##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10Q þ      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2005  o     
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 00131593 APOLLO GOLD CORPORATION  Yukon Territory, Canada
(State or Other Jurisdiction of
Incorporation or Organization)
    
    Not Applicable
(I.R.S. Employer Identification No.)
 5655 South Yosemite St., Suite 200
Greenwood Village, Colorado 80111-3220
(Address of Principal Executive Offices) (Zip Code) Registrants telephone number, including area code (720) 8869656 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days Yes þ      No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b2 of
the Exchange Act). Yes þ      No o At May 6, 2005, there
were 96,206,449 common shares of Apollo Gold Corporation outstanding.




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TABLE OF CONTENTS PagePART I FINANCIAL INFORMATION
    
    
    2ITEM 1. FINANCIAL STATEMENTS (Unaudited)
    
    
    2Consolidated Balance Sheet As of March 31, 2005 and as of December 31, 2004
    
    
    3Consolidated Statement of Operations and Deficit for the Three-Month Periods Ended March 31, 2005 and 2004
    
    
    4Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2005 and 2004
    
    
    6Notes to Financial Statements
    
    
    8ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    22ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    29ITEM 4. CONTROLS AND PROCEDURES
    
    
    30PART II OTHER INFORMATION
    
    
    30ITEM 1. LEGAL PROCEEDINGS
    
    
    30ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS
    
    
    30ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    30ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    31ITEM 5. OTHER INFORMATION
    
    
    31ITEM 6. EXHIBITS
    
    
    31Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO and CFO Pursuant to Section 906
  STATEMENTS REGARDING FORWARD LOOKING INFORMATION This report contains forwardlooking statements within the meaning of Section 21e of the
Securities Exchange Act of 1934, including, without limitation, statements regarding our
expectations, beliefs, intentions or future strategies that are signified by the words expects,
anticipates, intends, believes, or similar language. These forwardlooking statements
involve risks, uncertainties and other factors. All forwardlooking statements included in this
document are based on information available to us on the date hereof and speak only as of the date
hereof. The factors discussed under Risk Factors in our Annual Report on Form 10K for the year
ended December 31, 2004 (the Annual Report) are among those factors that, in some cases, have
affected our results and could cause the actual results to differ materially from those projected
in the forwardlooking statements. ACCOUNTING PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION Apollo Gold Corporation prepares its consolidated financial statements in accordance with
accounting principles generally accepted in Canada and publishes its financial statements in United
States dollars. This Quarterly Report on Form 10Q should be read in conjunction with our
consolidated financial statements and related notes included in this quarterly report, as well as
our annual financial statements for the fiscal year ended December 31, 2004 included in our Annual
Report on Form 10-K. 1




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Certain classifications have been made to the prior period financial statements to conform
with the current period presentation. Unless stated otherwise, all dollar amounts are expressed in United States dollars. References to we, our, us, the Company or Apollo mean Apollo Gold Corporation and
its consolidated subsidiaries, or to any one or more of them, as the context requires. NONGAAP FINANCIAL INFORMATION 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. We have included cash operating costs information to provide investors
with information about the cost structure of our mining operations. The term cash operating costs is used on a per ounce of gold basis. Cash operating costs
per ounce is equivalent to direct operating expense, less production royalties and mining taxes but
includes byproduct credits for payable silver, lead and zinc. The term total cash costs is inclusive of the above with the addition of production
royalties and mining taxes. The term total production costs includes all total cash costs with the addition of the
noncash portion of the costs including depreciation and amortization. This information differs from measures of performance determined in accordance with generally
accepted accounting principles (GAAP) in Canada and the United States and should not be considered
in isolation or a substitute for measures of performance prepared in accordance with GAAP. These
measures are not necessarily indicative of operating profit or cash flow from operations as
determined under GAAP and may not be comparable to similarly titled measures of other companies.
See Item 2, Managements Discussion and Analysis of Financial Condition and Results of Operations
for a reconciliation of these non-GAAP measures to our Statements of Operations. 
 FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS These consolidated financial statements should be read in conjunction with the financial
statements, accompanying notes and other relevant information included in the Companys Annual
Report on Form 10K for the year ended December 31, 2004 filed with the Securities and Exchange
Commission on March 16, 2005. 2




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APOLLO GOLD CORPORATION 
 CONSOLIDATED BALANCE SHEETS
(in thousands of United States Dollars) March 31,
    
    
    December 31,2005
    
    
    2004(Unaudited)
    
    
    (Audited)AssetsCurrentCash and cash equivalents
    
    $
    2,519
    
    
    $
    6,947Accounts receivable
    
    
    5,962
    
    
    
    3,088Prepaids
    
    
    357
    
    
    
    423Broken ore on leach pad
    
    
    10,266
    
    
    
    8,960Inventories
    
    
    2,505
    
    
    
    3,242Total Current Assets
    
    
    21,609
    
    
    
    22,660Broken ore on leach pad  long-term
    
    
    2,467
    
    
    
    4,824Property, plant and equipment
    
    
    59,347
    
    
    
    58,544Deferred stripping costs
    
    
    37,365
    
    
    
    36,851Restricted certificate of deposit
    
    
    9,778
    
    
    
    9,366Deferred loss on commodity contracts
    
    
    335
    
    
    
    1,340Deferred financing costs
    
    
    823
    
    
    
    901Total Assets
    
    $
    131,724
    
    
    $
    134,486LiabilitiesCurrentAccounts payable
    
    $
    8,181
    
    
    $
    10,035Accrued liabilities
    
    
    3,164
    
    
    
    2,447Unrealized loss on commodity contracts
    
    
    337
    
    
    
    1,500Notes payable
    
    
    2,406
    
    
    
    2,833Property and mining taxes payable
    
    
    1,225
    
    
    
    1,070Total Current Liabilities
    
    
    15,313
    
    
    
    17,885Notes payable and long-term liability
    
    
    535
    
    
    
    799Convertible debentures
    
    
    5,940
    
    
    
    5,538Accrued site closure costs
    
    
    26,617
    
    
    
    26,192Total Liabilities
    
    
    48,405
    
    
    
    50,414Continuing operations (Note 1)Shareholders EquityShare capital (Note 4)
    
    
    144,385
    
    
    
    141,795Issuable common shares
    
    
    231
    
    
    
    231Equity component of convertible debentures
    
    
    1,809
    
    
    
    1,815Note warrants
    
    
    781
    
    
    
    781Contributed surplus
    
    
    10,023
    
    
    
    9,627Deficit
    
    
    (73,910
    )
    
    
    (70,177
    )Total Shareholders Equity
    
    
    83,319
    
    
    
    84,072Total Liabilities and Shareholders Equity
    
    $
    131,724
    
    
    $
    134,486
 The accompanying notes are an integral part of these interim consolidated financial statements. 3




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APOLLO GOLD CORPORATION 
 CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT(in thousands of United States Dollars, except per share amounts)(unaudited)
 Three months endedMarch 31,2005
    
    
    2004(Restated - Note 6)RevenueRevenue from sale of minerals
    
    $
    15,694
    
    
    $
    19,979Operating ExpensesDirect operating costs
    
    
    16,808
    
    
    
    17,151Depreciation and amortization
    
    
    1,234
    
    
    
    1,320General and administrative expenses
    
    
    1,650
    
    
    
    1,730Stockbased compensation
    
    
    202
    
    
    
    27Accretion expense
    
    
    414
    
    
    
    345Royalty expense
    
    
    88
    
    
    
    210Exploration and business development
    
    
    240
    
    
    
    13920,636
    
    
    
    20,922Operating Loss
    
    
    (4,942
    )
    
    
    (943
    )Other Income (Expenses)Interest income
    
    
    104
    
    
    
    148Interest expense
    
    
    (741
    )
    
    
    (110
    )Gain on sale of property, plant and equipment
    
    
    1,834
    
    
    
    Foreign exchange loss and other
    
    
    (26
    )
    
    
    (188
    )Realized and unrealized gain (loss) on commodity contracts
    
    
    38
    
    
    
    (523
    )Net loss for the period
    
    
    (3,733
    )
    
    
    (1,616
    )Deficit, beginning of period
    
    
    (70,177
    )
    
    
    (51,988
    )Deficit, end of period
    
    $
    (73,910
    )
    
    $
    (53,604
    )Net loss per share, basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.02
    )Weighted average number of shares outstanding
    
    
    94,857,192
    
    
    
