shares of the Company
      at
      $0.50 per share in connection with acquiring rights to certain mineral claims
      at
      the Black Fox property.




*(iii)*  On
      October 31, 2007, the Company completed an offering of 7,454,545 flow-through
      shares of the Company at Cdn$0.55 per common share for net proceeds of $4.0
      million (Cdn$3.8 million) and fair value of broker compensation warrants of
      $58,000. In connection with this offering, 372,727 share purchase warrants
      were
      issued to the agent. Each share purchase warrant is immediately exercisable
      at
      Cdn$0.55 per common share of the Company and expires on April 30, 2009. The
      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 72%, an expected life of the warrants of 1.5 years, and an annual
      risk-free rate of 4.2%.




***(b)***
            Shares
                issued in 2006




*(i)*  On
      January 26, 2006, the Company completed a private placement of 11,650,000 units
      with Jipangu at Canadian (“Cdn”) $0.35 per unit for gross proceeds of $3.5
      million. Each unit consists of one common share of the Company and 0.17167
      of a
      warrant for a total of 2,000,000 warrants, with each whole warrant exercisable
      for two years at Cdn$0.39 for one common share of the Company.




*(ii)*  On
      February 27, 2006, the Company issued 2,290,408 common shares of the Company
      at
      Cdn$0.48 per share to officers of the Company, as approved by the Company’s
      Board of Directors in December 2005.




*(iii)*  On
      August
      29, 2006, the Company issued 400,000 common shares for investor relations
      services at $0.67 per share. On September 12, 2006, the Company issued 925,000
      common shares at $0.43 per share as a fee related to the JV Agreement in respect
      of MTMI.




*(iv)*  On
      October 30, 2006, the Company completed an offering of 2,222,221 flow-through
      units of the Company at Cdn$0.45 per unit for net proceeds of $773,000
      (Cdn$903,000) and fair value of broker compensation warrants of $27,000. Each
      flow-through unit is comprised of one flow-through common share of the Company
      and one-half of one share purchase warrant, with each whole warrant exercisable
      into one common share of the Company for a period of two years from closing
      at
      an exercise price of Cdn$1.00 for the first twelve months and Cdn$1.15 for
      the
      last twelve months. In connection with this offering, 166,666 broker
      compensation warrants were issued. (See Note 12(d) for a description of the
      broker compensation warrants.) The broker compensation 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 88%, an expected life of the
      warrants of two years, and an annual risk-free rate of 4.0%.




*(v)*  On
      November 9, 2006, the Company completed an offering of approximately 16.7
      million units of the Company at $0.30 per unit for net proceeds of approximately
      $4.5 million and fair value of placement agents’ warrants of $0.2 million. Each
      unit sold in the offering consists of one common share and one-half of one
      share
      purchase warrant, with each whole warrant exercisable into one common share
      of
      the Company for a period of three years after closing at an exercise price
      of
      $0.50. The warrants contain provisions that provide that the exercise price
      of
      the warrants will be reduced under certain circumstances. In connection with
      this offering, approximately 1,168,174 million placement agents’ warrants were
      issued with the same terms as described above.




F-20


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**13.**
            **SHARE
                CAPITAL (continued)**




The
      placement agents’ 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 85%, an expected life of the warrants of three years, and an
      annual risk-free rate of 4.0%.





***(c)***
            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 of $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.




*(ii)*  During
      2005, the Company increased its interest in the Huizopa Project with Argonaut.
      In consideration for such increase, the Company issued 1,000,000 shares with
      a
      value of $410,000 which were recorded as property, plant and equipment within
      the balance sheet. Following this arrangement, the Company’s Mexican subsidiary
      owns Argonaut’s former subsidiary which has a contractual interest in two of the
      concessions at the Huizopa Project. 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 of 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 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 (Note 23), 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. 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%.




*(v)*  On
      November 30, 2005, the Company issued 900,000 common shares to BMO at $0.22
      (Cdn$0.26) per share, as a completion fee related to the closing of the sale
      of
      the Nevada Assets.




***(d)***
            Warrants




The
      following summarizes outstanding warrants as at December 31, 2007:




**Date
                Issued**
            
            **Number
                of Warrants**
              **and
                Shares Issuable**
              **upon
                Exercise**
            
            **Exercise
                Price**
            
            **Expiry
                Date**Exercisable
                in US$November
                8, 2006
            
            
            8,344,103
            
            
            0.50
            
            
            November
                8, 2009November
                8, 2006
            
            
            1,168,174
            
            
            0.50
            
            
            November
                8, 2009February
                23, 2007
            
            
            17,160,000
            
            
            0.50
            
            
            February
                23, 2009February
                23, 2007
            
            
            1,201,200
            
            
            0.50
            
            
            February
                23, 200927,873,477Exercisable
                in Cdn$January
                26, 2006
            
            
            2,000,000
            
            
            Cdn$
                0.39 (1)
            
            
            January
                26, 2008October
                30, 2006
            
            
            1,111,111
            
            
            Cdn$
                1.15
            
            
            October
                30, 2008October
                31, 2007
            
            
            372,727
            
            
            Cdn$
                0.55
            
            
            April
                30, 20093,483,83831,357,315




(1)
              All
                  2,000,000 of these warrants were exercised prior to expiration
                  in January
                  2008.




F-21


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**13.**
              **SHARE
                  CAPITAL (continued)**





In
      addition, 166,666 broker compensation warrants were issued and were immediately
      exercisable on October 30, 2006. The broker compensation warrants were issued
      in
      connection with the private placement described in Note 13(b)(iv). Each
      broker compensation warrant is exercisable at Cdn$0.45 for two years into one
      common share of the Company and one-half of one share purchase warrant, with
      each whole share purchase warrant exercisable into one common share of the
      Company at Cdn$1.15 through October 30, 2008. The broker compensation warrants
      expire on October 30, 2008.




***(e)***
            Options




A
      summary
      of information concerning outstanding stock options at December 31, 2007 is
      as
      follows:




**Fixed
                Stock Options**
            
            **Performance-based**
              **Stock
                Options****Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Balances,
                December 31, 2004
            
            
            2,196,300
            
            $
            2.10
            
            
            1,904,756
            
            $
            0.80Options
                granted
            
            
            3,039,700
            
            
            0.58
            
            
            -
            
            
            -Options
                cancelled
            
            
            (1,361,900
            )
            
            1.42
            
            
            (110,174
            )
            
            0.80Balances,
                December 31, 2005
            
            
            3,874,100
            
            
            1.15
            
            
            1,794,582
            
            
            0.80Options
                granted
            
            
            473,000
            
            
            0.53
            
            
            -
            
            
            -Options
                exercised
            
            
            (50,000
            )
            
            0.39
            
            
            -
            
            
            -Options
                expired
            
            
            (900,000
            )
            
            1.20
            
            
            -
            
            
            -Options
                cancelled
            
            
            (344,200
            )
            
            1.05
            
            
            (563,730
            )
            
            0.80Balances,
                December 31, 2006
            
            
            3,052,900
            
            
            1.06
            
            
            1,230,852
            
            
            0.80Options
                granted
            
            
            3,291,939
            
            
            0.57
            
            
            -
            
            
            -Options
                cancelled
            
            
            (117,336
            )
            
            0.72
            
            
            -
            
            
            -Options
                expired
            
            
            -
            
            
            -
            
            
            (1,230,852
            )
            
            0.80Balances,
                December 31, 2007
            
            
            6,227,503
            
            $
            0.81
            
            
            -
            
            $
            -




F-22


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**13.**
            **SHARE
                CAPITAL (continued)**




*(i)*
            Fixed
                stock option plan




The
      Company has a fixed stock option plan that provides for the granting of options
      to directors, officers, employees and service providers of the Company at a
      price based on the trading price of the Common Shares one trading day preceding
      the date of grant. Options vest over two years and have a 10-year contractual
      term, unless otherwise determined by the Company’s Board of Directors. The
      Company is authorized to issue a maximum of 12,139,686 fixed stock options.
      As
      at December 31, 2007, an aggregate of 5,912,183 fixed stock options were
      available for future grants of awards under the plan.




