**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-K**




(Mark
      one)


R
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**For
                the fiscal year ended December 31, 2006or£
            **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)*





**(720)
      886-9656**


*(Registrant’s
      telephone number, including area code)*







**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 of the Act: Common Shares, no par
      value**




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.




Yes £ No R




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 £ No R




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 R No £




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. R




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 £     Accelerated
      filer £     Non-accelerated
      filer R




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




As
      of
      June 30, 2006, the aggregate market value of the registrant’s voting common
      stock held by non-affiliates of the registrant was $61,596,497 based upon the
      closing sale price of the common stock as reported by the American Stock
      Exchange on that date.




As
      of
      March 20, 2007, the registrant had 143,467,186 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 2007 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 21
      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
                cash flow from the Montana Tunnels
                mine;




-2-




·
            the
                establishment and estimates of mineral reserves and
                resources;




·
            production
                and production costs;




·
            cash
                operating costs;




·
            total
                cash costs;




·
            grade;




·
            feasibility
                studies;




·
            expenditures;




·
            exploration;




·
            permits;




·
            expansion
                plans;




·
            plans
                for Black Fox and Huizopa;




·
            closure
                costs;




·
            cash
                flows;




·
            future
                financing;




·
            liquidity;




·
            estimates
                of environmental liabilities;




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




·
            factors
                impacting our results of
                operations;




·
            application
                of Sarbanes-Oxley 404 reporting requirements and our ability to meet
                those
                reporting requirements; and




·
            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;




·
            changes
                in interest and currency exchange rates;




-3-




·
            timing
                and amount of production;




·
            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 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 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.** ***DESCRIPTION
      OF 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.




-12-


**BACKGROUND**




**Apollo
      Gold Corporation**




The
      following chart illustrates the 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 20, 2007)** ****









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 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 19 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**
            
            **2006**
            
            **2005**
            
            **2004**Gold
            
            
            32
            %
            
            46
            %
            
            37
            %Zinc
            
            
            47
            %
            
            34
            %
            
            34
            %Silver,
                lead and other metals
            
            
            21
            %
            
            20
            %
            
            29
            %




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




**Year
                Ended December 31,****2006(1)**
            
            **2005**
            
            **2004****Production
                Summary**Gold
                ounces
            
            
            4,959
            
            
            44,099
            
            
            33,743Silver
                ounces
            
            
            116,004
            
            
            524,722
            
            
            970,751Lead
                pounds
            
            
            1,196,317
            
            
            10,428,061
            
            
            10,064,265Zinc
                pounds
            
            
            3,040,058
            
            
            22,380,136
            
            
            26,222,805**(1)**The Montana Tunnels mine ceased milling operations on May 12, 2006;
                therefore, no metal products were produced after that
                date.**Average
                metals prices**Gold
                - London Bullion Mkt. ($/ounce)
            
            $
            604
            
            $
            445
            
            $
            409Silver
                - London Bullion Mkt. ($/ounce)
            
            $
            11.55
            
            $
            7.31
            
            $
            6.66Lead
                - LME Cash ($/pound)
            
            $
            0.58
            
            $
            0.44
            
            $
            0.40Zinc
                - LME Cash ($/pound)
            
            $
            1.49
            
            $
            0.63
            
            $
            0.48





***Gold***




Montana
      Tunnels produced 4,959, 44,099, and 33,743 ounces of gold during the years
      ended
      December 31, 2006, 2005, and 2004, 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**1997
            
            $
            362
            
            $
            283
            
            $
            3311998
            
            
            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*
            
            
            686
            
            
            608
            
            
            648





*
      Through
      March 15, 2007




***Zinc***




Production
      from the Montana Tunnels mine also includes the extraction, processing and
      sale
      of zinc and lead contained in sulfide concentrates. The mine produced
      approximately 3,000,000, 22,400,000 and 26,200,000 pounds of payable zinc in
      2006, 2005 and 2004, 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, 2002-2006**




**2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(000
                tonnes)**Refined
                Consumption
            
            
            11,285
            
            
            10,629
            
            
            10,651
            
            
            9,848
            
            
            9,376Refined
                Production
            
            
            10,867
            
            
            10,255
            
            
            10,357
            
            
            9,870
            
            
            9,710Release
                of Inv. Stocks
            
            
            30
            
            
            29
            
            
            12
            
            
            7
            
            
            3Increase
                (Decrease) World Stock
            
            
            (388
            )
            
            (345
            )
            
            (282
            )
            
            29
            
            
            337LME
                Stocks-
                Total
            
            
            88
            
            
            394
            
            
            629
            
            
            740
            
            
            651-
                Weeks’ consumption
            
            
            0.4
            
            
            1.9
            
            
            3.1
            
            
            3.9
            
            
            3.6Reported
                Stocks-
                Total
            
            
            420
            
            
            808
            
            
            1,039
            
            
            1,159
            
            
            1,095-
                Weeks’ consumption
            
            
            1.9
            
            
            4.0
            
            
            5.1
            
            
            6.1
            
            
            6.1LME
                cash price-
                $/tonne
            
            
            3,273
            
            
            1,380
            
            
            1,048
            
            
            828
            
            
            779-
                cents/lb
            
            
            148.5
            
            
            62.6
            
            
            47.5
            
            
            37.6
            
            
            35.3





Data
      Source: Standard Bank Metals Report.




*Zinc
      Price History*




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




**Zinc****Year**
            
            **High**
            
            **Low**2001
            
            
            0.48
            
            
            0.332002
            
            
            0.42
            
            
            0.332003
            
            
            0.46
            
            
            0.342004
            
            
            0.56
            
            
            0.422005
            
            
            0.86
            
            
            0.532006
            
            
            1.93
            
            
            1.432007*
            
            
            1.93
            
            
            1.38





*
      Through
      March 15, 2007




***Silver***




Montana
      Tunnels produced 116,004, 524,722 and 970,751 ounces of silver in the years
      ended December 31, 2006, 2005 and 2004, 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.




-16-




*Silver
      Price History*




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




**Silver****Year**
            
            **High**
            
            **Low**2001
            
            
            4.83
            
            
            4.032002
            
            
            5.13
            
            
            4.222003
            
            
            5.99
            
            
            4.352004
            
            
            8.29
            
            
            5.492005
            
            
            9.22
            
            
            6.392006
            
            
            14.94
            
            
            8.832007*
            
            
            14.58
            
            
            12.21





*
      Through
      March 15, 2007




***Lead***




Production
      from Montana Tunnels also includes the extraction, processing and sale of lead
      contained in sulfide concentrates. Montana Tunnels produced approximately
      1,200,000, 10,400,000 and 10,100,000 pounds of payable lead in 2006, 2005 and
      2004, 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, 2002-2006**




**2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**
            
            
            **2002****(000
                tonnes)**Refined
                Consumption
            
            
            8,048
            
            
            7,616
            
            
            7,257
            
            
            6,826
            
            
            6,642Refined
                Production
            
            
            8,102
            
            
            7,541
            
            
            6,955
            
            
            6,748
            
            
            6,670Release
                of Stock
            
            
            10
            
            
            36
            
            
            56
            
            
            60
            
            
            6Increase
                (Decrease) Stock
            
            
            64
            
            
            (39
            )
            
            (246
            )
            
            (18
            )
            
            34LME
                Stocks      - Total
            
            
            41
            
            
            44
            
            
            40
            
            
            109
            
            
            184-
                Weeks’ consumption
            
            
            0.3
            
            
            0.3
            
            
            0.3
            
            
            0.8
            
            
            1.4Reported
                Stocks - Total
            
            
            378
            
            
            314
            
            
            298
            
            
            407
            
            
            483-
                Weeks’ consumption
            
            
            2.4
            
            
            2.1
            
            
            2.1
            
            
            3.1
            
            
            3.8LME
                cash price - $/tonne
            
            
            1,288
            
            
            976
            
            
            887
            
            
            516
            
            
            453-
                cents/lb
            
            
            58.4
            
            
            44.3
            
            
            40.2
            
            
            23.4
            
            
            20.5





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*
            
            
            0.91
            
            
            0.71





*
      Through
      March 15, 2007




-17-




The
      price
      of silver, lead and zinc is affected by numerous factors that are beyond our
      control. See “Risk Factors.”




**Smelting
      and Refining Process**




We
      have
      an agreement with Johnson Matthey to refine gold doré to a final finished
      product. Johnson Matthey receives $0.50 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 $500 per
      delivery.




The
      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 expires in March 2009.
      See
      Item 2 “Description of Properties - Montana Tunnels Mine” for further
      information.




**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 33 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**




**Year
                Ended December 31,****Mines**
            
            **Apollo
                interest**
            
            **2006**
            
            **2005**
            
            **2004**Montana
                Tunnels
            
            
            50
            %
            
            275,850
            
            
            535,900
            
            
            643,800Black
                Fox Project
            
            
            100
            %
            
            448,800
            
            
            457,100
            
            
            457,100**Apollo
                Gold - Total**
            
            
            
            
            
            **724,650**
            
            
            **993,000**
            
            
            **1,100,900**





**Montana
      Tunnels Reserves**




The
      end-of-year 2006 reserves are 17.85 million tons containing 275,850 ounces
      of
      gold and 212 million pounds of zinc. The grade model was not modified in 2006
      as
      no new definition drilling was conducted during the year.




-18-




**Montana
      Tunnels Mine Reserve Statement at December 31, 2006** **(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
            
            
            5,167.9
            
            
            0.016
            
            
            0.169
            
            
            0.219
            
            
            0.587
            
            
            82.4Mill
                Stockpile
            
            
            Proven
            
            
            10.9
            
            
            0.008
            
            
            0.330
            
            
            0.110
            
            
            0.190
            
            
            0.1Subtotal
            
            
            Proven
            
            
            5,178.8
            
            
            0.016
            
            
            0.169
            
            
            0.219
            
            
            0.587
            
            
            82.5L
                Pit
            
            
            Probable
            
            
            107.2
            
            
            0.015
            
            
            0.180
            
            
            0.209
            
            
            0.509
            
            
            1.6M
                Pit
            
            
            Probable
            
            
            12,560.2
            
            
            0.015
            
            
            0.227
            
            
            0.166
            
            
            0.578
            
            
            191.8Subtotal
            
            
            Probable
            
            
            12,667.4
            
            
            0.015
            
            
            0.227
            
            
            0.166
            
            
            0.577
            
            
            193.4Total
            
            
            Proven
                + Probable
            
            
            17,846.2
            
            
            0.016
            
            
            0.210
            
            
            0.181
            
            
            0.580
            
            
            275.9





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




The
      past
      three years average metal prices were used for the calculation of the year-end
      2006 reserves, which are as follows:





Gold
      -
      $485/oz.  Silver
      -
      $8.50/oz. Lead
      -
      $0.47/lb.  Zinc
      -
      $0.87/lb.





**Black
      Fox Reserves**




The
      proven and probable mineral reserves estimates disclosed below for Black Fox
      were in an NI 43-101 report completed in August 2006 and were calculated
      based on a gold price of $550 per ounce. At the present time, we expect to
      update the reserves in second quarter 2007 and issue an NI 43-101 report within
      45 days of publishing the reserves for Black Fox. We expect the NI 43-101 report
      to reflect an increase in reserves based on the inclusion of underground
      material in addition to the open pit. In addition, following the issue of the
      new reserves we expect that a feasibility study will be completed by the end
      of
      2007.




**Black
      Fox Total Mineral Resource Summary**




**Tonnes**
              **000’s**
            
            **Grade**
              **G
                Au/t**
            
            **Ounces****Open
                Pit - Material**Reserve
            
            
            3,062
            
            
            4.56
            
            
            448,800Indicated
                Resource
            
            
            2,356
            
            
            3.27Inferred
                Resource
            
            
            6,626
            
            
            4.00**Underground
                - Material**Indicated
                Resource
            
            
            1,004
            
            
            9.66Inferred
                Resource
            
            
            1,228
            
            
            9.71


**(1)** *Cautionary Note to US Investors concerning estimates of Indicated Mineral
        Resources.* This  press
        release uses the term “indicated
        mineral resources”. We advise US investors that while the term is recognized and
        required by Canadian regulations, the US Securities and Exchange Commission
        does
        not recognize it. US investors are cautioned not to assume that any part
        or all
        of the mineral deposits in these categories will ever be converted into mineral
        reserves.
 
 **(2)** *Cautionary Note to US Investors concerning estimates of Inferred Mineral
        Resources* *.* This press
        release uses the term “inferred mineral
        resources”. We advise US investors that while the term is recognized and
        required by Canadian regulations, the US Securities and Exchange Commission
        does
        not recognize it. “Inferred mineral resources” have a great amount of
        uncertainty as to their existence, and great uncertainty as to their economic
        and legal feasibility. It cannot be assumed that all or any part of an inferred
        mineral resource will ever be upgraded to a higher category. In accordance
        with
        Canadian rules, estimates of inferred mineral resources cannot form the basis
        of
        feasibility or other economic studies. US investors are cautioned not to
        assume
        that part or all of the inferred mineral resource exists, or is economically
        or
        legally minable.




The
      resources shown utilize a 0.90 grams of gold per tonne (“g Au/t”) cut off for
      open pit material, and a 3.0 g Au/t cut off for underground
      material.





The
      open
      pit reserves of 448,800 gold ounces are in a
      pre-feasibility study completed by Mine Development Associates (“MDA”), a mining
      engineering firm based in Reno, Nevada as part of the NI 43-101. The study
      indicates an economic project based on a gold price of $550 per
      ounce.




Pit
      optimization studies were completed utilizing the following parameters for
      the
      deposit:




·
            Overburden
                mining costs - $1.25 per tonne of
                material;




-19-




·
            Rock
                mining costs - $1.50 per tonne of
                material;




·
            Processing
                costs - $12.16 per tonne ore;




·
            General
                administration costs - $4.50 per tonne
                ore;




·
            Plant
                gold recovery - 96%;
                and




·
            Assume
                50% of existing underground workings backfilled with material having
                a
                density of2.0.





**Black
      Fox Open Pit Economics - Own Mill - Reserve Ounces Only (base
      case)**




The
      economics, using the open pit reserves only, at a gold price of $550 per ounce
      utilizing an on site mill
      processing facility with a capacity of 1,500 tonnes per day and tailings
      facility has a positive Net Present Value (“NPV”) of $36 million at a 5%
      discount rate and an Internal Rate of Return (“IRR”) of 21.63%.




**Employee
      Relations**




As
      of
      December 31, 2006, we had approximately 160 employees, including 5 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.




**RISK
      FACTORS**




**ITEM
      1A.**




*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.*




-20-




**We
      have identified a material weakness in our internal controls over financial
      reporting.**




In
      2006 a
      major restructuring and streamlining at the corporate office significantly
      changed the design and structure of our internal controls and procedures at
      the corporate level. Also, following the closure of the mill in May 2006 and
      placing the Montana Tunnels mine on care and maintenance and the subsequent
      resumption of mining activities at the mine in September 2006, our controls
      at
      that location are not operating as previously designed related to segregation
      of
      duties over procurement, inventory control and accounting duties. Corporate
      management has increased its involvement with day-to-day oversight and
      management of the Montana Tunnels mine, but as of this date, management has
      not
      had sufficient time to evaluate these controls and therefore believes the change
      in controls is significant enough to be reported as a material weakness. In
      an
      effort to address this material weakness, staffing requirements and other
      changes in control are being evaluated as the future operational requirements
      of
      the Montana Tunnels mine are being determined. This material weakness could
      result in the misstatement of assets, liabilities, shareholders’ equity or
      expenses that would result in a misstatement of the interim or annual
      consolidated financial statements that would not be prevented or
      detected.





As
      a
      non- accelerated
      filer, compliance with the internal control reporting requirements of Section 404
      of
      the Sarbanes-Oxley Act of 2002 has been deferred and we will be subject to
      the
      requirements in our Annual Report on Form 10-K for fiscal year
      2007.




**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. 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.




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




As
      of
      March 20, 2007, approximately 46 million additional 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 11.7 million common shares issuable upon the conversion of the
      $8,731,000 outstanding principal amount of our Series B Convertible Debentures
      at the option of the holder at a conversion price of $0.75 per share and
      approximately 17.2 million common shares issuable upon the conversion of the
      $8,580,000 outstanding principal of the 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 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.




-21-




**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” (“PFIC”) for 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
      control, and we can not assure you that we will not become a PFIC in the future.
      If we were deemed to be a PFIC, then a United States taxpayer who disposes
      or is
      deemed to dispose of our shares at a gain, or who received a so-called “excess
      distribution” on the shares, generally would be required to treat such gain or
      excess distribution as ordinary income and pay an interest charge on a portion
      of the gain or distribution unless the taxpayer makes a timely qualified
      electing fund election (a “QEF” election). A United States taxpayer who makes a
      QEF election generally must report on a current basis his or her share of any
      of
      our ordinary earnings and net capital gain for any taxable year in which we
      are
      a PFIC, whether or not we distribute those earnings. Special estate tax rules
      could be applicable to our shares if we are classified as a PFIC for income
      tax
      purposes.




**We
      have a history of losses and we expect to incur losses in the
      future.**




Since
      our
      inception through a merger in June 2002, we have incurred significant losses
      and
      we expect significant losses to continue for the foreseeable future. Our net
      losses were $15,587,000, $22,208,000, and $31,007,000 for the years ended
      December 31, 2006, 2005 and 2004, respectively. There can be no assurance that
      we will achieve or sustain profitability in the future.




**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. If we are unsuccessful in addressing these risks and uncertainties,
      our
      business, results of operations and financial condition will be materially
      and
      adversely affected.




**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.




-22-




**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 shares
      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 gold price.




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.




**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.




-23-




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. 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.
      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.**




From
      time
      to time we will engage 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.