    74,654,540
 The accompanying notes are an integral part of these interim consolidated financial statements. 4




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APOLLO GOLD CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY(in thousands of United States Dollars, except per share amounts)(unaudited)
 EquityComponentIssuable
    
    
    ofShare Capital
    
    
    Common
    
    
    Convertible
    
    
    Note
    
    
    ContributedNumber of Shares
    
    
    Amount
    
    
    Shares
    
    
    Debentures
    
    
    Warrant
    
    
    Surplus
    
    
    Deficit
    
    
    TotalBalance, December
31, 2003
    
    
    73,539,790
    
    
    $
    120,881
    
    
    $
    231
    
    
    $
    
    
    
    $
    
    
    
    $
    12,766
    
    
    $
    (51,988
    )
    
    
    81,890Units issued for cash
    
    
    8,299,999
    
    
    
    4,873
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    622
    
    
    
    
    
    
    
    5,495Conversion of special
warrants
    
    
    2,326,666
    
    
    
    1,449
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    1,499Flow-through common
shares
    
    
    714,283
    
    
    
    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
    
    
    48,978
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88Shares issued for 2003
share-based
compensation
    
    
    265,000
    
    
    
    376
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (376
    )
    
    
    
    
    
    
    Bridge loan
compensation warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275
    
    
    
    
    
    
    
    275Equity component of
convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,815
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    1,878Note warrant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    781
    
    
    
    27
    
    
    
    
    
    
    
    808Debenture compensation
warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    
    
    
    
    163Stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    767
    
    
    
    
    
    
    
    767Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,189
    )
    
    
    (18,189
    )Balance, December 31,
2004
    
    
    90,973,118
    
    
    
    141,795
    
    
    
    231
    
    
    
    1,815
    
    
    
    781
    
    
    
    9,627
    
    
    
    (70,177
    )
    
    
    84,072Unit issued for cash
    
    
    4,199,998
    
    
    
    2,567
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    
    
    
    
    2,761Conversion of
convertible debentures
    
    
    33,333
    
    
    
    23
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    
    
    
    
    202Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,733
    )
    
    
    (3,733
    )Balance, March 31, 2005
    
    
    95,206,449
    
    
    $
    144,385
    
    
    $
    231
    
    
    $
    1,809
    
    
    
    781
    
    
    $
    10,023
    
    
    $
    (73,910
    )
    
    $
    83,319
 The accompanying notes are an integral part of these
interim consolidated financial statements. 5




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APOLLO GOLD CORPORATION 
 CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of United States Dollars)
(unaudited) Three months endedMarch 31,2005
    
    
    2004(Restated - Note 6)Operating ActivitiesNet loss for the period
    
    $
    (3,733
    )
    
    $
    (1,616
    )Items not affecting cashDepreciation and amortization
    
    
    1,234
    
    
    
    1,320Amortization of deferred financing costs
    
    
    80
    
    
    
    Stockbased compensation
    
    
    202
    
    
    
    27Accretion expense  accrued site closure costs
    
    
    414
    
    
    
    345Accretion expense  convertible debentures
    
    
    685
    
    
    
    (Decrease) Increase in unrealized loss on commodity contracts
    
    
    (1,163
    )
    
    
    5,198Decrease (Increase) in deferred loss on commodity contracts
    
    
    1,005
    
    
    
    (4,355
    )Gain on sale of property, plant and equipment
    
    
    (1,834
    )
    
    
    Other
    
    
        (15
    )
    
    
    (66
    )Net change in noncash operating working capital items
    
    
    759
    
    
    
    (1,636
    )(2,366
    )
    
    
    (783
    )Investing ActivitiesProperty, plant and equipment expenditures
    
    
        (3,058
    )
    
    
    (3,123
    )Deferred stripping costs
    
    
    (515
    )
    
    
    (3,515
    )Short-term investments
    
    
    
    
    
    
    (2,057
    )Proceeds from disposal of property, plant and equipment
    
    
    118
    
    
    
    Restricted Certificate of Deposit and other assets
    
    
    (412
    )
    
    
    (45
    )(3,867
    )
    
    
    (8,740
    )Financing ActivitiesProceeds on issuance of shares
    
    
    2,761
    
    
    
    8,561Convertible debentures interest paid
    
    
    (265
    )
    
    
    Acquisition and cancellation of shares
    
    
    
    
    
    
    (48
    )Payments of notes payable
    
    
    (691
    )
    
    
    (1,074
    )1,805
    
    
    
    7,439Net decrease in cash
    
    
    (4,428
    )
    
    
    (2,084
    )Cash and cash equivalents, beginning of period
    
    
    6,947
    
    
    
    25,851Cash and cash equivalents, end of period
    
    $
    2,519
    
    
    $
    23,767Supplemental Cash Flow Information:Interest paid
    
    $
    662
    
    
    $
    110
 During the three months ended March 31, 2004, property, plant and equipment totaling
$340,000 was acquired under a capital lease arrangement. The accompanying notes are an integral part of these interim consolidated financial
statements. 6




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APOLLO GOLD CORPORATION
 
 Notes to the Consolidated Financial Statements
 Three month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  1.
    CONTINUING OPERATIONSThese consolidated financial statements are prepared on the basis of a going concern which
assumes that the Company will realize its assets and discharge its liabilities in the normal
course of business for the foreseeable future. To date, Apollo has funded its operations
primarily through issuances of debt and equity securities. The Companys ability to
continue as a going concern is dependent on its ability to successfully operate the Montana
Tunnels Mine and Florida Canyon Mine (including the Standard Mine),
to generate cash flow
for the remainder of 2005, and to raise additional funds from planned sales of spare mining
equipment. We expect that these activities, in the aggregate will be sufficient to fund the
operations for the remainder of 2005. External financing will be required to develop the
Black Fox project. The availability, amount and timing of this financing is not certain at
this time.2.
    NATURE OF OPERATIONSApollo Gold Corporation (Apollo or the Company) is engaged in gold mining including
extraction, processing, refining and the production of other by-product metals, as well as
related activities including exploration and development. The Company currently owns and
operates the Florida Canyon Mine, an open pit heap leach operation located in the State of
Nevada; and the Montana Tunnels Mine, an open pit mine and mill, producing gold doré and
lead-gold and zinc-gold concentrates located in the State of Montana. The Company also owns
the Standard Mine which is situated 8 kms south of the Florida Canyon Mine. The Standard
Mine shares common facilities, such as warehousing, administration and the gold recovery
plant, with the Florida Canyon Mine. Standard is an open pit heap leach operation which was
developed during 2004 and the first quarter 2005, pouring its first ounce of gold in
December 2004 and is expected to be in commercial production in the second quarter 2005.
The Company also owns the Diamond Hill Mine, currently under care and maintenance, also
located in the State of Montana.Apollo has a development property, the Black Fox Project, which is located in the Province
of Ontario near the Township of Matheson. Apollo has four exploration properties located
near the Florida Canyon Mine. Apollo also has rights to acquire up to an 80% interest in
the Huizopa project located in the Sierra Madre gold belt in Mexico.3.
    ACCOUNTING POLICIESThese consolidated interim financial statements have been prepared in accordance with
Canadian generally accepted accounting principles (Canadian GAAP) and except as described
in Note 8, conform in all material respects with accounting principles generally accepted in
the United States (U.S. GAAP). The accounting policies followed in preparing these
financial statements are those used by the Company as set out in the audited financial
statements for the year ended
December 31, 2004. Certain information and note disclosure normally included in
consolidated financial statements prepared in accordance with Canadian GAAP have been
omitted. These interim financial statements should be read together with the Companys
audited financial statements for the year ended December 31, 2004.In the opinion of management, all adjustments considered necessary for fair presentation
have been included in these financial statements. Interim results are not necessarily
indicative of the results expected for the fiscal year. 7




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APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  3.
    ACCOUNTING POLICIES (Continued)Certain of the comparative figures have been reclassified to conform with the current period
presentation.4.
    SHARE CAPITAL  (a)
    On January 7, 2005, the Company completed the second tranche of a private
placement of 4,199,998 units with a purchase price of $0.75 for net proceeds of $2.8
million, net of expenses $0.3 million and fair value of brokers compensation warrants of
$0.2 million. Each unit is comprised of one common share of the Company and 0.75 share
purchase warrant, with each whole share purchase warrant exercisable into one common
share of the Company for two years at an exercise price of $1.00 per share. In
connection with this offering, 420,000 brokers compensation warrants were issued.(b)
    WarrantsThe following summarizes outstanding warrants as at March 31, 2005: Number of
    
