**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





R  **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended June 30, 2007





OR





£  **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





Commission
      File Number: 001-31593





**APOLLO
      GOLD CORPORATION**


(Exact
      name of registrant as specified in its charter)





**Yukon
                Territory, Canada**
            **Not
                Applicable**(State
                or other jurisdiction of
              incorporation
                or organization)
            (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 R No £





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





Large
                Accelerated Filer£
            Accelerated
                Filer£
            Non-Accelerated
                FilerR





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes £ No R





At
      August
      6, 2007, there were 143,467,186  common
      shares of Apollo Gold Corporation outstanding.












**TABLE
      OF CONTENTS**




*Page*PART
                I
            FINANCIAL
                INFORMATION
            
            4ITEM
                1.
            FINANCIAL
                STATEMENTS (Unaudited)
            
            4Condensed
                Consolidated Balance Sheets - As of June 30, 2007 and as of
                December 31, 2006
            
            5Condensed
                Consolidated Statements of Operations and Comprehensive Income (Loss)
                for
                the Three and Six Months Ended June 30, 2007 and 2006
            
            6Condensed
                Consolidated Statements of Shareholders’ Equity for the Year ended
                December 31, 2006 and the Six Months Ended June 30, 2007
            
            7Condensed
                Consolidated Statements of Cash Flows for the Three and Six Months
                Ended
                June 30, 2007 and 2006
            
            8Notes
                to the Condensed Consolidated Financial Statements
            
            9ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS
            
            24ITEM
                3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            32ITEM
                4.
            CONTROLS
                AND PROCEDURES
            
            33PART
                II
            OTHER
                INFORMATION
            
            34ITEM
                1.
            LEGAL
                PROCEEDINGS
            
            34ITEM
                1A.
            RISK
                FACTORS
            
            34ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            
            34ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            
            34ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            34ITEM
                5.
            OTHER
                INFORMATION
            
            35ITEM
                6.
            EXHIBITS
            
            35INDEX
                TO EXHIBITS
            
            37Certification
                of CEO Pursuant to Section 302
            
            Exhibit
                31.1Certification
                of CFO Pursuant to Section 302
            
            Exhibit
                31.2Certification
                of CEO and CFO Pursuant to Section 906
            
            Exhibit
                32.1




2




**STATEMENTS
      REGARDING FORWARD LOOKING INFORMATION**




This
      Quarterly Report on Form 10-Q contains forward looking statements as defined
      in
      the *Private
      Securities Litigation Reform Act of 1995* with
      respect to our financial condition, results of operations, business prospects,
      plans, objectives, goals, strategies, future events, capital expenditure, and
      exploration and development efforts. Forward-looking statements can be
      identified by the use of words such as “may,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “intends,” “continue,” or
      the negative of such terms, or other comparable terminology. These statements
      include comments regarding:




·
            future
                cash flow from the Montana Tunnels
                mine;




·
            the
                establishment and estimates of mineral reserves and
                resources;




·
            the
                timing of completion of feasibility studies at Black
                Fox;




·
            the
                availability of stockpiled lower grade material and ore for processing
                and
                production if mining activity were temporarily
                interrupted;




·
            production
                and production costs;




·
            daily
                production rates;




·
            throughput
                rates;




·
            cash
                operating costs;




·
            total
                cash costs;




·
            grades
                of ore mined and milled;




·
            expenditures;




·
            exploration;




·
            permits;




·
            expansion
                plans;




·
            plans
                for Black Fox and Huizopa;




·
            closure
                costs;




·
            cash
                flows;




·
            future
                financing;




·
            liquidity;




·
            estimates
                of environmental liabilities;




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




·
            anticipated
                exploration, development and corporate overhead
                expenditures;




·
            factors
                impacting our results of
                operations;




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




·
            the
                impact of adoption of new accounting
                standards.




These
      forward looking statements are subject to numerous risks, uncertainties and
      assumptions including:  unexpected
      changes in business and economic conditions; significant increases or
      decreases in gold and zinc prices; changes in interest and currency exchange
      rates; timing and amount of production; unanticipated grade changes;
      unanticipated metal recovery or production problems; changes in mining and
      milling costs; operational problems at our mining property; availability of
      materials, equipment, supplies and water; determination of reserves; changes
      in
      project parameters; costs and timing of development of new reserves; results
      of
      current and future exploration activities; results of pending and future
      feasibility studies; joint venture relationships; political or economic
      instability, either globally or in the countries in which we operate; local
      and
      community impacts and issues; timing and receipt of government approvals;
      accidents and labor disputes; environmental costs and risks; competitive
      factors, including competition for property acquisitions; availability of
      external financing on reasonable terms or at all; and the factors discussed
      in
      our Annual Report on Form 10-K for the year ended December 31, 2006 under the
      heading “Risk Factors.” Many of these factors are beyond our ability to control
      and predict. These factors are not intended to represent a complete list of
      the
      general or specific factors that may affect us. We disclaim any obligation
      to
      update forward looking statements, whether as a result of new information,
      future events or otherwise.




3




**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 condensed 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, 2006
      included in our Annual Report on Form 10-K. Certain reclassifications have
      been
      made to the prior period financial statements to conform with the current period
      presentation.




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




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




**NON-GAAP
      FINANCIAL INFORMATION**




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




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




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




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




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




**PART
      I** **FINANCIAL
      INFORMATION**




**ITEM
      1.** **FINANCIAL
      STATEMENTS**




These
      condensed 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, 2006 filed with the Securities and Exchange Commission on
      April 2, 2007.




4


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


(In
      thousands of U.S. dollars)


(Unaudited)





**June
                30,**
              **2007**
            
            **December
                31,**
              **2006****ASSETS**CURRENTCash
                and cash equivalents
            
            $
            7,076
            
            $
            4,512Accounts
                receivable and other
            
            
            2,327
            
            
            728Note
                receivable (Note 4)
            
            
            -
            
            
            1,865Prepaids
            
            
            100
            
            
            301Inventories
            
            
            1,525
            
            
            660Total
                current assets
            
            
            11,028
            
            
            8,066Property,
                plant and equipment
            
            
            42,253
            
            
            38,868Deferred
                stripping costs (Note 3)
            
            
            3,087
            
            
            -Restricted
                certificates of deposit
            
            
            5,497
            
            
            4,605Deferred
                financing costs
            
            
            -
            
            
            265TOTAL
                ASSETS
            
            $
            61,865
            
            $
            51,804**LIABILITIES**CURRENTAccounts
                payable
            
            $
            2,116
            
            $
            1,710Accrued
                liabilities
            
            
            2,990
            
            
            1,254Notes
                payable
            
            
            1,105
            
            
            671Property
                and mining taxes payable
            
            
            570
            
            
            442Convertible
                debentures
            
            
            8,271
            
            
            7,660Total
                current liabilities
            
            
            15,052
            
            
            11,737Accrued
                severance
            
            
            -
            
            
            370Notes
                payable
            
            
            224
            
            
            569Convertible
                debentures (Note 5)
            
            
            4,045
            
            
            -Accrued
                site closure costs
            
            
            7,402
            
            
            7,135Deferred
                gain (Note 4)
            
            
            3,321
            
            
            3,750TOTAL
                LIABILITIES
            
            
            30,044
            
            
            23,561Continuing
                operations (Note 1)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 6)
            
            
            159,788
            
            
            159,029Equity
                component of convertible debentures (Note 5)
            
            
            4,101
            
            
            1,809Note
                warrants (Note 5)
            
            
            3,211
            
            
            1,062Contributed
                surplus
            
            
            12,020
            
            
            11,166Deficit
            
            
            (147,299
            )
            
            (144,823
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            31,821
            
            
            28,243TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            61,865
            
            $
            51,804




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




5


**APOLLO
      GOLD CORPORATION**


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


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


(Unaudited)





**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Revenue
                from sale of minerals
            
            $
            12,841
            
            $
            3,667
            
            $
            15,731
            
            $
            9,805Operating
                expensesDirect
                operating costs
            
            
            7,932
            
            
            3,587
            
            
            10,995
            
            
            10,745Depreciation
                and amortization
            
            
            380
            
            
            377
            
            
            630
            
            
            958General
                and administrative expenses
            
            
            859
            
            
            1,248
            
            
            1,999
            
            
            2,472Accretion
                expense - accrued site closure costs
            
            
            127
            
            
            237
            
            
            254
            
            
            474Amortization
                of deferred gain
            
            
            (358
            )
            
            -
            
            
            (429
            )
            
            -Exploration
                and business development
            
            
            185
            
            
            249
            
            
            1,737
            
            
            600(Gain)
                loss on sale of property, plant and equipment
            
            
            -
            
            
            (2
            )
            
            -
            
            
            59,125
            
            
            5,696
            
            
            15,186
            
            
            15,254Operating
                income (loss)
            
            
            3,716
            
            
            (2,029
            )
            
            545
            
            
            (5,449
            )Other
                income (expenses)Interest
                income
            
            
            151
            
            
            88
            
            
            339
            
            
            154Interest
                expense (Note 7)
            
            
            (1,468
            )
            
            (613
            )
            
            (2,613
            )
            
            (1,213
            )Financing
                costs
            
            
            -
            
            
            -
            
            
            (480
            )
            
            -Foreign
                exchange loss and other
            
            
            37
            
            
            (14
            )
            
            (2
            )
            
            (13
            )Income
                (loss) from continuing operations for the period
            
            
            2,436
            
            
            (2,568
            )
            
            (2,211
            )
            
            (6,521
            )Loss
                from discontinued operations for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            (250
            )Net
                income (loss) and comprehensive income (loss) for the
                period
            
            $
            2,436
            
            $
            (2,568
            )
            $
            (2,211
            )
            $
            (6,771
            )Basic
                and diluted net income (loss) per share from:Continuing
                operations
            
            $
            0.02
            
            $
            (0.02
            )
            $
            (0.02
            )
            $
            (0.06
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            -$
            0.02
            
            $
            (0.02
            )
            $
            (0.02
            )
            $
            (0.06
            )Basic
                weighted-average number of shares outstanding
            
            
            143,467,186
            
            
            121,396,859
            
            
            143,072,061
            
            
            119,182,529Diluted
                weighted-average number of shares outstanding
            
            
            144,745,876
            
            
            121,396,859
            
            
            143,072,061
            
            
            119,182,529




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


6


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**


(In
      thousands of U.S. dollars)


(Unaudited)




**Share
                  Capital**
              
              **Equity
                  Component of****Number
                  of Shares**
              
              **Amount**
              
              **Convertible
                  Debentures**
              
              **Note
                  Warrants**
              
              **Contributed**
                **Surplus**
              
              **Deficit**
              
              **Total**Balance,
                  December 31, 2005
              
              
              107,456,451
              
              $
              148,526
              
              $
              1,809
              
              $
              781
              
              $
              10,561
              
              $
              (129,236
              )
              $
              32,441Units
                  issued for cash
              
              
              11,650,000
              
              
              3,488
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,488Shares
                  issued for 2005 stock-based compensation
              
              
              2,290,408
              
              
              955
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              955Reduction
                  of exercise price of Note Warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              305
              
              
              -
              
              
              -
              
              
              305Note
                  warrants exercised
              
              
              600,000
              
              
              264
              
              
              -
              
              
              (24
              )
              
              -
              
              
              -
              
              
              240Shares
                  issued for services
              
              
              1,325,000
              
              
              668
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              668Flow-through
                  units issued for cash
              