The
      following table summarizes information concerning outstanding and exercisable
      fixed stock options at December 31, 2007:




**Options
                Outstanding**
            
            **Options
                Exercisable****Number**
              **Outstanding**
            
            **Expiry
                Date**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per Share**
            
            **Weighted
                Average**
              **Remaining
                Contractual Life (in years****)**
            
            **Number**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per Share**678,200
            
            
            February
                18, 2013
            
            $
            2.24
            
            
            5.1
            
            
            678,200
            
            $
            2.24260,000
            
            
            March
                10, 2014
            
            
            2.05
            
            
            6.2
            
            
            260,000
            
            
            2.0525,000
            
            
            May
                19, 2014
            
            
            1.44
            
            
            6.4
            
            
            25,000
            
            
            1.4421,200
            
            
            August
                10, 2014
            
            
            0.95
            
            
            6.6
            
            
            21,200
            
            
            0.951,162,000
            
            
            March
                10, 2015
            
            
            0.65
            
            
            7.2
            
            
            1,162,000
            
            
            0.65100,000
            
            
            August
                4, 2015
            
            
            0.27
            
            
            7.6
            
            
            100,000
            
            
            0.27300,000
            
            
            December
                12, 2015
            
            
            0.20
            
            
            8.0
            
            
            300,000
            
            
            0.20125,000
            
            
            March
                28, 2016
            
            
            0.65
            
            
            8.2
            
            
            125,000
            
            
            0.65200,000
            
            
            May
                23, 2016
            
            
            0.53
            
            
            8.4
            
            
            100,000
            
            
            0.53108,000
            
            
            August
                10, 2016
            
            
            0.48
            
            
            8.6
            
            
            54,000
            
            
            0.4840,000
            
            
            November
                9, 2016
            
            
            0.32
            
            
            8.9
            
            
            20,000
            
            
            0.323,058,278
            
            
            February
                6, 2017
            
            
            0.57
            
            
            9.1
            
            
            -
            
            
            -49,825
            
            
            May
                23, 2017
            
            
            0.46
            
            
            9.6
            
            
            -
            
            
            -100,000
            
            
            September
                1, 2011
            
            
            0.46
            
            
            3.7
            
            
            -
            
            
            -6,227,503
            
            
            
            
            $
            0.81
            
            
            8.0
            
            
            2,845,400
            
            $
            1.10





The
      aggregate intrinsic value of options outstanding is $5.0 million and the
      aggregate intrinsic value of options currently exercisable is $3.1 million.
      The
      intrinsic value of options exercised for the year ending December 31, 2006
      was
      $20,000. There were no options exercised during the years ended December 31,
      2007 and 2005.




Stock
      compensation expense is recognized on a straight-line basis over the vesting
      period. Expense recognized for the years ended December 31, 2007, 2006 and
      2005
      was $1.0 million, $0.4 million and $0.6 million, respectively. As at December
      31, 2007 there was $0.3 million of total unrecognized compensation cost related
      to unvested options, which will be amortized over their remaining vesting period
      of 1.75 years.




*(ii)*
            Performance-based
                stock option plan




In
      2002,
      2,780,412 performance-based options with an expiry date of June 25, 2007 and
      an
      exercise price of $0.80 were granted to certain directors, officers and
      employees. In fiscal 2003, the balance of the options vested based upon the
      established fiscal 2003 performance criteria. On June 25, 2007, all of the
      performance-based stock options outstanding expired.




F-23


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**





**13.**
            **SHARE
                CAPITAL (continued)**




***(f)***
            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:




**2007**
            
            **2006**
            
            **2005**Risk-free
                interest rate
            
            
            4.0
            %
            
            4.1
            %
            
            3.7
            %Dividend
                yield
            
            
            0
            %
            
            0
            %
            
            0
            %Volatility
            
            
            71
            %
            
            89
            %
            
            73
            %Expected
                life in years
            
            
            6
            
            
            6
            
            
            5Weighted
                average grant-date fair value of stock options
            
            $
            0.37
            
            $
            0.40
            
            $
            0.36





The
      Black-Scholes option-pricing model requires the input of subjective assumptions,
      including expected term of the option award and stock price volatility. The
      expected term of options granted is derived from historical data on employee
      exercise and post-vesting employment termination behavior. Expected volatility
      is based on the historic volatility of our stock. These assumptions involve
      inherent uncertainties and the application of management judgment. In addition,
      the Company is required to estimate the expected forfeiture rate and only
      recognize expense for those options expected to vest.




***(g)***
            Shareholder
                Rights Plan




On
      January 17, 2007, the Company adopted a Shareholder Rights Plan (the “Rights
      Plan”). The Rights Plan was adopted to ensure the fair treatment of shareholders
      in connection with any take-over bid for common shares of Apollo. The Rights
      Plan seeks to provide shareholders with adequate time to properly assess a
      take-over bid without undue pressure. It also is intended to provide the Board
      with more time to fully consider an unsolicited take-over bid and, if
      appropriate, to explore other alternatives to maximize shareholder value. The
      Rights Plan is not intended to prevent take-over bids that treat shareholders
      fairly.





The
      Rights Plan, adopted and effective in January 2007, was ratified by the
      shareholders at Apollo’s Annual Meeting of Shareholders held on May 16, 2007.
      The Rights Plan expires in January 2012.





**14.**
            **INTEREST
                EXPENSE**




As
      at
      December 31, interest expense consists of:




**2007**
            
            **2006**
            
            **2005**Accretion
                on convertible debentures
            
            $
            3,528
            
            $
            1,059
            
            $
            1,085Interest
                paid on convertible debentures
            
            
            1,016
            
            
            1,058
            
            
            1,058Amortization
                of deferred financing costs
            
            
            -
            
            
            319
            
            
            319Interest
                related to Montana Tunnels joint venture agreement (Note
                4)
            
            
            711
            
            
            -
            
            
            -Capital
                leases and other
            
            
            483
            
            
            241
            
            
            71$
            5,738
            
            $
            2,677
            
            $
            2,533




F-24


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**15.**
            **INCOME
                TAXES**




The
      Company recorded a tax benefit of $1.4 million for the year ended December
      31,
      2007, due to the issuance of flow-through shares but recorded no other recovery
      for income taxes as the net loss carry forwards are fully offset by a valuation
      allowance. The Company did not record a provision or benefit for income taxes
      for the years ended December 31, 2006 and 2005, due to the availability of
      net
      operating loss carryforwards and the uncertainty of their future
      realization.