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 will be profitable.




**Exploration
      in general, and gold exploration in particular, are speculative and are
      frequently unsuccessful.**




Mineral
      exploration, particularly for gold and silver, 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.




-24-




**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.




**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 exploration
      activities at Black Fox and 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 nonbank
      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.




**Our
      Black Fox property is pledged to the holders of our 12% Series 2004-B
      Secured Convertible Debentures and we may not be able to obtain financing from
      an asset based lender.**




Our
      Black
      Fox property is pledged to the holders of our 12% Series 2004-B Secured
      Convertible Debentures as security for our obligations under these debentures.
      It may be difficult for us to raise additional external funds through banks,
      asset based lenders, or other types of lenders, which may require us to raise
      additional funds through future debt and equity offerings. In addition, the
      inability to pledge any additional significant assets may make it difficult
      or
      impossible to obtain financing on acceptable terms, or at all. The failure
      to
      obtain acceptable financing would have a material adverse effect on our growth
      strategy and our results of operations and financial condition.




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




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.
      In
      addition, our ability to hedge against zinc and lead price risk in a timely
      manner may be adversely affected by the smaller volume of transactions in both
      the zinc and lead markets. 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.




-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 could 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 bonding 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, some of which have greater financial resources
      than
      we do, we may be unable to acquire attractive new mining properties on terms
      that we consider acceptable.




**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.




-27-




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 the existence and extent of any of our properties
      are in doubt, title to mining properties are subject to potential claims by
      third parties claiming an interest in them and, in September 2006, some of
      our
      claims at our Black Fox project were listed as reopened for staking on the
      Ministry of Northern Development and Mines (MNDM) website. Five of these claims
      totaling 185 acres were immediately staked by local prospectors. None of the
      reserves or resources at our Black Fox project are located on the properties
      related to these claims. It is our opinion that these claims were erroneously
      listed as reopened and overstaked and we are working diligently with the MNDM
      to
      correct the overstaking.




**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, or 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.




**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. Some of our assets are located outside
      of
      Canada and our head office is located in the United States. Additionally, a
      number of our directors and the experts named in this Annual Report on Form
      10-K
      are residents of Canada. Although we have appointed Lackowicz, Shier &
Hoffman as our agents for service of process in the Yukon Territory, it might
      not be possible for investors to collect judgments obtained in Canadian courts
      predicated on the civil liability provisions of 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 and experts. Execution
      by United States courts of any judgment obtained against us, or any of the
      directors, executive officers or experts named in this Annual Report on Form
      10-K, 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.** ***DESCRIPTION
      OF 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, constructed and operated in 1987 by Pegasus Gold, a mining
      company incorporated in Canada. In 1998, Pegasus filed for bankruptcy and in
      2002, Apollo purchased Montana Tunnels Mining, Inc., the owner and operator
      of
      the Montana Tunnels mine.




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.




As
      of
      December 31, 2006, Elkhorn had contributed $9.27 million and Apollo and Elkhorn
      agreed to amend the JV Agreement effective December 31, 2006 such that Elkhorn
      committed to complete the full funding of $13 million by executing a promissory
      note for $3.73 million to evidence its obligation to complete its contribution.
      On January 4, 2007 Elkhorn paid $1.73 million of the promissory note with the
      balance of $2.0 million being paid on February 23, 2007.





***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
      the
      Montana Tunnels mine the open pit mining activity was suspended on
      October 21, 2005 for safety reasons due to increased wall activity on the
      eastern side of the open pit. Following the suspension of mining, the mill
      continued to process ore from stockpiled 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. For the year ended
      December 31, 2006, a total of 4,959 ounces of gold, 116,004 ounces of silver,
      1,196,317 lbs of lead and 3,040,058 lbs of zinc were produced.




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.
      In
      August 2006 key maintenance personnel were hired to repair the mobile equipment
      fleet followed by the hiring of mine operating personnel during September 2006.
      On September 10, 2006, the first bench was blasted and waste rock removal began
      along with the construction of a new ramp access to the open-pit ore reserves
      which are at the pit bottom. As at December 31, 2006, we had excavated
      approximately 5.8 million tons of remediation waste and were working on the
      ramp
      system below switchback # 4 which is 100 feet above accessing the open pit
      bottom and the ore body. 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.




**Montana
      Tunnels Mine Production History**




**Year
                Ended December 31,****Year**
            
            **Milled**
              **Tons**
              **000’s**
            
            **Au
                Oz Au/t**
            
            **Oz
                Au**
              **000’s**
            
            **Ag
                Oz Ag/t**
            
            **Oz
                Ag**
              **000’s**
            
            **Pb**
              **%**
            
            **Tons
                Pb**
              **000’s**
            
            **Zn**
              **%**
            
            **Tons
                Zn**
              **000’s**2006
            
            
            1,427
            
            
            0.0078
            
            
            5.0
            
            
            0.17
            
            
            116.0
            
            
            0.10
            
            
            0.6
            
            
            0.20
            
            
            1.52005
            
            
            4,955
            
            
            0.0129
            
            
            44.1
            
            
            0.19
            
            
            524.7
            
            
            0.15
            
            
            5.2
            
            
            0.34
            
            
            11.22004
            
            
            5,394
            
            
            0.0096
            
            
            33.7
            
            
            0.32
            
            
            970.8
            
            
            0.14
            
            
            5.0
            
            
            0.37
            
            
            13.1





-32-




**Year
                Ended December 31,****Payable
                Metal**
            
            **2006**
            
            **2005**
            
            **2004**Gold
                (oz)
            
            
            4,959
            
            
            44,099
            
            
            33,743Silver
                (oz)
            
            
            116,004
            
            
            524,722
            
            
            970,751Lead
                (lb)
            
            
            1,196,317
            
            
            10,428,061
            
            
            10,064,265Zinc
                (lb)
            
            
            3,040,058
            
            
            22,380,136
            
            
            26,222,805




**Year
                Ended December 31,****2006(1)**
            
            **2005**
            
            **2004**Total
                Cost/Ton Ore Processed
            
            $
            7.08
            
            $
            9.46
            
            $
            9.47Cash
                Operating Cost/Oz Gold
            
            $
            643
            
            $
            529
            
            $
            798Total
                Cash Cost/Oz Gold
            
            $
            718
            
            $
            563
            
            $
            839Total
                Production Cost/Oz Gold
            
            $
            794
            
            $
            618
            
            $
            913





**(1)** Cost per
      ton and 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.





The
      mine
      produced the following aggregate amounts of the listed metals from its inception
      in 1987 through December 31, 2006:


ProductionGold
              
              
              1,551,000
                  ozsSilver
              
              
              29,111,000
                  ozsLead
              
              
              365,800,000
                  lbs.Zinc
              
              
              996,400,000
                  lbs.





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




About
      half of Section 8 lands are our owned fee lands. Mining claims that cover the
      pit are listed in the table below.




**Claims
      Covering Montana Tunnels Mine**




**Patented
                Claims**
            
            **Mineral**
              **Survey**
            
            **Unpatented**
              **Claims**Geraldine
                C
            
            
            9184
            
            
            MF
                1P.Q.C
            
            
            9184
            
            
            F
                14Montana
            
            
            9184
            
            
            F
                15General
                Harris
            
            
            2038
            
            
            -Black
                Rock No. 2
            
            
            9184
            
            
            -Black
                Rock No. 3
            
            
            8940
            
            
            -D.E.D
            
            
            9184
            
            
            -Placer
            
            
            258
            
            
            -Anna
            
            
            8940
            
            
            -





Montana
      Tunnels owns or leases an aggregate of 5,088 acres in fee and patented lands.
      The property consists of 139 wholly or partially owned patented claims (2,413.42
      acres), three patented leased claims (45.19 acres) which are held pursuant
      to a
      mining lease expiring on March 19, 2014, and 2,629.44 acres of owned fee lands.
      All patented claims and fee lands have been surveyed. In addition, 213
      unpatented claims are maintained (4,260 acres). We estimate that 90% of the
      unpatented claims have been surveyed. A number of claims outside the contiguous
      mining claims and fee land are isolated.




None
      of
      the Montana Tunnels mine’s reserves are subject to royalties, but the mine does
      have three leased claims that contain mineralization, which will be subject
      to a
      4.5% net smelter return royalty if they are mined. The annual holding costs
      of
      the Montana Tunnels properties, exclusive of property taxes, total
      $53,000.




-33-




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.




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. While fully operational, mine production
      averages approximately 40,000 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 12-15% 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.




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.




-34-




**Montana
      Tunnels Mine Reserve Statement at December 31, 2006** **(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
            
            
            5,167.9
            
            
            0.016
            
            
            0.169
            
            
            0.219
            
            
            0.587
            
            
            82.4Mill
                Stockpile
            
            
            Proven
            
            
            10.9
            
            
            0.008
            
            
            0.330
            
            
            0.110
            
            
            0.190
            
            
            0.1Subtotal
            
            
            Proven
            
            
            5,178.8
            
            
            0.016
            
            
            0.169
            
            
            0.219
            
            
            0.587
            
            
            82.5L
                Pit
            
            
            Probable
            
            
            107.2
            
            
            0.015
            
            
            0.180
            
            
            0.209
            
            
            0.509
            
            
            1.6M
                Pit
            
            
            Probable
            
            
            12,560.2
            
            
            0.015
            
            
            0.227
            
            
            0.166
            
            
            0.578
            
            
            191.8Subtotal
            
            
            Probable
            
            
            12,667.4
            
            
            0.015
            
            
            0.227
            
            
            0.166
            
            
            0.577
            
            
            193.4Total
            
            
            Proven
                + Probable
            
            
            17,846.2
            
            
            0.016
            
            
            0.210
            
            
            0.181
            
            
            0.580
            
            
            275.9


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




***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.




Although
      the open pit was closed 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.




A
      major
      mine plan amendment continues to progress through an Environmental Impact
      Statement permitting process. If approved, the M-Pit mine expansion amendment
      by
      the Montana Department of Environmental Quality and Bureau of Land Management
      would provide approximately 25 million tons of additional ore for processing
      and
      add approximately five years onto the life of the mine.




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




**Year
                Ended December 31,****Type
                of Bonding**
            
            **2006(1)**
            
            **2005**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
            
            
            3,009,000
            
            
            1,264,000Total
                Obligated Bonding Requirement Met
            
            $
            18,126,000
            
            $
            16,381,000





**(1)**  Apollo’s
      share of the amounts shown for 2006 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.




-35-




Bonding
      requirements are subject to adjustment by the State of Montana for various
      reasons from time to time. As noted above, the bonding requirement for the
      Montana Tunnels mine increased from $16,381,000 to $18,126,000 during 2006
      as
      the result of a minor revision to the operating permit and a bond inflation
      adjustment.




***Drilling***




As
      of
      December 31, 2006, 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**




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
      1,983 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.




-36-




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%.




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.




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.




From
      1997
      until 2001, the mine produced approximately 210,000 ounces of gold. In early
      2003, we commenced a drilling program consisting of shallow holes to test the
      mine’s open pit potential. During 2003, 297 surface core holes were completed
      with depths varying from 200 to 500 meters.




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.




None
      of
      the currently defined resources or reserves are subject to production royalties.
      However, Apollo owns  properties totaling 1,266 acres that
      owned by Apollo are subject to net smelter return royalties, ranging from
      2.0% to 3.25%, if in the future any reserves are found on that
      property.




***Exploration
      and Development 2004***




In
      February 2004, a new drilling program commenced which first required the
      existing ramp system to be extended down to the 235 meter level and the
      construction of a 913 meter drift so as to allow drilling of the ore body from
      underground. During 2004, 210 underground holes totaling 41,065 meters were
      drilled.




Also
      in
      2004, an additional 105 surface holes were completed, totaling another 43,284
      meters. Our objectives for drilling these surface holes were to better define
      the open pit reserves; extend our resources along strike; extend resources
      in
      the eastern and western extensions of the main structure, bracketing or
      undercutting known gold-bearing zones; and explore known geophysical
      targets.




-37-




In
      April
      2004, through surface exploration drilling we discovered a new ore body in
      the
      footwall of the DPFZ. The discovery hole was based on the extension of an
      induced polarization anomaly. There are two components to the mineralization,
      the quartz breccia veins and the massive sulfide mineralization (Pb, Zn, Ag).
      These appear to be two mineralizing events sharing the same “plumbing system.”




***Exploration
      and Development 2005***




During
      2005 the surface and underground drilling programs continued with a total of
      51
      surface holes and 160 underground holes being completed.




***Exploration
      and Development 2006***




During
      2006 a further 3 holes were added to the surface and underground drilling
      programs. As of December 31, 2006, Apollo had completed a total of 453 surface
      diamond drill holes, totaling 130,390 meters as well as 386 underground holes
      totaling 75,704 meters giving a to-date total for both of 206,094
      meters.




Apollo’s
      drilling supplemented the data from the 285 surface and 721 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
            
            
            28,180Exall
            
            
            1995-1999
            
            
            Surface
            
            
            142
            
            
            21,288Exall
            
            
            1996-2001
            
            
            Underground
            
            
            721
            
            
            63,059Apollo
            
            
            2002-2006
            
            
            Surface
            
            
            453
            
            
            130,390Apollo
            
            
            2004-2006
            
            
            Underground
            
            
            386
            
            
            75,704Totals
            
            
            
            
            
            
            
            
            1,845
            
            
            318,621





In
      2005,
      we began the permitting process for the project, which we anticipate will be
      finished in late 2007 or early 2008 based on a plan for a combined open pit
      and
      underground mine with a 1,500 tonnes per day on-site mill. The estimated cost
      of
      the mine and mill is approximately $80 million.




***Mineral
      Reserves***




The
      reserves reported in a Canadian National Instrument NI 43-101 report in August
      2006 of 448,800 ounces of gold and the resources were based upon the 2003 to
      2006 exploration program and included a pre-feasibility study of developing
      an
      open pit mine on the Black Fox property. This study did not consider any
      underground material. We report no reserves at Black Fox under SEC Industry
      Guide 7, which requires a final bankable feasibility study.




The
      new
      resource study was prepared by MDA .
      MDA has
      confirmed that the resource study complies in all respects with NI 43-101
      guidelines. The
      table
      below summarizes the Black Fox Total Mineral Resource:




-38-


**Black
      Fox Total Mineral Resource Summary**




**Tonnes**
              **000’s**
            
            **Grade**
              **G
                Au/t**
            
            **Ounces****Open
                Pit - Material**Reserve
            
            
            3,062
            
            
            4.56
            
            
            448,800Indicated
                Resource
            
            
            2,356
            
            
            3.27Inferred
                Resource
            
            
            6,626
            
            
            4.00**Underground
                - Material**Indicated
                Resource
            
            
            1,004
            
            
            9.66Inferred
                Resource
            
            
            1,228
            
            
            9.71





MDA
      completed the resource estimate of material contained in the Black Fox model
      between the 9300 elevation and the 9960 elevation. Most of the resource is
      contained in a part of the Destor-Porcupine Fault, 750 meters along strike
      and
      drilled to a depth of 350 meters on the west and 500 meters on the east. The
      mineralization remains open along strike and to depth.




The
      Black
      Fox resource estimate is based on two cut  offs .
      A 0.90 g
      Au/t cut off, suitable for the open pit , was
      applied to material down to the 9720 elevation, or about 280 meters below the
      surface. Below the 9720 elevation, a 3.0 g Au/t cut off was used
      since it is likely that this material would only be mined by underground
      methods.




**** **Open
      Pit Reserves**




The
      open
      pit reserves of 448,800 gold ounces  are in a
      pre-feasibility study completed by MDA. The study indicates an economic project
      based on a gold price of $550 per ounce.




Pit
      optimization studies were completed utilizing the following parameters for
      the
      deposit:




·
            Overburden
                mining costs - $1.25 per tonne of
                material;




·
            Rock
                mining costs - $1.50 per tonne of
                material;




·
            Processing
                costs - $12.16 per tonne ore;




·
            General
                administration costs - $4.50 per tonne
                ore;




·
            Plant
                gold recovery - 96%;
                and




·
            Assume
                50% of existing underground workings backfilled with material having
                a
                density of2.0.




**Open
      Pit Economics**




The
      Black
      Fox project reserves were developed by completing a pre-feasibility study for
      the project considering open pit mining and two processing options:




·
            Own
                Milling - Construction of a new mill on the project site (base
                case);
                and




·
            Toll
                Milling - Toll milling at a nearby mill (toll mill case).




-39-


**Open
      Pit Economics - Own Mill - Reserve Ounces Only (base case)**




Using
      the
      open pit reserves only and assuming a gold price of $550 per ounce, an
      on site mill
      processing facility with a capacity of 1,500 tonnes per day and tailings
      facility has a positive NPV of $36.1 million at a 5% discount rate and an IRR
      of
      21.63%.





**Open
      Pit Economics - Toll Milling Case -** **Reserve
      Ounces Only**




Using
      the
      open pit reserves only, at a gold price of $550 per ounce, an off site mill
      processing facility with a capacity of 1,500 tonnes per day and tailings
      facility has a positive NPV of $54.0 million at a 5% discount rate and an IRR
      of
      96.27%.




***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.




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 concessions at the Huizopa exploration project.
      Pursuant to an agreement with the previous owner of one of those Mexican
      subsidiaries (the “Previous Owner”), if we exercise our right to acquire those
      concessions at the Huizopa project on which we currently hold an option, one
      of
      our Mexican subsidiaries and a Mexican company owned by the Previous Owner
      will
      enter into a joint venture agreement governing activities at the Huizopa project
      going forward, pursuant to which we can elect to ultimately retain up to an
      80%
      interest in the Huizopa project. 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 22 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. During 2004, we acquired new claims that completely surround
      the
      old Huizopa land position and, as a result, have expanded our land position
      to a
      total of 128 sq. km.