              
              2,222,221
              
              
              746
              
              
              -
              
              
              -
              
              
              27
              
              
              -
              
              
              773Units
                  issued for cash
              
              
              16,688,206
              
              
              4,357
              
              
              -
              
              
              -
              
              
              156
              
              
              -
              
              
              4,513Options
                  exercised
              
              
              50,000
              
              
              25
              
              
              -
              
              
              -
              
              
              (5
              )
              
              -
              
              
              20Stock-based
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              427
              
              
              -
              
              
              427Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (15,587
              )
              
              (15,587
              )Balance,
                  December 31, 2006
              
              
              142,282,286
              
              
              159,029
              
              
              1,809
              
              
              1,062
              
              
              11,166
              
              
              (144,823
              )
              
              28,243Change
                  in accounting policy (Note 3)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (265
              )
              
              (265
              )Balance
                  (as adjusted), January 1, 2007
              
              
              142,282,286
              
              
              159,029
              
              
              1,809
              
              
              1,062
              
              
              11,166
              
              
              (145,088
              )
              
              27,978Shares
                  issued for services
              
              
              20,000
              
              
              10
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              10Shares
                  issued for Huizopa settlement (Note 6(a))
              
              
              1,000,000
              
              
              540
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              540Note
                  warrants exercised
              
              
              164,900
              
              
              209
              
              
              -
              
              
              (143
              )
              
              -
              
              
              -
              
              
              66Equity
                  component of convertible debentures (Note 5)
              
              
              -
              
              
              -
              
              
              2,292
              
              
              -
              
              
              -
              
              
              -
              
              
              2,292Note
                  warrants (Note 5)
              
              
              -
              
              
              -
              
              
              -
              
              
              2,292
              
              
              -
              
              
              -
              
              
              2,292Debenture
                  compensation warrants(Note
                  5)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              467
              
              
              -
              
              
              467Stock-based
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              387
              
              
              -
              
              
              387Net
                  loss and comprehensive loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,211
              )
              
              (2,211
              )Balance,
                  June 30, 2007
              
              
              143,467,186
              
              $
              159,788
              
              $
              4,101
              
              $
              3,211
              
              $
              12,020
              
              $
              (147,299
              )
              $
              31,821




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


7


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


(In
      thousands of U.S. dollars)


(Unaudited)




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Operating
                activitiesNet
                income (loss) for the period
            
            $
            2,436
            
            $
            (2,568
            )
            $
            (2,211
            )
            $
            (6,771
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            380
            
            
            377
            
            
            630
            
            
            958Amortization
                of deferred stripping costs
            
            
            558
            
            
            -
            
            
            661
            
            
            -Amortization
                of deferred financing costs
            
            
            -
            
            
            79
            
            
            -
            
            
            159Financing
                costs
            
            
            -
            
            
            -
            
            
            174
            
            
            -Loss
                from discontinued operations
            
            
            -
            
            
            -
            
            
            -
            
            
            250Reduction
                in exercise price of Note Warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            305Stock-based
                compensation
            
            
            189
            
            
            81
            
            
            387
            
            
            189Shares
                issued for services and settlement of claims
            
            
            -
            
            
            -
            
            
            550
            
            
            -Accretion
                expense - accrued site closure costs
            
            
            127
            
            
            237
            
            
            254
            
            
            474Accretion
                expense - convertible debenture
            
            
            939
            
            
            258
            
            
            1,471
            
            
            504Loss
                onsale of property, plant and equipment and other
            
            
            -
            
            
            16
            
            
            -
            
            
            36Amortization
                of deferred gain (Note 4)
            
            
            (358
            )
            
            -
            
            
            (429
            )
            
            -Net
                change in non-cash operating working capital items (Note
                10)
            
            
            (762
            )
            
            162
            
            
            (364
            )
            
            (1,713
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            (250
            )Net
                cash provided by (used in) operating activities
            
            
            3,509
            
            
            (1,358
            )
            
            1,123
            
            
            (5,859
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            
            (802
            )
            
            (987
            )
            
            (3,677
            )
            
            (4,432
            )Deferred
                stripping costs
            
            
            (1,496
            )
            
            -
            
            
            (3,748
            )
            
            -Proceeds
                from disposal of property, plant and equipment
            
            
            -
            
            
            2
            
            
            -
            
            
            92Restricted
                certificate of deposit and other assets
            
            
            (499
            )
            
            (540
            )
            
            (892
            )
            
            10,013Net
                cash (used in) provided by investing activities
            
            
            (2,797
            )
            
            (1,525
            )
            
            (8,317
            )
            
            5,673Financing
                activitiesProceeds
                on issuance of shares
            
            
            -
            
            
            -
            
            
            -
            
            
            3,488Proceeds
                on issuance of convertible debentures and note warrants,
                net
            
            
            -
            
            
            -
            
            
            8,062
            
            
            -Proceeds
                from exercise of warrants
            
            
            -
            
            
            -
            
            
            66
            
            
            -Proceeds
                from notes payable
            
            
            -
            
            
            -
            
            
            1,250
            
            
            -Payments
                of notes payable
            
            
            (1,125
            )
            
            (92
            )
            
            (1,485
            )
            
            (449
            )Notes
                receivable from Elkhorn Tunnels, LLC
            
            
            -
            
            
            -
            
            
            1,865
            
            
            -Net
                cash (used in) provided by financing activities
            
            
            (1,125
            )
            
            (92
            )
            
            9,758
            
            
            3,039Net
                (decrease) increase in cash and cash equivalents
            
            
            (413
            )
            
            (2,975
            )
            
            2,564
            
            
            2,853Cash
                and cash equivalents, beginning of period
            
            
            7,489
            
            
            5,955
            
            
            4,512
            
            
            127Cash
                and cash equivalents, end of period (Note 10)
            
            $
            7,076
            
            $
            2,980
            
            $
            7,076
            
            $
            2,980SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            334
            
            $
            275
            
            $
            604
            
            $
            550Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -




**Non-cash
      investing and financing activities**




During
      the three and six months ended June 30, 2007, property, plant and equipment
      totaling $286 and $325, respectively, was acquired via issuance of notes
      payable. Also, during the six months ended June 30, 2007, the Company issued
      agent’s compensation warrants with a value of $294 for services rendered in
      connection with the issuance of the Series 2007-A convertible debentures (Note
      5).





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




8


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**1.**
            **CONTINUING
                OPERATIONS**




These
      condensed consolidated financial statements are prepared on the basis of a
      going
      concern which assumes that Apollo Gold Corporation (“Apollo” or the “Company”)
      will realize its assets and discharge its liabilities in the normal course
      of
      business for the foreseeable future. To date the Company has funded its
      operations through issuance of debt and equity securities, joint venture
      contributions from Elkhorn Tunnels, LLC (“Elkhorn”) and cash generated by the
      Montana Tunnels joint venture (Note 4). The Company’s ability to continue as a
      going concern is dependent on its ability to generate cash flow from the Montana
      Tunnels joint venture and/or continue to issue debt and equity
      securities.




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




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




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




Apollo
      has a development property, the Black Fox development project (the “Black Fox
      Project”), which is located near the Township of Matheson in the Province of
      Ontario, Canada. Apollo also owns Mexican subsidiaries that own concessions
      at
      the Huizopa exploration project (the “Huizopa Project”), which is located in the
      Sierra Madres in Chihuahua, Mexico.




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




***(a)***  These
      unaudited consolidated interim financial statements have been prepared in
      accordance with Canadian generally accepted accounting principles (“Canadian
      GAAP”) and except as described in Note 12, 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, 2006, except as disclosed in *(b),
      (c) and (d)* below.
      Certain information and note disclosures normally included in consolidated
      financial statements prepared in accordance with Canadian GAAP have been
      omitted. These interim financial statements should be read together with the
      Company’s audited financial statements for the year ended December 31,
      2006.




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




Certain
      of the comparative figures have been reclassified to conform to the presentation
      as at and for the three and six months ended June 30, 2007. In particular,
      $0.1
      million and $0.2 million of stock-based compensation, respectively, charged
      to
      operations have been reclassified to general and administrative expenses rather
      than disclosed separately.




9


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)





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




***(b)***  At
      June
      30, 2007, the Company has ore stockpiles which are included in Inventories.
      Ore
      stockpiles represent ore that has been mined and is available for further
      processing. Work-in-process inventories, including ore stockpiles, are valued
      at
      the lower of average production cost and net realizable value, after a
      reasonable allowance for further processing and sales costs.




***(c)***  On
      March
      2, 2006, the Emerging Issues Committee issued EIC-160, *Stripping
      Costs Incurred in the Production Phase of a Mining Operation,* which
      requires stripping costs that represent a betterment to the mineral property
      to
      be capitalized and amortized in a rational and systematic manner over the
      reserves that directly benefit from the specific stripping activity. The Company
      adopted EIC-160 as of January 1, 2007 on a prospective basis. During the three
      and six months ended June 30, 2007, the Company capitalized $1.5 million and
      $3.7 million, respectively, in deferred stripping costs and recorded
      amortization thereon in the amount of $0.6 million and $0.7 million,
      respectively. Deferred stripping costs are amortized using the
      units-of-production method over the expected life of the operation based on
      the
      estimated recoverable gold equivalent ounces.




***(d)***  Effective
      January 1, 2007, the Company adopted CICA Handbook Section 1530, *Comprehensive
      Income* ,
      CICA
      Handbook Section 3855, *Financial
      Instruments - Recognition and Measurement* ,
      CICA
      Handbook Section 3865, *Hedges* ,
      and
      CICA Handbook Section 3251, *Equity* .
      These
      new Handbook Sections provide comprehensive requirements for the recognition
      and
      measurement of financial instruments, transaction costs incurred on financial
      instruments, as well as standards on when and how hedge accounting may be
      applied. CICA Handbook Section 1530 also introduces a new component of equity
      referred to as comprehensive income. The Company has adopted these standards
      prospectively.




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




Upon
      adoption of this new standard, the Company has designated its cash and cash
      equivalents as held-for-trading, which are measured at fair value. Accounts
      receivable and other are classified as loans and receivables, which are measured
      at amortized cost. Restricted certificates of deposit are classified as
      held-to-maturity, and are measured at amortized cost. Accounts payable and
      accrued liabilities, property and mining taxes payable, convertible debentures,
      notes payable, and accrued site closure costs are classified as other
      liabilities, which are measured at amortized cost.




Under
      CICA Handbook Section 3855, the Company adopted a policy to expense debt
      financing costs when they are incurred and as a result the Company recorded
      a
      non-cash adjustment to increase opening deficit by $0.3 million to eliminate
      the
      opening balance of deferred financing costs that were capitalized and amortized
      under the Company’s previous accounting policy.




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




10




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)





**4.**
            **MONTANA
                  TUNNELS JOINT
                  VENTURE**




On
      July
      28, 2006, Apollo entered into a joint venture (“JV Agreement”) with Elkhorn in
      respect of the Mine. Elkhorn contributed $13 million in return for a 50%
      interest in the Mine.




Elkhorn
      will receive 55% and Apollo will receive 45% of the positive free cash flow,
      as
      defined in the JV agreement, from the Mine until such time as Elkhorn has
      received cash flow of $13 million (at which time Apollo will have received
      $10.6
      million). At that time, Apollo would become entitled to 60% and Elkhorn 40%
      of
      the positive free cash flow from the Mine, until both parties have received
      an
      equal amount (at which time Apollo will have received $17.7 million).
      Thereafter, the sharing would be 50/50. Additionally, Elkhorn is entitled to
      a
      10% interest distribution (reduced from 12% effective April 1, 2007) charged
      to
      the joint venture as interest expense (Note 7) on its initial contribution
      of
      $13 million until it has received cash flow of $13 million.