The
      provision for income taxes reported differs from the amounts computed by
      applying the cumulative Canadian federal and provincial income tax rates to
      the
      (income) loss before tax provision due to the following:




**2007**
            
            **2006**
            
            **2005**Statutory
                tax rate
            
            
            33.12
            %
            
            33.12
            %
            
            34.90
            %Provision
                for (recovery of) income taxes computed at standard rates
            
            $
            338
            
            $
            (5,046
            )
            $
            (5,570
            )Differences
                due to foreign tax rates
            
            
            37
            
            
            (718
            )
            
            (817
            )Flow
                through share recovery
            
            
            (1,394
            )
            
            -
            
            
            -Effect
                of tax losses not benefited in the period they arose
            
            
            (375
            )
            
            5,764
            
            
            6,387$
            (1,394
            )
            $
            -
            
            $
            -





The
      tax
      effects of temporary differences that would give rise to significant portions
      of
      the future tax assets and future tax liabilities at December 31, were as
      follows:




**2007**
            
            **2006**Future
                income tax assetsNet
                operating losses carried forward
            
            $
            51,239
            
            $
            47,075Exploration
                and development expenses
            
            
            (505
            )
            
            303Property,
                plant and equipment
            
            
            1,003
            
            
            1,964Accrued
                site closure costs
            
            
            3,492
            
            
            4,730Issuance
                of flow-through shares
            
            
            1,165
            
            
            -Other
            
            
            2,902
            
            
            4,93959,296
            
            
            59,011Less:
                Valuation allowance
            
            
            (58,131
            )
            
            (59,011
            )Net
                future income tax asset
            
            $
            1,165
            
            $
            -





Utilization
      of the net operating losses carried forward and the foreign exploration and
      development expenses are subject to limitations. The Company has placed a full
      valuation allowance on its excess tax assets due to a lack of past taxable
      profits. It does not believe significant income tax obligations will occur
      in
      the near future. At December 31, 2007, the Company has the following unused
      tax
      losses available for tax carryforward purposes:




**Country**
            
            **Amount**
            
            **Expiry**Canada
            
            $
            24,308
            
            
            2008-2027United
                States
            
            
            113,913
            
            
            2011-2027





F-25


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**16.**
            **EARNINGS
                PER SHARE**




Basic
      earnings per share is calculated by dividing net income available to common
      shareholders by the weighted average number of common shares outstanding during
      the period. Diluted earnings per share is calculated to reflect the dilutive
      effect of exercising outstanding warrants and stock options by applying the
      treasury stock method.




Earnings
      used in determining earnings per share from continuing operations are presented
      below for the year ended December 31, 2007.




($
                thousands, except per share amounts)
            
            **Net
                income**
            
            **Shares**
            
            **Per
                Share****Basic
                earnings per share**Net
                income from continuing operations
            
            $
            2,416
            
            
            145,645,178
            
            $
            0.02Effect
                of dilutive securities: warrants
            
            
            -
            
            
            536,852
            
            
            -Effect
                of dilutive securities: stock options
            
            
            -
            
            
            245,940
            
            
            -**Diluted
                earnings per share**Net
                income from continuing operations
            
            $
            2,416
            
            
            146,427,970
            
            $
            0.02





Diluted
      loss per share for 2006 and 2005 is not presented as there were no dilutive
      securities for these years.





Warrants
      and stock options to purchase 34.9 million, 20.0 million and
      28.3 million shares of common stock at average exercise prices of $0.61,
      $0.75 and $1.18 were outstanding as of December 31, 2007, 2006 and 2005,
      respectively, but were not included in the computation of diluted weighted
      average number of common shares because the strike prices of the warrants and
      stock options exceeded the price of the common stock. Other warrants and stock
      options to purchase 8.4 million and 1.8 million shares of common stock that
      were outstanding as of December 31, 2006 and 2005 were not included in the
      computation of diluted weighted average common shares because their effect
      would
      have been anti-dilutive.





**17.**
            **FINANCIAL
                INSTRUMENTS AND RISK
                MANAGEMENT**




***(a)***
            Market
                risk




Due
      to
      the nature of the precious metals market, the Company is not dependent on a
      significant customer to provide a market for its refined gold and silver.
      However, the Company’s lead-gold and zinc-gold concentrates are subject to a
      contract with Teck Cominco Metals Ltd. and if the Company had to change the
      smelters to which these concentrates are shipped, the additional transportation
      costs could be considerable. Although it is possible that the Company could
      be
      directly affected by weaknesses in the metals processing business, the Company
      periodically monitors the financial condition of its customers.




F-26


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**17.**
              **FINANCIAL
                  INSTRUMENTS AND RISK MANAGEMENT
                  (continued)**




***(b)***
            The
                estimated fair value of the Company’s financial instruments was as
                follows:




**December
                31,****2007**
            
            **2006****Carrying**
              **Amount**
            
            **Fair**
              **Value**
            
            **Carrying**
              **Amount**
            
            **Fair**
              **Value**Cash
                and cash equivalents
            
            $
            4,852
            
            $
            4,852
            
            $
            4,512
            
            $
            4,512Derivative
                instruments
            
            
            2,101
            
            
            2,101
            
            
            -
            
            
            -Accounts
                receivable and other
            
            
            1,846
            
            
            1,846
            
            
            728
            
            
            728Note
                receivable
            
            
            -
            
            
            -
            
            
            1,865
            
            
            1,865Long-term
                investments
            
            
            1,467
            
            
            1,467
            
            
            -
            
            
            -Accounts
                payable
            
            
            2,748
            
            
            2,748
            
            
            1,710
            
            
            1,710Accrued
                liabilities
            
            
            2,940
            
            
            2,940
            
            
            1,254
            
            
            1,254Notes
                payable and other liabilitiesCurrent
            
            
            7,617
            
            
            7,617
            
            
            671
            
            
            671Non-current
            
            
            448
            
            
            448
            
            
            939
            
            
            939Convertible
                debentures
            
            
            5,537
            
            
            8,380
            
            
            7,660
            
            
            8,731





**18.**
            **COMMITMENTS
                AND CONTINGENCIES**




***(a)***
            Royalties




The
      Company’s properties are subject to royalty obligations based on minerals
      produced from the properties. The Montana Tunnels (L Pit, the currently
      permitted pit) and Black Fox Project current reserves are not subject to royalty
      obligations. Royalty obligations for the M Pit of Montana Tunnels and Huizopa
      Project may arise upon mine production.




***(b)***
            Environmental




The
      Company’s mining and exploration activities are subject to various federal,
      provincial and state laws and regulations governing the protection of the
      environment. These laws and regulations are continually changing and generally
      becoming more restrictive. The Company conducts its operations so as to protect
      public health and the environment and believes its operations are materially
      in
      compliance with all applicable laws and regulations. The Company has made,
      and
      expects to make in the future, expenditures to comply with such laws and
      regulations.