    
    Exercise
    
    
    ExpiryWarrants
    
    Shares
    
    
    Price
    
    
    Date653,277
    
    
    653,277
    
    
    $
    1.67
    
    
    September 26, 200563,969
    
    
    63,969
    
    
    
    1.67
    
    
    October 27, 20051,000,000
    
    
    1,000,000
    
    
    
    0.80
    
    
    October 19, 20061,400,133
    
    
    1,400,133
    
    
    
    0.80
    
    
    November 4, 20063,000,000
    
    
    3,000,000
    
    
    
    2.10
    
    
    December 23, 20066,224,999
    
    
    6,224,999
    
    
    
    1.00
    
    
    December 31, 20063,149,998
    
    
    3,149,998
    
    
    
    1.00
    
    
    January 7, 20075,253,600
    
    
    5,253,600
    
    
    
    0.80
    
    
    November 4, 20071,396,000
    
    
    1,396,000
    
    
    
    0.80
    
    
    November 4, 200722,141,976
    
    
    22,141,976
  In addition, 1,250,000 compensation warrants are outstanding. Each
compensation warrant is exercisable at $0.75 into one common share of the Company
and 0.75 share purchase warrants, with each whole share purchase warrant exercisable
into one common share of the Company at $1.00 per common share. The compensation
warrants are immediately exercisable and expire on January 7, 2007. The share
purchase warrants are exercisable for two years from the date of issuance. 8




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APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  4.
    SHARE CAPITAL (Continued)  (c)
    OptionsA summary of information concerning outstanding stock options at March 31, 2005 is
as follows: PerformancebasedFixed Stock Options
    
    
    Stock OptionsWeighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Number of
    
    
    AverageCommon
    
    
    Exercise
    
    
    Common
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceBalances, December 31, 2004
    
    
    2,196,300
    
    
    $
    2.10
    
    
    
    1,904,756
    
    
    $
    0.80Options granted
    
    
    2,539,700
    
    
    
    0.65
    
    
    
    
    
    
    
    Options cancelled
    
    
    (36,700
    )
    
    
    (1.94
    )
    
    
    
    
    
    
    Balances, March 31, 2005
    
    
    4,699,300
    
    
    $
    1.31
    
    
    
    1,904,756
    
    
    $
    0.80
  (i)
    Fixed stock option planThe following table summarizes information concerning outstanding and
exercisable fixed stock options at March 31, 2005: Options Outstanding
    
    
    Options ExercisableWeightedWeighted
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    ExerciseNumber
    
    
    
    Exercise Price
    
    
    Number
    
    
    Price perOutstanding
    
    Expiry Date
    
    per Share
    
    
    Exercisable
    
    
    Share1,481,200
    
    February 18, 2013
    
    $
    2.24
    
    
    
    1,481,200
    
    
    $
    2.242,600
    
    March 28, 2013
    
    
    2.34
    
    
    
    2,600
    
    
    
    2.3470,000
    
    August 22, 2013
    
    
    2.12
    
    
    
    35,000
    
    
    
    2.12100,000
    
    November 13, 2013
    
    
    1.67
    
    
    
    50,000
    
    
    
    1.67347,000
    
    March 10, 2014
    
    
    2.05
    
    
    
    173,500
    
    
    
    2.05114,200
    
    May 19, 2014
    
    
    1.44
    
    
    
    
    
    
    
    42,800
    
    August 10, 2014
    
    
    0.95
    
    
    
    
    
    
    
    1,800
    
    November 10, 2014
    
    
    0.60
    
    
    
    
    
    
    
    2,539,700
    
    March 10, 2015
    
    
    0.65
    
    
    
    
    
    
    
    4,699,300
    
    
    
    $
    1.31
    
    
    
    1,742,300
    
    
    $
    2.20
  (ii)
    Performance-based stock option planAs at March 31, 2005, the 1,904,756 performance-based stock options were
fully vested and have an expiry date of June 25, 2007. 9




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  4.
    SHARE CAPITAL (Continued)  (d)
    Stock-based compensationThe 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: Three months ended March 31,2005
    
    
    2004Risk free interest rate
    
    
    3.6
    %
    
    
    2.8
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Volatility
    
    
    73
    %
    
    
    54
    %Expected life in years
    
    
    5
    
    
    
    5
  5.
    INCOME TAXESThe Company did not record a recovery for income taxes for the period ended March 31, 2005
as the net loss carry forwards are fully offset by a valuation allowance.6.
    FINANCIAL INSTRUMENTS AND RISK MANAGEMENTCommodity contractsThe Company entered into commodity contracts, with Standard Bank London Limited, for gold in
the aggregate amount of 100,000 ounces involving the use of combinations of put and call
options. As of March 31, 2005 there were 4,000 ounces remaining on these contracts. The
remaining 4,000 ounces were completed on April 25, 2005. The contracts gave the holder the
right to buy, and the Company the right to sell, stipulated amounts of gold with a put
option strike price of $295 per ounce and a call option strike price of $345 per ounce. As
at March 31, 2005, the fair value of the contracts was a loss of approximately $0.3 million
(December 31, 2004  $1.5 million). 10




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  6.
    FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)Commodity contracts (continued)The Company incorrectly accounted for the above commodity contracts with Standard Bank
London Limited as hedges during each of the quarters ended March 31, June 30 and September
30, 2004. Quarterly losses for 2004 have been restated to reflect the correct accounting
treatment for these commodity contracts. The previously reported and restated information
as at and for the three month period ended March 31, 2004 is disclosed below: As reported
    
    
    As restatedStatement of OperationsRevenue
    
    $
    20,079
    
    
    $
    19,979Realized and unrealized loss on commodity contracts
    
    
    
    
    
    
    (523
    )Net loss
    
    
    (993
    )
    
    
    (1,616
    )Deficit
    
    
    (52,981
    )
    
    
    (53,604
    )Basic and diluted loss per share
    
    
    (0.01
    )
    
    
    (0.02
    )Balance SheetDeferred loss on commodity contracts
    
    
    
    
    
    
    4,355Accounts payable
    
    
    5,420
    
    
    
    5,200Unrealized loss on commodity contracts
    
    
    
    
    
    
    5,198
 11




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  7.
    SEGMENTED INFORMATIONApollo operates the Montana Tunnels, Florida Canyon Mines and the new Standard Mine in the
United States and the Black Fox development project in Canada. As the products and services
of the Companys largest segments, Montana Tunnels and Florida Canyon, are essentially the
same, the reportable segments have been determined at the level where decisions are made on
the allocation of resources and capital and where performance is measured. The accounting
policies for these segments are the same as those followed by the Company as a whole.
Financial information for Florida Canyon and the Standard Mine is combined since they share
common facilities, such as warehousing, administration and the gold recovery plant. Mining
activities at Florida Canyon were temporarily suspended on March 1, 2005, although gold
production continues from the leach pad. A decision on resumption of mining will be made
later in 2005.The Standard mine is in the development stage and is expected to be in commercial production
in the second quarter 2005. The revenue from gold production in the first quarter 2005 was
credited to the capital cost of development.Amounts as at March 31, 2005 are as follows: FloridaMontana
    
    
    Canyon/
    
    
    
    
    
    
    CorporateTunnels
    
    
    Standard
    
    
    Black Fox
    
    
    and Other
    
    
    TotalCash and cash equivalents
    
    $
    106
    
    
    $
    (6
    )
    
    $
    247
    
    
    $
    2,172
    
    
    $
    2,519Broken ore on leach pad  current
    
    
    
    
    
    
    10,266
    
    
    
    
    
    
    
    
    
    
    
    10,266Other non-cash current assets
    
    
    6,646
    
    
    
    1,945
    
    
    
    99
    
    
    
    134
    
    
    
    8,8246,752
    
    
    
    12,205
    
    
    
    346
    
    
    
    2,306
    
    
    
    21,609Broken ore on leach pad  long-term
    
    
    
    
    
    
    2,467
    
    
    
    
    
    
    
    
    
    
    
    2,467Property, plant and equipment
    
    
    15,955
    
    
    
    21,052
    
    
    
    21,531
    
    
    
    809
    
    
    