Apollo
      accounts for its 50% interest in the assets and liabilities of the Montana
      Tunnels joint venture using the proportionate consolidation method. As of
      December 31, 2006, the Company recorded a deferred gain on the transfer of
      assets and liabilities to the joint venture of $3.8 million. The deferred gain
      is amortized using the units-of-production method over the expected life of
      the
      operation based on the estimated recoverable gold equivalent ounces.
      Amortization of the deferred gain was $0.36 million and $0.43 million for the
      three and six months ended June 30, 2007, respectively.




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




**June
                30,**
              **2007**
            
            **December
                31,**
              **2006**CurrentCash
                and cash equivalents
            
            $
            1,381
            
            $
            (64
            )Accounts
                receivable and other
            
            
            1,969
            
            
            21Note
                receivable
            
            
            -
            
            
            1,865Inventories
                (Note 3)
            
            
            1,525
            
            
            660Prepaids
            
            
            19
            
            
            244,894
            
            
            2,506Property,
                plant and equipment
            
            
            7,165
            
            
            7,151Deferred
                stripping costs
            
            
            3,087
            
            
            -Restricted
                certificates of deposit
            
            
            4,269
            
            
            3,430Total
                assets
            
            $
            19,415
            
            $
            13,087CurrentAccounts
                payable
            
            $
            891
            
            $
            216Accrued
                liabilities
            
            
            1,430
            
            
            669Notes
                payable
            
            
            1,075
            
            
            496Property
                and mining taxes payable
            
            
            567
            
            
            4383,963
            
            
            1,819Notes
                payable
            
            
            192
            
            
            527Accrued
                site closure costs
            
            
            6,357
            
            
            6,127Total
                liabilities
            
            $
            10,512
            
            $
            8,473




11




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)





**5.**
            **CONVERTIBLE
                DEBENTURES**




On
      February 23, 2007, the Company completed a private placement of $8.6 million
      aggregate principal amount of Series 2007-A convertible debentures (“2007
      Debentures”). Each $1,000 of principal amount of 2007 Debentures included 2,000
      common share purchase warrants (“2007 Debenture Warrants”) (Note 6(b)(i)). The
      2007 Debentures mature on February 23, 2009 and bear interest at a rate of
      12%
      per annum during the first year and 18% per annum during the second year,
      payable annually beginning on February 23, 2008.




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




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




Over
      the
      two-year term, the 2007 Debentures are accreted to their face value through
      a
      periodic charge to accretion expense with a corresponding credit to the
      liability component. The accretion expense is based on the effective interest
      method. For the three and six months ended June 30, 2007, the Company recorded
      accretion expense of $0.6 and $0.9 million, respectively, related to the 2007
      Debentures, which is included in interest expense.




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




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




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




Under
      the
      terms of the Registration Rights Agreements entered into by the Company in
      connection with the 2007 Debentures, the common shares underlying the 2007
      Debentures and the 2007 Debenture Warrants are required to be registered for
      resale with the U.S. Securities and Exchange Commission (“SEC”). If the
      registration statement with respect to 50% of such shares was not declared
      effective by the SEC by May 25, 2007, the Company would be required to pay
      additional interest to the holders of the 2007 Debentures equal to 6% per annum.
      The Company did not meet the May 25, 2007 effectiveness deadline and as a result
      accrued additional interest of $26,000 for the period commencing May 25, 2007
      through June 30, 2007.




12


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**6.**
            **SHARE
                CAPITAL**




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




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




***(b)***
            Warrants




The
      following summarizes outstanding warrants as at June 30, 2007:




**Date
                Issued**
            
            **Number
                of Warrants**
            
            **Number
                of Shares**
            
            **Exercise
                Price**
            
            **Expiry
                Date**Exercisable
                in US$November
                4, 2004
            
            
            4,248,700
            
            
            4,248,700
            
            
            0.40
            
            
            November
                4, 2007November
                4, 2004
            
            
            240,000
            
            
            240,000
            
            
            0.80
            
            
            November
                4, 2007November
                4, 2004
            
            
            1,396,000
            
            
            1,396,000
            
            
            0.80
            
            
            November
                4, 2007November
                8, 2006
            
            
            8,344,103
            
            
            8,344,103
            
            
            0.50
            
            
            November
                8, 2009November
                8, 2006
            
            
            1,168,174
            
            
            1,168,174
            
            
            0.50
            
            
            November
                8, 2009February
                23, 2007
            
            
            17,160,000
            
            
            17,160,000
            
            
            0.50
            
            
            February
                23, 2009February
                23, 2007
            
            
            1,201,200
            
            
            1,201,200
            
            
            0.50
            
            
            February
                23, 200933,758,177
            
            
            33,758,177Exercisable
                in Cdn$January
                26, 2006
            
            
            2,000,000
            
            
            2,000,000
            
            
            0.39
            
            
            January
                26, 2008October
                30, 2006
            
            
            1,111,111
            
            
            1,111,111
            
            
            1.00
                (1
            )
            
            October
                30, 20083,111,111
            
            
            3,111,11136,869,288
            
            
            36,869,288





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





In
      addition, in connection with the Company’s private placement to Canadian
      purchasers of 2,222,221 flow-through units on October 30, 2006, the Company
      issued 166,666 broker compensation warrants. Each broker compensation warrant
      is
      immediately exercisable at Cdn$0.45 for two years into one common share of
      the
      Company and one-half of one share purchase warrant, with each whole share
      purchase warrant exercisable into one common share of the Company at Cdn$1.00
      per common share through October 30, 2007 and at Cdn$1.15 through October 30,
      2008. The broker compensation warrants expire on October 30, 2008.




13


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)





**6.**
            **SHARE
                CAPITAL (continued)**




***(c)***
            Options




A
      summary
      of information concerning outstanding stock options at June 30, 2007 is as
      follows:




**Fixed
                Stock Options**
            
            **Performance-based**
              **Stock
                Options****Number
                of**
              **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number
                of**
              **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Balances,
                December 31, 2006
            
            
            3,052,900
            
            $
            1.06
            
            
            1,230,852
            
            $
            0.80Options
                granted
            
            
            3,142,114
            
            
            0.57
            
            
            -
            
            
            -Options
                forfeited
            
            
            (31,750
            )
            
            1.07
            
            
            -
            
            
            -Options
                expired
            
            
            -
            
            
            -
            
            
            (1,230,852
            )
            
            0.80Balances,
                June 30, 2007
            
            
            6,163,264
            
            $
            0.81
            
            
            -
            
            $
            -





*(i)*  Fixed
      stock option plan




The
      Company has a stock option plan that provides for the granting of options to
      directors, officers, employees and service providers of the Company. Options
      vest over two years and have a 10-year contractual term, unless otherwise
      determined by the Company’s Board of Directors. The Company is authorized to
      issue a maximum of 12,139,686 fixed stock options. As at June 30, 2007, an
      aggregate of 5,976,422 fixed stock options were available for future grants
      of
      awards under the plan.




The
      following table summarizes information concerning outstanding and exercisable
      fixed stock options at June 30, 2007:




**Options
                Outstanding**
            
            **Options
                Exercisable****Number**
              **Outstanding**
            
            **Expiry
                Date**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**
            
            **Weighted
                Average**
              **Remaining
                Contractual Life (in years****)**
            
            **Number**
              **Exercisable**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**678,200
            
            
            February
                18, 2013
            
            $
            2.24
            
            
            5.6
            
            
            678,200
            
            $
            2.24261,000
            
            
            March
                10, 2014
            
            
            2.05
            
            
            6.7
            
            
            261,000
            
            
            2.0525,000
            
            
            May
                19, 2014
            
            
            1.44
            
            
            6.9
            
            
            25,000
            
            
            1.4421,200
            
            
            August
                10, 2014
            
            
            0.95
            
            
            7.1
            
            
            21,200
            
            
            0.951,162,750
            
            
            March
                10, 2015
            
            
            0.65
            
            
            7.7
            
            
            1,162,750
            
            
            0.65100,000
            
            
            August
                4, 2015
            
            
            0.27
            
            
            8.1
            
            
            50,000
            
            
            0.27300,000
            
            
            December
                12, 2015
            
            
            0.20
            
            
            8.5
            
            
            150,000
            
            
            0.20125,000
            
            
            March
                28, 2016
            
            
            0.65
            
            
            8.8
            
            
            125,000
            
            
            0.65200,000
            
            
            May
                23, 2016
            
            
            0.53
            
            
            8.9
            
            
            100,000
            
            
            0.53108,000
            
            
            August
                10, 2016
            
            
            0.48
            
            
            9.1
            
            
            -
            
            
            -40,000
            
            
            November
                9, 2016
            
            
            0.32
            
            
            9.4
            
            
            -
            
            
            -3,142,114
            
            
            February
                6, 2017
            
            
            0.57
            
            
            9.6
            
            
            -
            
            
            -6,163,264
            
            
            
            
            $
            0.81
            
            
            8.5
            
            
            2,573,150
            
            $
            1.18





*(ii)*  Performance-based
      stock option plan




The
      1,230,852 performance-based stock options that were exercisable at $0.80 expired
      June 25, 2007.


14


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)





**6.**
            **SHARE
                CAPITAL (continued)**





***(d)***
            Stock-based
                compensation




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





**Six
                months ended June 30,****2007**
            
            **2006**Risk
                free interest rate
            
            
            4.0
            %
            
            4.2
            %Dividend
                yield
            
            
            0
            %
            
            0
            %Volatility
            
            
            71
            %
            
            89
            %Expected
                life in years
            
            
            6
            
            
            6Weighted
                average grant-date fair value of stock options
            
            $
            0.38
            
            $
            0.43





***(e)***
            Shareholder
                Rights Plan




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





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




**7.**
            **INTEREST
                EXPENSE**




Interest
      expense consists of:




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Accretion
                on convertible debentures
            
            $
            939
            
            $
            258
            
            $
            1,471
            
            $
            504Interest
                paid on convertible debentures
            
            
            264
            
            
            265
            
            
            529
            
            
            529Amortization
                of deferred financing costs
            
            
            -
            
            
            79
            
            
            -
            
            
            159Interest
                related to Montana Tunnels joint venture agreement (Note
                4)
            
            
            171
            
            
            -
            
            
            449
            
            
            -Capital
                leases and other
            
            
            94
            
            
            11
            
            
            164
            
            
            21$
            1,468
            
            $
            613
            
            $
            2,613
            
            $
            1,213




15





**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**8.**
            **INCOME
                TAXES**




The
      Company did not record a recovery for income taxes for the period ended June
      30,
      2007 as the net loss carry forwards are fully offset by a valuation allowance.
      The Company recorded no income tax expense for the period since any taxable
      income will be offset by a recovery of prior tax losses.