***(c)***
            Litigation
                and claims




The
      Company is from time to time involved in various claims, legal proceedings
      and
      complaints arising in the ordinary course of business. The Company does not
      believe that adverse decisions in any pending or threatened proceedings related
      to any matter, or any amount which it may be required to pay by reason thereof,
      will have a material effect on the financial conditions or future results of
      operations of the Company.




In
      May
      2006, a purported class action lawsuit was filed in U.S. District Court Missoula
      Division of Montana by 14 former employees at the Montana Tunnels mine alleging
      (i) violations of the Worker Adjustment and Retraining Notification Act of
      1988
      (the “WARN Act”) and the Montana Wage Act and (ii) breach of contract. The
      allegations relate to the termination of the employees following the cessation
      of mining in October 2005. Specifically, the plaintiffs allege that the Company
      gave deficient WARN Act notice and are seeking damages for back pay and
      benefits. A negotiated settlement was tentatively reached between the Company
      and the plaintiffs and is expected to be finalized in 2008. The Company believes
      the resolution of this matter will not have a material impact on the Company’s
      financial statements.




F-27


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**





**18.**
            **COMMITMENTS
                AND CONTINGENCIES
                (continued)**




***(d)***
            Indemnification
                obligations




The
      Company is subject to certain indemnification obligations relating to the sale
      of the Nevada Assets (Note 23). At this time, the Company is unable to predict
      what cost there will be related to such indemnification
      obligations.




**19.**
            **LEASE
                COMMITMENTS**




Minimum
      lease payments under capital and non-cancelable operating leases and the present
      value of net minimum payments at December 31, 2007 were as follows:





**Capital**
              **Leases**
            
            **Operating**
              **Leases**2008
            
            $
            699
            
            $
            1012009
            
            
            122
            
            
            792010
            
            
            45
            
            
            3Total
            
            
            866
            
            $
            183Less
                imputed interest
            
            
            50Total
                present value of minimum capital lease payments
            
            
            816Less
                current portion of capital lease obligations
            
            
            657Long-term
                capital lease obligations
            
            $
            159





Rent
      expense under non-cancelable operating leases was $0.1 million for 2007, 2006,
      and 2005. The current portion of the capital lease obligations is included
      in
      current portion of notes payable and the long-term portion is included in
      long-term portion of notes payable in the consolidated balance
      sheets.




**20.**
            **SUPPLEMENTAL
                CASH FLOW INFORMATION**




***(a)***
            Net
                changes in non-cash operating working capital items for the years
                ended
                December 31 are:




**2007**
            
            **2006**
            
            **2005**(Increase)
                decrease in:Accounts
                receivable and other
            
            $
            (1,118
            )
            $
            1,889
            
            $
            325Prepaids
            
            
            360
            
            
            385
            
            
            (291
            )Inventories
            
            
            (1,509
            )
            
            387
            
            
            484Increase
                (decrease) in:Accounts
                payable
            
            
            1,038
            
            
            (3,920
            )
            
            1,178Accrued
                liabilities
            
            
            1,605
            
            
            69
            
            
            45Property
                and mining taxes payable
            
            
            515
            
            
            (292
            )
            
            104$
            891
            
            $
            (1,482
            )
            $
            1,845





***(b)***
            Components
                of cash and cash equivalents as of the years ended December 31
                are:




**2007**
            
            **2006**
            
            **2005**Cash
            
            $
            625
            
            $
            387
            
            $
            127Short-term
                investments
            
            
            4,227
            
            
            4,125
            
            
            -$
            4,852
            
            $
            4,512
            
            $
            127





F-28


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**20.**
            **SUPPLEMENTAL
                CASH FLOW INFORMATION
                (continued)**




***(c)***
            Non-cash
                transactions




During
      the year ended December 31, 2007, (i) Series 2007-A convertible debentures
      with
      a face value of $200,000 were converted and the Company recorded a reduction
      of
      $94,000 in convertible debentures and a corresponding increase in equity; (ii)
      property, plant and equipment totaling $527,000 was acquired via issuance of
      shares (Note 13(a)(ii)); (iii) property, plant and equipment totaling $325,000
      was acquired via issuance of notes payable; (iv) the Company financed a portion
      of its insurance program included in Prepaids by issuing a note payable of
      $653,000 and (v) the Company issued agent’s compensation warrants with a value
      of $294,000 for services rendered in connection with the issuance of the Series
      2007-A convertible debentures (Note 10(a)).




During
      the year ended December 31, 2006, property, plant and equipment totaling $2.6
      million was acquired via issuance of a promissory note. The balance of $2.3
      million of the promissory note was replaced by a capital lease obligation.
      Additionally, the Company increased prepaid expenses for insurance by issuing
      a
      note payable of $0.3 million. As at December 31, 2006, the Company contributed
      all of the assets and liabilities of MTMI related to the Montana Tunnels mine
      to
      the joint venture entered into with Elkhorn (see Note 4).





During
      the year ended December 31, 2005, the Company issued 1,000,000 shares in
      connection with the increase of the Huizopa interest in Mexico. Share capital
      and property, plant and equipment both increased by $0.4 million as a result
      of
      this transaction. Also, holders of the convertible debentures converted $25,000
      face value for common shares. The convertible debenture decreased by $17,000,
      share capital increased by $23,000 and equity component of convertible
      debentures decreased by $6,000 as a result of this conversion. Additionally,
      property, plant and equipment totaling $0.2 million was acquired under capital
      lease obligations.





**21.**
            **RELATED
                PARTY TRANSACTIONS**




The
      Company had the following related party transactions during each of the years
      in
      the three-year period ended December 31, 2007:




**2007**
            
            **2006**
            
            **2005**Legal
                fees paid to one law firm, a partner of the firm is a director of
                the
                Company
            
            $
            381
            
            $
            118
            
            $
            335Consulting
                services paid to a relative of an officer and director of the
                Company
            
            
            9
            
            
            14
            
            
            18





These
      transactions are in the normal course of business and are measured at the
      exchange amount which is the consideration established and agreed to by the
      related parties. Also, a director of the Company participated in the October
      2007 flow-through share offering and purchased 54,545 flow-through shares in

      connection with the offering (Note 13(a)(iii)).




**22.**
            **SEGMENTED
                INFORMATION**




Apollo
      operates the Montana Tunnels mine (a 50% joint venture effective December 31,
      2006) 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 segment information for Montana Tunnels assets and liabilities as of
      December 31, 2007 and 2006 and the results of operations for the year ended
      December 31, 2007 are reported under the proportionate consolidation method
      as a
      result of the JV Agreement (Note 4). The Montana Tunnels assets and liabilities
      and results of operations of the Montana Tunnels joint venture disclosed in
      Note
      4 differ from the amounts below due to the inclusion of assets and liabilities
      and results of operations of Montana Tunnels Mining, Inc. not pertaining to
      the
      Montana Tunnels joint venture which primarily relate to the Diamond Hill mine.
      The accounting policies for these segments are the same as those followed by
      the
      Company as a whole. In each of the years ended December 31, 2007, 2006 and
      2005,
      one customer accounted for more than 10% of revenues. This customer is located
      in Canada and accounted for approximately 96% (2006 - 97%, 2005 - 93%) of
      revenues.