    59,347Deferred stripping costs
    
    
    37,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,365Restricted certificate of deposit
    
    
    4,101
    
    
    
    4,995
    
    
    
    558
    
    
    
    124
    
    
    
    9,778Deferred costs and losses
    
    
    
    
    
    
    335
    
    
    
    
    
    
    
    823
    
    
    
    1,158Total assets
    
    $
    64,173
    
    
    $
    41,054
    
    
    $
    22,435
    
    
    $
    4,062
    
    
    $
    131,724Current liabilities
    
    $
    6,904
    
    
    $
    4,682
    
    
    $
    748
    
    
    $
    2,979
    
    
    $
    15,313Notes payable and convertible
debentures
    
    
    266
    
    
    
    269
    
    
    
    
    
    
    
    5,940
    
    
    
    6,475Accrued site closure costs
    
    
    11,950
    
    
    
    14,667
    
    
    
    
    
    
    
    
    
    
    
    26,617Total liabilities
    
    $
    19,120
    
    
    $
    19,618
    
    
    $
    748
    
    
    $
    8,919
    
    
    $
    48,405
 12




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  7.
    SEGMENTED INFORMATION (Continued)Amounts as at December 31, 2004 are as follows: FloridaMontana
    
    
    Canyon/
    
    
    
    
    
    
    CorporateTunnels
    
    

Standard
    
    
    Black Fox
    
    
    and Other
    
    
    TotalCash and cash equivalents
    
    $
    (260
    )
    
    $
    61
    
    
    $
    53
    
    
    $
    7,093
    
    
    $
    6,947Broken ore on leach pad  current
    
    
    
    
    
    
    8,960
    
    
    
    
    
    
    
    
    
    
    
    8,960Other non-cash current assets
    
    
    4,985
    
    
    
    1,489
    
    
    
    151
    
    
    
    128
    
    
    
    6,7534,725
    
    
    
    10,510
    
    
    
    204
    
    
    
    7,221
    
    
    
    22,660Broken ore on leach pad  long-term
    
    
    
    
    
    
    4,824
    
    
    
    
    
    
    
    
    
    
    
    4,824Property, plant and equipment
    
    
    17,239
    
    
    
    20,945
    
    
    
    19,560
    
    
    
    800
    
    
    
    58,544Deferred stripping costs
    
    
    36,851
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,851Restricted certificate of deposit
    
    
    3,752
    
    
    
    4,995
    
    
    
    562
    
    
    
    57
    
    
    
    9,366Deferred costs and losses
    
    
    
    
    
    
    1,340
    
    
    
    
    
    
    
    901
    
    
    
    2,241Total assets
    
    $
    62,567
    
    
    $
    42,614
    
    
    $
    20,326
    
    
    $
    8,979
    
    
    $
    134,486Current liabilities
    
    $
    6,943
    
    
    $
    6,724
    
    
    $
    481
    
    
    $
    3,737
    
    
    $
    17,885Notes payable
    
    
    423
    
    
    
    376
    
    
    
    
    
    
    
    5,538
    
    
    
    6,337Accrued site closure costs
    
    
    11,753
    
    
    
    14,439
    
    
    
    
    
    
    
    
    
    
    
    26,192Total liabilities
    
    $
    19,119
    
    
    $
    21,539
    
    
    $
    481
    
    
    $
    9,275
    
    
    $
    50,414
 13




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  7.
    SEGMENTED INFORMATION (Continued)Amounts for the three month periods ended March 31, 2005 and 2004, respectively, are as
follows: Three Months Ended March 31, 2005Montana
    
    
    Florida
    
    
    
    
    
    
    CorporateTunnels
    
    
    Canyon
    
    
    Black Fox
    
    
    and Other
    
    
    TotalRevenue from sale of minerals
    
    $
    12,332
    
    
    $
    3,362
    
    
    $
    
    
    
    $
    
    
    
    $
    15,694Direct operating costs
    
    
    12,974
    
    
    
    3,834
    
    
    
    
    
    
    
    
    
    
    
    16,808Depreciation and amortization
    
    
    688
    
    
    
    514
    
    
    
    
    
    
    
    32
    
    
    
    1,234General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,650
    
    
    
    1,650Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    202Accretion expense
    
    
    197
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    414Royalty expenses
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    88Exploration and business
development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    24013,859
    
    
    
    4,653
    
    
    
    
    
    
    
    2,124
    
    
    
    20,636Operating loss
    
    
    (1,527
    )
    
    
    (1,291
    )
    
    
    
    
    
    
    (2,124
    )
    
    
    (4,942
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    104Interest expense
    
    
    (23
    )
    
    
    (33
    )
    
    
    
    
    
    
    (685
    )
    
    
    (741
    )Gain on sale of property, plant
and equipment
    
    
    1,365
    
    
    
    469
    
    
    
    
    
    
    
    
    
    
    
    1,834Foreign exchange loss and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    (26
    )Realized and unrealized gain on
commodity contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    38Net loss
    
    $
    (185
    )
    
    $
    (855
    )
    
    $
    
    
    
    $
    (2,693
    )
    
    $
    (3,733
    )Investing activitiesProperty, plant and equipment
expenditures
    
    $
    31
    
    
    $
        1,017
    
    
    $
    1,970
    
    
    $
    40
    
    
    $
        3,058Deferred stripping expenditures
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    515
 14




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  7.
    SEGMENTED INFORMATION (Continued) Three Months Ended March 31, 2004Montana
    
    
    Florida
    
    
    
    
    
    
    CorporateTunnels
    
    
    Canyon
    
    
    Black Fox
    
    
    and Other
    
    
    TotalRevenue from sale of minerals
    
    $
    11,624
    
    
    $
    8,355
    
    
    $
    
    
    
    $
    
    
    
    $
    19,979Direct operating costs
    
    
    10,200
    
    
    
    6,951
    
    
    
    
    
    
    
    
    
    
    
    17,151Depreciation and amortization
    
    
    576
    
    
    
    717
    
    
    
    
    
    
    
    27
    
    
    
    1,320General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,730
    
    
    
    1,730Stockbased compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    27Accretion expense
    
    
    41
    
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    345Royalty expenses
    
    
    
    
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    210Exploration and business
development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    13910,817
    
    
    
    8,182
    
    
    
    
    
    
    
    1,923
    
    
    
    20,922Operating income (loss)
    
    
    807
    
    
    
    173
    
    
    
    
    
    
    
    (1,923
    )
    
    
    (943
    )Interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148
    
    
    
    148Interest expense
    
    
    (44
    )
    
    
    (66
    )
    
    
    
    
    
    
    
    
    
    
    (110
    )Foreign exchange loss and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (188
    )
    
    
    (188
    )Realized and unrealized loss on
commodity contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (523
    )
    
    
    (523
    )Net income (loss)
    
    $
    763
    
    
    $
    107
    
    
    $
    
    
    
    $
    (2,486
    )
    
    $
    (1,616
    )Investing activitiesProperty, plant and equipment
expenditures
    
    $
    350
    
    
    $
    699
    
    
    $
    2,007
    
    
    $
    67
    
    
    $
    3,123Deferred stripping expenditures
    
    
    3,515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,515
 15




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  8.
    DIFFERENCES BETWEEN CANADIAN AND U.S. GAAPThe 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 United States Securities and Exchange Commission for the three month periods ended
March 31, 2005 and 2004.Material variances between financial statement items under Canadian GAAP and the amounts
determined under U.S. GAAP are as follows: Consolidated Balance Sheet
March 31, 2005 EquityDeferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ComponentBroken
    
    
    Property
    
    
    Deferred
    
    
    Loss on
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ofOre on
    
    
    Plant and
    
    
    Stripping
    
    
    Commodity
    
    
    Deferred
    
    
    Convertible
    
    
    Share
    
    
    Convertible
    
    
    ContributedLeach Pad
    
    
    Equipment
    
    
    Costs
    
    
    Contracts
    
    
    Financing
    
    
    Debentures
    
    
    Capital
    
    
    Debentures
    
    
    Surplus
    
    
    DeficitAs at March 31,
2005, Canadian GAAP
    
    $
    10,266
    
    
    $
    59,347
    
    
    $
    37,365
    
    
    $
    335
    
    
    $
    823
    
    
    $
    5,940
    
    
    $
    144,385
    
    
    $
    1,809
    
    
    $
    10,023
    
    
    $
    (73,910
    )Impairment of
property, plant and
equipment, capitalized
deferred stripping
costs and change in
depreciation and
amortization (b)
    