**9.**
            **LITIGATION
                AND CLAIMS**




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




**10.**
            **SUPPLEMENTAL
                CASH FLOW INFORMATION**




Net
      changes in non-cash operating working capital items for the three and six months
      ended June 30 are:




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**(Increase)
                decrease in:Accounts
                receivable and other
            
            $
            (938
            )
            $
            1,198
            
            $
            (1,599
            )
            $
            2,460Prepaids
            
            
            172
            
            
            90
            
            
            201
            
            
            319Inventories
            
            
            (284
            )
            
            187
            
            
            (865
            )
            
            144Increase
                (decrease) in:Accounts
                payable
            
            
            (373
            )
            
            (538
            )
            
            406
            
            
            (4,398
            )Accrued
                liabilities
            
            
            470
            
            
            (606
            )
            
            1,365
            
            
            (29
            )Property
                and mining taxes payable
            
            
            191
            
            
            (169
            )
            
            128
            
            
            (209
            )$
            (762
            )
            $
            162
            
            $
            (364
            )
            $
            (1,713
            )





Components
      of cash and cash equivalents as of June 30, 2007 and 2006 are:




**June
                30, 2007**
            
            **June
                30,****2006**Cash
            
            $
            1,106
            
            $
            385Short-term
                investments
            
            
            5,970
            
            
            2,595Cash
                and cash equivalents
            
            $
            7,076
            
            $
            2,980




16


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**11.**
            **SEGMENTED
                  INFORMATION**




Apollo
      operates the Montana Tunnels mine (a 50% joint venture effective December 31,
      2006) in the United States and the Black Fox development project in Canada.
      The
      reportable segments have been determined at the level where decisions are made
      on the allocation of resources and capital and where performance is measured.
      The assets and liabilities of Montana Tunnels as at June 30, 2007 and December
      31, 2006 below differ from the amounts for the Montana Tunnels joint venture
      in
      Note 4 due to the inclusion of assets and liabilities of Montana Tunnels Mining,
      Inc. not pertaining to the Montana Tunnels joint venture, which primarily relate
      to the Diamond Hill mine. The accounting policies for these segments are the
      same as those followed by the Company as a whole.




Amounts
      as at June 30, 2007 are as follows:




**Montana
                Tunnels**
            
            **Black****Fox**
            
            **Corporate****and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            1,381
            
            $
            (16
            )
            $
            5,711
            
            $
            7,076Other
                non-cash current assets
            
            
            3,560
            
            
            111
            
            
            281
            
            
            3,9524,941
            
            
            95
            
            
            5,992
            
            
            11,028Property,
                plant and equipment
            
            
            7,173
            
            
            31,927
            
            
            3,153
            
            
            42,253Deferred
                stripping costs
            
            
            3,087
            
            
            -
            
            
            -
            
            
            3,087Restricted
                certificates of deposit
            
            
            4,892
            
            
            605
            
            
            -
            
            
            5,497Total
                assets
            
            $
            20,093
            
            $
            32,627
            
            $
            9,145
            
            $
            61,865Current
                liabilities and convertible debenture
            
            $
            3,966
            
            $
            195
            
            $
            10,891
            
            $
            15,052Notes
                payable
            
            
            192
            
            
            32
            
            
            -
            
            
            224Convertible
                debenture
            
            
            -
            
            
            -
            
            
            4,045
            
            
            4,045Accrued
                site closure costs
            
            
            7,013
            
            
            389
            
            
            -
            
            
            7,402Deferred
                gain
            
            
            3,321
            
            
            -
            
            
            -
            
            
            3,321Total
                liabilities
            
            $
            14,492
            
            $
            616
            
            $
            14,936
            
            $
            30,044





Amounts
      as at December 31, 2006 are as follows:





**Montana
                Tunnels**
            
            **Black****Fox**
            
            **Corporate****and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            (64
            )
            $
            9
            
            $
            4,567
            
            $
            4,512Other
                non-cash current assets
            
            
            2,579
            
            
            105
            
            
            870
            
            
            3,5542,515
            
            
            114
            
            
            5,437
            
            
            8,066Property,
                plant and equipment
            
            
            7,159
            
            
            30,455
            
            
            1,254
            
            
            38,868Restricted
                certificates of deposit
            
            
            4,052
            
            
            553
            
            
            -
            
            
            4,605Deferred
                financing costs
            
            
            -
            
            
            -
            
            
            265
            
            
            265Total
                assets
            
            $
            13,726
            
            $
            31,122
            
            $
            6,956
            
            $
            51,804Current
                liabilities
            
            $
            1,823
            
            $
            149
            
            $
            9,765
            
            $
            11,737Notes
                payable and other long term liabilities
            
            
            527
            
            
            42
            
            
            370
            
            
            939Accrued
                site closure costs
            
            
            6,760
            
            
            375
            
            
            -
            
            
            7,135Deferred
                Gain
            
            
            3,750
            
            
            -
            
            
            -
            
            
            3,750Total
                liabilities
            
            $
            12,860
            
            $
            566
            
            $
            10,135
            
            $
            23,561




17


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**11.**
            **SEGMENTED
                INFORMATION (continued)**





Amounts
      for the three and six month periods ended June 30, 2007 and 2006, respectively,
      are as follows:




**Three
                months ended June 30, 2007****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            12,841
            
            $
            -
            
            $
            -
            
            $
            12,841Direct
                operating costs
            
            
            7,932
            
            
            -
            
            
            -
            
            
            7,932Depreciation
                and amortization
            
            
            354
            
            
            -
            
            
            26
            
            
            380General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            859
            
            
            859Accretion
                expense - accrued site closure costs
            
            
            127
            
            
            -
            
            
            -
            
            
            127Amortization
                of deferred gain
            
            
            (358
            )
            
            -
            
            
            -
            
            
            (358
            )Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            185
            
            
            1858,055
            
            
            -
            
            
            1,070
            
            
            9,125Operating
                income (loss)
            
            
            4,786
            
            
            -
            
            
            (1,070
            )
            
            3,716Interest
                income
            
            
            52
            
            
            -
            
            
            99
            
            
            151Interest
                expense
            
            
            (239
            )
            
            -
            
            
            (1,229
            )
            
            (1,468
            )Foreign
                exchange gain and other
            
            
            -
            
            
            -
            
            
            37
            
            
            37Income
                (loss) from continuing operations
            
            $
            4,599
            
            $
            -
            
            $
            (2,163
            )
            $
            2,436Investing
                activitiesProperty,
                plant and equipment expenditures and deferred stripping
                expenditures
            
            $
            1,962
            
            $
            618
            
            $
            4
            
            $
            2,584





**Six
                months ended June 30, 2007****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            15,731
            
            $
            -
            
            $
            -
            
            $
            15,731Direct
                operating costs
            
            
            10,995
            
            
            -
            
            
            -
            
            
            10,995Depreciation
                and amortization
            
            
            578
            
            
            -
            
            
            52
            
            
            630General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            1,999
            
            
            1,999Accretion
                expense - accrued site closure costs
            
            
            254
            
            
            -
            
            
            -
            
            
            254Amortization
                of deferred gain
            
            
            (429
            )
            
            -
            
            
            -
            
            
            (429
            )Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            1,737
            
            
            1,73711,398
            
            
            -
            
            
            3,788
            
            
            15,186Operating
                gain (loss)
            
            
            4,333
            
            
            -
            
            
            (3,788
            )
            
            545Interest
                income
            
            
            97
            
            
            -
            
            
            242
            
            
            339Interest
                expense
            
            
            (587
            )
            
            -
            
            
            (2,026
            )
            
            (2,613
            )Financing
                costs
            
            
            -
            
            
            -
            
            
            (480
            )
            
            (480
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (2
            )
            
            (2
            )Income (loss)
                from continuing operations
            
            $
            3,843
            
            $
            -
            
            $
            (6,054
            )
            $
            (2,211
            )Investing
                activitiesProperty,
                plant and equipment expenditures and deferred stripping
                expenditures
            
            $
            4,341
            
            $
            1,458
            
            $
            1,951
            
            $
            7,750




18


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)





**11.**
            **SEGMENTED
                INFORMATION (continued)**





**Three
                months ended June 30, 2006****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            3,667
            
            $
            -
            
            $
            -
            
            $
            3,667Direct
                operating costs
            
            
            3,587
            
            
            -
            
            
            -
            
            
            3,587Depreciation
                and amortization
            
            
            351
            
            
            -
            
            
            26
            
            
            377General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            1,248
            
            
            1,248Accretion
                expense - accrued site closure costs
            
            
            237
            
            
            -
            
            
            -
            
            
            237Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            247
            
            
            2474,175
            
            
            -
            
            
            1,521
            
            
            5,696Operating
                loss
            
            
            (508
            )
            
            -
            
            
            (1,521
            )
            
            (2,029
            )Interest
                income
            
            
            63
            
            
            -
            
            
            25
            
            
            88Interest
                expense
            
            
            (9
            )
            
            -
            
            
            (604
            )
            
            (613
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (14
            )
            
            (14
            )Loss
                from continuing operations
            
            $
            (454
            )
            $
            -
            
            $
            (2,114
            )
            $
            (2,568
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            -
            
            $
            871
            
            $
            116
            
            $
            987





**Six
                months ended June 30, 2006****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            9,805
            
            $
            -
            
            $
            -
            
            $
            9,805Direct
                operating costs
            
            
            10,745
            
            
            -
            
            
            -
            
            
            10,745Depreciation
                and amortization
            
            
            901
            
            
            -
            
            
            57
            
            
            958General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            2,472
            
            
            2,472Accretion
                expense - accrued site closure costs
            
            
            474
            
            
            -
            
            
            -
            
            
            474Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            605
            
            
            60512,120
            
            
            -
            
            
            3,134
            
            
            15,254Operating
                loss
            
            
            (2,315
            )
            
            -
            
            
            (3,134
            )
            
            (5,449
            )Interest
                income
            
            
            114
            
            
            -
            
            
            40
            
            
            154Interest
                expense
            
            
            (18
            )
            
            -
            
            
            (1,195
            )
            
            (1,213
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (13
            )
            
            (13
            )Loss
                from continuing operations
            
            $
            (2,219
            )
            $
            -
            
            $
            (4,302
            )
            $
            (6,521
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            -
            
            $
            4,316
            
            $
            116
            
            $
            4,432




**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S.
                GAAP**




The
      Company prepares its consolidated financial statements in accordance with
      Canadian GAAP. The following adjustments and/or additional disclosures would
      be
      required in order to present the financial statements in accordance with U.S.
      GAAP and with practices prescribed by the SEC for the three and six months
      ended
      June 30, 2007 and 2006.




