**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 March 31, 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
      May 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 March 31, 2007 and as of
                December 31, 2006
            
            5Condensed
                Consolidated Statements of Operations and Comprehensive Loss for
                the Three
                Months Ended March 31, 2007 and 2006
            
            6Condensed
                Consolidated Statements of Shareholders’ Equity for the Year ended
                December 31, 2006 and the Three Months Ended March 31,
                2007
            
            7Condensed
                Consolidated Statements of Cash Flows for the Three Months Ended
                March 31,
                2007 and 2006
            
            8Notes
                to the Condensed Consolidated Financial Statements
            
            9ITEM
                2.
            
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS
            
            22ITEM
                3.
            
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            28ITEM
                4.
            
            CONTROLS
                AND PROCEDURES
            
            29PART
                II
            
            OTHER
                INFORMATION
            
            30ITEM
                1.
            
            LEGAL
                PROCEEDINGS
            
            30ITEM
                2.
            
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            
            30ITEM
                3.
            
            DEFAULTS
                UPON SENIOR SECURITIES
            
            30ITEM
                4.
            
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            30ITEM
                5.
            
            OTHER
                INFORMATION
            
            30ITEM
                6.
            
            EXHIBITS
            
            30INDEX
                TO EXHIBITS
            
            32Certification
                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 underground reserve and 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 expenditure
                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 recovery or production problems; changes in mining and milling
      costs; operational problems at our mining property; metallurgy, processing,
      access, availability of materials, equipment, supplies and water; determination
      of reserves; changes in project parameters; costs and timing of development
      of
      new reserves; results of current and future exploration activities; results
      of
      pending and future feasibility studies; joint venture relationships; political
      or economic instability, either globally or in the countries in which we
      operate; local and community impacts and issues; timing of receipt of government
      approvals; accidents and labor disputes; environmental costs and risks;
      competitive factors, including competition for property acquisitions;
      availability of external financing 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 classifications have been
      made to the prior period financial statements to conform with the current period
      presentation.




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




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




**NON-GAAP
      FINANCIAL INFORMATION**




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)





**March
                31,**
              **2007**
            
            **December
                31,**
              **2006****ASSETS**CURRENTCash
                and cash equivalents
            
            $
            7,489
            
            $
            4,512Accounts
                receivable and other
            
            
            1,389
            
            
            728Note
                receivable (Note 4)
            
            
            -
            
            
            1,865Prepaids
            
            
            272
            
            
            301Inventories
            
            
            1,241
            
            
            660Total
                current assets
            
            
            10,391
            
            
            8,066Property,
                plant and equipment
            
            
            41,538
            
            
            38,868Deferred
                stripping costs (Note 3)
            
            
            2,149
            
            
            -Restricted
                certificates of deposit
            
            
            4,998
            
            
            4,605Deferred
                financing costs
            
            
            -
            
            
            265TOTAL
                ASSETS
            
            $
            59,076
            
            $
            51,804**LIABILITIES**CURRENTAccounts
                payable
            
            $
            2,489
            
            $
            1,710Accrued
                liabilities
            
            
            2,519
            
            
            1,254Notes
                payable
            
            
            1,756
            
            
            671Property
                and mining taxes payable
            
            
            379
            
            
            442Convertible
                debentures
            
            
            7,959
            
            
            7,660Total
                current liabilities
            
            
            15,102
            
            
            11,737Accrued
                severance
            
            
            -
            
            
            370Notes
                payable
            
            
            413
            
            
            569Convertible
                debentures (Note 5)
            
            
            3,418
            
            
            -Accrued
                site closure costs
            
            
            7,268
            
            
            7,135Deferred
                gain (Note 4)
            
            
            3,679
            
            
            3,750TOTAL
                LIABILITIES
            
            
            29,880
            
            
            23,561Continuing
                operations (Note 1)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 6)
            
            
            159,665
            
            
            159,029Equity
                component of convertible debentures
            
            
            4,101
            
            
            1,809Note
                warrants
            
            
            3,334
            
            
            1,062Contributed
                surplus
            
            
            11,831
            
            
            11,166Deficit
            
            
            (149,735
            )
            
            (144,823
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            29,196
            
            
            28,243TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            59,076
            
            $
            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
      LOSS**


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


(Unaudited)





**Three
                months ended**
              **March
                31,****2007**
            
            **2006**Revenue
                from sale of minerals
            
            $
            2,890
            
            $
            6,138Operating
                expensesDirect
                operating costs
            
            
            3,063
            
            
            7,158Depreciation
                and amortization
            
            
            250
            
            
            581General
                and administrative expenses
            
            
            1,140
            
            
            1,224Accretion
                expense - accrued site closure costs
            
            
            127
            
            
            237Amortization
                of deferred gain
            
            
            (71
            )
            
            -Exploration
                and business development
            
            
            1,552
            
            
            351Loss
                on sale of property, plant and equipment
            
            
            -
            
            
            76,061
            
            
            9,558Operating
                loss
            
            
            (3,171
            )
            