    
    
    
    
    
    (4,686
    )
    
    
    (8,034
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,720
    )Black Fox development
costs (c)
    
    
    
    
    
    
    (16,018
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,018
    )Convertible debenture
(d)(i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319
    
    
    
    1,974
    
    
    
    (1
    )
    
    
    (1,809
    )
    
    
    123
    
    
    
    32Convertible debenture
(d)(ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,675
    
    
    
    (20,675
    )Commodity contracts (e)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (335
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (335
    )Flowthrough common
shares (f)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )
    
    
    
    
    
    
    
    
    
    
    238Commencement of
operations at Standard
Mine (i)
    
    
    266
    
    
    
    (580
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (314
    )As at March 31, 2005,
U.S. GAAP
    
    $
    10,532
    
    
    $
    38,063
    
    
    $
    29,331
    
    
    $
    
    
    
    $
    1,142
    
    
    $
    7,914
    
    
    $
    144,146
    
    
    $
    
    
    
    $
    30,821
    
    
    $
    (123,702
    )
 Consolidated Balance Sheet
December 31, 2004 EquityDeferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ComponentProperty
    
    
    Deferred
    
    
    Loss on
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ofPlant and
    
    
    Stripping
    
    
    Commodity
    
    
    Deferred
    
    
    Convertible
    
    
    Share
    
    
    Convertible
    
    
    ContributedEquipment
    
    
    Costs
    
    
    Contracts
    
    
    Financing
    
    
    Debentures
    
    
    Capital
    
    
    Debentures
    
    
    Surplus
    
    
    DeficitAs at December 31, 2004,
Canadian GAAP
    
    $
    58,544
    
    
    $
    36,851
    
    
    $
    1,340
    
    
    $
    901
    
    
    $
    5,538
    
    
    $
    141,795
    
    
    $
    1,815
    
    
    $
    9,627
    
    
    $
    (70,177
    )Impairment of property,
plant and equipment,
capitalized deferred
stripping costs and change
in depreciation and
amortization (b)
    
    
    (4,848
    )
    
    
    (8,199
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,047
    )Black Fox development
costs (c)
    
    
    (14,048
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,048
    )Convertible debenture (d)(i)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    2,321
    
    
    
    
    
    
    
    (1,815
    )
    
    
    123
    
    
    
    (279
    )Convertible debenture (d)(ii)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,675
    
    
    
    (20,675
    )Commodity contracts (e)
    
    
    
    
    
    
    
    
    
    
    (1,340
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,340
    )Flowthrough common shares
(f)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (238
    )
    
    
    
    
    
    
    
    
    
    
    238As at December 31, 2004,
U.S. GAAP
    
    $
    39,648
    
    
    $
    28,652
    
    
    $
    
    
    
    $
    1,251
    
    
    $
    7,859
    
    
    $
    141,557
    
    
    
    
    
    
    $
    30,425
    
    
    $
    (119,328
    )
 16




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  8.
    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: 2005
    
    
    2004(Restated Note 8e)Net loss for the three month period ended March 31,
based on Canadian GAAP
    
    $
    (3,733
    )
    
    $
    (1,616
    )Cumulative effect of change in accounting policy (a)
    
    
    
    
    
    
    (1,508
    )Change in depreciation of property, plant and equipment (b)
    
    
    162
    
    
    
    142Change in amortization of capitalized deferred stripping costs (b)
    
    
    165
    
    
    
    155Black Fox development costs (c)
    
    
    (1,970
    )
    
    
    (1,995
    )Convertible debenture ((d)(i))
    
    
    311
    
    
    
    Commodity contracts loss (e)
    
    
    1,005
    
    
    
    1,005Standard Mine development costs (i)
    
    
    (314
    )
    
    
    Net loss for the period based on U.S. GAAP
    
    $
    (4,374
    )
    
    $
    (3,817
    )Comprehensive loss
    
    $
    (4,374
    )
    
    $
    (3,817
    )Net loss per share  U.S. GAAP basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.05
    )
   (a)
    Stock-based compensationUnder Canadian GAAP, effective January 1, 2004, the Company adopted the amended
recommendations of CICA Handbook Section 3870. Under U.S. GAAP, effective January
1, 2004, the Company adopted the modified prospective method of accounting for
stock-based compensation recommended in SFAS 148, Accounting for Stock-Based
Compensation  Transition and Disclosure(SFAS 148). Prior to January 1, 2004,
the Company measured its employee stock-based awards using the intrinsic value
method prescribed by APB No. 25, Accounting for Stock Issued to Employees.(b)
    Impairment of property, plant and equipment and capitalized deferred stripping
costsUnder Canadian GAAP, write-downs for impairment of property, plant and equipment and
capitalized deferred stripping costs 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 proven and
probable reserves. Accordingly, for U.S. GAAP purposes, an impairment of property,
plant and equipment and capitalized deferred stripping costs was recorded in 2002
and an adjustment to the related depreciation and amortization expense has been
recorded.(c)
    Black Fox ProjectUnder Canadian GAAP, mining development costs at the Black Fox Project have been
capitalized. Under U.S. GAAP, these expenditures are expensed as incurred, pending
completion of a feasibility study. Accordingly, for U.S. GAAP purposes, a reduction
in property, plant and equipment of $16.0 million has been recorded as at March 31,
2005. 17




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  8.
    DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (Continued)  (d)
    Convertible debenture  (i)
    Under Canadian GAAP, the convertible debentures were recorded
as a compound financial instrument including detachable note warrants. 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.(ii)
    Under Canadian GAAP, the convertible debentures were recorded
as an equity instrument on issuance in March 2002. Under U.S. GAAP, on
issuance, the convertible debenture would have been recorded as a liability and
reclassified to equity only upon conversion. Further, under U.S. GAAP, the
beneficial conversion feature represented by the excess of the fair value of
the shares and warrants issuable on conversion of the debenture, measured on
the commitment date, over the amount of the proceeds to be allocated to the
common shares and warrants upon conversion, would be allocated to contributed
surplus. This results in a discount on the debenture that is recognized as
additional interest expense over the term of the debenture and any unamortized
balance is expensed immediately upon conversion of the debenture. Accordingly,
for U.S. GAAP purposes, the Company has recognized a beneficial conversion
feature and debenture issuance costs of $20.7 million in the year ended
December 31, 2002. Canadian GAAP does not require the recognition of any
beneficial conversion feature. 18




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  8.
    DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (Continued)  (e)
    Commodity contractsPrior 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 Accounting Guideline 13 and
unrealized gains and losses on these contracts are now recorded in the statement of
operations under Canadian GAAP. As described in Note 6, quarterly losses for 2004
have been restated to reflect the correct accounting treatment for these commodity
contracts in accordance with Canadian GAAP. Similarly, under U.S. GAAP the Company
incorrectly accounted for the unrealized loss on cash flow hedges as a component of
comprehensive loss, rather than net loss for the period. The previously reported
and restated information as at and for the three month period ended March 31, 2004
is disclosed below: As reported
    
    
    As restatedRealized and unrealized gain on commodity contracts
    
    $
    819
    
    
    $
    1,005Net loss
    
    $
    (3,380
    )
    
    $
    (3,817
    )Unrealized loss on cash flow hedges
    
    
    (437
    )
    
    
    Comprehensive loss
    
    $
    (3,817
    )
    
    $
    (3,817
    )
  (f)
    Flow-through common sharesUnder 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. For U.S. GAAP,
the premium over (discount from) market value is credited (debited) to other
liabilities (deferred costs) and included in income as the qualifying expenditures
are made.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 March 31, 2005, unexpended flow-through funds
were $ 0.4 million (December 31, 2004  $0.6 million).(g)
    Statement of cash flowsUnder Canadian GAAP, expenditures incurred for deferred stripping costs are included
in cash flows from investing activities in the consolidated statement of cash flows.
Under U.S. GAAP, these expenditures are included in cash flows from operating
activities. Accordingly, under U.S. GAAP, the consolidated statement of cash flows
for the three month periods ended March 31, 2005 and 2004 would reflect a reduction
in cash utilized in investing activities of $0.5 million and $3.5 million,
respectively, and a corresponding increase in cash utilized in operating activities. 19