19




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)





**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




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




**June
                30, 2007**
            
            **December
                31,**
              **2006****Total
                assets in accordance with Canadian GAAP**
            
            **$**
            **61,865**
            
            **$**
            **51,804**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)(ii)
            
            
            (1,945
            )
            
            (2,038
            )Deferred
                stripping costs (a)(iii)
            
            
            (3,087
            )
            
            -Black
                Fox development costs(b)
            
            
            (23,675
            )
            
            (22,354
            )Convertible
                debentures(c)
            
            
            878
            
            
            103Equity
                accounting for investment in Montana Tunnels joint
                venture(a)(i)
            
            
            (10,512
            )
            
            (8,473
            )**Total
                assets in accordance with U.S. GAAP**
            
            **$**
            **23,333**
            
            **$**
            **19,042****Total
                liabilities in accordance with Canadian GAAP**
            
            **$**
            **30,044**
            
            **$**
            **23,561**Convertible
                debentures (c)
            
            
            2,909
            
            
            764Equity
                accounting for investment in Montana Tunnels joint
                venture(a)(i)
            
            
            (10,512
            )
            
            (8,473
            )Deferred
                gain(a)(i)
            
            
            (3,321
            )
            
            (3,750
            )**Total
                liabilities in accordance with U.S. GAAP**
            
            **$**
            **18,929**
            
            **$**
            **12,102**




**June
                30, 2007**
            
            **December
                31,****2006****Total
                shareholders’ equity in accordance with Canadian
                GAAP**
            
            **$**
            **31,821**
            
            **$**
            **28,243**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)(ii)
            
            
            (1,945
            )
            
            (2,038
            )Deferred
                stripping costs (a)(iii)
            
            
            (3,087
            )
            
            -Black
                Fox development costs(b)
            
            
            (23,675
            )
            
            (22,354
            )Convertible
                debentures(c)
            
            
            (2,031
            )
            
            (661
            )Deferred
                gain(a)(i)
            
            
            3,321
            
            
            3,750**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **4,404**
            
            **$**
            **6,940****Total
                shareholders’ equity and liabilities in accordance with U.S.
                GAAP**
            
            **$**
            **23,333**
            
            **$**
            **19,042**




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





**June
                30, 2007**
            
            **December
                31,****2006**Share
                capital
            
            $
            159,549
            
            $
            158,790Note
                warrants
            
            
            3,211
            
            
            1,062Contributed
                surplus
            
            
            38,701
            
            
            31,964Deficit
            
            
            (197,057
            )
            
            (184,876
            )**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **4,404**
            
            **$**
            **6,940**




20


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**12.**
            **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:




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Income
                (loss) from continuing operations for the periodbased
                on Canadian GAAP
            
            $
            2,436
            
            $
            (2,568
            )
            $
            (2,211
            )
            $
            (6,521
            )Change
                in depreciation of property, plant and equipment (a)(ii)
            
            
            50
            
            
            52
            
            
            94
            
            
            183Capitalized
                deferred stripping costs and amortization (a)(iii)
            
            
            (938
            )
            
            -
            
            
            (3,087
            )
            
            -Black
                Fox development costs (b)
            
            
            (643
            )
            
            (1,233
            )
            
            (1,321
            )
            
            (2,095
            )Convertible
                debentures (c)
            
            
            92
            
            
            151
            
            
            (5,227
            )
            
            293Amortization
                of deferred gain (a)(i)
            
            
            (358
            )
            
            -
            
            
            (429
            )
            
            -Income
                (loss) from continuing operations for the period based on U.S.
                GAAP
            
            
            639
            
            
            (3,598
            )
            
            (12,181
            )
            
            (8,140
            )Loss
                from discontinued operations for the period based on Canadian and
                U.S.
                GAAP
            
            
            -
            
            
            -
            
            
            -
            
            
            (250
            )Net
                income (loss) and comprehensive income (loss) for the period based
                on U.S.
                GAAP
            
            $
            639
            
            $
            (3,598
            )
            $
            (12,181
            )
            $
            (8,390
            )Basic
                and diluted income (loss) per share in accordance with U.S.
                GAAP:Continuing
                operations
            
            $
            0.00
            
            $
            (0.03
            )
            $
            (0.09
            )
            $
            (0.07
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss) per share - U.S. GAAP basic and diluted
            
            $
            0.00
            
            $
            (0.03
            )
            $
            (0.09
            )
            $
            (0.07
            )





***(a)***
            Montana
                Tunnels mine




*(i)*  Under
      Canadian GAAP, the Company has accounted for its joint venture interest in
      the
      Montana Tunnels mine ("MTM") using the proportionate consolidation method
      whereby the Company's proportionate share of each line item of MTM's assets,
      liabilities, revenues and expenses is included in the corresponding line item
      of
      the Company's financial statements.  Under U.S. GAAP, the Company would
      account for MTM using the equity method whereby the Company's share of the
      investees' earnings and losses is included in operations and its investments
      therein are adjusted by a similar amount.  The carrying value of MTM was
      lower under U.S. GAAP than under Canadian GAAP following an impairment of the
      property, plant and equipment in prior years and as a result the gain on
      transfer of the Company's interest in MTM into the joint venture under U.S.
      GAAP
      is higher.  Under U.S. GAAP, the gain on transfer of the Company's interest
      MTM into the joint venture was included in the net loss for the year ended
      December 31, 2006; whereas under Canadian GAAP it was deferred and is recognized
      as an adjustment to net loss using the units of production method over the
      expected life of the operation based on the estimated recoverable gold
      equivalent ounces.




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




Under
      Canadian GAAP, write-downs for impairment of property, plant and equipment
      are
      determined using current proven and probable reserves and mineral resources
      expected to be converted into mineral reserves. Under U.S. GAAP, write-downs
      recorded in 2002 were determined using current




21


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





proven
      and probable reserves. Accordingly, for U.S. GAAP purposes, an impairment of
      property, plant and equipment and an adjustment to the related depreciation
      has
      been recorded.




*(iii)*  Deferred
      stripping costs




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




***(b)***
            Black
                Fox Project




Under
      Canadian GAAP, mining development costs at the Black Fox Project have been
      capitalized. Under U.S. GAAP, these expenditures are expensed as incurred.
      Accordingly, for U.S. GAAP purposes, a reduction in property, plant and
      equipment of $23.7 million has been recorded as at June 30, 2007.




***(c)***
            Convertible
                debentures




*(i)*  Under
      Canadian GAAP, the Series 2007-A Convertible Debentures (the “2007 Debentures”)
      were recorded as a compound financial instrument including detachable note
      warrants. On issuance in February 2007, under U.S. GAAP, the detachable note
      warrants are similarly treated as an equity instrument with the remainder of
      the
      2007 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 2007 Debentures in accordance with EITF 00-27,
“Application of Issue No. 98-5 to Certain Convertible Instruments” (“EITF
      00-27”), is allocated to contributed surplus. This discount on the 2007
      Debentures, in the amount of $5.9 million, 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 12% Series 2004-B Convertible Debentures (the “2004
      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 2004 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 2004 Debentures in
      accordance with EITF 00-27, is allocated to contributed surplus. This discount
      on the 2004 Debentures, in the amount of $0.1 million, 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.




*(iii)*  As
      of
      January 1, 2007, under Canadian GAAP, the Company expenses debt financing costs
      when they are incurred (Note 3(d)). Prior to January 1, 2007, under Canadian
      GAAP, debt financing costs were capitalized and amortized. Under U.S. GAAP,
      debt
      financing costs are capitalized.




22


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2007**


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


(Unaudited)




**12.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





***(d)***
            Statements
                of cash flows




*(i)*  Under
      Canadian GAAP, mining development costs at the Black Fox Project are included
      in
      cash flows from investing activities in the consolidated statements of cash
      flows.  Under U.S. GAAP, these expenditures are included in cash flows from
      operating activities.  Accordingly, under U.S. GAAP, the consolidated
      statements of cash flows for the three and six months ended June 30, 2007 would
      reflect a decrease in cash used in investing activities of $0.6 million and
      $1.3
      million, respectively, and a corresponding decrease in cash provided by
      operating activities for each period. Additionally, for the three and six months
      ended June 30, 2006 the consolidated statements of cash flow under U.S. GAAP
      would reflect a decrease of $0.9 million and $1.7 million, respectively, used
      in
      investing activities, respectively, and a corresponding increase in cash used
      in
      operating activities for each period.




*(ii)*  Under
      Canadian GAAP, deferred stripping costs are included in cash flows from
      investing activities in the consolidated statements of cash flows.  Under
      U.S. GAAP, these stripping costs are included in cash flows from operating
      activities. Accordingly, under U.S. GAAP, the consolidated statements of cash
      flows for the three and six months ended June 30, 2007 would reflect a decrease
      in cash used in investing activities of $1.5 million and $3.7 million,
      respectively, and a corresponding decrease in cash provided by operating
      activities.




*(iii)*  Under
      Canadian GAAP, debt financing costs are included in cash flows from operating
      activities. Under U.S. GAAP, these costs are capitalized and are included in
      cash flows from financing activities. Accordingly, under U.S. GAAP, the
      consolidated statement of cash flows for the six months ended June 30, 2007
      would reflect a decrease in cash flows provided by financing activities of
      $0.3
      million, and a corresponding decrease in cash used in operating
      activities.




***(e)***
            Income
                taxes




The
      Company adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* ,
      on
      January 1, 2007. There was no effect on the Company’s cumulative retained
      earnings as of January 1, 2007, as a result of the adoption of Interpretation
      48. As of the date of adoption, there were no unrecognized U.S. tax benefits.
      Under current conditions and expectations, management does not foresee any
      significant changes in unrecognized tax benefits that would have a material
      impact on the Company’s financial statements. The Company and/or one or more of
      its subsidiaries file income tax returns in the United States and Canada. The
      Company is generally not subject to U.S. and Canada income tax examinations
      that
      could create a tax liability for tax years before 2001. The Company recognizes
      interest accrued related to unrecognized tax benefits in interest expense and
      penalties in operating expenses.




23


**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 condensed consolidated financial statements and related notes.
      The
      financial statements have been prepared in accordance with generally accepted
      accounting principles in Canada (Canadian GAAP). For a reconciliation to GAAP
      in
      the United States (U.S. GAAP), see Note 12 to the attached condensed
      consolidated financial statements.




In
      this
      Form 10-Q, the terms “cash operating cost,” “total cash cost” and “total
      production cost” are non-GAAP financial measures and are used on a per ounce of
      gold sold basis. Cash operating costs per ounce is equivalent to direct
      operating cost as found on the Condensed Consolidated Statements of Operations,
      less production royalty expenses and mining taxes but includes by-product
      credits for payable silver, lead, and zinc production. Total cash costs is
      equivalent to cash operating costs plus production royalties and mining taxes.
      The term “total production costs” is equivalent to total cash costs plus
      non-cash costs including depreciation and amortization. See “Reconciliation of
      Cash Operating and Total Operating Costs Per Ounce” below.




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




**BACKGROUND
      AND RECENT DEVELOPMENTS**




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




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




On
      January 17, 2007, the Company adopted a Shareholder Rights Plan (the “Rights
      Plan”). The Rights Plan was adopted to ensure the fair treatment of shareholders
      in connection with any take-over bid for common shares of Apollo. The Rights
      Plan, adopted and effective in January 2007, was ratified by the shareholders
      at
      the Apollo Annual Meeting held in May 2007. The Rights Plan expires in January
      2012.




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




**Montana
      Tunnels**





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





The
      remediation, which lasted from September 2006 to February 2007, required the
      removal of 8.4 million tons of waste material, at a total cost of $15.5 million.
      These costs, plus working capital of $2.5 million, were funded $14.25 million
      by
      Elkhorn, our joint venture partner, $1.25 million by us and $2.5 million from
      a
      working capital loan to the joint venture from Teck Cominco Metals Ltd. (“Teck
      Cominco”), our smelter contractor. As of June 30, 2007, Montana Tunnels owed
      Teck Cominco $0.3 million on this loan, which was repaid in full on July 19,
      2007.




24




During
      the second quarter 2007, approximately 3,400,000 tons were mined, of which
      1,367,000 tons were ore. The mill processed 1,246,000 tons of ore at an average
      throughput of 13,700 tons per day for the quarter and payable production was
      11,000 ounces of gold, 173,000 ounces of silver, 3,784,000 lbs of lead and
      6,976,000 lbs of zinc. Apollo’s share of this production was 50%. The mine
      commenced a project to increase mill throughput by 1,000 tons per day by
      re-commissioning a larger primary crusher (last utilized in 2005) which is
      scheduled for completion at the end of August 2007.