F-29


**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**





**22.**
            **SEGMENTED
                INFORMATION (continued)**




Amounts
      as at December 31, 2007 are as follows:




**Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            306
            
            $
            (39
            )
            $
            4,585
            
            $
            4,852Other
                non-cash current assets
            
            
            3,206
            
            
            171
            
            
            4,248
            
            
            7,6253,512
            
            
            132
            
            
            8,833
            
            
            12,477Long-term
                investments
            
            
            -
            
            
            -
            
            
            1,467
            
            
            1,467Property,
                plant and equipment
            
            
            9,176
            
            
            36,100
            
            
            3,102
            
            
            48,378Deferred
                stripping costs
            
            
            4,787
            
            
            -
            
            
            -
            
            
            4,787Restricted
                certificates of deposit
            
            
            6,057
            
            
            650
            
            
            8
            
            
            6,715Other
                long-term assets
            
            
            -
            
            
            84
            
            
            -
            
            
            84Future
                income tax assets
            
            
            -
            
            
            -
            
            
            1,165
            
            
            1,165Total
                assets
            
            $
            23,532
            
            $
            36,966
            
            $
            14,575
            
            $
            75,073Current
                liabilities
            
            $
            3,580
            
            $
            688
            
            $
            9,994
            
            $
            14,262Notes
                payable and other long-term liabilities
            
            
            145
            
            
            14
            
            
            5,826
            
            
            5,985Accrued
                site closure costs
            
            
            8,995
            
            
            447
            
            
            -
            
            
            9,442Deferred
                gain
            
            
            2,511
            
            
            -
            
            
            -
            
            
            2,511Total
                liabilities
            
            $
            15,231
            
            $
            1,149
            
            $
            15,820
            
            $
            32,200





Amounts
      as at December 31, 2006 are as follows:




**Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            (64
            )
            $
            9
            
            $
            4,567
            
            $
            4,512Other
                non-cash current assets
            
            
            2,579
            
            
            40
            
            
            870
            
            
            3,4892,515
            
            
            49
            
            
            5,437
            
            
            8,001Property,
                plant and equipment
            
            
            7,159
            
            
            30,455
            
            
            1,254
            
            
            38,868Restricted
                certificates of deposit
            
            
            4,052
            
            
            553
            
            
            -
            
            
            4,605Other
                long-term assets
            
            
            -
            
            
            65
            
            
            -
            
            
            65Deferred
                financing costs
            
            
            -
            
            
            -
            
            
            265
            
            
            265Total
                assets
            
            $
            13,726
            
            $
            31,122
            
            $
            6,956
            
            $
            51,804Current
                liabilities
            
            $
            1,823
            
            $
            149
            
            $
            9,765
            
            $
            11,737Notes
                payable and other long-term liabilities
            
            
            527
            
            
            42
            
            
            370
            
            
            939Accrued
                site closure costs
            
            
            6,760
            
            
            375
            
            
            -
            
            
            7,135Deferred
                gain
            
            
            3,750
            
            
            -
            
            
            -
            
            
            3,750Total
                liabilities
            
            $
            12,860
            
            $
            566
            
            $
            10,135
            
            $
            23,561


F-30


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**22.**
            **SEGMENTED
                INFORMATION (continued)**




Amounts
      for the years ended December 31, 2007, 2006 and 2005 are as
      follows:




**Year
                Ended December 31, 2007****Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            38,474
            
            $
            -
            
            $
            -
            
            $
            38,474Direct
                operating costs
            
            
            26,336
            
            
            -
            
            
            -
            
            
            26,336Depreciation
                and amortization
            
            
            1,276
            
            
            -
            
            
            104
            
            
            1,380General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            4,647
            
            
            4,647Accrued
                site closure costs - accretion expense
            
            
            507
            
            
            -
            
            
            -
            
            
            507Amortization
                of deferred gain
            
            
            (1,239
            )
            
            -
            
            
            -
            
            
            (1,239
            )Exploration
                and business development
            
            
            -
            
            
            39
            
            
            2,391
            
            
            2,43026,880
            
            
            39
            
            
            7,142
            
            
            34,061Operating
                income (loss)
            
            
            11,594
            
            
            (39
            )
            
            (7,142
            )
            
            4,413Interest
                income
            
            
            219
            
            
            -
            
            
            482
            
            
            701Interest
                expense
            
            
            (946
            )
            
            -
            
            
            (4,792
            )
            
            (5,738
            )Financing
                costs
            
            
            -
            
            
            -
            
            
            (693
            )
            
            (693
            )Realized
                gain on investments - hedging contracts
            
            
            -
            
            
            -
            
            
            395
            
            
            395Unrealized
                gain on investments - hedging contracts
            
            
            -
            
            
            -
            
            
            2,101
            
            
            2,101Unrealized
                losses on other short-term investments
            
            
            -
            
            
            -
            
            
            (33
            )
            
            (33
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (124
            )
            
            (124
            )Income
                (loss) from continuing operations before income taxes
            
            $
            10,867
            
            $
            (39
            )
            $
            (9,806
            )
            $
            1,022Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            8,352
            
            $
            5,617
            
            $
            1,951
            
            $
            15,920




**Year
                Ended December 31, 2006****Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            10,177
            
            $
            -
            
            $
            -
            
            $
            10,177Direct
                operating costs
            
            
            15,361
            
            
            -
            
            
            -
            
            
            15,361Depreciation
                and amortization
            
            
            1,538
            
            
            -
            
            
            109
            
            
            1,647General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            4,004
            
            
            4,004Accrued
                site closure costs - accretion expense
            
            
            948
            
            
            -
            
            
            -
            
            
            948(Gain)
                loss on sale of property, plant and equipment
            
            
            -
            
            
            -
            
            
            7
            
            
            7Exploration
                and business development
            
            
            -
            
            
            -
            
            
            1,033
            
            
            1,03317,847
            
            
            -
            
            
            5,153
            
            
            23,000Operating
                loss
            
            
            (7,670
            )
            
            -
            
            
            (5,153
            )
            
            (12,823
            )Interest
                income
            
            
            273
            
            
            -
            
            
            148
            
            
            421Interest
                expense
            
            
            (237
            )
            
            -
            
            
            (2,440
            )
            
            (2,677
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (158
            )
            
            (158
            )Loss
                from continuing operations before income taxes
            
            $
            (7,634
            )
            $
            -
            
            $
            (7,603
            )
            $
            (15,237
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            2,640
            
            $
            5,289
            
            $
            127
            
            $
            8,056





F-31


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**22.**
            **SEGMENTED
                INFORMATION (continued)**





**Year
                Ended December 31, 2005****Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            43,254
            
            $
            -
            
            $
            -
            
            $
            43,254Direct
                operating costs
            
            
            48,357
            
            
            -
            
            
            -
            
            
            48,357Depreciation
                and amortization
            
            
            2,417
            
            
            -
            
            
            134
            
            
            2,551General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            8,185
            
            
            8,185Accrued
                site closure costs - accretion expense
            
            
            881
            
            
            -
            
            
            -
            
            
            881Gain
                on sale of property, plant and equipment
            
            
            (3,865
            )
            
            -
            
            
            17
            
            
            (3,848
            )Exploration
                and business development
            
            
            -
            
            
            -
            
            
            918
            
            
            91847,790
            
            
            -
            
            
            9,254
            
            
            57,044Operating
                loss
            
            
            (4,536
            )
            
            -
            
            
            (9,254
            )
            
            (13,790
            )Interest
                income
            
            
            126
            
            
            -
            
            
            271
            
            
            397Interest
                expense
            
            
            (64
            )
            
            -
            
            
            (2,469
            )
            
            (2,533
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (35
            )
            
            (35
            )Loss
                from continuing operations
            
            $
            (4,474
            )
            $
            -
            
            $
            (11,487
            )
            $
            (15,961
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            97
            
            $
            5,290
            
            $
            721
            
            $
            6,108





**23.**
            **DISCONTINUED
                OPERATIONS**




On
      November 18, 2005, the Company sold its Nevada Assets for $14.0 million in
      cash,
      resulting in the Company recording a total impairment of $8.7 million. The
      Nevada Assets 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; and four
      exploration properties located near the Florida Canyon Mine.