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##### Table of Contents



APOLLO GOLD CORPORATIONNotes to the Consolidated Financial StatementsThree month period ended March 31, 2005(Stated in United States Dollars; tabular amounts in thousands)(Unaudited)
  8.
    DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (Continued)  (h)

    Comprehensive incomeStatement of Financial Accounting Standards (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.(i)

    Commencement of operations at Standard MineAccording to Canadian GAAP the Standard Mine was not in production in the first
quarter 2005. Under U.S. GAAP, commercial production is defined as when
construction is complete and saleable minerals are produced which was March 1, 2005.
Accordingly per U.S. GAAP purposes a reduction in property, plant and equipment of
$0.6 million, an addition of broken ore inventory of $0.3 million and net loss of
$0.3 million has been recorded at March 31, 2005.(j)

    Recently issued accounting pronouncementsIn March 2005, The EITF reached a consensus that stripping costs incurred during the
production phase are variable production costs that should be included in the costs
of the inventory produced during the period that the stripping costs are incurred.
The consensus in this issue is effective for fiscal periods beginning after December
15, 2005, with early adoption permitted. The effect of initially applying this
consensus will be accounted for similar to a cumulative effect adjustment under APB
Opinion No. 20. Disclosure of the pro forma effects of the application on net
income is not required. Alternatively, an entity may recognize this change in
accounting by restating its prior period financial statements through retrospective
application of this consensus. The Company is currently evaluating the impact of
this consensus.  9.
    SUBSEQUENT EVENTSubsequent to March 31, 2005, the Company has restructured its existing earn-in joint
venture arrangement with Argonaut Mines LLC (Argonaut) at the Huizopa project in Mexico
and the Company issued 1,000,000 common shares to Argonaut on
May 6, 2005. Following the
restructuring the Companys Mexican subsidiary will own Argonauts former subsidiary which
has a contractual interest in two of the concessions at the project and the Company will no
longer have any earn-in requirements for the project. 20




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 ALL DOLLAR AMOUNTS ARE EXPRESSED IN UNITED STATES DOLLARS 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 accounting principles generally accepted in Canada (Canadian GAAP). For a
reconciliation to accounting principles generally accepted in the United States (US GAAP), see Note
8 to the attached consolidated financial statements. In this Form 10-Q, the terms cash operating cost and total cash cost are used on a per ounce of
gold basis. Cash operating cost per ounce is equivalent to direct operating costs expense for the
period as found on the Consolidated Statements of Operations, less mining taxes and by-product
credits received for silver, lead, and zinc production divided by the number of ounces of gold sold during the
period. Total cash cost per ounce is equivalent to mining operation expenses for the period, less
by-product credits received for silver, lead and zinc production, plus royalty expenses payable, divided by the number
of ounces of gold sold during the period. The term total production costs is total cash costs
plus depreciation and amortization. Reconciliation of
    
    Three months endedCash Operating and Total Production Costs Per Ounce
    
    March 31,($ in thousands)
    
    2005
    
    
    2004Gold Ounces Sold
    
    
    22,491
    
    
    
    33,170Direct Operating Costs
    
    
    16,808
    
    
    
    17,151Less: Mining Taxes
    
    
    417
    
    
    
    401By-Product Credits
    
    
    7,050
    
    
    
    7,371Cash Operating Cost
    
    
    9,341
    
    
    
    9,379Cash Operating Cost per Ounce
    
    $
    415
    
    
    $
    283Cash Operating Costs
    
    
    9,341
    
    
    
    9,379Add: Mining Taxes
    
    
    417
    
    
    
    401Royalty Expense
    
    
    88
    
    
    
    210Total Cash Costs
    
    
    9,846
    
    
    
    9,990Total Cash Cost per Ounce
    
    $
    438
    
    
    $
    301Total Cash Costs
    
    
    9,846
    
    
    
    9,990Add: Depreciation & Amortization
(operations only)
    
    
    1,202
    
    
    
    1,293Total Production Costs
    
    
    11,048
    
    
    
    11,283Total Production Cost per Ounce
    
    $
    491
    
    
    $
    340
 We have included total cash cost and cash operating 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 US GAAP and should not be
considered in isolation or as a substitute for measures of performance prepared in accordance with
Canadian and US 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. 21




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##### Table of Contents



The following presents a discussion of the financial condition and results of operations of the
Company for the three months ended March 31, 2005 and the same time period for 2004. BACKGROUND AND RECENT DEVELOPMENTS We are principally engaged in the exploration, development and mining of gold. We own and
operate the Florida Canyon Mine, a low grade heap leach gold mine located southwest of Winnemucca,
Nevada; the Standard Mine, also a low grade heap leach gold operation, located 5 miles south of
Florida Canyon; the Montana Tunnels Mine, a gold, silver, lead and zinc open pit mine, located near
Helena, Montana; and the Black Fox development property, located east of Timmins, Ontario, Canada.
We own or have rights to several exploration properties in Mexico and Nevada. In the first quarter 2005 gold production was 22,491 ounces at a total cash cost of $438 per
ounce. Production at Montana Tunnels at 12,645 ounces was lower than expected but higher than the
10,783 ounces produced in the same period 2004. Total cash costs at Montana Tunnels at $472 per
ounce were higher than expected and also higher than those in the same period 2004. Production at Florida Canyon was slightly higher than expected at 9,846 ounces but
significantly lower than the first quarter 2004 when production was 22,387 ounces. At Florida Canyon during the first quarter 2005, the decision was taken to focus on the new
Standard Mine and therefore, mining activity at Florida Canyon was temporally suspended from March
1, 2005. Production of gold however, continues at Florida Canyon as the gold contained within the
pad is leached. The Standard Mine was developed during 2004 along with the construction of the associated heap
leach facilities. Under Canadian GAAP it was determined that due to the plant only being
commissioned in late February 2005, coupled with the limited leach pad fields available for
leaching, the mine was not in production during the first quarter 2005. Under US GAAP production
commenced on March 1, 2005, following completion of the plant. During the first quarter 2005 at Black Fox, 63 underground holes (14,803 meters) and 44
surface holes (7,941 meters) were completed, bringing total drilling conducted by Apollo to 442
surface holes and 273 underground holes or a total of 190,000 meters. The permitting process and a
feasibility study were commenced in 2004 based on a plan for a combined open pit and underground
mine, with an on-site mill, with a capacity of approximately 1,500 tonnes of ore per day. The
feasibility study is expected to be completed in late 2005. The table below summarizes our production for gold, silver and other metals, as well as
average metals prices, for each period indicated: 22




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##### Table of Contents



Apollo Gold Corporations Production & Metals Price Averages (1) 1stQtr.2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Gold (Ounces)
    
    
    22,491
    
    
    
    106,825
    
    
    
    145,935
    
    
    
    148,173
    
    
    
    192,887Silver (Ounces)
    
    
    170,405
    
    
    
    1,031,156
    
    
    
    471,241
    
    
    
    275,925
    
    
    
    963,050Lead (Pounds)
    
    
    3,124,092
    
    
    
    10,064,265
    
    
    
    10,843,184
    
    
    
    5,481,230
    
    
    
    13,759,579Zinc (Pounds)
    
    
    6,420,429
    
    
    
    26,222,805
    
    
    
    21,792,452
    
    
    
    15,328,392
    
    
    
    40,158,321Average Metal Prices:Gold  London
Bullion Mkt.
($/ounce)
    
    $
    427
    
    
    $
    409
    
    
    $
    364
    
    
    $
    310
    
    
    $
    271Silver  London
Bullion Mkt.
($/ounce)
    
    $
    6.97
    
    
    $
    6.66
    
    
    $
    4.88
    
    
    $
    4.59
    
    
    $
    4.37Lead  LME ($/pound)
    
    $
    0.44
    
    
    $
    0.40
    
    
    $
    0.23
    
    
    $
    0.20
    
    
    $
    0.22Zinc  LME ($/pound).
    