Ore
                mined
            1,367,000
                tonsWaste
                mined
            2,024,000
                tonsTotal
                mined
            3,391,000
                tonsOre
                milled
            1,246,000
                tons





**Grade:**
            
            
            
            **Recoveries:**Au
                ounces per ton
            
            
            0.0136
            
            
            Au
            
            
            72.9
            %Ag
                ounces per ton
            
            
            0.2420
            
            
            Ag
            
            
            73.3
            %Pb
                %
            
            
            0.2160
            
            
            Pb
            
            
            78.1
            %Zn
                %
            
            
            0.4455
            
            
            Zn
            
            
            76.6
            %





Total
      cash costs for the second quarter 2007 on a by-product basis were minus $237
      per
      ounce of gold and on a co-product basis they were $406 per ounce of gold, $8.11
      per ounce of silver, $0.70 per lb of lead and $1.05 per lb of zinc.





**Forecast** - We
      continue to believe that we will meet our previously announced production
      forecast for the Montana Tunnels mine for the period from March 1, 2007 to
      December 31, 2007 of 40,000 ozs of gold, 250,000 ozs of silver, 5,750,000 lbs
      of
      lead and 12,500,000 lbs of zinc. Apollo’s share of this forecasted production
      would be 50%.





**Black
      Fox**





At
      the
      end of the second quarter 2007, we announced the results of a new Canada
      National Instrument 43-101 (“NI 43-101”) mineral reserve and resource at Black
      Fox. The NI 43-101, which was filed on August 13, 2007, demonstrates the
      continued expansion of Black Fox since the last published NI 43-101 dated August
      14, 2006. The new mineral reserve and resource estimate was prepared by SRK
      Consulting, Denver, Colorado .
      SRK has
      confirmed that the reserve and resource study complies in all respects with
      NI
      43-101 guidelines. The
      table
      below summarizes the Black Fox Total Mineral Reserve:





**Black
      Fox - Probable Reserves as of June 30, 2007**





**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**
            
            **Contained**
              **Au
                Ounces**Open
                Pit
            
            
            1.0
            
            
            3,362
            
            
            5.8
            
            
            625,000Underground**(1)**
            
            
            3.0
            
            
            1,108
            
            
            10.6
            
            
            377,000**Total
                Reserves**
            
            
            
            
            
            **4,470**
            
            
            **7.0**
            
            
            **1,002,000**





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





The
      minable reserve was calculated based on a gold price of US$525/oz which is
      approximately the three-year trailing average. The average total cash cost
      per
      ounce of gold was calculated at $236 per ounce.




25


In
        addition to the reserves above, the NI 43-101 contains the indicated and
        inferred resources shown in the tables below:
 
 **Black
        Fox - Indicated Resources as of June 30, 2007** **(1)**
 
 **Mining
                  Method***
              
              **Cutoff
                  Grade**
                **Au
                  g/t**
              
              **Tonnes**
                **(000)**
              
              **Grade**
                **Au
                  g/t**Open
                  Pit
              
              
              1.0
              
              
              997
              
              
              4.5Underground
              
              
              3.0
              
              
              667
              
              
              10.1
 
 * Mining
        method is determined by relative location above or below the 9,815m
        elevation.
  **Black
        Fox - Inferred Resources as of June 30, 2007** **(2)**
 
 **Mining
                  Method**
              
              **Cutoff
                  Grade**
                **Au
                  g/t**
              
              **Tonnes**
                **(000)**
              
              **Grade**
                **Au
                  g/t**Open
                  Pit
              
              
              1.0
              
              
              3,256
              
              
              4.7Underground
              
              
              3.0
              
              
              929
              
              
              12.3
 
 * Mining
        method is determined by relative location above or below the 9,815m
        elevation.




**(1)********
            ***Cautionary
                Note to U.S. Investors concerning estimates of Indicated Mineral
                Resources.***We
                advise U.S. investors that while the term “indicated mineral resources” is
                recognized and required by Canadian regulations, the U.S. Securities
                and
                Exchange Commission (“SEC”) does not recognize it. U.S. investors are
                cautioned not to assume that any part or all of the mineral deposits
                in
                these categories will ever be converted into mineral
                reserves.


**(2)********
            ***Cautionary
                Note to U.S. Investors concerning estimates of Inferred Mineral
                Resources****.*We
                advise U.S. investors that while the term“inferredmineral resources” is recognized and required by Canadian regulations, the
                SEC does not recognize it. “Inferred mineral resources” have a great
                amount of uncertainty as to their existence, and great uncertainty
                as to
                their economic and legal feasibility. It cannot be assumed that all
                or any
                part of an inferred mineral resource will ever be upgraded to a higher
                category. In accordance with Canadian rules, estimates of inferred
                mineral
                resources cannot form the basis of feasibility or other economic
                studies.
                U.S. investors are cautioned not to assume that part or all of the
                inferred mineral resource exists, or is economically or legally
                minable.





Our
      third
      party consultant, SRK Consulting, Inc., has commenced work on a bankable
      feasibility study which we expect to be completed in the first quarter of
      2008.





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




**Huizopa
      Project**




During
      the first quarter 2007, the Company made payments ahead of schedule in
      settlement of certain claims and the outstanding land payments on its Huizopa
      properties. These payments resulted in Apollo’s 100% Mexican owned subsidiaries
      owning 100% of the 128 square kilometer mining concessions known as
      Huizopa.




26


**METAL
      SALES & METAL PRICE AVERAGES**




The
      table
      below summarizes our share of metal sales of gold, silver, lead and zinc of
      the
      Montana Tunnels mine, as well as average metal prices and other key statistics,
      for each period indicated:




**Three
                months ended June 30,**
            
            **Six
                months ended June 30,****2007
                (1)**
            
            **2006
                (2)**
            
            **2007
                (1)(3)**
            
            **2006
                (2)****Metal
                sales:**Gold
                (ounces)
            
            
            5,483
            
            
            1,746
            
            
            6,644
            
            
            4,959Silver
                (ounces)
            
            
            86,267
            
            
            54,895
            
            
            110,456
            
            
            116,004Lead
                (pounds)
            
            
            1,891,830
            
            
            325,992
            
            
            2,395,807
            
            
            1,196,317Zinc
                (pounds)
            
            
            3,488,291
            
            
            769,091
            
            
            4,413,306
            
            
            3,040,058Total
                revenue ($millions)
            
            $
            12.8
            
            $
            3.7
            
            $
            15.7
            
            $
            9.8**Total
                cash and production costs on a by-product basis:**Total
                cash costs per ounce of gold
            
            $
            (237
            )
            $
            737
            
            $
            (243
            )
            $
            892Total
                production costs per ounce of gold
            
            $
            (173
            )
            $
            1,038
            
            $
            (173
            )
            $
            1,098**Total
                cash costs on a co-product basis:**Total
                cash costs per ounce of gold
            
            $
            406
            
            $
            788
            
            $
            407
            
            $
            742Total
                cash costs per ounce of silver
            
            $
            8.11
            
            $
            12.78
            
            $
            8.15
            
            $
            13.53Total
                cash costs per pound of lead
            
            $
            0.70
            
            $
            0.36
            
            $
            0.67
            
            $
            0.60Total
                cash costs per pound of zinc
            
            $
            1.05
            
            $
            2.43
            
            $
            1.03
            
            $
            1.72**Average
                metal prices:**Gold
                - London bullion mkt. ($/ounce)
            
            $
            667
            
            $
            628
            
            $
            662
            
            $
            591Silver
                - London bullion mkt. ($/ounce)
            
            $
            13.34
            
            $
            11.58
            
            $
            13.26
            
            $
            10.98Lead
                - London Metal Exchange ($/pound)
            
            $
            0.98
            
            $
            0.44
            
            $
            0.90
            
            $
            0.50Zinc
                - London Metal Exchange ($/pound)
            
            $
            1.66
            
            $
            1.52
            
            $
            1.62
            
            $
            1.27





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




**Three
                months ended June 30,**
            
            **Six
                months ended June 30,****($
                in thousands, except per ounce of gold data)**
            
            **2007
                (1)**
            
            **2006
                (2)**
            
            **2007
                (1)(3)**
            
            **2006
                (2)**Gold
                ounces sold
            
            
            5,483
            
            
            1,165
            
            
            6,644
            
            
            4,378Direct
                operating costs
            
            $
            7,932
            
            $
            3,587
            
            $
            9,748
            
            $
            10,745Less:Mining
                taxes, royalty expenses
            
            
            351
            
            
            134
            
            
            436
            
            
            270By-product
                credits
            
            
            9,234
            
            
            2,728
            
            
            11,363
            
            
            6,841Cash
                operating cost
            
            
            (1,653
            )
            
            725
            
            
            (2,051
            )
            
            3,634Cash
                operating cost per ounce of gold
            
            **$**
            **(301**
            **)**
            **$**
            **623**
            
            **$**
            **(309**
            **)**
            **$**
            **830**Cash
                operating costs
            
            
            (1,653
            )
            
            725
            
            
            (2,051
            )
            
            3,634Add:Mining
                taxes, royalty expenses
            
            
            351
            
            
            134
            
            
            436
            
            
            271Total
                cash costs
            
            
            (1,302
            )
            
            859
            
            
            (1,615
            )
            
            3,905Total
                cash cost per ounce of gold
            
            **$**
            **(237**
            **)**
            **$**
            **737**
            
            **$**
            **(243**
            **)**
            **$**
            **892**Total
                cash costs
            
            
            (1,302
            )
            
            859
            
            
            (1,615
            )
            
            3,905Add:Depreciation
                & amortization
            
            
            355
            
            
            351
            
            
            466
            
            
            901Total
                production costs
            
            
            (947
            )
            
            1,210
            
            
            (1,149
            )
            
            4,806Total
                production cost per ounce of gold
            
            **$**
            **(173**
            **)**
            **$**
            **1,038**
            
            **$**
            **(173**
            **)**
            **$**
            **1,098**





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


**(2)**
            The
                results shown for the three and six months ended June 30, 2006 reflect
                Apollo’s 100% ownership of the Mine during that period. Additionally, the
                mill at the Mine was shut down on May 12, 2006. Up until that point
                the
                Mine was milling low grade stockpiled
                ore.


**(3)**
            Metal
                sales, revenue and costs for the first six months of 2007 only includes
                the four months of March through June as milling was restarted on
                March 1,
                2007 after being shut down since May 12,
                2006.




27




**MATERIAL
      CHANGES IN RESULTS OF OPERATIONS**




***Three
      Months Ended June 30, 2007 Compared to the Three Months Ended June 30,
      2006***




**Revenue
      from the Sale of Minerals.**




Revenue
      for the three months ended June 30, 2007  increased
      250% to $12.8 million from $3.7 million for the same period in 2006. The
      increase in revenue is due to milling of higher grade ores, higher metal prices
      in 2007 and the fact that the mill was shut down from May 12, 2006 to March
      1,
      2007. These factors were partially offset because, effective December 31, 2006,
      the Mine is a 50/50 joint venture, and therefore Apollo’s share of the revenue
      is 50%.




**Operating
      Expenses.**




*Direct
      Operating Costs.* Direct
      operating costs, which include mining costs, processing costs and smelting
      and
      refining charges, for the three months ended June 30, 2007  increased
      121% to $7.9 million from $3.6 million for the three months ended June 30,
      2006.
      The increase in costs is a result of the resumption of production on March
      1,
      2007 after being shut down since May 2006. Also, effective December 31, 2006,
      the Mine is a 50/50 joint venture, and therefore Apollo’s share of the direct
      operating costs is 50%.




*Depreciation
      and Amortization.* Depreciation and amortization expenses were  $0.4
      million and $0.4 million for the three months ended June 30, 2007 and 2006,
      respectively. Effective December 31, 2006, the Mine is a 50/50 joint venture,
      and therefore Apollo’s share of the Mine’s depreciation is 50%. This reduction
      in Apollo’s share of the Mine’s depreciation in 2007 is offset by the decrease
      in depreciation in 2006 which resulted from the mill being shut down on May
      12,
      2006.