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 certain claims and the outstanding land payments
      on its Huizopa properties.




-40-




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 lastics. 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.




Mapping
      of the mining concession began in June 2004 and have been ongoing through 2006.
      We also established an extensive remote field camp at the project and
      refurbished an existing airstrip. The camp is supplied by fixed wing aircraft
      and helicopter. The results were compiled and transferred to our 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 sites was commenced.




In
      the
      first quarter of 2006, Apollo entered into an agreement with the Ejido Huizopa
      (the “Ejido”). Pursuant to the agreement, and in consideration for certain
      payments to the Ejido, the Company has a right to use Ejido land covering the
      12,800 hectares of 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.




The
      current 2007 plan contemplates the construction of a dirt road to allow easier
      access to the site, followed by an initial core drill and a reverse circulation
      drill campaign of approximately 50 holes.




**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.




-41-




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, 2006, 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.




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.
      We
      believe that we have meritorious defenses in this suit and are vigorously
      defending ourselves against these claims.




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 2006.


-42-




**PART
      II - OTHER INFORMATION**




**ITEM
      5.** ***MARKET
      FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES 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 20, 2007, 143,467,186 common shares were outstanding, and we had
      approximately 5,000 shareholders of record. On March 20, 2007, the closing
      price
      per share for our common shares as reported by the American Stock Exchange
      was
      $0.52 and as reported by the Toronto Stock Exchange was Cdn$0.61.




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$)****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**2005**First
                Quarter
            
            $
            0.81
            
            $
            0.45
            
            $
            0.96
            
            $
            0.54Second
                Quarter
            
            
            0.47
            
            
            0.26
            
            
            0.56
            
            
            0.30Third
                Quarter
            
            
            0.38
            
            
            0.22
            
            
            0.44
            
            
            0.27Fourth
                Quarter
            
            
            0.32
            
            
            0.16
            
            
            0.37
            
            
            0.18





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 (formerly International Pursuit Corporation (“Pursuit”))
      as of December 31, 2006, 2005, 2004, 2003 and 2002, derived from our audited
      financial statements. On June 25, 2002, Pursuit acquired Nevoro Gold Corporation
      (“Nevoro”) and its wholly-owned subsidiary Apollo Gold, Inc.; accordingly, the
      statement of operations of the Company for the year ended December 31, 2002,
      includes the results of Pursuit for the year ended December 31, 2002, and Nevoro
      for the period from June 25, 2002 through December 31, 2002. Subsequent to
      June
      25, 2002, substantially all of the gold mining and exploration business
      conducted by the Company consists of the gold mining and exploration operations
      of Apollo. 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.”




-43-


**Summary
      of Financial Condition**


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




**Canadian
                GAAP**
            
            **Years
                Ended December 31,****2006(1)**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****Statements
                of Operations Data**Revenue
                from sale of minerals
            
            $
            10,177
            
            $
            43,254
            
            $
            38,254
            
            $
            30,858
            
            $
            -Direct
                operating costs
            
            
            15,361
            
            
            48,357
            
            
            52,473
            
            
            34,184
            
            
            12,159Exploration
                and business development
            
            
            1,033
            
            
            918
            
            
            1,051
            
            
            2,117
            
            
            451Operating
                Loss
            
            
            (12,823
            )
            
            (13,790
            )
            
            (26,586
            )
            
            (17,105
            )
            
            (15,811
            )Loss
                from Continuing Operations
            
            
            (15,237
            )
            
            (15,961
            )
            
            (27,295
            )
            
            (15,790
            )
            
            (15,585
            )(Loss)
                Income from Discontinued Operations
            
            
            (350
            )
            
            (6,247
            )
            
            (3,712
            )
            
            1,700
            
            
            405Net
                Loss
            
            
            (15,587
            )
            
            (22,208
            )
            
            (31,007
            )
            
            (14,090
            )
            
            (15,180
            )Net
                Loss per share, basic and dilutedContinuing
                Operations
            
            
            (0.13
            )
            
            (0.16
            )
            
            (0.34
            )
            
            (0.29
            )
            
            (0.81
            )Discontinued
                Operations
            
            
            (0.00
            )
            
            (0.06
            )
            
            (0.05
            )
            
            0.03
            
            
            0.02Total
            
            $
            (0.13
            )
            $
            (0.22
            )
            $
            (0.39
            )
            $
            (0.26
            )
            $
            (0.79
            )Weighted
                average number of shares outstanding
            
            
            123,621,267
            
            
            101,811,291
            
            
            78,716,042
            
            
            54,536,679
            
            
            19,297,668**Balance
                Sheets Data**
            
            **At
                December 31,**Total
                Assets
            
            $
            51,804
            
            $
            62,545
            
            $
            97,635
            
            $
            96,577
            
            $
            66,361Long-term
                debt, including current portion
            
            
            8,900
            
            
            7,272
            
            
            6,750
            
            
            2,332
            
            
            2,365Total
                Shareholders’ Equity
            
            
            28,243
            
            
            32,441
            
            
            47,221
            
            
            57,857
            
            
            29,685








**U.S.
                GAAP**
            
            **Years
                Ended December 31,****2006(1)**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****Statements
                of Operations Data**Revenue
                from sale of minerals
            
            $
            10,177
            
            $
            43,254
            
            $
            38,254
            
            $
            30,858
            
            $
            -Direct
                operating costs
            
            
            15,361
            
            
            48,357
            
            
            52,473
            
            
            34,184
            
            
            12,159Exploration
                and business development
            
            
            4,206
            
            
            6,051
            
            
            11,456
            
            
            5,760
            
            
            451Operating
                Loss
            
            
            (15,813
            )
            
            (22,183
            )
            
            (36,302
            )
            
            (22,574
            )
            
            (23,871
            )Loss
                from Continuing Operations
            
            
            (11,813
            )
            
            (19,826
            )
            
            (38,792
            )
            
            (21,021
            )
            
            (44,320
            )(Loss)
                Income from Discontinued Operations
            
            
            (350
            )
            
            (4,907
            )
            
            308
            
            
            (1,395
            )
            
            (1,860
            )Net
                Loss
            
            
            (12,163
            )
            
            (24,733
            )
            
            (38,484
            )
            
            (22,416
            )
            
            (46,180
            )Net
                (Loss) Income per share, basic and dilutedContinuing
                Operations
            
            
            (0.10
            )
            
            (0.19
            )
            
            (0.49
            )
            
            (0.38
            )
            
            (2.30
            )Discontinued
                Operations
            
            
            (0.00
            )
            
            (0.05
            )
            
            0.00
            
            
            (0.03
            )
            
            (0.09
            )Total
            
            $
            (0.10
            )
            $
            (0.24
            )
            $
            (0.49
            )
            $
            (0.41
            )
            $
            (2.39
            )Weighted
                average number of shares outstanding
            
            
            123,621,267
            
            
            101,811,291
            
            
            78,716,042
            
            
            54,536,679
            
            
            19,297,668**Balance
                Sheets Data**
            
            **At
                December 31,**Total
                Assets
            
            $
            19,042
            
            $
            39,331
            
            $
            77,749
            
            $
            87,391
            
            $
            60,905Long-term
                debt, including current portion
            
            
            9,664
            
            
            8,785
            
            
            9,071
            
            
            2,332
            
            
            2,365Total
                Shareholders’ Equity
            
            
            6,940
            
            
            7,714
            
            
            25,014
            
            
            43,311
            
            
            21,726





**(1)**  On
      July
      28, 2006, we entered into a joint venture agreement in respect of the Montana
      Tunnels mine, pursuant to which Elkhorn Tunnels, LLC was granted a 50% interest
      in the Montana Tunnels mine in exchange for financial contributions. ****




-44-


**Summary
      Operational Statistics**




**Year
                Ended December 31,****2006(1)**
            
            **2005**
            
            **2004****Production
                Summary**Gold
                ounces
            
            
            4,959
            
            
            44,099
            
            
            33,743Silver
                ounces
            
            
            116,004
            
            
            524,722
            
            
            970,751Lead
                pounds
            
            
            1,196,317
            
            
            10,428,061
            
            
            10,064,265Zinc
                pounds
            
            
            3,040,058
            
            
            22,380,136
            
            
            26,222,805**Cash
                Cost Per Ounce**Cash
                Operating Cost/oz
            
            $
            643
            
            $
            529
            
            $
            798Total
                Cash Cost/oz
            
            $
            718
            
            $
            563
            
            $
            839Total
                Production Cost/oz
            
            $
            794
            
            $
            618
            
            $
            913





**(1)** 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.




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 21 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.




Certain
      of the comparative figures have been reclassified to conform with the 2006
      presentation.




-45-




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




**Year
                Ended December 31,****2006(1)**
            
            **2005**
            
            **2004****($
                in thousands, except per ounce data)**Gold
                Ounces Sold
            
            
            4,959
            
            
            44,099
            
            
            33,743Direct
                Operating Costs
            
            $
            10,469
            
            $
            48,357
            
            $
            52,473Less: 
                Mining and Property Taxes
            
            
            375
            
            
            1,482
            
            
            1,371By-Product
                Credits
            
            
            6,907
            
            
            23,531
            
            
            24,178Cash
                Operating Cost
            
            
            3,187
            
            
            23,344
            
            
            26,924Cash
                Operating Cost per Ounce
            
            
            643
            
            
            529
            
            
            798Cash
                Operating Cost
            
            
            3,187
            
            
            23,344
            
            
            26,924Add:
                Mining and Property Taxes
            
            
            375
            
            
            1,482
            
            
            1,371Total
                Cash Cost
            
            
            3,562
            
            
            24,826
            
            
            28,295Total
                Cash Cost per Ounce
            
            
            718
            
            
            563
            
            
            838Total
                Cash Cost
            
            
            3,562
            
            
            24,826
            
            
            28,295Add:
                Depreciation & Amortization
            
            
            376
            
            
            2,417
            
            
            2,527Total
                Production Cost
            
            
            3,938
            
            
            27,243
            
            
            30,822Total
                Production Cost per Ounce
            
            
            794
            
            
            618
            
            
            913





**(1)** Costs
      and 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.




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. On July 28, 2006, we entered into a joint
      venture agreement with Elkhorn in respect of the Mine, pursuant to which Elkhorn
      was granted a 50% interest in the Mine in exchange for financial
      contributions.




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.




As
      at
      January 1, 2006, Apollo had $11.0 million on deposit as substitute collateral
      for the Apollo $8.73 million 12% Series 2004-B secured convertible debentures.
      In January 2006, after meeting certain conditions, Apollo replaced the $11.0
      million cash collateral with its Black Fox property as security for the
      convertible debentures, which resulted in additional funds being available
      to
      the Company.




-46-




Also
      in
      January 2006 we entered into a subscription agreement with Jipangu, Inc.
      (“Jipangu”) for a $3.5 million private placement pursuant to which Jipangu
      purchased 11,650,000 equity units priced at Cdn$0.35 per unit with each unit
      consisting of one of our common shares and 0.17167 of a warrant, with each
      whole
      warrant exercisable for two years at Cdn$0.39 for one of our common shares.
      The
      private placement closed on January 26, 2006.




On
      January 23, 2006, we announced that we would reduce the number of executive
      officers from seven to three, effective February 18, 2006. We entered into
      severance agreements with the four departing officers, pursuant to which the
      departing officers received termination packages consisting of a combination
      of
      cash and Company common stock and as a result, an aggregate of 1,187,175 common
      shares were issued at Cdn$0.48 per share to the departing officers.




Also
      on
      January 23, 2006, the Company entered into amended employment agreements with
      the three remaining executive officers pursuant to which the officers agreed
      to
      reduce their base salaries by an aggregate of $170,000 per annum in exchange
      for
      an aggregate of 1,103,223 common shares at Cdn$0.48 per share.




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 to the Company
      of approximately $4.5 million. Each unit sold in the offering consists of one
      common share and one-half of one warrant to purchase one common share at $0.50
      exercisable for three years after closing. The warrants contain provisions
      that
      provide that, subject to certain exceptions, if the Company sells, grants an
      option to purchase or otherwise disposes, issues or reprices any common shares
      (or any securities that are convertible into or exercisable for common shares)
      at a price per share less than $0.50 per share, then the exercise price of
      the
      warrants will be reduced to such price. In connection with this offering,
      approximately 1.2 million placement agent’s warrants were issued with the same
      terms as described above.




At
      the
      Montana Tunnels mine open pit mining activity was suspended on October 21,
      2005 for safety reasons due to increased wall activity on the eastern side
      of
      the open pit. Following the suspension of mining, the mill continued to process
      ore from stockpiled 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. For the year ended December 31, 2006, a total
      of
      4,959 ounces of gold, 116,004 ounces of silver, 1,196,317 lbs of lead and
      3,040,058 lbs of zinc were produced.




On
      July
      28, 2006, Apollo entered into a JV Agreement with Elkhorn in respect of the
      Mine. The JV Agreement called for Elkhorn to contribute $13 million on or before
      January 1, 2007 in return for a 50% interest in the Mine. As of December 31,
      2006, Elkhorn had contributed $9.27 million and Apollo and Elkhorn agreed to
      amend the JV Agreement effective December 31, 2006. The amendment provided
      that
      Elkhorn would satisfy its obligation to fund $13 million by executing a
      promissory note for $3.73 million. On January 4, 2007, Elkhorn paid $1.73
      million of the promissory note with the balance of $2.0 million being paid
      on
      February 23, 2007.




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.
      As
      at December 31, 2006, we had excavated approximately 5.8 million tons of
      remediation waste and were working on the ramp system below switchback # 4
      which
      is 100 feet above accessing the open pit bottom and the ore body. 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.




-47-




At
      Black
      Fox the permitting process carried on throughout the year and in August 2006
      we
      reported andd resources reserves , under a Canadian National
      Instrument NI 43-101 report. The resources and reserves were based upon the
      2003 to 2006 exploration program and included a pre-feasibility study of
      developing an open pit mine on the Black Fox property. This study did not
      consider any underground material. We report no reserves at Black Fox under
      SEC
      Industry Guide 7, which requires a final bankable feasibility study. The
      table
      below summarizes the Black Fox Total Mineral Resource:




**Tonnes**
              **000’s**
            
            **Grade**
              **G
                Au/t**
            
            **Ounces****Open
                Pit - Material**Reserve
            
            
            3,062
            
            
            4.56
            
            
            448,800Indicated
                Resource (1)
            
            
            2,356
            
            
            3.27Inferred
                Resource (2)
            
            
            6,626
            
            
            4.00**Underground
                - Material**Indicated
                Resource (1)
            
            
            1,004
            
            
            9.66Inferred
                Resource (2)
            
            
            1,228
            
            
            9.71


**(1)** *Cautionary Note to US Investors concerning estimates of Indicated Mineral
        Resources.* This  press
        release uses the term “indicated
        mineral resources”. We advise US investors that while the term is recognized and
        required by Canadian regulations, the US Securities and Exchange Commission
        does
        not recognize it. US investors are cautioned not to assume that any part
        or all
        of the mineral deposits in these categories will ever be converted into mineral
        reserves.
 
 **(2)** *Cautionary Note to US Investors concerning estimates of Inferred Mineral
        Resources* *.* This press
        release uses the term “inferred mineral
        resources”. We advise US investors that while the term is recognized and
        required by Canadian regulations, the US Securities and Exchange Commission
        does
        not recognize it. “Inferred mineral resources” have a great amount of
        uncertainty as to their existence, and great uncertainty as to their economic
        and legal feasibility. It cannot be assumed that all or any part of an inferred
        mineral resource will ever be upgraded to a higher category. In accordance
        with
        Canadian rules, estimates of inferred mineral resources cannot form the basis
        of
        feasibility or other economic studies. US investors are cautioned not to
        assume
        that part or all of the inferred mineral resource exists, or is economically
        or
        legally minable.





Black
      Fox
      Open Pit Economics **** -
      Using
      the open pit reserves only, at a gold price of $550 per ounce, an on site mill
      processing facility with a capacity of 1,500 tonnes per day and tailings
      facility has a positive NPV of $36 million at a 5% discount rate and an IRR
      of
      21.63%.




At
      our
      Huizopa project Apollo entered into an agreement with the Ejido Huizopa which
      gives the Company a right to use Ejido land covering the 12,800 hectares of
      the
      Company’s mining concessions in Huizopa for all activities necessary for the
      exploration, development and production of potential ore deposits. 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.




**BUSINESS
      STRATEGY AND DEVELOPMENT**




**2007
      Forecasted Highlights:**




We
      have
      three properties: the Montana Tunnels mine (Apollo interest - 50%), the Black
      Fox project and the Huizopa project. Below is a summary of our expectations
      for
      these three properties in 2007.




**Montana
      Tunnels mine** - The
      mine is a 50/50 joint venture with Elkhorn. During 2007 the mine is expected
      to
      mine 7,200,000 tons waste material and 5,800,000 tons of ore for a total of
      13,000,000 tons mined giving a stripping ratio of 1.24:1. With the resumption
      of
      the milling of ore on March 1, 2007, the mine is expected to mill 4,500,000
      tons
      of ore and to produce the following payable metals during 2007: 40,000 ozs
      of
      gold, 250,000 ozs of silver, 11,500,000 lbs of lead and 25,000,000 lbs of zinc.
      Apollo’s share of this production is: 20,000 ozs of gold, 125,000 ozs of silver,
      5,750,000 lbs of lead and 12,500,000 lbs of zinc. We expect our share of capital
      expenditures to be approximately $0.7 million.