    $
    0.60
    
    
    $
    0.48
    
    
    $
    0.38
    
    
    $
    0.35
    
    
    $
    0.40
   (1)
    
    Includes the operations of Nevoro Gold Corporation and its whollyowned subsidiary Apollo
Gold Inc., prior to June 25, 2002. Gold production in the first quarter 2005 was approximately 2,500 ounces lower than expected.
This short fall in production was at Montana Tunnels, due to a combination of lower mill
through-put and lower grade of ore. Florida Canyon produce 9,846 ounces, slightly above
expectation. Apollos total cash costs for the quarter were $438 per ounce of gold which was
higher than expected with the cost at Florida Canyon being $394 per ounce and at Montana Tunnels
being $472 per ounce. As a result of the slower ramp up of the Standard Mine during the first quarter 2005 and the
slightly lower than expected grades at Montana Tunnels, the Company has undertaken a review of its
production forecasts for the remainder of the year. This review indicates that production for the
remaining three quarters of 2005 will be in the range 87,000 to 107,000 ounces of gold at a total
cash cost of approximately $350 to $380 per ounce. Total cash cost per ounce is as defined by the
Gold Council and therefore includes such items as deferred stripping and drawdown of leach pad
inventories, which is expected to total approximately $70 per ounce during the last three quarters
of 2005. Material Changes in Results of Operations Our revenues for the three months ended March 31, 2005 were $15.7 million derived primarily
from the sale of 22,491 ounces of gold. This compares to $20.0 million derived primarily from the
sale of 33,170 ounces of gold for the same period in 2004. The average price received for gold for
the first three months of 2005 and 2004 was $384 and $380 per ounce, respectively. Our revenues
for silver, zinc and lead for the three months ended March 31, 2005 were $7.0 million compared to
$7.4 million during the same period 2004. The lower revenue in 2005 was due to reduced gold
production as a result of the curtailment of mining activities at Florida Canyon and lower milling grades
at Montana Tunnels. Sales of minerals from our Montana Tunnels Mine accounted for 79% of our revenues for the
three months ended March 31, 2005, with the remaining 21% of revenues derived from sales of
minerals from our Florida Canyon Mine. In the three months ended March 31, 2005, we received
approximately 55% of our revenue from sales of gold and 45% from sales of silver, zinc and lead
compared to 63% from the sales of gold and 37% from the sales of silver, zinc and lead for the same
period in 2004. The drop in gold revenue percentage in 2005 is a result of the lower production
from Florida Canyon mine. We sold 22,491 ounces of gold in the first quarter 2005 at a total cash cost of $438 per
ounce, compared to 33,170 ounces at a total cash costs of $301 per ounce in the first quarter 2004.
The increase 23




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##### Table of Contents



in total cash costs is primarily attributable to the lower production at Florida Canyon plus
the higher cost of fuel and steel at both operations. Montana Tunnels During the first quarter of 2005, 5.4 million tons were mined at Montana Tunnels. Waste
removed totaled 3.7 million tons. Revenues at Montana Tunnels were slightly behind our projections
as the gold ore grades were slightly less than planned. Lower than planned mill throughput was due
to process water quality problems resulting in lower gold and total metal production. The following presents the key statistics for the Montana Tunnels operation for the first
quarter of 2005 and 2004. 2005
    
    
    2004First Quarter
    
    
    First QuarterTons Mined
    
    
    5,395,823
    
    
    
    8,932,282Tons Milled
    
    
    1,410,782
    
    
    
    1,108,589Production:Gold Ounces
    
    
    12,645
    
    
    
    10,783Silver Ounces
    
    
    164,006
    
    
    
    118,758Lead Pounds
    
    
    3,124,092
    
    
    
    3,143,393Zinc Pounds
    
    
    6,420,429
    
    
    
    9,040,272Total cash costs per ounce
    
    $
    472
    
    
    $
    278Total production costs per ounce
    
    $
    527
    
    
    $
    332Total Revenue ($millions)
    
    $
    12.3
    
    
    $
    11.6Capital Expenditures ($millions)
    
    $
    0.5
    
    
    $
    3.8
 Total mine tonnage moved during the first quarter 2005 was 5,395,823 tons compared to
8,932,282 tons mined in the same quarter 2004. Of the total mined in the first quarter 2005,
1,415,000 tons was ore, giving a strip ratio for the quarter of 2.6:1 which was slightly higher
than expected. This compares to ore mined in the first quarter 2004 of 1,249,000 tons for a strip
ratio of 6.0:1. Following the mill up-grade in 2004, 1,410,782 tons were milled in the quarter ended March 31,
2005 compared to 1,108,589 tons in the same quarter 2004. Ounces of gold produced at 12,645 ounces
was 1,862 ounces higher than in 2004 but lower than expected as a result of tonnage through-put and
lower than forecast grade. The lower than expected milling tonnage was due to severe weather in
January and February causing the tailings pond to freeze, more than in previous winters. These
factors, together with the unusual low water levels in the pond, restricted water supply to
historic levels of milling rather than the up-rated throughput planned as a result of the mill
upgrade project in 2004. These problems were identified and corrective action was taken. The lower grade of gold ore not only affected gold production but also zinc production, the
revenue from which is treated as a by-product and therefore lowers the total cash cost per ounce of
gold. Lower production of zinc therefore led to a higher total cash cost per ounce of gold. Florida Canyon At Florida Canyon, production was 9,846 ounces of gold at a total cash cost of $394 per ounce
for the three months ended March 31, 2005 as compared to 22,387 ounces of gold at a total cash cost
of $314 per ounce for the same period in 2004. This lower production was a result of the lower
mining activity 24




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##### Table of Contents



following the reduction to one shift in the third quarter of 2004 and the temporary cessation
of mining on March 1, 2005. The original plan was to mine throughout 2005. However management determined at the end of
February that it should focus its manpower and resources on the Standard Mine and therefore the
decision was taken to temporarily suspend mining activity from March 1, 2005 and to continue to
produce gold by leaching down the gold contained within the existing pad. The decision whether to
build the leach pad extension, which is fully permitted, and to resume mining will be taken later
in the year. The mine cash costs were slightly higher than expected due to mining problems
encountered in January and the early part of February as Nevada experienced its worst winter in
decades with heavy snowfalls and freezing fogs disrupting mining activity and the leaching of the
pad both during the snow and the subsequent thaw. Following are key operating statistics at Florida Canyon for the first quarter of 2005
compared to 2004: 2005
    
    
    2004First Quarter
    
    
    First QuarterTons mined
    
    
    960,292
    
    
    
    6,389,682Gold production
    
    
    9,846
    
    
    
        23,387Silver production
    
    
    6,399
    
    
    
    20,055Total cash costs per
            ounce
    
    $
    394
    
    
    $
    314Total production costs
            per ounce
    
    $
    446
    
    
    $
    346Total revenue ($   millions)
    
    $
    3.2
    
    
    $
    8.4Capital Expenditures:Florida Canyon ($   millions)
    
    $
    0.0
    
    
    $
    0.1Standard Mine ($   millions)
    
    $
        1.0
    
    
    $
    0.6
 Standard Mine At the Standard Mine loading of ore onto the heap leach pad continued throughout the quarter
and the area under leach was expanded. During the first quarter 2005, tons mined were as expected at 2,012,711 tons of which 774,000
tons were ore with the balance being waste giving a strip ratio of 1.6:1. This strip ratio was
higher than the average expected for the year 2005. All ore tons were placed on the pad at an
average grade of 0.0163 ounces per ton. Under Canadian GAAP it was determined that due to construction of the plant only being
completed in late February 2005, coupled with the limited number of leach fields available, the
mine was not in production in the first quarter 2005. Standard Mine produced 3,600 ounces of gold
during this period, the revenue from which was credited against capital costs. Costs Direct
    operating costs were $16.8 million and $17.2 million for the three
    months ended March 31, 2005 and 2004, respectively. These amounts include
    mining and processing costs. Depreciation and amortization
expenses were $1.2 million
    for the three months ended March 31, 2005 as compared to $1.2 million
    for the same period 2004. General administrative expenses were $1.7 million for the three months ended March 31, 2005,
unchanged from the first quarter 2004. As from January 2004 the Company adopted the fair value
method of accounting for stock options as set out in CICA Handbook section 3870, StockBased 25