*General
      and Administrative Expenses.* General
      and administrative expenses were $0.9 million and $1.2 million for the three
      months ended June 30, 2007 and 2006, respectively. The decrease is a result
      of
      receiving a management fee in 2007 of $0.2 million for being the operator of
      the
      Montana Tunnels joint venture and lower corporate overhead costs.




*Accretion
      Expense - Accrued Site Closure Costs.* Accrued
      accretion expense  was
      $0.1
      million for the three months ended June 30, 2007 compared to $0.2 million for
      the same period in 2006. Effective December 31, 2006, the Mine is a 50/50 joint
      venture, and therefore Apollo’s share of the Mine’s accretion expense is
      50%.





*Amortization
      of Deferred Gain.* Amortization
      of the deferred gain, relating to the transfer of assets and liabilities to
      the
      Montana Tunnels joint venture, was $0.4 million for the three months ended
      June
      30, 2007 and nil for the three months ended June 30, 2006.





*Exploration
      and Business Development Expense.* Expenses
      for exploration and development, consisting of exploration related expenses
      at
      our Huizopa Project, totaled $0.2 million and $0.2 million for the three months
      ended June 30, 2007 and 2006, respectively.




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses increased
      60%
      to $9.1 million for the three months ended June 30, 2007, from $5.7 million
      for
      the three months ended June 30, 2006.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* ** We
      realized interest income of $0.2 million and incurred interest expense of $1.4
      million during the three months ended June 30, 2007 compared to $0.1 million
      in
      interest income and $0.6 million in interest expense during the three months
      ended June 30, 2006. The increase in interest expense is due to an increase
      in
      accretion expense of $0.7 million, mostly related to the Series 2007-A
      convertible debenture issued in February 2007, and interest of $0.2 million
      related to the Montana Tunnels joint venture agreement.




28


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




As
      a
      result of the foregoing, we recorded income from continuing operations of $2.4
      million, or $0.02 per share, for the three months ended June 30, 2007, as
      compared to a loss of $2.6 million, or $0.02 per share, for the three months
      ended June 30, 2006.




**Net
      Income (Loss).**




For
      the
      three months ended June 30, 2007, we recorded net income of $2.4 million, or
      $0.02 per share, as compared to a net loss of $2.6 million, or $0.02 per share,
      for the three months ended June 30, 2006. We recorded no income tax expense
      for
      the period since any taxable income will be offset by a recovery of prior tax
      losses.




***Six
      Months Ended June 30, 2007 Compared to the Six Months Ended June 30,
      2006***




**Revenue
      from the Sale of Minerals.**




Revenue
      for the six months ended June 30, 2007 increased 60% to $15.7 million from
      $9.8
      million for the same period in 2006. The increase in revenue is due to milling
      higher grade ores, higher metal prices in 2007 and the fact that the mill was
      shut down on May 12, 2006. These factors were partially offset because milling
      resumed March 1, 2007 and, effective December 31, 2006, the Mine is a 50/50
      joint venture, and therefore Apollo’s share of the revenue is 50%.




**Operating
      Expenses.**




*Direct
      Operating Costs.* Direct
      operating costs, which includes mining costs, processing costs and smelting
      and
      refining charges, for the six months ended June 30, 2007 increased 2% to $11.0
      million from $10.7 million for the six months ended June 30, 2006. The increase
      in costs is a result of the resumption of production on March 1, 2007 after
      being shut down since May 2006. Also, effective December 31, 2006, the Mine
      is a
      50/50 joint venture, and therefore Apollo’s share of the direct operating costs
      is 50%.




*Depreciation
      and Amortization* *.*  Depreciation
      and amortization expenses were $0.6 million and $1.0 million for  the
      six
      months ended June 30, 2007 and 2006, respectively.  Effective
      December 31, 2006, the Mine is a 50/50 joint venture, and therefore Apollo’s
      share of the Mine’s depreciation is 50%.




*General
      and Administrative Expenses.* General
      and administrative expenses were $2.0 million and $2.5 million  for
      the
      six months ended June 30, 2007 and 2006, respectively. The decrease is a result
      of receiving a management fee in 2007 of $0.3 million for being the operator
      of
      the Montana Tunnels joint venture and lower overhead costs.




*Accretion
      Expense - Accrued Site Closure Costs.* Accrued
      accretion expense was $0.3 million for the six months ended June 30, 2007
      compared to $0.5 million for the same period in 2006. Effective December 31,
      2006, the Mine is a 50/50 joint venture, and therefore Apollo’s share of the
      Mine’s accretion expense is 50%.





*Amortization
      of Deferred Gain.* Amortization
      of the deferred gain, relating to the transfer of assets and liabilities to
      the
      Montana Tunnels joint venture, was $0.4 million for the six months ended June
      30, 2007 and nil for the six months ended June 30, 2006.





*Exploration
      and Business Development Expense.* Expenses
      for exploration and development, consisting of exploration related expenses
      at
      our exploration properties, totaled $1.7 million and $0.6 million for the six
      months ended June 30, 2007 and 2006, respectively. The increase in exploration
      expenses is mainly due to increased activity at the Huizopa
      property.




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses decreased
      to
      $15.2 million for the six months ended June 30, 2007, from $15.3 million for
      the
      six months ended June 30, 2006.




29




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $0.3 million and incurred interest expense of $2.6
      million during the six months ended June 30, 2007 compared to $0.2 million
      in
      interest income and $1.2 million in  interest
      expense during the six months ended June 30, 2006. The increase in interest
      expense is due to an increase in accretion expense of $1.0 million, mostly
      related to the Series 2007-A convertible debenture issued in February 2007,
      and
      interest of $0.4 million related to the Montana Tunnels joint venture
      agreement.




*Financing
      Costs.* Financing
      costs of $0.5 million for the six months ended June 30, 2007 were in connection
      with the convertible debentures issued in February 2007.




**Loss
      from Continuing Operations.**




As
      a
      result of the foregoing, we incurred a loss from continuing operations of $2.2
      million, or $0.02 per share, for the six months ended June 30, 2007, as compared
      to a loss of $6.5 million, or $0.06 per share, for the six months ended June
      30,
      2006.




**Loss
      from Discontinued Operations.**




For
      the
      six months ended June 30, 2007, loss from discontinued operations was nil,
      compared to a loss of $0.3 million for the six months ended June 30,
      2006.




**Net
      Loss.**




For
      the
      six months ended June 30, 2007, we incurred a net loss of $2.2 million, or
      $0.02
      per share, as compared to a net loss of $6.8 million, or $0.06 per share, for
      the six months ended June 30, 2006.




**MATERIAL
      CHANGES IN LIQUIDITY**




To
      date,
      we have funded our operations primarily through issuances of debt and equity
      securities, joint venture contributions from our Montana Tunnels joint venture
      partner and now, during the second quarter 2007, from our share of the cash
      flow
      from the Montana Tunnels joint venture. At June 30, 2007, we had cash of $7.1
      million, compared to cash of $4.5 million at December 31, 2006. The increase
      in
      cash since December 31, 2006 is the result of operating cash inflows of $1.1
      million and financing cash inflows of $9.8 million, offset by investing cash
      outflows of $8.3 million.




During
      the six months ended June 30, 2007, investing activities used $8.3 million.
      Capitalized deferred stripping costs at the Montana Tunnels mine were $3.7
      million. Capital expenditures for property, plant and equipment of $3.7 million
      include $1.5 million for the further development of the Black Fox Project and
      $1.9 million for land payments at our Huizopa Project. Investing activities
      include $0.9 million for the funding of the Montana Tunnels reclamation
      liability.




During
      the six months ended June 30, 2007, financing activities provided $9.8 million
      in cash. On February 23, 2007, we completed a private placement of $8.6 million
      unsecured convertible debentures (“2007 Debentures”) which had 17.2 million
      share purchase warrants attached. The 2007 Debentures are convertible into
      common shares at $0.50 per common share until maturity on February 23, 2009
      and
      bear interest at 12% in the first year and 18% in the second year. The share
      purchase warrants are exercisable for two years at an exercise price of $0.50
      per common share. Additionally, we borrowed $1.25 million from Teck Cominco
      (our
      50% share) through an interest free, short-term note. Payments of notes payable
      accounted for a cash outflow of $1.5 million, of which $1.1 million was
      repayment of the Teck Cominco note.




We
      estimate that with our June 30, 2007 cash balance of $7.1 million and our share
      of the projected cash flows from the joint ventured Montana Tunnels mine, we
      will have sufficient funds to finance the current 2007 work programs of $3.0
      million at Black Fox and $2.0 million for exploration at Huizopa, as well as
      corporate overhead. However, we will continue to explore financing opportunities
      to further develop the Black Fox Project and expand our exploration program
      at
      the Huizopa Project, which may include Canadian flow-through financing for
      use
      at the Black Fox Project. The availability, amount, terms and timing of this
      financing are not certain at this time.




30




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




**MATERIAL
      CHANGES IN CONTRACTUAL OBLIGATIONS**




During
      the three months ended June 30, 2007, we issued a note payable for property,
      plant and equipment at our Montana Tunnels mine for $0.6 million (Apollo’s 50%
      portion is $0.3 million), which is payable in monthly installments over three
      years.




**MATERIAL
      CHANGES IN OFF BALANCE SHEET ARRANGEMENTS**




None.




**ENVIRONMENTAL**




The
      Company’s current environmental liabilities are at Montana Tunnels and Black
      Fox. As of June 30, 2007, we have accrued $7.4 million related to reclamation,
      an increase of $0.3 million from December 31, 2006. These liabilities are
      covered by a combination of surety bonds, restricted cash and property totaling
      $18.7 million at June 30, 2007. We have accrued the present value of
      management’s estimate of the liability as of June 30, 2007.




**DIFFERENCES
      BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
      (GAAP)**




The
      Company reports under Canadian GAAP and reconciles to U.S. GAAP. The application
      of U.S. GAAP has a significant effect on the net income or loss and net income
      or loss per share. For a detailed explanation see Note 12 of our interim
      financial statements.




**CRITICAL
      ACCOUNTING ESTIMATES AND POLICIES**




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make a variety of estimates and
      assumptions that affect 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.




For
      a
      discussion of critical accounting policies, please refer to those disclosed
      in
      our 10-K filing for the year ended December 31, 2006 and to the changes in
      accounting policies described below.




**CHANGES** **** **IN
      ACCOUNTING POLICIES**




a)  At
      June
      30, 2007, the Company has ore stockpiles which are included in Inventories.
      Ore
      stockpiles represent ore that has been mined and is available for further
      processing. Work-in-process inventories, including ore stockpiles, are valued
      at
      the lower of average production cost and net realizable value, after a
      reasonable allowance for further processing and sales costs.




b)  On
      March
      2, 2006, the Emerging Issues Committee issued EIC-160, *Stripping
      Costs Incurred in the Production Phase of a Mining Operation,* which
      requires stripping costs that represent a betterment to the mineral property
      to
      be capitalized and amortized in a rational and systematic manner over the
      reserves that directly benefit from the specific stripping activity. The Company
      adopted EIC-160 as of January 1, 2007 on a prospective basis. During the three
      and six months ended June 30, 2007, the Company capitalized $1.5 million and
      $3.7 million, respectively, in deferred stripping costs and recorded
      amortization thereon in the amount of $0.6 million and $0.7 million,
      respectively. Deferred stripping costs are amortized using the
      units-of-production method over the expected life of the operation based on
      the
      estimated recoverable gold equivalent ounces.