**Black
      Fox project** - We
      anticipate that our third party consultant, SRK Consulting, Inc., will complete
      an NI 43-101 compliant underground reserve in the second quarter 2007, which
      should be followed up six months later by a feasibility study based on a
      combined open pit and underground mining operation along with an on site mill.
      Permitting of the operation is ongoing and should be completed late 2007 or
      early 2008.


-48-





The
      2007
      plan covers two drilling programs: (a) deep hole core drilling and (b) shallow
      hole core drilling. The goals of the two programs are to (i) expand the
      mineralization along strike and down dip of the present resources along the
      Destor-Porcupine Fault and (ii) expand the base metal/gold discovery in the
      footwall to see if the two systems intersect at depth. This drilling campaign
      will be financed from flow-through funding. Capital expenditures to cover the
      above are forecast to be approximately $4.5 million.





**Huizopa
      project** - During
      2007 our focus at Huizopa will be to advance the exploration phase of the
      project, specifically, construction of a dirt road to give easier access for
      a
      drilling campaign. The drilling will be a reverse circulation drilling program
      of approximately 25 holes and a core drill program of approximately 25 holes
      lasting from September to November (after the road is completed). The cost
      of
      the project is expected to be approximately $2.5 million for the year
      2007.





**APOLLO
      GOLD CORPORATION**




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




**Revenue
      from the Sale of Minerals from Continuing Operations (Montana
      Tunnels).**





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.




-49-




*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.




*General
      and Administrative Expenses.* General
      and administrative expenses for the year ended December 31, 2006 decreased
      to
      $3.6 million compared to $7.6 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 .




*Stock-based
      Compensation.* In the
      year ended December 31, 2006, stock-based compensation from the issuance of
      stock options to our employees was $0.4 million. This compares to $0.6 million
      in 2005.




*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, which were 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.




-50-




**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.




***Results
      of Operations Year Ended December 31, 2005 Compared to Year Ended December
      31,
      2004***




**Revenue
      from the Sale of Minerals from Continuing Operations (Montana
      Tunnels).**





Revenues
      from continuing operations for the year ended December 31, 2005 increased 13%
      to
      $43.3 million from $38.3 million for the year ended December 31, 2004, primarily
      due to higher gold production at Montana Tunnels and higher metals prices.




Revenues
      from gold for the year ended December 31, 2005 increased 40% to $19.7 million
      from $14.1 million for the year ended December 31, 2004. The average price
      received for gold for the years ended December 31, 2005 and 2004 was $447 and
      $417 per ounce, respectively.




Revenues
      from silver, zinc and lead for the year ended December 31, 2005 decreased 3%
      to
      $23.5 million from $24.2 million during 2004.




For
      the
      year ended December 31, 2005, 46% of our revenue was derived from sales of
      gold
      and 54% from sales of silver, zinc and lead, compared to 37% from sales of
      gold
      and 63% from sales of silver, zinc and lead for 2004.




Gold
      production increased 31% to 44,099 ounces for the year ended December 31, 2005
      from 33,743 ounces in 2004. Most of this production was derived from modeled
      and
      unmodeled “fringe” ores mined from the open pit through October 2005. As a
      result of pit wall instability, open pit mining operations were suspended mid
      October 2005 and subsequent metal production was from processing lower grade
      stockpiled ore. See
      Item
      2 “Description of Properties - Montana Tunnels Mine” for further
      information.




**Operating
      Expenses.**




*Direct
      Operating Costs.* Direct
      operating costs for the year ended December 31, 2005 decreased 8% to $48.4
      million from $52.5 million for the year ended December 31, 2004, primarily
      due
      to moving 62% more tons of waste and ore in 2004 than in 2005. These amounts
      include mining and processing costs, as well as smelting and refining charges.
      Total cash cost per ounce for the year ended December 31, 2005 decreased 33%
      to
      $563 from $838 for the year ended December 31, 2004. Although the total cash
      cost per ounce was lower than in 2004, it was higher than expected due to
      remediation expenses related to pit wall instability throughout the year, which
      eventually led to the suspension of mining in the open pit in mid October 2005.
      Additionally, higher fuel, energy and commodity prices contributed to the higher
      than expected costs, with fuel prices peaking at $2.56 per gallon during
      2005.




*Depreciation
      and Amortization.* Depreciation and amortization expenses remained at $2.6 million for the year
      ended December 31, 2005, the same as in 2004.




*General
      and Administrative Expenses.* General
      and administrative expenses for the year ended December 31, 2005 increased
      7% to
      $7.6 million from $7.1 million for the year ended December 31, 2004, primarily
      due to increased legal and accounting expenses incurred in connection with
      our
      financing transactions, exchange listing fees, the cost of our Sarbanes-Oxley
      efforts for the year, as well as the accrual for the costs related to the
      severance paid to the four departed executive officers and to the amended
      agreements of the three remaining officers.




-51-




*Stock-based
      Compensation.* In the
      year ended December 31, 2005, we incurred stock-based compensation of $597,000
      resulting from the issuance of stock options to our employees. This compares
      to
      $767,000 in 2004.




*Accretion
      Expense.* In the
      year ended December 31, 2005, we accrued accretion expense of $0.9 million,
      relating to accrued site closure costs at our Montana Tunnels mine as compared
      to $0.8 million in 2004.




*Exploration
      and Business Development.* The cost
      of exploration, consisting of drilling and related expenses, totaled $0.9
      million and $1.1 million for the years ended December 31, 2005 and 2004,
      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 operating expenses for the year ended
      December 31, 2005 decreased 6% to $60.9 million from $64.8 million for the
      year
      ended December 31, 2004, primarily due to a decrease in costs during the fourth
      quarter 2005 as a result of suspending open pit mining at Montana Tunnels in
      October 2005. The decrease in operating expenses was partially offset by
      increased general and administrative expenses.




**Other
      Income (Expense).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $397,000 during the year ended December 31, 2005
      compared with $313,000 for the year ended December 31, 2004. We incurred
      interest expense of $2,533,000 during 2005 and $252,000 during 2004. The
      increase in interest expense is due to accretion on the convertible debentures,
      which were issued in November of 2004.




*Foreign
      Exchange (Loss/Gain).* We
      realized foreign exchange losses of $35,000 and $770,000 during the years ended
      2005 and 2004, respectively, from cash balances not held in United States
      dollars. This decrease is a result of having lower cash balances in Canadian
      dollars in 2005 than in 2004.




**Loss
      from Continuing Operations.**




Loss
      from
      continuing operations for the year ended December 31, 2005 decreased 42% to
      $16.0 million from $27.3 million in 2004. The main factors contributing to
      the
      loss were the lower than expected revenues as a result of the mining problems
      related to the wall instability and the higher costs of commodities such as
      fuel, energy and tires. The decreased loss in 2005 compared to 2004 was due
      to
      the high cost of mining in 2004 as a result of moving 34 million tons of waste
      and ore compared to 21 million tons in 2005.




**Loss
      from Discontinued Operations.**




For
      the
      year ended December 31, 2005, loss from discontinued operations was $6.2
      million, compared to a loss of $3.7 million, or $0.05 per share, for the year
      ended December 31, 2004.




*Florida
      Canyon Mine and Standard Mine.* As part
      of the sale of the Nevada assets, the Florida Canyon and Standard mines were
      sold on November 18, 2005. For the year ended December 31, 2005 revenues at
      these two mines were $18.6 million and operating costs were $24.8 million,
      compared to revenues of $26.5 million and operating costs of $30.2 for the
      year
      ended December 31, 2004.




-52-




**Net
      Loss for the Year.**




Based
      on
      these factors, we incurred a net loss of $22.2 million, or $0.22 per share,
      for
      the year ended December 31, 2005, as compared to a loss of $31.0 million, or
      $0.39 per share, for the year ended December 31, 2004.




**Summary
      of Quarterly Results (Unaudited)**




**2006
                Quarter Ended In**
            
            **2005
                Quarter Ended In****Dec(1)**
            
            **Sept(2)**
            
            **June(3)**
            
            **March(4)**
            
            **Dec(5)**
            
            **Sept(6)**
            
            **June(7)**
            
            **March****($
                in thousands, except per share and total cash cost per ounce
                data)**Revenue
                from the sale of minerals
            
            $
            -
            
            $
            372
            
            $
            3,667
            
            $
            6,138
            
            $
            7,260
            
            $
            13,351
            
            $
            10,581
            
            $
            12,332Operating
                loss
            
            
            (2,661
            )
            
            (4,714
            )
            
            (2,029
            )
            
            (3,419
            )
            
            (2,109
            )
            
            (2,977
            )
            
            (4,538
            )
            
            (4,166
            )Loss
                from continuing operations for the period
            
            
            (3,347
            )
            
            (5,370
            )
            
            (2,568
            )
            
            (3,952
            )
            
            (3,955
            )
            
            (3,614
            )
            
            (4,961
            )
            
            (3,431
            )Net
                loss
            
            
            (3,447
            )
            
            (5,370
            )
            
            (2,568
            )
            
            (4,202
            )
            
            (4,248
            )
            
            (7,213
            )
            
            (6,499
            )
            
            (4,248
            )Net
                loss per share, basic and diluted
            
            
            (0.03
            )
            
            (0.04
            )
            
            (0.02
            )
            
            (0.04
            )
            
            (0.04
            )
            
            (0.07
            )
            
            (0.07
            )
            
            (0.04
            )Gold
                production in ounces - Montana Tunnels
            
            
            -
            
            
            581
            
            
            1,165
            
            
            3,213
            
            
            5,026
            
            
            14,104
            
            
            12,324
            
            
            12,645Total
                cash cost per ounce - Montana Tunnels
            
            $
            N/A
            
            $
            N/A
            
            $
            737
            
            $
            932
            
            $
            762
            
            $
            513
            
            $
            590
            
            $
            472





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


**(2)**  No
      production, remediation of the open pit commenced in September
      2006.


**(3)**   Continued
      milling low grade ore stockpiles until the mill was shutdown on May 12,
      2006.


**(4)**  Continued
      milling low grade ore stockpiles.


**(5)**  Open
      pit
      mining suspended in mid October 2005. Continued milling low grade ore
      stockpiles.


**(6)**  Milled
      tonnage was reduced due to ramp problems and a two-week mill shutdown in July
      2005.


**(7)**  Production
      delays due to periodic ramp closures caused by excessive rainfall.





**Financial
      Condition and Liquidity**




To
      date,
      we have funded our operations through (i) issuances of debt and equity
      securities, (ii) funding from Elkhorn, our joint venture partner at the Montana
      Tunnels mine, (iii) the sale of 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 (collectively,
      the
“Nevada Assets”) in November 2005 to Jipangu plus (iv) the sale of other surplus
      assets. At December 31, 2006, we had cash and cash equivalents of $4.5 million,
      compared to $0.1 million at December 31, 2005.  The
      increase in cash from December 31, 2005 is primarily the result of (i)
      contributions of $9.3 million from joint venture partners, (ii) the release
      of
      $11.0 million in January 2006 from the restricted cash account held at December
      31, 2005, as collateral security for our 12% Series 2004-B Secured
      Convertible Debentures and (iii) net proceeds of $8.8 million from the
      issuance and sale of common shares and warrants, offset by operating cash
      out flows of $11.6 million from operating activities, primarily from the Montana
      Tunnels operation.




At
      March
      1, 2007, we had cash and short-term investments of $8.7 million, which includes
      net proceeds of $7.9 million from issuance of a convertible debentures and
      warrants in February 2007, less the payment of $2.6 million related
      to our Huizopa project as per Note 15 of the “Notes to the Consolidated
      Financial Statements.”




-53-






In
        2006,
        cash provided by investing activities totaled $3.7 million. Cash supplied
        from
        restricted cash was $9.0 million, consisting of the $11.0 million released
        from
        restricted cash in January 2006 as cash collateral security for the $8.8
        million
        12% Series 2004-B Convertible Debentures, partially offset by $2.0 million
        additional restricted cash for the Montana Tunnels reclamation liability.
        Capital expenditures were $5.4 million, of which $5.3 million were for the
        further development of the Black Fox project.




During
      the year ended December 31, 2006, financing activities provided $8.8 million
      in
      cash, from (a) completing in January 2006, the sale to Jipangu of equity units
      at Cdn$0.35 per unit, consisting of 11,650,000 common shares and 2,000,000
      warrants exercisable at Cdn$0.39 for net proceeds of $3.5 million, (b)
      completing in October 2006, an offering of flow-through equity units of the
      Company at Cdn$0.45 per unit, consisting of 2,222,221 flow-through shares and
      1,111,111 warrants exercisable at amounts from Cdn$1.00 to Cdn$1.15 for net
      proceeds of $0.8 million, and (c) completing in November 2006, an offering
      for
      equity units at $0.30 per unit, consisting of 16,688,206 common shares and
      8,344,103 warrants exercisable at $0.50 for net proceeds of $4.5 million. During
      2006, $1.4 million was paid on equipment leases.




We
      estimate that with our year end cash balance of $4.5 million,
      as supplemented by the monies raised in our private placement of
      convertible debentures and warrants in February 2007 and our share of the
      projected cash flow from the joint ventured Montana Tunnels mine, we will have
      sufficient funds to finance the current 2007 work programs of $4.5 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 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.




-54-




**Table
      of Contractual Obligations**




**Payment
                Due by Period****Contractual
                Obligations**
              **(as
                of December 31, 2006)**
            
            **Total**
            
            **Less**
              **Than**
              **1 Year**
            
            **1-3**
              **Years**
            
            **3-5**
              **Years**
            
            **More
                than**
              **5
                Years****(Thousands)**Convertible
                debenture
            
            $
            8,756
            
            $
            8,756
            
            $
            -
            
            $
            -
            
            $
            -Interest
                on convertible debenture
            
            
            1,015
            
            
            1,015
            
            
            -
            
            
            -
            
            
            -Capital
                lease obligations
            
            
            1,320
            
            
            728
            
            
            577
            
            
            15
            
            
            -Operating
                lease obligations
            
            
            308
            
            
            140
            
            
            94
            
            
            74
            
            
            -Purchase
                obligations
            
            
            2,592
            
            
            2,571
            
            
            21
            
            
            -
            
            
            -Notes
                payable
            
            
            137
            
            
            137
            
            
            -
            
            
            -
            
            
            -Other
                long-term liabilities reflected on the
              balance
                sheet**(1)**
            
            
            10,605
            
            
            -
            
            
            -
            
            
            -
            
            
            10,605




**(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 $7.1 million as shown on
                the balance sheet as of December 31, 2006 (full value is $13.3 million
                before removing 50% joint venture interest). The amount shown above
                is
                undiscounted to show full expected cash requirements to Apollo (full
                value
                is $19.6 million before removing 50% joint venture interest). As
                of
                December 31, 2006, restricted cash of $4.6 million ($8.0 million
                before
                removing 50% joint venture interest) has been placed in trust as
                security
                relating to the asset retirement
                obligation.




**Off
      Balance Sheet Arrangements**




We
      have
      no off balance sheet arrangements as of December 31, 2006.




**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, 2006, we have accrued $13.3 million (Apollo’s share is $7.1
      million) related to reclamation, severance and other closure requirements at
      our
      properties, an increase of $0.6 million from December 31, 2005. These
      liabilities are covered by a combination of surety bonds, restricted cash and
      property totaling $18.7 million at December 31, 2006. We have accrued what
      management believes is the present value of our best estimate of the liabilities
      as of December 31, 2006; 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.




-55-




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 Variable Interest Entities
      as at December 31, 2006.




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**




Sales
      of
      metals products sold directly to smelters are recorded when title and risk
      of
      loss transfer to the smelter at current spot metals prices. We must estimate
      the
      price at which our metals will be sold in reporting our profitability and cash
      flow. Recorded values are adjusted monthly until final settlement. Sales of
      metal in products tolled, rather than sold to smelters, are recorded at
      contractual amounts when title and risk of loss transfer to the
      buyer.




**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.




**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.




-56-




**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.




**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.




**RELATED
      PARTY TRANSACTIONS**




The
      Company had the following related party transactions for the three years ended
      December 31, 2006, 2005 and 2004, respectively.




**2006**
            
            **2005**
            
            **2004****(Thousands)**Legal
                fees paid to two law firms, a partner of each firm is a director
                of the
                Company
            
            $
            118
            
            $
            335
            
            $
            549Consulting
                services paid to a relative of an officer and director of the
                Company
            
            
            14
            
            
            18
            
            
            6





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.




**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. When appropriate, we invest excess cash in short-term debt instruments
      of the U.S. and Canadian governments and their agencies on a fixed interest
      rate
      basis. Over time, the rates received on such investments may 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 2007, 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.




-57-




**Foreign
      Currency Exchange Rate Risk**




The
      price
      of gold is denominated in U.S. dollars and the majority of our revenues and
      expenses are denominated in U.S. dollars. To the extent there are fluctuations
      in local currency exchange rates against the dollar, the devaluation of a local
      currency is generally economically neutral or beneficial to the operation
      because local salaries and supplies will decrease against the U.S. dollar
      revenue stream.




**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 in the past purchased puts/calls and we
      may
      in the future more actively manage our exposure through 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 Comment 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-2Comment
                by Independent Registered Chartered Accountants on Canada-United
                States of
                America Reporting Differences
            
            
            F-2Consolidated
                Balance Sheets as of December 31, 2006 and 2005
            
            
            F-3Consolidated
                Statements of Operations for the Years Ended December 31, 2006, 2005,and
                2004
            
            
            F-4Consolidated
                Statements of Shareholders’ Equity for the Years Ended December 31, 2006,
                2005, and 2004
            
            
            F-5Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2006, 2005,
                and
                2004
            
            
            F-6Notes
                to the Consolidated Financial Statements
            
            
            F-7





**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.




-58-




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





**Disclosure
      Controls and Procedures**




Apollo
      maintains disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in the reports that we file or submit
      under
      the Exchange Act is recorded, processed, summarized and reported within the
      time
      periods specified in the SEC’s rules and forms, and that such information is
      accumulated and communicated to Apollo’s management, including its Chief
      Executive Officer and Chief Financial Officer, as appropriate, to allow timely
      decisions regarding required financial disclosure.