The
      following table presents results of operations for discontinued operations
      for
      the years ended December 31, 2006 and 2005.




**Year
                Ended December 31,****2006**
            
            
            **2005**Revenue
                from sale of minerals
            
            $
            -
            
            $
            18,591Direct
                operating costs
            
            
            -
            
            
            17,375Depreciation
                and amortization
            
            
            -
            
            
            867Accretion
                expense
            
            
            -
            
            
            898Royalty
                expenses
            
            
            -
            
            
            267Exploration
                and business development
            
            
            -
            
            
            218Gain
                on sale of property, plant and equipment and other
            
            
            -
            
            
            (3,547
            )Impairment
            
            
            -
            
            
            8,724-
            
            
            24,802Operating
                loss
            
            
            -
            
            
            (6,211
            )Interest
                expense
            
            
            -
            
            
            (74
            )Realized
                and unrealized gain on commodity contracts
            
            
            -
            
            
            38Loss
                on disposal of discontinued operations
            
            
            (350
            )
            
            -Loss
                from discontinued operations
            
            $
            (350
            )
            $
            (6,247
            )





F-32


**APOLLO
          GOLD CORPORATION**
  **Notes
          to the Consolidated Financial Statements**  **-
          (Continued)**
 **(Stated
          in U.S. dollars; tabular amounts in thousands)**


**24.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S.
                GAAP**




The
      Company prepares its consolidated financial statements in accordance with
      Canadian GAAP. The following adjustments and/or additional disclosures would
      be
      required in order to present the financial statements in accordance with U.S.
      GAAP and with practices prescribed by the U.S. Securities and Exchange
      Commission at December 31, 2007 and 2006 and for the years ended December 31,
      2007, 2006 and 2005.




Material
      variances between financial statement items under Canadian GAAP and the amounts
      determined under U.S. GAAP are as follows:


**2007**
              
              **2006****Total
                  assets in accordance with Canadian GAAP**
              
              **$**
              **75,073**
              
              **$**
              **51,804**Deferred
                  financing costs (a)
              
              
              160
              
              
              -Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              (12,032
              )
              
              (8,473
              )Impairment
                  of property, plant and equipment, and change in depreciation and
                  amortization(b)(ii)
              
              
              (1,812
              )
              
              (2,038
              )Deferred
                  stripping costs (b)(iii)
              
              
              (4,787
              )
              
              -Black
                  Fox development costs(c)
              
              
              (26,827
              )
              
              (22,354
              )Convertible
                  debentures (d)
              
              
              509
              
              
              103Income
                  taxes (e)
              
              
              (1,165
              )
              
              -**Total
                  assets in accordance with U.S. GAAP**
              
              **$**
              **29,119**
              
              **$**
              **19,042**


**Total
                  liabilities in accordance with Canadian GAAP**
              
              **$**
              **32,200**
              
              **$**
              **23,561**Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              (12,032
              )
              
              (8,473
              )Deferred
                  gain (b)(i)
              
              
              (2,511
              )
              
              (3,750
              )Convertible
                  debentures (d)
              
              
              2,063
              
              
              764Income
                  taxes (e)
              
              
              628
              
              
              -**Total
                  liabilities in accordance with U.S. GAAP**
              
              **$**
              **20,348**
              
              **$**
              **12,102**


**Total
                  shareholders’ equity in accordance with Canadian
                  GAAP**
              
              **$**
              **42,873**
              
              **$**
              **28,243**Deferred
                  financing costs (a)
              
              
              160
              
              
              -Deferred
                  gain (b)(i)
              
              
              2,511
              
              
              3,750Impairment
                  of property, plant and equipment, and change in depreciation and
                  amortization(b)(ii)
              
              
              (1,812
              )
              
              (2,038
              )Deferred
                  stripping costs (b)(iii)
              
              
              (4,787
              )
              
              -Black
                  Fox development costs (c)
              
              
              (26,827
              )
              
              (22,354
              )Convertible
                  debentures (d)
              
              
              (1,554
              )
              
              (661
              )Income
                  taxes (e)
              
              
              (1,793
              )
              
              -**Total
                  shareholders’ equity in accordance with U.S. GAAP**
              
              **$**
              **8,771**
              
              **$**
              **6,940**




**Total
                shareholders’ equity and liabilities in accordance with U.S.
                GAAP**
            
            **$**
            **29,119**
            
            **$**
            **19,042**





Under
      U.S. GAAP, the components of shareholders’ equity would be as
      follows:





**2007**
            
            **2006**Share
                capital
            
            $
            165,790
            
            $
            158,790Note
                warrants
            
            
            2,292
            
            
            1,062Contributed
                surplus
            
            
            39,463
            
            
            31,964Deficit
            
            
            (198,774
            )
            
            (184,876
            )**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **8,771**
            
            **$**
            **6,940**




F-33


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**





**24.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





Under
      U.S. GAAP, the net loss and net loss per share would be adjusted as
      follows:


**Year
                  ended December 31,****2007**
              
              **2006**
              
              **2005**Income
                  (loss) from continuing operations for the year, based onCanadian
                  GAAP
              
              $
              2,416
              
              $
              (15,237
              )
              $
              (15,961
              )Financing
                  costs (a)
              
              
              (105
              )
              
              -
              
              
              -Gain
                  on transfer of assets and liabilities to joint venture and amortization
                  (b)(i)
              
              
              (1,239
              )
              
              5,789
              
              
              -Change
                  in depreciation of property, plant and equipment (b)(ii)
              
              
              227
              
              
              183
              
              
              588Capitalized
                  deferred stripping and amortization (b)(iii)
              
              
              (4,787
              )
              
              -
              
              
              -Black
                  Fox development costs (c)
              
              
              (4,473
              )
              
              (3,173
              )
              
              (5,133
              )Convertible
                  debentures (d)
              
              
              (4,543
              )
              
              625
              
              
              680Income
                  taxes (e)
              
              
              (1,394
              )
              
              -
              
              
              -Loss
                  from continuing operations for the year based on U.S. GAAP
              
              
              (13,898
              )
              
              (11,813
              )
              
              (19,826
              )Loss
                  from discontinued operations for the year based on Canadian
                  GAAP
              