31




c)  Effective
      January 1, 2007, the Company adopted CICA Handbook Section 1530, *Comprehensive
      Income* ,
      CICA
      Handbook Section 3855, *Financial
      Instruments - Recognition and Measurement* ,
      CICA
      Handbook Section 3865, *Hedges* ,
      and
      CICA Handbook Section 3251, *Equity* .
      These
      new Handbook Sections provide comprehensive requirements for the recognition
      and
      measurement of financial instruments, transaction costs incurred on financial
      instruments, as well as standards on when and how hedge accounting may be
      applied. CICA Handbook Section 1530 also introduces a new component of equity
      referred to as comprehensive income. The Company has adopted these standards
      prospectively.




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




Upon
      adoption of this new standard, the Company has designated its cash and cash
      equivalents as held-for-trading, which are measured at fair value. Accounts
      receivable and other are classified as loans and receivables, which are measured
      at amortized cost. Restricted certificates of deposit are classified as
      held-to-maturity, and are measured at amortized cost. Accounts payable and
      accrued liabilities, property and mining taxes payable, convertible debentures,
      notes payable, and accrued site closure costs are classified as other
      liabilities, which are measured at amortized cost.




Under
      CICA Handbook Section 3855, the Company adopted a policy to expense debt
      financing costs when they are incurred and as a result the Company recorded
      a
      non-cash adjustment to increase opening deficit by $0.3 million to eliminate
      the
      opening balance of deferred financing costs that were capitalized and amortized
      under the Company’s previous accounting policy.




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





**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, commodity price fluctuations and equity price
      risk.




**Interest
      Rate Risk**




When
      appropriate we invest excess cash in short-term debt instruments of the United
      States and Canadian governments and their agencies on both a fixed and variable
      interest rate basis. Our restricted certificates of deposit are invested in
      long-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 2007,
      a
      one percent change in interest rates would not materially impact our annual
      income. We may in the future actively manage our exposure to interest rate
      risk.




**Foreign
      Currency Exchange Rate Risk**




Most
      of
      the Company’s activities at its Black Fox Project are transacted in Canadian
      dollars and some of the Company’s cash balances are therefore maintained in
      Canadian dollars. Since the Company’s reporting currency is the U.S. dollar,
      foreign currency gains and losses on its Canadian dollar cash balances can
      result in volatile net losses and earnings, and adversely affect the Company’s
      financial position and results of operations.




32




**Commodity
      Price Risk**




The
      profitability of the Company’s operations will be dependent upon the market
      prices of gold and zinc. Gold and zinc prices fluctuate widely and are affected
      by numerous factors beyond the control of the Company. The level of interest
      rates, the rate of inflation, the world supply of gold and zinc and the
      stability of exchange rates can all cause significant fluctuations in prices.
      Such external economic factors are in turn influenced by changes in
      international investment patterns, monetary systems and political developments.
      The prices of gold and zinc have fluctuated widely in recent years, and future
      price declines could cause some projects to become uneconomic, thereby having
      a
      material adverse effect on the Company’s business and financial condition.




Furthermore,
      reserve calculations and life-of-mine plans using significantly lower gold
      and
      zinc prices could result in material write-downs of the Company’s investment in
      mining properties and increased amortization.




In
      addition to adversely affecting the Company's reserve estimates and its
      financial condition, declining gold and zinc prices could require a reassessment
      of the feasibility of a particular project. Such a reassessment may be the
      result of a management decision or may be required under financing arrangements
      related to a particular project. Even if the project is ultimately determined
      to
      be economically viable, the need to conduct such a reassessment may cause delays
      in the implementation of the project.




**Equity
      Price Risk**




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




**ITEM
              4.**
            **CONTROLS
                AND PROCEDURES**




**Disclosure
      Controls and Procedures**




Disclosure
      controls and procedures are our controls and other procedures that are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Securities Exchange Act of 1934, as amended, is
      recorded, processed, summarized and reported within the time periods specified
      in the Securities and Exchange Commission’s rules and forms. Disclosure controls
      and procedures include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file under the Securities Exchange Act is accumulated and communicated to our
      management, including our principal executive officer and principal 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 and with the participation 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 were
      prepared in accordance with generally accepted accounting principles.
      Accordingly, management believes that the financial statements included in
      this
      report fairly present in all material respects our financial condition, results
      of operations and cash flows for the periods presented.




We
      identified a material weakness for the year ended December 31, 2006. A
      material weakness is a significant deficiency, or combination of significant
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected. In January 2006, a major restructuring and streamlining at the
      corporate office significantly changed the design and structure of the internal
      controls and procedures at the corporate level. We lacked appropriate review
      of
      non-routine or complex accounting matters, related accounting entries, and
      appropriate documentation, disclosure and application of Canadian and U.S.
      GAAP,
      primarily due to a lack of sufficient personnel with a level of technical
      accounting expertise commensurate with our reporting requirements. As of this
      date our management believes this material weakness still exists.




33





Also,
      related to the reduction in staffing at the Montana Tunnels mine in mid October
      2005 and an additional reduction in staffing in early May 2006, at which time
      the mine ceased production operations, our controls at that location are not
      operating as previously designed related to segregation of duties over
      procurement, inventory control and accounting duties. Corporate management
      has
      increased its involvement with day-to-day oversight and management of the
      Montana Tunnels mine and as of December 31, 2006 our management believes the
      change in controls is significant enough to be reported as a material weakness.
      In an effort to address this material weakness, staffing additions were made
      in
      2007 and staffing requirements and other changes in control are being
      evaluated.





We
      intend
      to continue to monitor our internal controls and we will continue to take steps
      to implement improvements or enhancements.





**Changes
      in Internal Control**




We
      made
      accounting staffing additions and redesigned some of our controls and procedures
      during the quarter ended June 30, 2007 at the corporate office and at the
      Montana Tunnels mine to increase segregation of duties and improve internal
      control over financial reporting. We are currently evaluating the effect of
      these changes on our internal control over financial reporting.




**PART
      II** **OTHER
      INFORMATION**




**ITEM
              1.**
            **LEGAL
                PROCEEDINGS**




In
      May
      2006, a purported class action lawsuit was filed in U.S. Federal Court Missoula
      Division of Montana by 14 former employees at our Montana Tunnels mine alleging
      (i) violations of the Worker Adjustment and Retraining Notification Act of
      1988
      (the “WARN Act”) and the Montana Wage Act and (ii) breach of contract. The
      allegations relate to the termination of the employees following the cessation
      of mining in October 2005. Specifically, the plaintiffs allege that we gave
      deficient WARN Act notice and are seeking damages for back pay and benefits.
      We
      believe that the resolution of this matter will not have a material impact
      on
      our financial statements.




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




Item
      1A
      of our Annual Report on Form 10-K for the year ended December 31, 2006 sets
      forth information relating to important risks and uncertainties that could
      materially adversely affect our business, financial condition or results of
      operations. Those risk factors continue to be relevant to understanding our
      business, financial condition and operating results.




**ITEM
              2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**




None.




**ITEM
              3.**
            **DEFAULTS
                UPON SENIOR SECURITIES**




None.




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




The
      2007
      Annual Meeting of Stockholders of Apollo Gold Corporation was held on
      May 16, 2007. The matters voted upon and passed at the meeting were
      (i) the election of the directors listed below, (ii) the ratification
      of the re-appointment of Deloitte & Touche LLP as the Corporation’s
      independent auditors to hold office until the next annual meeting of
      shareholders, (iii) the ratification of the adoption of the Corporation’s
      shareholder rights plan and (iv) the approval of certain amendments to the
      Company’s stock option plan.





At
      the
      meeting, the slate of directors nominated by management-consisting of Robert
      W.
      Babensee, Marvin K. Kaiser, G. Michael Hobart, R. David Russell, Charles E.
      Stott, David W. Peat and W.S. (Steve) Vaughan-was elected. Each director was
      elected to serve until the next annual meeting or until his successor is
      appointed, unless his office is earlier vacated in accordance with the Business
      Corporation’s Act (Yukon Territory), and the By-laws of the Corporation.




34





The
      board
      of directors recommended the re-appointment of Deloitte & Touche LLP,
      Chartered Accountants, of Vancouver, British Columbia, the independent auditors
      of the Company since 2002, as the auditors of the Corporation to hold office
      until the close of the next annual meeting of the shareholders. The shareholders
      voted in favor of this recommendation.





The
      shareholders voted in favor of a resolution to approve, ratify and confirm
      the
      adoption of the shareholder rights plan agreement (the “Rights Plan”) dated as
      of January 17, 2007 between the Corporation and CIBC Mellon Trust Company.
      The
      Rights Plan was adopted to ensure the fair treatment of shareholders in
      connection with any take-over bid for Common Shares of the
      Corporation.





The
      shareholders voted in favor of the amended Stock Option Plan. Added to the
      Stock
      Option Plan was an amendment provision which sets out those circumstances where
      the board of directors may not, without the approval of the holder’s of the
      Corporation’s common shares, make amendments to the Stock Option
      Plan.




The
      results of the voting on those matters are outlined in the following
      table:




**Broker****Votes
                Against/**
            
            **Votes**
            
            **Non-****Proposal**
            
            **Votes
                for**
            
            **Withheld**
            
            **Abstained**
            
            **Votes**(i) Election
                of Management’s Slate of Directors:Charles
                E. Stott
            
            
            101,564,808
            
            
            3,884,866
            
            
            —
            
            
            —R.
                David Russell
            
            
            101,514,311
            
            
            3,935,363
            
            
            —
            
            
            —W.S.
                (Steve) Vaughan
            
            
            101,526,222
            
            
            3,923,452
            
            
            —
            
            
            —G.
                Michael Hobart
            
            
            101,351,870
            
            
            4,098,114
            
            
            —
            
            
            —Robert
                W. Babensee
            
            
            101,509,119
            
            
            3,940,555
            
            
            —
            
            
            —Marvin
                K. Kaiser
            
            
            101,323,556
            
            
            4,126,118
            
            
            —
            
            
            —David
                W. Peat
            
            
            101,333,741
            
            
            4,115,933
            
            
            —
            
            
            —(ii) Ratification
                of Deloitte & Touche LLP
            
            
            101,945,851
            
            
            3,500,801
            **(1)**
            
            —
            
            
            —(iii) Approval
                of Shareholder Rights Plan
            
            
            46,100,181
            
            
            21,730,849
            **(1)**
            
            —
            
            
            —(iv) Approval
                of Stock Option Plan, as amended
            
            
            41,697,591
            
            
            26,133,529
            **(1)**
            
            —
            
            
            —




**(1)**
            
            Based
                on the records of the Company’s scrutineer for the meeting, this number
                may include votes abstained and/or broker
                non-votes.




**ITEM
              5.**
            **OTHER
                INFORMATION**




None.




**ITEM
              6.**
            **EXHIBITS**




**Exhibit
                No.**
            
            **Title
                of Exhibit**31.1
            
            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




35


**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:August
              14, 2007
            
            /s/
              R.
              DAVID RUSSELLR.
                David Russell, President andChief
                Executive Officer


Date:August
                14, 2007
              
              /s/
                MELVYN WILLIAMSMelvyn
                    Williams,Chief
                    Financial Officer and Senior Vice President Financeand Corporate
                    Development
 36


**Index
      to Exhibits**





**Exhibit
                No.**
            
            **Title
                of Exhibit**31.1
            
            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




37