As
      of the
      end of the 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(b)
      under
      the Exchange Act. Based upon, and as of the date of this evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures were not effective because of the change in our internal
      control procedures and design during 2006 discussed below. In light of these
      changes, we performed additional analysis and other post-closing procedures
      to
      ensure our consolidated financial statements were prepared in accordance with
      generally accepted accounting principles. Accordingly, management believes
      that
      the financial statements included in this report fairly present in all material
      respects our financial condition, results of operations and cash flows for
      the
      periods presented.




**Changes
      in Internal Control**




In
      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. Also, following the closure of the mill in May 2006 and placing
      the Montana Tunnels mine on care and maintenance and the subsequent resumption
      of mining activities at the mine in September 2006, our controls at that
      location are not operating as previously designed related to segregation of
      duties over procurement, inventory control and accounting duties. Corporate
      management has increased its involvement with day-to-day oversight and
      management of the Montana Tunnels mine, but as of this date, management has
      not
      had sufficient time to evaluate these controls and therefore believes the change
      in controls is significant enough to be reported as a material weakness. In
      an
      effort to address this material weakness, staffing requirements and other
      changes in control are being evaluated as the future operational requirements
      of
      the Montana Tunnels mine are being determined. This material weakness could
      result in the misstatement of assets, liabilities, shareholders’ equity or
      expenses that would result in a misstatement of the interim or annual
      consolidated financial statements that would not be prevented or
      detected.





We
      intend
      to continue to monitor our internal controls, and if further improvements or
      enhancements are identified, we will take steps to implement such improvements
      or enhancements. As a result of the changes disclosed above, there were changes
      in our internal control over financial reporting, which have materially
      affected, or are reasonably likely to materially affect, such internal
      controls.




**Sarbanes-Oxley
      Act Section 404 Internal Control Reporting Requirements**




As
      a non-accelerated
      filer,compliance with the internal control reporting requirements of Section 404
      of
      the Sarbanes-Oxley Act of 2002 has been deferred and we will be subject to
      the
      requirements in our Annual Report on Form 10-K for fiscal year
      2007.




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





None.




-59-
 
  **PART
        III**




**ITEM
      10.** ***DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT***




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 2007 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***




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***




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 and Finance Committee” contained in the Proxy Statement, which information
      is incorporated by reference in this Annual Report on Form 10-K.




-60-


**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.




-61-




**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
            
            Trust
                Indenture, dated November 4, 2004, by and among Apollo Gold Corporation,
                Apollo Gold, Inc., and The Canada Trust Company, filed with the SEC
                on
                November 9, 2004 as Exhibit 4.2 to the Current Report on Form
                8-K.4.3
            
            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.4.4
            
            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.4.5
            
            Subscription
                for Shares, dated June 1, 2005, by and between Apollo Gold Corporation
                and
                Jipangu Inc., filed with the SEC on August 9, 2005 as Exhibit 4.1
                to the
                Quarterly Report on Form 10-Q.4.6
            
            Registration
                Rights Agreement, dated June 1, 2005, by and between Apollo Gold
                Corporation and Jipangu, Inc., filed with the SEC on August 9, 2005
                as
                Exhibit 4.2 to the Quarterly Report on Form 10-Q.4.7
            
            Subscription
                Details, dated June 30, 2005, by and between Apollo Gold Corporation
                and
                BMO Nesbitt Burns Inc., filed with the SEC on August 9, 2005 as Exhibit
                4.3 to the Quarterly Report on Form 10-Q.4.8
            
            Subscription
                Agreement, dated October 17, 2005, by and between Apollo Gold Corporation
                and Jipangu, Inc., filed with the SEC on October 28, 2005 as Exhibit
                4.1
                to the Current Report on Form 8-K.4.9
            
            Registration
                Rights Agreement, dated October 17, 2005, by and between Apollo Gold
                Corporation and Jipangu, Inc., filed with the SEC on October 28,
                2005 as
                Exhibit 4.2 to the Current Report on Form 8-K4.10
            
            Form
                of Amendment, effective January 16, 2006, to Warrants to Purchase
                Common
                Shares, dated November 4, 2004, filed with the SEC on January 13,
                2006 as
                Exhibit 4.1 to the Current Report on Form 8-K.4.11
            
            First
                Supplemental Indenture, dated December 13, 2004, to the Trust Indenture,
                dated November 4, 2004, by and among Apollo Gold Corporation, Apollo
                Gold,
                Inc., and The Canada Trust Company, filed with the SEC on January
                13, 2006
                as Exhibit 10.3 to the Current Report on Form 8-K.4.12
            
            Amendment
                No. 1, dated January 25, 2006, to Registration Rights Agreement,
                dated
                June 1, 2005, by and between Apollo Gold Corporation and Jipangu
                Inc.,
                filed with the SEC on January 26, 2006 as Exhibit 4.1 to the Current
                Report on Form 8-K.4.13
            
            Side
                Letter from Jipangu Inc. to Apollo Gold Corporation, effective January
                18,
                2006, filed with the SEC on January 26, 2006 as Exhibit 4.2 to the
                Current
                Report on Form 8-K (amending the Apollo Gold Subscription Agreement
                for
                Units dated October 17, 2005, filed with the SEC on October 28, 2005
                as
                Exhibit 4.1 to the Current Report on Form 8-K).4.14
            
            Amendment
                No. 1, dated January 25, 2006, to Registration Rights Agreement,
                dated
                October 17, 2005, by and between Apollo Gold Corporation and Jipangu
                Inc.,
                filed with the SEC on January 26, 2006 as Exhibit 4.3 to the Current
                Report on Form 8-K.




-62-


**Exhibit****No.**
            
            **Exhibit
                Name**4.15
            
            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.4.16
            
            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.4.17
            
            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.4.18
            
            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.4.19
            
            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.4.20
            
            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.4.21
            
            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-K4.22
            
            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.4.23
            
            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.4.24
            
            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.4.25
            
            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.4.26
            
            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.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
            
            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).10.4
            
            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).




-63-


**Exhibit****No.**
            
            **Exhibit
                Name**10.5
            
            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).10.6
            
            Form
                of Indemnification Agreement, dated various dates, between Apollo
                Gold
                Corporation and filed with the SEC on September 24, 2004 as Exhibit
                10.1
                to the Current Report on Form 8-K.10.7
            
            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.10.8
            
            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.10.9
            
            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.10.10
            
            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.10.11
            
            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.10.12
            
            Letter
                from Apollo Gold Corporation to the Debentureholders of the Series
                2004-B
                Convertible Secured Debentures, dated December 19, 2005, filed with
                the
                SEC on January 13, 2006 as Exhibit 10.4 to the Current Report on
                Form
                8-K.10.13
            
            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.10.14
            
            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.10.15
            
            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.10.16
            
            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.10.17
            
            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.




-64-


**Exhibit****No.**
            
            **Exhibit
                Name**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.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
            
            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.21.1
            
            List
                of subsidiaries of the Registrant*23.1
            
            Consent
                of Deloitte & Touche LLP*23.2
            
            Consent
                of Mine Development Associates*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.




-65-


**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 30, 2007
      on
      its behalf by the undersigned, thereunto duly authorized.


APOLLO
              GOLD
              CORPORATIONBy:
            /s/
              R.
              DAVID RUSSELLR.
                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
              R.
                David Russell
            
            President
                and Chief Executive Officer, and Director (Principal Executive
                Officer)
            
            March
                30, 2007/s/
                CHARLES E. STOTT
              Charles
                E. Stott
            
            Chairman
                of the Board of Directors
            
            March
                30, 2007/s/
                G. MICHAEL HOBART
              G.
                Michael Hobart
            
            Director
            
            March
                30, 2007/s/
                  ROBERT W. BABENSEE
              Robert
                W. Babensee
            
            Director
            
            March
                30, 2007/s/
                W.S. VAUGHAN
              W.S.
                Vaughan
            
            Director
            
            March
                30, 2007/s/
                MARVIN K. KAISER
              Marvin
                K. Kaiser
            
            Director
            
            March
                30, 2007/s/
                DAVID W. PEAT
              David
                W. Peat
            
            Director
            
            March
                30, 2007/s/ MELVYN
              WILLIAMS
              Melvyn
                Williams
            
            Chief
                Financial Officer and Senior Vice President - Finance and Corporate
                Development (Principal Financial and Accounting Officer)
            
            March
                30,
                2007




-66-




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**





Report
                of Independent Registered Chartered Accountants
            
            F-2Comment
                by Independent Registered Chartered Accountants on Canada-United
                States of
                America Reporting Differences
            
            F-2Consolidated
                Balance Sheets as of December 31, 2006 and 2005
            
            F-3Consolidated
                Statements of Operations for the Years Ended December 31, 2006, 2005,
                and
                2004
            
            F-4Consolidated
                Statements of Shareholders’ Equity for the Years Ended December 31, 2006,
                2005, and 2004
            
            F-5Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2006, 2005,
                and
                2004
            
            F-6Notes
                to the Consolidated Financial Statements
            
            F-7




F-1


**REPORT
      OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS**




To
      the
      Shareholders of Apollo Gold Corporation





We
      have
      audited the consolidated balance sheets of Apollo Gold Corporation (the
“Company”) as at December 31, 2006 and 2005, and the consolidated statements of
      operations, shareholders’ equity, and cash flows for each of the years in the
      three year period ended December 31, 2006. 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 the 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, 2006 and
      2005, and the results of its operations and its cash flows for each of the
      years
      in the three year period ended December 31, 2006 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 the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion.




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


Independent
      Registered Chartered Accountants


Vancouver,
      Canada


March
      29,
      2007





**COMMENT
      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 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 shareholders dated March 29, 2007 is expressed in
      accordance with Canadian reporting standards which do not permit a reference
      to
      such conditions and events in the report of the independent registered chartered
      accountants when these are adequately disclosed in the consolidated financial
      statements.




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


Independent
      Registered Chartered Accountants


Vancouver,
      Canada


March
      29,
      2007




F-2


**APOLLO
      GOLD CORPORATION**




**CONSOLIDATED
      BALANCE SHEETS**





**December
                31,****2006**
            
            **2005****(In
                thousands of****U.S.
                Dollars)****ASSETS**CURRENTCash
                and cash equivalents
            
            $
            4,512
            
            $
            127Accounts
                receivable and other
            
            
            728
            
            
            2,638Note
                receivable (Note 4)
            
            
            1,865
            
            
            -Prepaids
            
            
            301
            
            
            400Inventories
                (Note 5)
            
            
            660
            
            
            1,708Total
                current assets
            
            
            8,066
            
            
            4,873Property,
                plant and equipment (Note 6)
            
            
            38,868
            
            
            40,045Restricted
                certificates of deposit (Note 7)
            
            
            4,605
            
            
            17,043Deferred
                financing costs (Note 9)
            
            
            265
            
            
            584TOTAL
                ASSETS
            
            $
            51,804
            
            $
            62,545**LIABILITIES**CURRENTAccounts
                payable
            
            $
            1,710
            
            $
            6,802Accrued
                liabilities
            
            
            1,254
            
            
            1,841Notes
                payable (Note 8)
            
            
            671
            
            
            596Property
                and mining taxes payable
            
            
            442
            
            
            1,172Convertible
                debenture (Note 9)
            
            
            7,660
            
            
            -Total
                current liabilities
            
            
            11,737
            
            
            10,411Accrued
                severance
            
            
            370
            
            
            383Notes
                payable (Note 8)
            
            
            569
            
            
            75Convertible
                debenture (Note 9)
            
            
            -
            
            
            6,601Accrued
                site closure costs (Note 11)
            
            
            7,135
            
            
            12,634Deferred
                gain (Note 4)
            
            
            3,750
            
            
            -TOTAL
                LIABILITIES
            
            
            23,561
            
            
            30,104Continuing
                operations (Note 1)Commitments
                and contingencies (Note 15)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 12)
            
            
            159,029
            
            
            148,526Equity
                component of convertible debentures (Note 9)
            
            
            1,809
            
            
            1,809Note
                warrants (Note 9)
            
            
            1,062
            
            
            781Contributed
                surplus (Note 12)
            
            
            11,166
            
            
            10,561Deficit
            
            
            (144,823
            )
            
            (129,236
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            28,243
            
            
            32,441TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            51,804
            
            $
            62,545




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




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




F-3


**APOLLO
      GOLD CORPORATION**




**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





**Year
                Ended December 31,****2006**
            
            **2005**
            
            **2004****(In
                thousands of U.S. dollars, except**
              **for
                share and per share amounts)**REVENUERevenue
                from sale of minerals
            
            $
            10,177
            
            $
            43,254
            
            $
            38,254OPERATING
                EXPENSESDirect
                operating costs
            
            
            15,361
            
            
            48,357
            
            
            52,473Depreciation
                and amortization
            
            
            1,647
            
            
            2,551
            
            
            2,640General
                and administrative expenses
            
            
            3,577
            
            
            7,588
            
            
            7,095Stock-based
                compensation
            
            
            427
            
            
            597
            
            
            767Accretion
                expense - accrued site closures costs
            
            
            948
            
            
            881
            
            
            820Loss
                (gain) on sale of property, plant and equipment
            
            
            7
            
            
            (3,848
            )
            
            (6
            )Exploration
                and business development
            
            
            1,033
            
            
            918
            
            
            1,05123,000
            
            
            57,044
            
            
            64,840OPERATING
                LOSS
            
            
            (12,823
            )
            
            (13,790
            )
            
            (26,586
            )OTHER
                INCOME (EXPENSES)Interest
                income
            
            
            421
            
            
            397
            
            
            313Interest
                expense
            
            
            (2,677
            )
            
            (2,533
            )
            
            (252
            )Foreign
                exchange loss and other
            
            
            (158
            )
            
            (35
            )
            
            (770
            )LOSS
                FROM CONTINUING OPERATIONS FOR THE YEAR
            
            
            (15,237
            )
            
            (15,961
            )
            
            (27,295
            )LOSS
                FROM DISCONTINUED OPERATIONS FOR THE YEAR (Note 20)
            
            
            (350
            )
            
            (6,247
            )
            
            (3,712
            )NET
                LOSS FOR THE YEAR
            
            $
            (15,587
            )
            $
            (22,208
            )
            $
            (31,007
            )BASIC
                AND DILUTED NET LOSS PER SHARE FROM:Continuing
                operations
            
            $
            (0.13
            )
            $
            (0.16
            )
            $
            (0.34
            )Discontinued
                operations
            
            
            (0.00
            )
            
            (0.06
            )
            
            (0.05
            )$
            (0.13
            )
            $
            (0.22
            )
            $
            (0.39
            )BASIC
                AND DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
            
            
            123,621,267
            
            
            101,811,291
            
            
            78,716,042




**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, 2003
            
            
            73,539,790
            
            $
            121,112
            
            $
            -
            
            $
            -
            
            $
            12,766
            
            $
            (76,021
            )
            $
            57,857Units
                issued for cash (Note 12(c)(ii))
            
            
            8,299,999
            
            
            4,873
            
            
            -
            
            
            -
            
            
            622
            
            
            -
            
            
            5,495Conversion
                of special warrants (Note 12(c)(i))
            
            
            2,326,666
            
            
            1,449
            
            
            -
            
            
            -
            
            
            50
            
            
            -
            
            
            1,499Flow-through
                common shares (Note 12(c)(iii))
            
            
            714,285
            
            
            515
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            515Warrants
                exercised
            
            
            5,399,848
            
            
            12,695
            
            
            -
            
            
            -
            
            
            (4,083
            )
            
            -
            
            
            8,612Options
                exercised
            
            
            399,054
            
            
            966
            
            
            -
            
            
            -
            
            
            (647
            )
            
            -
            
            
            319Shares
                reacquired and cancelled
            
            
            (20,500
            )
            
            (48
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (48
            )Shares
                issued for Huizopa interest (Note 12 (c)(v))
            
            
            48,978
            
            
            88
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            88Shares
                issued for 2003 stock-based compensation
            
            
            265,000
            
            
            376
            
            
            -
            
            
            -
            
            
            (376
            )
            
            -
            
            
            -Bridge
                loan compensation warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            275
            
            
            -
            
            
            275Equity
                component of convertible debentures
            
            
            -
            
            
            -
            
            
            1,815
            
            
            -
            
            
            63
            
            
            -
            
            
            1,878Note
                Warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            781
            
            
            27
            
            
            -
            
            
            808Debenture
                compensation warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            163
            
            
            -
            
            
            163Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            767
            
            
            -
            
            
            767Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (31,007
            )
            
            (31,007
            )Balance,
                December 31, 2004
            
            
            90,973,120
            
            
            142,026
            
            
            1,815
            
            
            781
            
            
            9,627
            
            
            (107,028
            )
            
            47,221Units
                issued for cash (Note 12(b)(i))
            
            
            4,199,998
            
            
            2,587
            
            
            -
            
            
            -
            
            
            194
            
            
            -
            
            
            2,781Shares
                issued for increase in Huizopa interest
              (Note 12(b)(ii))
            
            
            1,000,000
            
            
            410
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            410Shares
                issued for cash (Note 12(b)(iii))
            
            
            10,000,000
            
            
            3,183
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,183Conversion
                of convertible
              debentures
            
            
            33,333
            
            
            23
            
            
            (6
            )
            
            -
            
            
            -
            
            
            -
            
            
            17Engagement
                fee shares and warrants (Note 12(b)(iv))
            