              
              -
              
              
              (350
              )
              
              (6,247
              )Commodity
                  contract gains
              
              
              -
              
              
              -
              
              
              1,340Standard
                  Mine development costs
              
              
              -
              
              
              -
              
              
              (980
              )Impairment
              
              
              -
              
              
              -
              
              
              980Loss
                  from discontinued operations for the year based on U.S.
                  GAAP
              
              
              -
              
              
              (350
              )
              
              (4,907
              )Net
                  loss for the year based on U.S. GAAP
              
              $
              (13,898
              )
              $
              (12,163
              )
              $
              (24,733
              )Comprehensive
                  loss
              
              $
              (13,898
              )
              $
              (12,163
              )
              $
              (24,733
              )Basic
                  and diluted loss per share in accordance with U.S. GAAP:Continuing
                  operations
              
              $
              (0.10
              )
              $
              (0.10
              )
              $
              (0.19
              )Discontinued
                  operations
              
              
              -
              
              
              (0.00
              )
              
              (0.05
              )Net
                  loss per share, basic and diluted - U.S. GAAP
              
              $
              (0.10
              )
              $
              (0.10
              )
              $
              (0.24
              )




Under
      U.S. GAAP, the consolidated statements of cash flows would be adjusted as
      follows:


**Year
                  ended December 31,****2007**
              
              **2006**
              
              **2005**Cash
                  provided by (used in) operating activities based on Canadian
                  GAAP
              
              $
              7,485
              
              $
              (11,609
              )
              $
              (11,279
              )Deferred
                  financing costs (a)
              
              
              160
              
              
              -
              
              
              -Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              (12,165
              )
              
              -
              
              
              -Black
                  Fox development costs (c)
              
              
              (4,473
              )
              
              (3,173
              )
              
              (5,133
              )Cash
                  used in operating activities based on U.S. GAAP
              
              
              (8,993
              )
              
              (14,782
              )
              
              (16,412
              )Cash
                  (used in) provided by investing activities based on Canadian
                  GAAP
              
              
              (19,283
              )
              
              3,682
              
              
              1,390Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              10,032
              
              
              64
              
              
              -Black
                  Fox development costs (c)
              
              
              4,473
              
              
              3,173
              
              
              5,133Restricted
                  cash for Canadian flow-through expenditures (e)
              
              
              (2,354
              )
              
              (858
              )
              
              -Cash
                  (used in) provided by investing activities based on U.S.
                  GAAP
              
              
              (7,132
              )
              
              6,061
              
              
              6,523Cash
                  provided by financing activities based on Canadian GAAP
              
              
              12,281
              
              
              12,311
              
              
              3,162Deferred
                  financing costs (a)
              
              
              (160
              )
              
              -
              
              
              -Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              1,763
              
              
              -
              
              
              -Cash
                  provided by financing activities based on U.S. GAAP
              
              
              13,884
              
              
              12,311
              
              
              3,162Effect
                  of exchange rate changes on cash
              
              
              (143
              )
              
              1
              
              
              (32
              )Net
                  cash (outflow) inflow in accordance with U.S. GAAP
              
              
              (2,384
              )
              
              3,591
              
              
              (6,759
              )Cash,
                  beginning of year in accordance with U.S. GAAP
              
              
              3,718
              
              
              127
              
              
              6,886Cash,
                  end of year in accordance with U.S. GAAP
              
              $
              1,334
              
              $
              3,718
              
              $
              127




F-34




**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**24.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





***(a)***
            Financing
                costs




As
      of
      January 1, 2007, under Canadian GAAP, the Company expenses debt financing costs
      when they are incurred (Note 3(s)). Prior to January 1, 2007, under Canadian
      GAAP, debt financing costs were capitalized and amortized over the term of
      the
      related debt. As a result, the Company recorded an adjustment to increase
      opening deficit by $0.3 million and reduce the opening balance of deferred
      financing costs by $0.3 million. Under U.S. GAAP, debt financing costs are
      capitalized and amortized over the term of the related debt. Deferred financing
      costs for the credit facility (Note 9) are $0.2 million at December 31,
      2007.




***(b)***
            Montana
                Tunnels




*(i)*  Joint
      venture




Under
      Canadian GAAP, the Company has accounted for its joint venture interest in
      the
      Montana Tunnels mine ("MTM") using the proportionate consolidation method
      whereby the Company's proportionate share of each line item of MTM's assets,
      liabilities, revenues and expenses is included in the corresponding line item
      of
      the Company's financial statements (Note 4).  Under U.S. GAAP, the Company
      would account for MTM using the equity method whereby the Company's share of
      the
      investees' earnings and losses is included in operations and its investments
      therein are adjusted by a similar amount.  The carrying value of MTM was
      lower under U.S. GAAP than under Canadian GAAP following an impairment of the
      property, plant and equipment (Note 24(b)(ii)) in prior years and as a result
      the gain on transfer of the Company's interest in MTM into the joint venture
      under U.S. GAAP is higher. Under U.S. GAAP the gain on transfer of the Company's
      interest in MTM into the joint venture was included in the net loss for the
      year
      ended December 31, 2006; whereas under Canadian GAAP it was deferred and is
      recognized as an adjustment to net income using the units-of-production method
      over the expected life of mine based on the recoverable gold equivalent ounces.
      The
      adjustments to reconcile between Canadian GAAP and U.S. GAAP for Montana Tunnels
      have been presented separately rather than being presented as a single equity
      accounting adjustment.  The Company believes that this presentation
      provides more detailed information to a reader of the financial statements
      enabling the reader to reconcile the individual adjustments to the primary
      Canadian GAAP financial statements and footnotes.




*(ii)*  Impairment
      of property, plant and equipment




Under
      Canadian GAAP, write-downs for impairment of property, plant and equipment
      are
      determined using current proven and probable reserves and mineral resources
      expected to be converted into mineral reserves. In 2002, under U.S. GAAP,
      write-downs were determined using current proven and probable reserves.
      Accordingly, for U.S. GAAP purposes, an impairment of property, plant and
      equipment and an adjustment to the related depreciation has been
      recorded.




*(iii)*  Deferred
      stripping costs




Under
      Canadian GAAP, stripping costs that represent a betterment to the mineral
      property are capitalized and amortized using the units-of-production method
      over
      the expected life of the mine based on the estimated recoverable gold equivalent
      ounces. Under U.S. GAAP, these expenditures are expensed as
      incurred.




***(c)***
            Black
                Fox Project




Under
      Canadian GAAP, mining development costs at the Black Fox Project have been
      capitalized. Under U.S. GAAP, these expenditures are expensed as incurred.
      Accordingly, for U.S. GAAP purposes, a cumulative reduction in property, plant
      and equipment of $26.8 million has been recorded as at December 31, 2007 and
      an
      additional expense of $4.5 million has been recorded for the year then
      ended.