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Compensation and Other StockBased Payments. As a result, sharebased compensation was
$202,000 in 2005 compared to $27,000 in the same period of 2004. Accrued accretion expense was $0.4 million related to accrued site closure costs at the
Florida Canyon and Montana Tunnels mines for the three months ended March 31, 2005 compared to $0.3
million in the same period of 2004. Royalty expenses were $88,000 for the three months ended March
31, 2005 as compared to $210,000 at March 31, 2004 as a result of the lower gold production at
Florida Canyon. Expenses for exploration and development, consisting of drilling and related expenses at our
exploration properties, totaled approximately $0.2 million and $0.1 million for the three months
ended March 31, 2005 and 2004, respectively. The increase in expenditures is due to increased
exploration activities in Mexico. As a result of these expense components, our operating expenses totaled approximately $20.6
million for the three months ended March 2005, as compared to approximately $20.9 million for the
same period in 2004. Apollo realized interest income of $104,000 during the three months ended March 31, 2005 and
interest expense of $741,000 in the same period compared to $148,000 in interest income and
$110,000 in interest expense during the comparable period in 2004. The interest income reduction
is due to lower levels of cash being invested. The increase in interest expense is due to
accretion on the convertible debenture issued in the fourth quarter of 2004. A $1.8 million gain on sale of spare mining equipment was realized during the first quarter
2005. Foreign exchange losses were $26,000 and $188,000 during the three months ended March 31, 2005
and 2004, respectively, from cash balances held in Canadian dollars. Apollo utilizes United States
dollars as its functional and reporting currency. There was a $38,000 gain for the three months ended March 31, 2005 for the commodities
contract with Standard Bank as compared to a $523,000 loss for the three months ended March 31,
2004. Based on these factors, Apollo incurred a loss of $3.7 million or $0.04 per share for the
three months ended March 31, 2005, as compared to a loss of $1.6 million or $0.02 per share, for
the three months ended March 31, 2004. Material Changes in Liquidity To date,
    Apollo has funded its operations primarily through issuances of debt and equity
    securities. At March 31, 2005, cash and cash equivalents was $2.5 million,
    compared to cash and cash equivalents of $6.9 million at December 31,
    2004. The decrease in cash from December 31, 2004 was primarily the result
    of operating cash outflows of $2.4 million, investment activities of
    $3.9 million plus a reduction of capital lease debt of $0.7 million and
    debenture interest paid of $0.3 million. These outflows were offset by
    funds from proceeds on issuance of shares of $2.8 million. Investing
activities used $3.9 million of cash during the three months ended March 31, 2005,
compared to $8.7 million in the same period 2004. Capital expenditures in the first quarter were
$3.6 million of which $1.0 million were expended at Standard Mines, $2.0 million for the further
development of the Black Fox project and $0.5 million in respect of the finalization of the Montana
Tunnels waste strip program. In addition to this capital expenditure, $0.4 million was invested in
the restricted cash account as part of the Montana Tunnels reclamation liability. 26




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During the quarter, the Companys put/call gold straddle position was reduced from 16,000
ounces of gold down to 4,000 as of March 31, 2005. The final 4,000 ounces was delivered into the
contract on April 25, 2005. Apollo intends to raise additional funds from the sale of spare mining equipment and may raise
additional financing from the sale of debt or equity securities, which may include Canadian flow-through financing to fund a portion of its Canadian exploration. We expect that these
funds, together with internally generated funds, will be sufficient to fund the remainder of the
2005 corporate overheads of approximately $5.0 million, lease payments of $1.8 million and
debenture interest of $0.8 million. Financing activities for the three months ending March 31, 2005 included completing the second
tranche of a registered offering of 4,199,998 units with an issue price of $0.75 for proceeds of
$2.8 million, net of expenses of $0.3 million and fair
value of brokers compensation warrant of $0.2 million. Differences Between Canadian and US Generally Accepted Accounting Principles (GAAP) The Company reports under Canadian GAAP and reconciles to US GAAP. The application of US GAAP
has a significant effect on the net loss and net loss per share. For a detailed explanation see
Note 8 of our interim financial statements. Critical Accounting Estimates and Policies The preparation of financial statements in conformity with generally accepted accounting
principals requires management to make a variety of estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements as well as the reported amounts of revenues and expenses
during the reporting periods covered by the financial statements. Our significant accounting policies are disclosed in Note 3 to the Consolidated Financial
Statements included in our Form 10K for the year ended December 31, 2004. Contractual Obligations The Company has several outstanding equipment leases and financings. As of March 31, 2005,
there are no material changes from the information presented in the Companys Annual Report. Off Balance Sheet Arrangements We have a contingent liability at our Black Fox property in the form of a $Cdn 3.0 million
pre-production royalty payment to the original owners of the property due if and when the mine
reaches commercial production. Environmental As of March 31, 2005, we have accrued $26.6 million related to reclamation, severance and
other closure requirements, an increase from December 31, 2004 of $0.4 million. This liability is
covered by a combination of surety bonds, totaling $32.0 million, and cash bonds totaling $6.8
million, for a total reclamation surety, at March 31, 2005 of $38.8 million. We have accrued what
management believes is the present value of our best estimate of the liability as of March 31,
2005; however, it is possible that our obligation may change in the near or long term depending on
a number of factors, including finalization of settlement terms, ruling from the courts and other
factors. 27




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Subsequent Events Subsequent to March 31, 2005, on April 29, 2005, Apollo Gold and Argonaut Mines, LLC, together
with their respective Mexican subsidiaries, entered into an Amended and Restated Agreement by which
they restructured their existing arrangement at the Huizopa project in Mexico. The restructuring
transaction was completed on May 6, 2005. In return for Argonauts agreement to restructure the
existing arrangement at Huizopa, Apollo issued 1,000,000 common shares to Argonaut on May 6, 2005.
Apollos Mexican subsidiary is now the owner of the Mexican subsidiary of Argonaut which has a
contractual interest in two of the concessions at the project. As a result of that transaction,
Apollos Mexican subsidiary no longer has any earn-in requirements pertaining to the Huizopa
project, although it will still be responsible for the underlying payments to the landowner at the
project, and the payments and performance of obligations required to maintain those concessions.
If Apollos Mexican subsidiary chooses not to go forward with the project, it is obligated to
transfer a controlling interest in the Mexican subsidiary of Argonaut back to Argonaut. 
 ITEM 3. 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 and
commodity price fluctuations. 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 United States 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 2005, a one percent change in interest rates
would result in a $50,000 change in interest income. We may in the future actively manage our
exposure to interest rate risk. Foreign Currency Exchange Rate Risk The price of gold is denominated in United States dollars and the majority of our revenues and
expenses are denominated in United States 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 US dollar revenue stream. Approximately 15% of our cash and cash equivalents
were invested in Canadian dollar treasury notes at December 31, 2004. While we have realized
exchange gains on such investments during 2004, a decrease in the value of the Canadian dollar
versus the US dollar could result in exchange losses. We currently do not utilize market risk
sensitive instruments to manage our exposure. 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. According to current
estimates, a $10 change in the price of gold would result in a $1.1 million change in pre-tax
earnings and cash flows during 2005. We have in the past purchased puts/calls and we have 4,000
ounces of puts/calls outstanding at March 31, 2005. We may in the future more actively manage our
exposure through hedging programs. 28




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##### Table of Contents



ITEM 4. 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 material weaknesses discussed below. In
light of the material weaknesses described below, we performed additional analysis and other
post-closing procedures to ensure our consolidated financial statements are 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. We identified material weaknesses for the year ended December 31, 2004 in two areas. A
material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. First, we have deficient inventory control
and management processes and lack of segregation of procurement and accounting duties at our
Florida Canyon Mine, primarily due to a lack of sufficient personnel at the Florida Canyon Mine.
Second, we lack appropriate review of non-routine or complex accounting matters, relating
accounting entries, and appropriate documentation, disclosure and application of Canadian and U.S.
GAAP, primarily due to a lack of sufficient personnel with a level of technical accounting
expertise commensurate with our reporting requirements. We have hired additional personnel and will implement new controls in the second quarter of
2005 at Florida Canyon Mine. In addition, we have developed and will continue to refine policies
and procedures for the review, identification, and documentation of non-routine, complex
transactions and the application of accounting standards to ensure compliance with Canadian and
U.S. GAAP. 
 OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS None 
 ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS None 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None 29




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 
 ITEM 5. OTHER INFORMATION None 
 ITEM 6. EXHIBITS Exhibit No.
    
    Title of Exhibit31.1
    
    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
 30




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SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. APOLLO GOLD CORPORATION Date: May 9, 2005
    
    /s/ R. David RussellR. David Russell, President andChief Executive OfficerDate: May 9, 2005
    
    /s/ Melvyn WilliamsMelvyn Williams,Chief Financial Officer and Senior Vice PresidentFinance and Corporate Development
 31




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Index to Exhibits Exhibit No.
    
    Title of Exhibit31.1
    
    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