            
            350,000
            
            
            100
            
            
            -
            
            
            -
            
            
            143
            
            
            -
            
            
            243Completion
                fee shares (Note 12(b)(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 12(a)(i))
            
            
            11,650,000
            
            
            3,488
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,488Shares
                issued for 2005 stock-based compensation (Note 12(a)(ii))
            
            
            2,290,408
            
            
            955
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            955Reduction
                of exercise price of Note Warrants (Note 9)
            
            
            -
            
            
            -
            
            
            -
            
            
            305
            
            
            -
            
            
            -
            
            
            305Note
                Warrants exercised
            
            
            600,000
            
            
            264
            
            
            -
            
            
            (24
            )
            
            -
            
            
            -
            
            
            240Shares
                issued for services (Note 12(a)(iii))
            
            
            1,325,000
            
            
            668
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            668Flow-through
                units issued for cash (Note 12(a)(iv))
            
            
            2,222,221
            
            
            746
            
            
            -
            
            
            -
            
            
            27
            
            
            -
            
            
            773Units
                issued for cash (Note 12(a)(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
            )
            $
            28,243




**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,****2006**
            
            **2005**
            
            **2004****(In
                thousands of U.S. dollars)**OPERATING
                ACTIVITIESNet
                loss for the year
            
            $
            (15,587
            )
            $
            (22,208
            )
            $
            (31,007
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            1,647
            
            
            2,551
            
            
            2,640Amortization
                of deferred financing costs
            
            
            319
            
            
            319
            
            
            53Loss
                from discontinued operations
            
            
            350
            
            
            6,247
            
            
            3,712Reduction
                in exercise price of Note Warrants
            
            
            305
            
            
            -
            
            
            -Stock-based
                compensation
            
            
            427
            
            
            597
            
            
            767Shares
                issued for services
            
            
            668
            
            
            -
            
            
            -Accretion
                expense - accrued site closure costs
            
            
            948
            
            
            881
            
            
            820Accretion
                expense - convertible debenture, net of interest paid
            
            
            1,059
            
            
            1,085
            
            
            (92
            )Foreign
                exchange loss and other
            
            
            81
            
            
            372
            
            
            6Loss
                (gain) on sale of property, plant and equipment
            
            
            7
            
            
            (3,848
            )
            
            (6
            )Bridge
                loan compensation warrants
            
            
            -
            
            
            -
            
            
            275Net
                change in non-cash operating working capital items (Note
                17)
            
            
            (1,482
            )
            
            1,845
            
            
            3,423Discontinued
                operations
            
            
            (350
            )
            
            848
            
            
            (1,299
            )Net
                cash used in operating activities
            
            
            (11,608
            )
            
            (11,311
            )
            
            (20,708
            )INVESTING
                ACTIVITIESProperty,
                plant and equipment expenditures
            
            
            (5,417
            )
            
            (5,487
            )
            
            (13,018
            )Short-term
                investments
            
            
            -
            
            
            -
            
            
            5,855Proceeds
                from disposal of property, plant and equipment
            
            
            92
            
            
            4,526
            
            
            -Restricted
                certificate of deposit and other assets
            
            
            9,007
            
            
            (12,671
            )
            
            (1,286
            )Proceeds
                from disposition of discontinued operations
            
            
            -
            
            
            14,000
            
            
            -Discontinued
                operations
            
            
            -
            
            
            1,022
            
            
            (9,587
            )Net
                cash provided by (used in) investing activities
            
            
            3,682
            
            
            1,390
            
            
            (18,036
            )FINANCING
                ACTIVITIESProceeds
                on issuance of shares and warrants
            
            
            8,773
            
            
            5,944
            
            
            7,509Proceeds
                from exercise of warrants and options
            
            
            260
            
            
            -
            
            
            8,931Proceeds
                from bridge loan
            
            
            -
            
            
            -
            
            
            3,000Repayment
                of bridge loan
            
            
            -
            
            
            -
            
            
            (3,000
            )Acquisition
                and cancellation of shares
            
            
            -
            
            
            -
            
            
            (48
            )Proceeds
                on issuance of convertible debentures, net
            
            
            -
            
            
            -
            
            
            7,525Payments
                of notes payable
            
            
            (1,357
            )
            
            (752
            )
            
            (1,478
            )Contributions
                by Elkhorn
            
            
            4,635
            
            
            -
            
            
            -Discontinued
                operations
            
            
            -
            
            
            (2,030
            )
            
            (2,641
            )Net
                cash provided by financing activities
            
            
            12,311
            
            
            3,162
            
            
            19,798NET
                INCREASE (DECREASE) IN CASH
            
            
            4,385
            
            
            (6,759
            )
            
            (18,946
            )CASH
                AND CASH EQUIVALENTS, BEGINNING OF YEAR
            
            
            127
            
            
            6,886
            
            
            25,832CASH
                AND CASH EQUIVALENTS, END OF YEAR
            
            $
            4,512
            
            $
            127
            
            $
            6,886SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            1,299
            
            $
            1,204
            
            $
            560Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -





See
      Note
      17 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, 2006, 2005 and 2004** **(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 (i) issuance of debt and equity securities, (ii) funding
      from
      joint venture partners (Note 4), (iii) the sale of 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 (collectively, the “Nevada Assets”) in November 2005 to Jipangu, Inc.
      (“Jipangu”) plus (iv) the sale of other surplus assets. The Company’s ability to
      continue as a going concern is dependent on its ability to generate cash flow
      from the Montana Tunnels mine and/or continue to issue debt and equity
      securities.




If
      the
      Company is unable to generate cash flow from the Montana Tunnels mine 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 Tunnels, LLC
      (“Elkhorn”). The Mine is an open pit mine and mill, producing gold doré and lead-gold
      and
      zinc-gold concentrates, located in the State of Montana. 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. As of December
      31, 2006 Elkhorn had earned a 50% interest in the Mine (Note 4). The Company
      also owns the Diamond Hill Mine, currently under care and maintenance, also
      located in the State of Montana.




Apollo
      has a development property, the Black Fox 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.




**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 21, 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:




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)**


***(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 Variable Interest Entities
      as at December 31, 2006.




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, 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)***
            Inventories




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




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)**


***(f)***
            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 operation 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
      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. Costs relating to repair and maintenance
      costs are expensed as incurred.




Financing
      and acquisition costs including interest and fees are capitalized on the basis
      of expenditures 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.




***(g)***
            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.




***(h)***
            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.




***(i)***
            Exploration
                expenditures




Exploration
      expenditures are expensed as incurred during the reporting period.




***(j)***
            Property
                evaluations




The
      Company evaluates the carrying amounts of its mining properties and related
      buildings, plant and equipment 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
      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)**


***(k)***
            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.




***(l)***
            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.




***(m)***
            Stock
                incentive plans




Effective
      January 1, 2004, the Company adopted the amended recommendations of the CICA
      Handbook Section 3870, *Stock-based
      Compensation and Other Stock-based Payments.* Under
      the
      amended standards of this Section, the fair value of all stock-based awards
      granted are estimated using the Black-Scholes model and are recorded in
      operations over their vesting periods. If and when the stock options are
      ultimately exercised, the applicable amounts of additional contributed surplus
      are transferred to share capital.




***(n)***
            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 13), 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.




***(o)***
            Loss
                per share




The
      basic
      loss per share is computed by dividing the net loss by the weighted average
      number of common shares outstanding during the year. The fully diluted 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.




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)***
            Comparative
                figures




Certain
      of the prior year’s figures have been reclassified to conform to the current
      year’s presentation.




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




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




On
      July
      28, 2006, the Company entered into a JV Agreement with Elkhorn in respect of
      the
      Montana Tunnels mine which called for Elkhorn to contribute $13 million and
      Montana Tunnels Mining, Inc. (“MTMI”) to contribute all of its assets and
      liabilities related to the Mine into the joint venture. The money contributed
      by
      Elkhorn was used initially to remediate the east wall instability problems
      encountered at the Mine during September and early October 2005, which led
      to
      the suspension of mining on October 21, 2005, and thereafter to move the Mine
      back towards commercial production.




As
      of
      December 31, 2006, Elkhorn had contributed $9.27 million and MTMI and Elkhorn
      agreed to amend the JV Agreement effective December 31, 2006 such that Elkhorn
      committed to complete the full funding of $13 million by executing a promissory
      note for $3.73 million to evidence its obligation to complete its contribution.
      On January 4, 2007 Elkhorn paid $1.73 million of the promissory note with the
      balance of $2.0 million being paid on February 23, 2007. Highlights of the
      JV
      Agreement are:




·
            Elkhorn
                earned a 50% interest in the Mine when it made its full contribution
                of
                $13 million upon signing the $3.73 million promissory note effective
                December 31, 2006.




·
            MTMI
                is the operator of the Mine. A separate committee consisting of two
                designees from each of MTMI and Elkhorn will oversee the joint
                venture.




·
            Elkhorn
                will receive 55% and Apollo will receive 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 would become entitled
                to 60% and Elkhorn 40% of the positive free cash flow from the Mine,
                until
                both parties have received an equal amount. Thereafter, the sharing
                would
                be 50/50. Additionally, Elkhorn is entitled to a preferential interest
                distribution on its initial contribution of $13 million until it
                has
                received cash flow of $13 million.




Apollo
      accounts for its 50% interest in the assets and liabilities of the joint venture
      using the proportionate consolidation method. For the year ended 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 will be
      amortized using the units-of-production method over the expected life of the
      operation based on the estimated recoverable gold equivalent
      ounces.




F-11




**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)**




The
      assets and liabilities of the Montana Tunnels joint venture at December 31,
      2006
      are as follows:




**Apollo’s
                50% Share of Joint Venture**CurrentCash
                and cash equivalents
            
            $
            (64
            )Accounts
                receivable and other
            
            
            21Note
                receivable
            
            
            1,865Inventories
            
            
            660Prepaids
            
            
            242,506Property,
                plant and equipment
            
            
            7,151Restricted
                certificates of deposit
            
            
            3,430Total
                assets
            
            $
            13,087CurrentAccounts
                payable
            
            $
            216Accrued
                liabilities
            
            
            669Notes
                payable
            
            
            496Property
                and mining taxes payable
            
            
            4381,819Notes
                payable
            
            
            527Accrued
                site closure costs
            
            
            6,127Total
                liabilities
            
            $
            8,473




***(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. 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.




**5.**
            **INVENTORIES**




Inventories
      consist of:




**2006**
            
            **2005**Concentrate
                inventory
            
            $
            -
            
            $
            94Doré
                inventory
            
            
            -
            
            
            14Materials
                and supplies
            
            
            660
            
            
            1,600$
            660
            
            $
            1,708





F-12








**APOLLO
      GOLD CORPORATION**




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


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





**6.**
            **PROPERTY,
                PLANT AND EQUIPMENT**




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




**2006**
            
            **2005****Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net
                Book**
              **Value**
            
            **Cost**
            
            **Accumulated**
              **Depreciation**
            
            **Net
                Book**
              **Value**Mine
                assetsBuilding,
                plant and equipment
            
            $
            6,106
            
            $
            2,441
            
            $
            3,665
            
            $
            8,919
            
            $
            3,163
            
            $
            5,756Mining
                properties and development costs
            
            
            31,298
            
            
            1,485
            
            
            29,813
            
            
            31,497
            
            
            2,663
            
            
            28,83437,404
            
            
            3,926
            
            
            33,478
            
            
            40,416
            
            
            5,826
            
            
            34,590Mineral
                rights
            
            
            5,390
            
            
            -
            
            
            5,390
            
            
            5,455
            
            
            -
            
            
            5,455Total
                property, plant and equipment
            
            $
            42,794
            
            $
            3,926
            
            $
            38,868
            
            $
            45,871
            
            $
            5,826
            
            $
            40,045Leased
                assets included above in Building, plant and equipment
            
            $
            1,488
            
            $
            165
            
            $
            1,323
            
            $
            187
            
            $
            30
            
            $
            157





**7.**
            **RESTRICTED
                CERTIFICATES OF DEPOSIT**




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




**2006**
            
            **2005**Restricted
                certificate of deposit - Site closure obligation - Montana Tunnels
                (a)
            
            $
            4,052
            
            $
            5,465Restricted
                certificate of deposit - Site closure obligation - Black
                Fox
            
            
            553
            
            
            581Restricted
                certificate of deposit - Convertible debenture (b)
            
            
            -
            
            
            10,997$
            4,605
            
            $
            17,043





***(a)***
            Restricted
                certificate of deposit - Site closure obligation - Montana
                Tunnels




The
      restricted certificate of deposit represents cash that has been placed in trust
      as security to the State of Montana relating to the Company’s site closure
      obligations (see Note 11).




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 $268,000 monthly
      (Apollo share is $134,000) 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, 2006, the restricted certificate of
      deposit for bonding requirements at Montana Tunnels is $7.5 million (Apollo
      share is $3.7 million) (2005 - $5.5 million).




***(b)***
            Restricted
                certificate of deposit - Convertible
                debenture




The
      restricted certificate of deposit - convertible debenture represents cash that
      was placed in trust with The Canada Trust Company as security for the
      convertible debenture (Note 9). This restriction was released on January 8,
      2006.




F-13


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


**8.**
            **NOTES
                PAYABLE**




The
      notes
      payable are secured by a fixed charge on certain machinery and equipment and
      bear interest at various rates between 5.7%  and
      28.2%, (2005 - 2.8% and 7.5%) and are repayable as follows at December 31,
      2006:




2007
            
            $
            6712008
            
            
            5552009
            
            
            14Total
                notes payable
            
            
            1,240Less
                current portion
            
            
            (671
            )Total
                long-term obligations
            
            $
            569





**9.**
            **CONVERTIBLE
                DEBENTURE**




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 (Note 12 (b)(i)).
      These special notes were converted into $8.8 million convertible secured
      debentures (the “Debentures”) and 5,253,750 warrants (the “Note Warrants”). The
      Debentures mature on December 16, 2007 and bear interest at a rate of 12% per
      annum, payable quarterly in arrears beginning on December 31, 2004. The Note
      Warrants expire on November 4, 2007 and are each exercisable for one common
      share of the Company at a price of $0.40 per common share, except as
      noted.




The
      Debentures are convertible, at the option of the holder, at any time prior
      to
      maturity or five days prior to redemption into common shares of the Company
      at a
      price of $0.75 per common share. Since redemption can be made either by cash
      or
      by common shares at the option of the Company, the Debentures are classified
      as
      a compound financial instrument for accounting purposes.




The
      value
      of the Debentures is comprised of a $5.6 million fair value of the 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 have been measured at their respective fair values on the date that
      the Debentures and Note Warrants were issued. The $5.6 million fair value of
      the
      Debentures is classified as a liability and the $3.1 million combined fair
      value
      of the conversion option and Note Warrants have been classified in shareholders’
equity. Over the three-year term of the Debentures, the fair value of the
      Debentures are accreted to their face value. The periodic accretion of the
      Debentures is charged to accretion expense. For the year ended December 31,
      2006, the Company recorded accretion of $2.1 million (2005 - $2.1 million)
      related to the Debentures as a charge to accretion expense with a corresponding
      credit to the liability component of the 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 are amortized over the term
      of
      the Debenture. During both 2006 and 2005, $319,000 of deferred financing costs
      were charged to operations.




In
      addition, the agents were granted 1,167,500 warrants as additional compensation
      in connection with the issuance of the Debentures. Each warrant entitled the
      holder to acquire one share at a price of $0.80 per share until all of the
      warrants expired unexercised on November 4, 2006. The grant-date fair value
      of
      these compensation warrants of $0.3 million is comprised of $0.1 million equity
      issuance costs and $0.2 million deferred financing costs to be amortized over
      the term of the Debenture.




F-14


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


**9.**
            **CONVERTIBLE
                DEBENTURE****(continued)**




On
      January 6, 2006, Apollo pledged the Company’s Black Fox Property to the Canada
      Trust Company (the “Secured Party”) as substitute collateral for the Debentures,
      which were previously secured by $11.0 million restricted cash. The Secured
      Party is the trustee for the holders of the Debentures. 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 Debentures from $0.80 to $0.40 per common
      share. The reduction in the exercise price was effective January 16, 2006,
      and
      applies to all warrants attached to the Debentures except for the 240,000
      warrants held by the Company’s insiders, which remain 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.




**10.**
            **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 two years.




The
      amounts charged to earnings for the Company’s defined contribution plan totaled
      $10,000, nil and $338,000 for the years ended December 31, 2006, 2005 and 2004,
      respectively.




**11.**
            **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 their bonding requirements.
      The estimates prepared by management are then reconciled with the requirements
      of government agencies.




At
      December 31, 2006, the accrued site closure liabilities amounted to $7.1 million
      (2005 - $12.6 million). These liabilities are based on third party engineer
      reports. The liabilities are covered by a combination of surety bonds,
      restricted certificates of deposit and property which in aggregate are valued
      at
      approximately $9.6 million.




In
      view
      of the uncertainties concerning future removal and site restoration costs,
      as
      well as the applicable laws and legislations, 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.




F-15




**APOLLO
      GOLD CORPORATION**




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


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





**11.**
            **ACCRUED
                SITE CLOSURE COSTS********(continued)**




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




Balance,
                December 31, 2003
            
            $
            9,148Accretion
            
            
            820Increase
                in reclamation assets
            
            
            1,785Balance,
                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
            
            $
            7,135




The
      Company has estimated that the total obligations associated with the retirement
      of its properties at December 31, 2006 are $10.6 million. The $7.1 million
      (2005
      - $12.6 million) fair value of these obligations is determined using a 7.5%
      credit adjusted risk-free discount rate and expected payment of obligations
      over
      thirteen years.




**12.**
            **SHARE
                CAPITAL**




***(a)***
            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(c)(i) 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%.