F-35


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**


**24.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




***(d)***
            Convertible
                debenture




Under
      Canadian GAAP, the 2007 Debentures and 2004 Debentures were recorded as compound
      financial instruments including detachable note warrants (Note 10). On issuance,
      under U.S. GAAP, the detachable note warrants are similarly treated as an equity
      instrument with the remainder of the convertible debentures treated as a
      liability. Further, under U.S. GAAP, the beneficial conversion features
      determined using the effective conversion prices based on the proceeds allocated
      to the convertible debentures in accordance with EITF 00-27, *Application
      of Issue No. 98-5 to Certain Convertible Instruments* ,
      is
      allocated to contributed surplus. This discount on the debenture is recognized
      as additional interest expense immediately as the debt is convertible at the
      date of issuance. Canadian GAAP does not require the recognition of any
      beneficial conversion feature.




***(e)***
            Flow-through
                common shares




Under
      Canadian income tax legislation, a company is permitted to issue shares whereby
      the Company agrees to incur qualifying expenditures and renounce the related
      income tax deductions to the investors. The Company has accounted for the issue
      of flow-through shares using the deferral method in accordance with Canadian
      GAAP. At the time of issue, the funds received are recorded as share
      capital.




The
      Financial Accounting Standards Board ("FASB") staff has taken the view that
      under SFAS No. 109, *Accounting
      for Income Taxes* ,
      the
      proceeds from issuance should be allocated between the offering of shares and
      the sale of tax benefits. The allocation is made based on the difference between
      the quoted price of the existing shares and the amount the investor pays for
      the
      shares. A liability is recognized for this difference. As of December 31, 2007,
      a reduction in future income tax assets of $1.2 million and an increase in
      liabilities of $0.6 million was recorded and a corresponding $1.8 million
      reduction in equity. The liability is reversed when tax benefits are renounced
      and a deferred tax liability is recognized at that time. Income tax expense
      is
      the difference between the amount of a deferred tax liability and the liability
      recognized on issuance.




Also,
      notwithstanding whether there is a specific requirement to segregate the funds,
      the flow-through funds which are unexpended at the consolidated balance sheet
      dates are considered to be restricted and are not considered to be cash or
      cash
      equivalents under U.S. GAAP. As at December 31, 2007, unexpended flow-through
      funds were $3.2 million (December 31, 2006 - $0.9 million).




***(f)***
            Income
                taxes




While
      tax
      accounting rules are essentially the same under both U.S. and Canadian GAAP,
      tax
      account differences can arise from differing treatment of various assets and
      liabilities. For example, certain mine developments cost are capitalized under
      Canadian GAAP and expensed under U.S. GAAP, as explained in (c) above. An
      analysis of these differences indicates that there are larger potential tax
      benefits under U.S. GAAP than under Canadian GAAP but a valuation allowance
      has been applied to all amounts as of December 31, 2007.  The
      Company adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”), on January 1, 2007. There was no effect on the Company’s cumulative
      retained earnings as of January 1, 2007, as a result of the adoption of FIN
      48.
      As of the date of adoption, there were no U.S. tax benefits. FIN 48 prescribes
      a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. FIN 48 requires that the Company recognize in its consolidated
      financial statements, only those tax positions that are “more-likely-than-not”
of being sustained as of the adoption date, based on the technical merits of
      the
      position. As a result of the implementation of FIN 48, the Company performed
      a
      comprehensive review of its material tax positions in accordance with
      recognition and measurement standards established by FIN 48. Based on this
      review the provisions
      of FIN 48 had no effect on the Company’s financial position, cash flows or
      results of operations at either January 1, 2007 or December 31,
      2007.


F-36




**APOLLO
      GOLD CORPORATION**




**Notes
      to the Consolidated Financial Statements**  **-
      (Continued)**


**(Stated
      in U.S. dollars; tabular amounts in thousands)**


**24.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




Under
      current conditions and expectations, the Company does not foresee any
      significant changes in unrecognized tax benefits that would have a material
      impact on the Company’s financial statements. The Company and/or one of its
      subsidiaries are subject to the following material taxing jurisdictions: United
      States and Canada. The Company is generally not subject to examinations that
      could create a tax liability for tax years before 2004 by the Internal Revenue
      Service and before 2001 by Revenue Canada. The Company recognizes interest
      accrued related to unrecognized tax benefits in interest expense and penalties
      in operating expenses. The Company has no accrued interest or penalties related
      to uncertain tax positions as of January 1, 2007 or December 31, 2007.




***(g)***
            Recently
                issued accounting pronouncements




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      157”). This statement defines fair value, establishes guidelines for measuring
      fair value and expands disclosures regarding fair value measurements. SFAS
      157
      does not require any new fair value measurements but rather eliminates
      inconsistencies in guidance found in various prior accounting pronouncements.
      SFAS 157 is effective for fiscal years beginning after November 15, 2007. The
      Company expects that adoption of SFAS 157 will not have a material effect on
      its
      financial condition or results of operation.




In
      February 2007, the FASB issued SFAS 159, *The
      Fair Value Option for Financial Assets and Liabilities - Including an amendment
      of FASB Statement No. 115* (“SFAS
      159). ** SFAS 159
      permits entities to choose to measure certain financial assets and liabilities
      at fair value (the “fair value option”). Unrealized gains and losses, arising
      subsequent to adoption, are reported in earnings. The Company is required to
      adopt SFAS 159 in the first quarter of 2008. The Company is currently evaluating
      the impact, if any, that the implementation SFAS 159 will have on the Company’s
      results of operations or financial position.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
      Combinations (“SFAS 141(R)”). SFAS 141(R) establishes principles and
      requirements for how an acquirer recognizes and measures in its financial
      statements the identifiable assets acquired, the liabilities assumed, any
      noncontrolling interest in the acquiree and the goodwill acquired.
      SFAS 141(R) also establishes disclosure requirements to enable the
      evaluation of the nature and financial effects of the business combination.
      SFAS 141(R) is effective for fiscal years beginning after December 15,
      2008. The Company is currently evaluating the potential impact, if any, of
      the
      adoption of SFAS 141(R) on its consolidated financial
      statements.





In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of Accounting
      Research Bulletin No. 51* (“SFAS 160”). SFAS 160 establishes accounting and reporting standards
      for ownership interests in subsidiaries held by parties other than the parent,
      the amount of consolidated net income attributable to the parent and to the
      noncontrolling interest, changes in a parent’s ownership interest, and the
      valuation of retained noncontrolling equity investments when a subsidiary is
      deconsolidated. SFAS 160 also establishes disclosure requirements that
      clearly identify and distinguish between the interests of the parent and the
      interests of the noncontrolling owners. SFAS 160 is effective for fiscal
      years beginning after December 15, 2008. The Company is currently
      evaluating the potential impact, if any, of the adoption of SFAS 160 on its
      consolidated financial statements.


F-37




**INDEX
      TO EXHIBITS**




**Exhibit**
              **No.**
            
            **Exhibit
                Name**10.25
            
            Employment
                Agreement between Apollo Gold Corporation and Montana Tunnels Mining,
                Inc.
                and Timothy G. Smith, effective as of February 15,
                2004.10.26
            
            Employment
                Agreement by and between Apollo Gold Corporation and Brent E. Timmons,
                effective as of April 1, 2007.21.1
            
            List
                of subsidiaries of the Registrant23.1
            
            Consent
                of Deloitte & Touche LLP23.2
            
            Consent
                of SRK Consulting (US), Inc31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act