F-16




**APOLLO
      GOLD CORPORATION**




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


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







**12.**
            **SHARE
                CAPITAL (continued)**




*(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. 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%.




***(b)***
            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. In connection with the first and second tranches,
      1,250,000 broker compensation warrants were issued. (See Note 12(c)(ii) for
      a description of the broker compensation warrants.)




*(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, 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.




***(b)***
            Shares
                issued in 2004




*(i)*
      On November 4, 2004, in connection with the offering of Special Notes (Note
      9),
      the Company issued 2,326,666 special warrants for proceeds of $1.4 million,
      net
      of expenses of $0.2 million and fair value of agent’s warrants of $50,000. Each
      special warrant was converted at no additional cost into one share and 0.6
      share
      purchase warrant entitling the purchase of one share of the Company for three
      years at a price of $0.80 per share. In connection with this offering, the
      agent
      received a commission of 6.5% of gross proceeds plus 232,667 compensation
      warrants, each warrant entitling the purchase of one share of the Company for
      two years at $0.80 per share.




F-17




**APOLLO
      GOLD CORPORATION**




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


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





**12.**
            **SHARE
                CAPITAL (continued)**




*(ii)*  On
      December 31, 2004, the Company completed the first tranche of a private
      placement for 8,299,999 units with an exercise price of $0.75 for proceeds
      of
      $4.9 million, net of expenses of $0.7 million and fair value of underwriter’s
      units of $0.6 million. Each unit is convertible at no additional cost into
      one
      common share of the Company and 0.75 share purchase warrant with each whole
      share purchase warrant entitling the purchase of one share of the Company for
      two years at a price of $1.00 per share. In connection with this offering,
      830,000 underwriter’s units were issued with the same terms as described
      above.




*(iii)*  On
      December 31, 2004, under a private placement financing, the Company issued
      714,285 flow-through common shares, for aggregate proceeds of $0.5
      million.




*(iv)*  Using
      the
      fair value based method of stock-based compensation, share issuance costs of
      $50,000 and $0.6 million were recognized for the compensation warrants and
      broker units. These amounts were determined using an option pricing model with
      the following weighted average assumptions: no dividends were paid, a volatility
      of the Company’s share price of 64%, and an expected life of the warrants of two
      years and annual risk-free rate of 3.48%.




*(v)*  The
      Company issued 48,978 shares in part consideration to meet the earn-in
      requirements of the Huizopa joint venture agreement with Argonaut Mines
      LLC.




***(c)***
            Warrants




The
      following summarizes outstanding warrants as at December 31, 2006:




**Date
                Issued**
            
            **Number
                of Warrants**
            
            **Number
                of Shares**
            
            **Exercise
                Price**
            
            **Expiry
                Date**Exercisable
                in US$November
                4, 2004
            
            
            4,413,600
            
            
            4,413,600
            
            
            0.40
            
            
            November
                4, 2007November
                4, 2004
            
            
            240,000
            
            
            240,000
            
            
            0.80
            
            
            November
                4, 2007November
                4, 2004
            
            
            1,396,000
            
            
            1,396,000
            
            
            0.80
            
            
            November
                4, 2007January
                7, 2005
            
            
            3,149,998
            
            
            3,149,998
            
            
            1.00
            
            
            January
                7, 2007November
                8, 2006
            
            
            8,344,103
            
            
            8,344,103
            
            
            0.50
            
            
            November
                8, 2009November
                8, 2006
            
            
            1,168,174
            
            
            1,168,174
            
            
            0.50
            
            
            November
                8, 200918,711,875
            
            
            18,711,875Exercisable
                in Cdn$June
                30, 2005
            
            
            1,250,000
            
            
            1,250,000
            
            
            Cdn$    
                    0.40
            
            
            June
                30, 2007January
                26, 2006
            
            
            2,000,000
            
            
            2,000,000
            
            
            Cdn$   
                     0.39
            
            
            January
                26, 2008October
                30, 2006
            
            
            1,111,111
            
            
            1,111,111
            
            
            Cdn$   
                1.00 (1
            )
            
            October
                30, 20084,361,111
            
            
            4,361,11123,072,986
            
            
            23,072,986





(1)
            The
                exercise price of these warrants increase to Cdn$1.15 on October
                31, 2007
                if unexercised.





*(i)*  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 12(a)(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$1.00 per common share through October 30, 2007 and at Cdn$1.15
      through October 30, 2008. The broker compensation warrants expire on October
      30,
      2008.




F-18


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


**12.**
            **SHARE
                CAPITAL (continued)**




*(ii)*  Furthermore,
      1,250,000 broker compensation warrants were issued and were immediately
      exercisable on January 7, 2005. The broker compensation warrants were
      issued in connection with the first and second tranches of the private placement
      described in Note 12(b)(i). Each broker compensation warrant was
      exercisable at $0.75 into one common share of the Company and 0.75 of a share
      purchase warrant, with each whole share purchase warrant exercisable into one
      common share of the Company at $1.00 per common share. The broker compensation
      warrants expired on January 7, 2007.




***(d)***
            Options




A
      summary
      of information concerning outstanding stock options at December 31, 2006 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, 2003
            
            
            1,887,300
            
            $
            2.20
            
            
            2,500,154
            
            $
            0.80Options
                granted
            
            
            689,300
            
            
            1.84
            
            
            -
            
            
            -Options
                forfeited
            
            
            -
            
            
            -
            
            
            (399,054
            )
            
            0.80Options
                cancelled
            
            
            (380,300
            )
            
            2.22
            
            
            (196,344
            )
            
            0.80Balances,
                December 31, 2004
            
            
            2,196,300
            
            
            2.10
            
            
            1,904,756
            
            
            0.80Options
                granted
            
            
            3,039,700
            
            
            0.58
            
            
            -
            
            
            -Options
                forfeited
            
            
            (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
                forfeited
            
            
            (344,200
            )
            
            1.05
            
            
            (563,730
            )
            
            0.80Balances,
                December 31, 2006
            
            
            3,052,900
            
            $
            1.06
            
            
            1,230,852
            
            $
            0.80





*(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, 2006, an aggregate of 9,086,786 fixed stock options were
      available for future grants of awards under the plan.




F-19


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


**12.**
            **SHARE
                CAPITAL (continued)**




The
      following table summarizes information concerning outstanding and exercisable
      fixed stock options at December 31, 2006:




**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**686,500
            
            
            February
                18, 2013
            
            $
            2.24
            
            
            6.1
            
            
            686,500
            
            $
            2.24261,000
            
            
            March
                10, 2014
            
            
            2.05
            
            
            7.2
            
            
            261,000
            
            
            2.0525,000
            
            
            May
                19, 2014
            
            
            1.44
            
            
            7.4
            
            
            25,000
            
            
            1.4421,800
            
            
            August
                10, 2014
            
            
            0.95
            
            
            7.6
            
            
            21,800
            
            
            0.951,185,600
            
            
            March
                10, 2015
            
            
            0.65
            
            
            8.2
            
            
            592,800
            
            
            0.65100,000
            
            
            August
                4, 2015
            
            
            0.27
            
            
            8.6
            
            
            50,000
            
            
            0.27300,000
            
            
            December
                12, 2015
            
            
            0.20
            
            
            9.0
            
            
            150,000
            
            
            0.20125,000
            
            
            March
                28, 2016
            
            
            0.65
            
            
            9.2
            
            
            62,500
            
            
            0.65200,000
            
            
            May
                23, 2016
            
            
            0.53
            
            
            9.4
            
            
            -
            
            
            -108,000
            
            
            August
                10, 2016
            
            
            0.48
            
            
            9.6
            
            
            -
            
            
            -40,000
            
            
            November
                9, 2016
            
            
            0.32
            
            
            9.9
            
            
            -
            
            
            -3,052,900
            
            
            
            
            $
            1.06
            
            
            7.9
            
            
            1,849,600
            
            $
            1.41





The
      aggregate intrinsic value of options outstanding is $3.2 million and the
      aggregate intrinsic value of options currently exercisable is $2.6 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,
      2005 and 2004.




Stock
      compensation expense is recognized on a straight-line basis over the vesting
      period. Expense recognized for the years ended December 31, 2006 and 2005 was
      $0.4 million and $0.6 million, respectively. As at December 31, 2006 there
      was
      $0.1 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, and were subject to reduction if certain performance criteria were
      not met. In fiscal 2003, the balance of the options vested based upon the
      established fiscal 2003 performance criteria. As of December 31, 2006 there
      are
      1,230,852 performance-based stock options outstanding.




***(e)***
            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:




**2006**
            
            **2005**
            
            **2004**Risk-free
                interest rate
            
            
            4.1
            %
            
            3.7
            %
            
            3.1
            %Dividend
                yield
            
            
            0
            %
            
            0
            %
            
            0
            %Volatility
            
            
            89
            %
            
            73
            %
            
            57
            %Expected
                life in years
            
            
            6
            
            
            5
            
            
            5Weighted
                average grant-date fair value of stock options
            
            $
            0.40
            
            $
            0.36
            
            $
            0.91




F-20


**APOLLO
        GOLD CORPORATION**
  **Notes
        to the Consolidated Financial Statements**  **-
        (Continued)**
 **(Stated
        in U.S. dollars; tabular amounts in thousands)**
  **12.**
              **SHARE
                  CAPITAL (continued)**




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.




**13.**
            **INCOME
                TAXES**




The
      Company did not record a provision or benefit for income taxes for the periods
      ended December 31, 2006, 2005 and 2004, 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
      loss before tax provision due to the following:




**2006**
            
            **2005**
            
            **2004**Statutory
                tax rate
            
            
            33.12
            %
            
            34.90
            %
            
            35.62
            %Recovery
                of income taxes computed at standard rates
            
            $
            5,046
            
            $
            5,570
            
            $
            9,722Higher
                (lower) foreign tax rates
            
            
            718
            
            
            817
            
            
            150Tax
                losses not recognized in the period that the benefit arose
            
            
            (5,764
            )
            
            (6,387
            )
            
            (9,872
            )$
            -
            
            $
            -
            
            $
            -





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:




**2006**
            
            **2005**Future
                income tax assetsNet
                operating losses carried forward
            
            $
            47,075
            
            $
            46,385Exploration
                and development expenses
            
            
            303
            
            
            829Property,
                plant and equipment
            
            
            1,964
            
            
            2,672Accrued
                site closure costs
            
            
            4,730
            
            
            4,587Other
            
            
            4,939
            
            
            5,67659,011
            
            
            60,149Less:
                Valuation allowance
            
            
            (59,011
            )
            
            (60,149
            )Net
                future income tax asset
            
            $
            -
            
            $
            -





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, 2006, the Company has the following unused
      tax
      losses available for tax carryforward purposes:




**Country**
            
            **Amount**
            
            **Expiry**Canada
            
            $
            19,093
            
            
            2007-2026United
                States
            
            
            117,283
            
            
            2011-2026




F-21


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


**14.**
            **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.




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




**December
                31,****2006**
            
            **2005****Carrying**
              **Amount**
            
            **Fair**
              **Value**
            
            **Carrying**
              **Amount**
            
            **Fair**
              **Value**Cash
                and cash equivalents
            
            $
            4,512
            
            $
            4,512
            
            $
            127
            
            $
            127Accounts
                receivable and other
            
            
            728
            
            
            728
            
            
            2,638
            
            
            2,638Note
                receivable
            
            
            1,865
            
            
            1,865
            
            
            -
            
            
            -Accounts
                payable
            
            
            1,710
            
            
            1,710
            
            
            6,802
            
            
            6,802Accrued
                liabilities
            
            
            1,254
            
            
            1,254
            
            
            1,841
            
            
            1,841Notes
                payable and other liabilitiesCurrent
            
            
            671
            
            
            671
            
            
            596
            
            
            596Non-current
            
            
            939
            
            
            939
            
            
            448
            
            
            448Convertible
                debenture
            
            
            7,660
            
            
            7,660
            
            
            6,601
            
            
            6,601





**15.**
            **COMMITMENTS
                AND CONTINGENCIES**




***(a)***
            Royalties




The
      Company’s properties are subject to royalty obligations based on minerals
      produced from the properties. The Montana Tunnels and Black Fox Project current
      reserves are not subject to royalty obligations. Royalty obligations for the
      Huizopa Project will 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.




F-22




**APOLLO
      GOLD CORPORATION**




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


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




**15.**
            **COMMITMENTS
                AND CONTINGENCIES
                (continued)**




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. The Company believes that it has meritorious defenses in this suit
      and
      is vigorously defending itself against these claims. The Company cannot
      reasonably predict the final outcome of this lawsuit.




***(d)***
            Huizopa
                Project




To
      maintain the exploration and exploitation rights for the “Rosa” and “Donna”
concessions, both located in the Municipality of Madera, Chihuahua, Mexico,
      the
      Company was 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 certain claims and the outstanding land payments
      on its Huizopa properties. These payments resulted in Apollo’s 100% Mexican
      owned subsidiaries owning 100% of the 128 square kilometers mining concessions
      known as Huizopa.




***(e)***
            Indemnification
                obligations




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




**16.**
            **LEASE
                COMMITMENTS**




Minimum
      lease payments under capital and non-cancelable operating leases and the present
      value of net minimum payments at December 31, 2006 were as follows:




**Capital**
              **Leases**
            
            **Operating**
              **Leases**2007
            
            $
            727
            
            $
            1402008
            
            
            578
            
            
            942009
            
            
            15
            
            
            74Total
            
            
            1,320
            
            $
            308Less
                imputed interest
            
            
            217Total
                present value of minimum capital lease payments
            
            
            1,103Less
                current portion of capital lease obligations
            
            
            534Long-term
                capital lease obligations
            
            $
            569





Rent
      expense under non-cancelable operating leases was $98,000, $71,000 and $81,000
      for 2006, 2005 and 2004, respectively. 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.




F-23


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


**17.**
            **SUPPLEMENTAL
                  CASH FLOW
                  INFORMATION**




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




**2006**
            
            **2005**
            
            **2004**(Increase)
                decrease in:Accounts
                receivable and other
            
            $
            1,889
            
            $
            325
            
            $
            898Prepaids
            
            
            385
            
            
            (291
            )
            
            165Inventories
            
            
            387
            
            
            484
            
            
            (552
            )Increase
                (decrease) in:Accounts
                payable
            
            
            (3,920
            )
            
            1,178
            
            
            2,564Accrued
                liabilities
            
            
            69
            
            
            45
            
            
            224Property
                and mining taxes payable
            
            
            (292
            )
            
            104
            
            
            124$
            (1,482
            )
            $
            1,845
            
            $
            3,423





***(b)***
            Non-cash
                transactions




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.





During
      the year ended December 31, 2004, the Company issued 48,978 shares to meet
      the
      earn-in requirements of the Huizopa joint venture agreement. Share capital
      and
      property, plant and equipment both increased by $0.1 million as a result of
      this
      transaction. Property, plant and equipment totaling $0.3 million was acquired
      under capital lease obligations.





**18.**
            **RELATED
                PARTY TRANSACTIONS**




The
      Company had the following related party transactions during each of the years
      in
      the three-year period ended December 31, 2006:




**2006**
            
            **2005**
            
            **2004**Legal
                fees paid to two law firms, a partner of each firm is a director
                of the
                Company
            
            $
            118
            
            $
            335
            
            $
            549Consulting
                services paid to a relative of an officer and director of the
                Company
            
            
            14
            
            
            18
            
            
            6





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.




F-24


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


**19.**
            **SEGMENTED
                INFORMATION**




Apollo
      operates the Montana Tunnels mine in the United States and the Black Fox
      development project in Canada. The reportable segments have been determined
      at
      the level where decisions are made on the allocation of resources and capital
      and where performance is measured. At December 31, 2006, the segment information
      for the Montana Tunnels assets and liabilities are reported under the
      proportionate consolidation method as a result of the JV Agreement (Note 4).
      The
      Montana Tunnels assets and liabilities as at December 31, 2006 below differ
      from
      the amounts for the Montana Tunnels joint venture in Note 4 due to the inclusion
      of assets and liabilities of Montana Tunnels Mining, Inc. not pertaining to
      the
      Montana Tunnels joint venture which are primarily those of the Diamond Hill
      mine. The accounting policies for these segments are the same as those followed
      by the Company as a whole.




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
            
            
            105
            
            
            870
            
            
            3,5542,515
            
            
            114
            
            
            5,437
            
            
            8,066Property,
                plant and equipment
            
            
            7,159
            
            
            30,455
            
            
            1,254
            
            
            38,868Restricted
                certificates of deposit
            
            
            4,052
            
            
            553
            
            
            -
            
            
            4,605Deferred
                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





Amounts
      as at December 31, 2005 are as follows:




**Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            8
            
            $
            15
            
            $
            104
            
            $
            127Other
                non-cash current assets
            
            
            4,218
            
            
            100
            
            
            428
            
            
            4,7464,226
            
            
            115
            
            
            532
            
            
            4,873Property,
                plant and equipment
            
            
            13,917
            
            
            24,794
            
            
            1,334
            
            
            40,045Restricted
                certificates of deposit
            
            
            5,465
            
            
            581
            
            
            10,997
            
            
            17,043Deferred
                financing costs
            
            
            -
            
            
            -
            
            
            584
            
            
            584Total
                assets
            
            $
            23,608
            
            $
            25,490
            
            $
            13,447
            
            $
            62,545Current
                liabilities
            
            $
            5,444
            
            $
            221
            
            $
            4,746
            
            $
            10,411Notes
                payable, convertible debenture and other
            
            
            -
            
            
            66
            
            
            6,993
            
            
            7,059Accrued
                site closure costs
            
            
            12,634
            
            
            -
            
            
            -
            
            
            12,634Total
                liabilities
            
            $
            18,078
            
            $
            287
            
            $
            11,739
            
            $
            30,104




F-25




**APOLLO
      GOLD CORPORATION**




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


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




**19.**
            **SEGMENTED
                INFORMATION (continued)**




Amounts
      for the years ended December 31, 2006, 2005 and 2004 are as
      follows:




**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
            
            
            -
            
            
            -
            
            
            3,577
            
            
            3,577Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            427
            
            
            427Accrued
                site closure costs - accretion expense
            
            
            948
            
            
            -
            
            
            -
            
            
            948Loss
                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
            
            $
            (7,634
            )
            $
            -
            
            $
            (7,603
            )
            $
            (15,237
            )Investing
                activities
              Property,
                plant and equipment expenditures
            
            $
            2,640
            
            $
            5,289
            
            $
            127
            
            $
            8,056





**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
            
            
            -
            
            
            -
            
            
            7,588
            
            
            7,588Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            597
            
            
            597Accrued
                site closure costs - accretion expense
            
            
            881
            
            
            -
            
            
            -
            
            
            881(Gain)
                loss 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
                activities
              Property,
                plant and equipment expenditures
            
            $
            97
            
            $
            5,290
            
            $
            721
            
            $
            6,108




F-26




**APOLLO
      GOLD CORPORATION**




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


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




**19.**
            **SEGMENTED
                INFORMATION (continued)**





**Year
                Ended December 31, 2004****Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            38,254
            
            $
            -
            
            $
            -
            
            $
            38,254Direct
                operating costs
            
            
            52,473
            
            
            -
            
            
            -
            
            
            52,473Depreciation
                and amortization
            
            
            2,527
            
            
            -
            
            
            113
            
            
            2,640General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            7,095
            
            
            7,095Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            767
            
            
            767Accrued
                site closure costs - accretion expense
            
            
            820
            
            
            -
            
            
            -
            
            
            820Gain
                on sale of property, plant and equipment
            
            
            -
            
            
            -
            
            
            (6
            )
            
            (6
            )Exploration
                and business development
            
            
            -
            
            
            -
            
            
            1,051
            
            
            1,05155,820
            
            
            -
            
            
            9,020
            
            
            64,840Operating
                loss
            
            
            (17,566
            )
            
            -
            
            
            (9,020
            )
            
            (26,586
            )Interest
                income
            
            
            27
            
            
            -
            
            
            286
            
            
            313Interest
                expense
            
            
            (141
            )
            
            -
            
            
            (111
            )
            
            (252
            )Foreign
                exchange loss and other
            
            
            (111
            )
            
            -
            
            
            (659
            )
            
            (770
            )Loss
                from continuing operations
            
            $
            (17,791
            )
            $
            -
            
            $
            (9,504
            )
            $
            (27,295
            )Investing
                activities
              Property,
                plant and equipment expenditures
            
            $
            4,207
            
            $
            10,646
            
            $
            394
            
            $
            15,247





**20.**
            **DISCONTINUED
                OPERATIONS**




On
      November 18, 2005, the Company sold its Nevada Assets to Jipangu 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:




**Year
                Ended December 31,****2006**
            
            **2005**
            
            **2004**Revenue
                from sale of minerals
            
            $
            -
            
            $
            18,591
            
            $
            26,487Direct
                operating costs
            
            
            -
            
            
            17,375
            
            
            26,190Depreciation
                and amortization
            
            
            -
            
            
            867
            
            
            2,581Accretion
                expense
            
            
            -
            
            
            898
            
            
            598Royalty
                expenses
            
            
            -
            
            
            267
            
            
            669Exploration
                and business development
            
            
            -
            
            
            218
            
            
            -(Gain)
                loss on sale of property, plant and equipment and other
            
            
            -
            
            
            (3,547
            )
            
            177Impairment
            
            
            -
            
            
            8,724
            
            
            --
            
            
            24,802
            
            
            30,215Operating
                loss
            
            
            -
            
            
            (6,211
            )
            
            (3,728
            )Interest
                expense
            
            
            -
            
            
            (74
            )
            
            (216
            )Realized
                and unrealized gain on commodity contracts
            
            
            -
            
            
            38
            
            
            232Loss
                on disposal of discontinued operations
            
            
            (350
            )
            
            -
            
            
            -Loss
                from discontinued operations
            
            $
            (350
            )
            $
            (6,247
            )
            $
            (3,712
            )




F-27




**APOLLO
      GOLD CORPORATION**




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


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




**21.**
            **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, 2006 and 2005 and for the years ended December 31,
      2006, 2005 and 2004.




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




**2006**
            
            **2005****Total
                assets in accordance with Canadian GAAP**
            
            **$**
            **51,804**
            
            **$**
            **62,545**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(b)(ii)
            
            
            (2,038
            )
            
            (4,260
            )Black
                Fox development costs(c)
            
            
            (22,354
            )
            
            (19,181
            )Convertible
                debentures(d)
            
            
            103
            
            
            227Equity
              accounting for investment in Montana
              Tunnels joint venture(b)(i)
            
            
            (8,473
            )
            
            -**Total
                assets in accordance with U.S. GAAP**
            
            **$**
            **19,042**
            
            **$**
            **39,331**




**Total
                liabilities in accordance with Canadian GAAP**
            
            **$**
            **23,561**
            
            **$**
            **30,104**Convertible
                debentures(d)
            
            
            764
            
            
            1,513Equity
                accounting for investment in Montana Tunnels joint
                venture(b)(i)
            
            
            (8,473
            )
            
            -Deferred
                gain(b)(i)
            
            
            (3,750
            )
            
            -**Total
                liabilities in accordance with U.S. GAAP**
            
            **$**
            **12,102**
            
            **$**
            **31,617**




**Total
                shareholders’ equity in accordance with Canadian
                GAAP**
            
            **$**
            **28,243**
            
            **$**
            **32,441**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(b)(ii)
            
            
            (2,038
            )
            
            (4,260
            )Black
                Fox development costs(c)
            
            
            (22,354
            )
            
            (19,181
            )Convertible
                debentures(d)
            
            
            (661
            )
            
            (1,286
            )Deferred
                gain(b)(i)
            
            
            3,750
            
            
            -**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **6,940**
            
            **$**
            **7,714**




**Total
                shareholders’ equity and liabilities in accordance with U.S.
                GAAP**
            
            **$**
            **19,042**
            
            **$**
            **39,331**




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





**2006**
            
            **2005**Share
                capital
            
            $
            158,790
            
            $
            148,287Note
                warrants
            
            
            1,062
            
            
            781Contributed
                surplus
            
            
            31,964
            
            
            31,359Deficit
            
            
            (184,876
            )
            
            (172,713
            )**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **6,940**
            
            **$**
            **7,714**


F-28




**APOLLO
      GOLD CORPORATION**




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


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




**21.**
            **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,****2006**
            
            **2005**
            
            **2004**Loss
                from continuing operations for the year ended December 31,based
                on Canadian GAAP
            
            $
            (15,237
            )
            $
            (15,961
            )
            $
            (27,295
            )Cumulative
                effect of change in accounting policy (a)
            
            
            -
            
            
            -
            
            
            (1,508
            )Change
                in depreciation of property, plant and equipment (b)(ii)
            
            
            183
            
            
            588
            
            
            695Black
                Fox development costs (c)
            
            
            (3,173
            )
            
            (5,133
            )
            
            (10,405
            )Convertible
                debenture (d)
            
            
            625
            
            
            680
            
            
            (279
            )Gain
                on transfer of assets and liabilities to joint
                venture(b)(i)
            
            
            5,789
            
            
            -
            
            
            -Loss
                from continuing operations for the year based on U.S. GAAP
            
            
            (11,813
            )
            
            (19,826
            )
            
            (38,792
            )Loss
                from discontinued operations for the year based on Canadian
                GAAP
            
            
            (350
            )
            
            (6,247
            )
            
            (3,712
            )Commodity
                contract gains (e)
            
            
            -
            
            
            1,340
            
            
            4,020Standard
                Mine development costs
            
            
            -
            
            
            (980
            )
            
            -Impairment
            
            
            -
            
            
            980
            
            
            -(Loss)
                income from discontinued operations for the year based on U.S.
                GAAP
            
            
            (350
            )
            
            (4,907
            )
            
            308Net
                loss for the year based on U.S. GAAP
            
            $
            (12,163
            )
            $
            (24,733
            )
            $
            (38,484
            )Comprehensive
                loss
            
            $
            (12,163
            )
            $
            (24,733
            )
            $
            (38,484
            )Basic
                and diluted loss per share in accordance with U.S. GAAP:Continuing
                operations
            
            $
            (0.10
            )
            $
            (0.19
            )
            $
            (0.49
            )Discontinued
                operations
            
            
            (0.00
            )
            
            (0.05
            )
            
            0.00Net
                loss per share - U.S. GAAP basic and diluted
            
            $
            (0.10
            )
            $
            (0.24
            )
            $
            (0.49
            )





***(a)***
            Stock-based
                compensation




Under
      Canadian GAAP, effective January 1, 2004, the Company adopted the amended
      recommendations of CICA Handbook Section 3870 (Note 3 (m)). Under U.S. GAAP,
      effective January 1, 2004, the Company adopted the modified prospective method
      of accounting for stock-based compensation recommended in SFAS No. 148, *Accounting
      for Stock-Based Compensation - Transition and Disclosure* ,
      resulting in a cumulative effect of change in accounting policy of $1.5 million.
      As of January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), *Share-Based
      Payment* .
      The
      adoption of this standard did not impact the Company’s financial position or
      results of operations.




***(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.  Under U.S. GAAP, the Company would
      account for MTM using the equity method whereby the Company’s share of the
      investee’s 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 21 (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 is included in the net loss
      for
      the year.




F-29




**APOLLO
      GOLD CORPORATION**




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


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




**21.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





*(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.




***(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 $22.4 million has been recorded as at December 31, 2006 and
      an
      additional expense of $3.2 million has been recorded for the year then
      ended.




***(d)***
            Convertible
                debenture




Under
      Canadian GAAP, the convertible debentures were recorded as a compound financial
      instrument including detachable note warrants (Note 9). On issuance in November
      2004, under U.S. GAAP, the detachable note warrant is 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 feature
      determined using the effective conversion price based on the proceeds allocated
      to the convertible debenture 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)***
            Discontinued
                operations (Commodity contracts)




Prior
      to
      January 1, 2004, under U.S. GAAP, unrealized gains and losses on the put and
      call option contracts were recorded in the statement of operations. As of
      January 1, 2004, the Company adopted the provisions of CICA Accounting Guideline
      13, *Hedging
      Relationships* and
      unrealized gains and losses on these contracts are now recorded in the statement
      of operations under Canadian GAAP.




***(f)***
            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, 2006,
      this balance was determined to be immaterial and no adjustment is shown in
      the
      reconciliation. 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.




F-30




**APOLLO
      GOLD CORPORATION**




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


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




**21.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




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, 2006, unexpended flow-through
      funds were $0.9 million (December 31, 2005 - $0.2 million).




***(g)***
            Comprehensive
                income




SFAS
      No.
      130, *Reporting
      Comprehensive Income* (“SFAS
      130”) establishes standards for the reporting and display of comprehensive
      income and its components in a full set of general purpose financial statements.
      SFAS 130 requires that all items that are required to be recognized under
      accounting standards as components of comprehensive income be reported in a
      financial statement. For the Company, the only component of comprehensive loss
      is the net loss for the period.




***(h)***
            Statements
                of cash flows




Under
      Canadian GAAP, mining development costs at the Black Fox Project are included
      in
      cash flows from investing activities in the consolidated statements of cash
      flows.  Under U.S. GAAP, these expenditures are included in cash flows from
      operating activities.  Accordingly, under U.S. GAAP, the consolidated
      statements of cash flows for the years ended December 31, 2006, 2005 and 2004
      would reflect an increase in cash provided by investing activities of $3.2
      million, $5.1 million and $10.4 million, respectively, and a corresponding
      decrease in cash used in operating activities.




***(i)***
            Recently
                issued accounting pronouncements




In
      March
      2004, the Emerging Issues Task Force (“EITF”) issued EITF 04-3, *Mining
      Assets: Impairment and Business Combinations* . EITF
      04-3
      requires mining companies to consider cash flows related to the economic value
      of mining assets (including mineral properties and rights) beyond those assets
      proven and probable reserves, as well as anticipated market price fluctuations,
      when assigning value in a business combination in accordance with SFAS 141
      and
      when testing the mining assets for impairment in accordance with SFAS 144.
      The
      consensus is effective for fiscal periods beginning after March 31, 2004. The
      adoption of EITF 04-3 did not have a material impact on the Company’s financial
      position, results of operations or cash flows.




In
      September 2005, the EITF reached a consensus on Issue No. 04-13, *Accounting
      for Purchases and Sales of Inventory with the Same Counterparty* (“EITF
      04-13”). The EITF concluded that entities that enter into inventory purchase and
      sales transactions with the same counterparty, in contemplation of one another,
      should combine the transactions and treat them as non-monetary exchanges
      involving inventory. The consensus is effective for new inventory arrangements
      entered into, or modifications or renewals of existing inventory arrangements
      occurring, in interim or annual reporting periods beginning after March 15,
      2006. The adoption of EITF 04-13 did not have any impact on the Company’s
      operating results or financial positions.





In
      February 2006, the FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instrument* (“SFAS
      155”), an amendment of SFAS 140 and SFAS 133. SFAS 155 permits the Company to
      elect to measure any hybrid financial instrument at fair value (with changes
      in
      fair value recognized in earnings) if the hybrid instrument contains an embedded
      derivative that would otherwise be required to be bifurcated and accounted
      for
      separately under SFAS 133. The election to measure the hybrid instrument at
      fair
      value is made on an instrument-by-instrument basis and is irreversible. This
      Statement will be effective for all instruments acquired, issued, or subject
      to
      a remeasurement event occurring after the beginning of the Company’s first
      fiscal year that begins after September 15, 2006. The Company expects that
      the
      adoption of SFAS 155 will have no impact on its operating results or financial
      position.




F-31




**APOLLO
      GOLD CORPORATION**




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


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




**21.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




In
      June
      2006, the FASB issued Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”). This interpretation clarifies the recognition threshold and measurement
      of
      a tax position taken on a tax return, and requires expanded disclosure with
      respect to the uncertainty in income taxes. FIN 48 is effective for fiscal
      years
      beginning after December 15, 2006. The adoption of FIN 48 is not expected to
      have a material impact on the Company’s consolidated financial position, results
      of operations or disclosures.




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
      September 2006, the FASB issued SFAS No. 158, *Employer’s
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statement No. 87, 88, 106 and 132R* (“SFAS
      158”). This Statement requires an employer to recognize in its statement of
      financial position an asset of a plan’s over funded status or a liability for a
      plan’s under funded status, measure a plan’s assets and its obligations that
      determine its funded status as of the end of the employer’s fiscal year (with
      limited exceptions), and recognize changes in the funded status of a defined
      benefit postretirement plan in the year in which the changes occur. The Company
      expects that adoption of SFAS 158 will have no impact on its financial condition
      or results of operations.




In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108 (“SAB 108”). SAB 108 provides guidance on the consideration of
      the effects of prior year misstatements in quantifying current year
      misstatements for the purpose of a materiality assessment. SAB 108 permits
      existing public companies to record the cumulative effect of initially applying
      this approach in the fiscal year ending after November 15, 2006 by recording
      necessary correcting adjustments to the carrying values of assets and
      liabilities as of the beginning of that year with the offsetting adjustment
      recorded to the opening balance of retained earnings. The adoption of SAB 108
      did not have a material impact on its financial condition or results of
      operations.





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
      March
      2007, the FASB met to discuss the SEC’s interpretation of SFAS 133, *Accounting
      for Derivative Instruments and Hedging Activities* .
      The
      FASB agreed with the SEC’s interpretation that warrants with an exercise price
      denominated in a currency other than the issuer's functional currency are
      required to treat the fair value of the warrants as a liability and to mark
      to
      market those warrants on a current basis with a corresponding gain or loss
      recorded in loss from operations. The FASB decided that the SEC’s interpretation
      could be adopted prospectively. The Company's functional currency is United
      States dollars. Under Canadian GAAP, warrants to purchase common shares are
      accounted for as a component of shareholders' equity. The Company expects the
      adoption of this guidance will not have a material impact on its results of
      operations.


F-32




**APOLLO
      GOLD CORPORATION**




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


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





**22.**
            **SUBSEQUENT
                EVENTS**




***(a)***
            Shareholder
                Rights Plan




On
      January 17, 2007, the Company adopted a Shareholder Rights Plan (the “Rights
      Plan”). The Rights Plan has been 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
      applicable, 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 will be presented for
      ratification by the shareholders at the Apollo Annual Meeting expected to be
      held in May 2007. If approved by the shareholders, the Rights Plan expires
      in
      January 2012.




***(b)***
            Convertible
                debenture




On
      February 23, 2007, the Company completed a private placement of $8.58 million
      offering consisting of $8.58 million aggregate principal amount of convertible
      debentures. 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 Debentures under certain circumstances. The
      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. Each $1,000 principal amount of the
      convertible debentures includes 2,000 common share purchase
      warrants.




In
      addition, the placement agents received compensation warrants to purchase the
      Company’s common shares totaling 7% of the gross proceeds divided by
      $0.50 **** per
      share. Each purchase warrant and compensation warrant entitles the holder to
      purchase one share of the Company at an exercise price of $0.50 and expire
      on
      February 23, 2009.




F-33




**INDEX
      TO EXHIBITS**




**Exhibit**
              **No.**
            
            **Exhibit
                Name**21.1
            
            List
                of subsidiaries of the Registrant23.1
            
            Consent
                of Deloitte & Touche LLP23.2
            
            Consent
                of Mine Development Associates31.1
            
            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