            (3,420
            )Other
                income (expenses)Interest
                income
            
            
            188
            
            
            66Interest
                expense (Note 7)
            
            
            (1,145
            )
            
            (600
            )Financing
                costs
            
            
            (480
            )
            
            -Foreign
                exchange loss and other
            
            
            (39
            )
            
            1Loss
                from continuing operations for the period
            
            
            (4,647
            )
            
            (3,953
            )Loss
                from discontinued operations for the period
            
            
            -
            
            
            (250
            )Net
                loss and comprehensive loss for the period
            
            $
            (4,647
            )
            $
            (4,203
            )Basic
                and diluted net loss per share from:Continuing
                operations
            
            $
            (0.03
            )
            $
            (0.04
            )Discontinued
                operations
            
            
            -
            
            
            -$
            (0.03
            )
            $
            (0.04
            )Basic
                and diluted weighted-average number of shares outstanding
            
            
            142,672,545
            
            
            116,555,263




**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****Number**
              **of
                Shares**
            
            **Amount**
            
            **Equity
                  Component of**
                  **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
            
            
            86
            
            
            -
            
            
            (20
            )
            
            -
            
            
            -
            
            
            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
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            198
            
            
            -
            
            
            198Net
                loss and comprehensive loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,647
            )
            
            (4,647
            )Balance,
                March 31, 2007
            
            
            143,467,186
            
            $
            159,665
            
            $
            4,101
            
            $
            3,334
            
            $
            11,831
            
            $
            (149,735
            )
            $
            29,196




**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**
              **March
                31,****2007**
            
            **2006**Operating
                activitiesNet
                loss for the period
            
            $
            (4,647
            )
            $
            (4,203
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            250
            
            
            581Amortization
                of deferred stripping costs
            
            
            103
            
            
            -Amortization
                of deferred financing costs
            
            
            -
            
            
            80Financing
                costs
            
            
            174
            
            
            -Loss
                from discontinued operations
            
            
            -
            
            
            250Reduction
                in exercise price of Note Warrants
            
            
            -
            
            
            305Stock-based
                compensation
            
            
            198
            
            
            108Shares
                issued for services and settlement of claims
            
            
            550
            
            
            -Accretion
                expense - accrued site closure costs
            
            
            127
            
            
            237Accretion
                expense - convertible debenture
            
            
            532
            
            
            246Loss
                on sale of property, plant and equipment and other
            
            
            -
            
            
            20Amortization
                of deferred gain
            
            
            (71
            )
            
            -Net
                change in non-cash operating working capital items (Note
                10)
            
            
            398
            
            
            (1,875
            )Discontinued
                operations
            
            
            -
            
            
            (250
            )Net
                cash used in operating activities
            
            
            (2,386
            )
            
            (4,501
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            
            (2,875
            )
            
            (3,445
            )Deferred
                stripping costs
            
            
            (2,252
            )
            
            -Proceeds
                from disposal of property, plant and equipment
            
            
            -
            
            
            90Restricted
                certificate of deposit and other assets
            
            
            (393
            )
            
            10,553Net
                cash (used in) provided by investing activities
            
            
            (5,520
            )
            
            7,198Financing
                activitiesProceeds
                on issuance of convertible debentures and note warrants,
                net
            
            
            8,062
            
            
            3,488Proceeds
                from exercise of warrants
            
            
            66
            
            
            -Proceeds
                from notes payable
            
            
            1,250
            
            
            -Payments
                of notes payable
            
            
            (360
            )
            
            (357
            )Notes
                receivable from Elkhorn Tunnels, LLC
            
            
            1,865
            
            
            -Net
                cash provided by financing activities
            
            
            10,883
            
            
            3,131Net
                increase in cash and cash equivalents
            
            
            2,977
            
            
            5,828Cash
                and cash equivalents, beginning of period
            
            
            4,512
            
            
            127Cash
                and cash equivalents, end of period
            
            $
            7,489
            
            $
            5,955SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            335
            
            $
            275Income
                taxes paid
            
            $
            -
            
            $
            -




Non-cash
        investing and financing activities




During
      the three months ended March 31, 2007, property, plant and equipment totaling
      $39 was acquired via issuance of a promissory note.




The
          Company issued agent’s compensation warrants with a value of $294 for services
          rendered in connection with the issuance of the 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**


**Three
      month period ended March 31, 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 and funding from
      joint
      venture partners (Note 4). The Company’s ability to continue as a going concern
      is dependent on its ability to generate cash flow from the Montana Tunnels
      joint
      venture and/or continue to issue debt and equity securities.




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




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




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




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




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




***(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 current
      period presentation.




***(b)*** At
      March
      31, 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.




9




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


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




***(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
      months ended March 31, 2007, the Company capitalized $2.3 million in deferred
      stripping costs and recorded amortization thereon in the amount of $0.1 million.
      Deferred stripping costs are amortized using the units-of-production method
      over
      the expected life of the operation based on the estimated recoverable gold
      equivalent ounces.




***(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. 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
      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
      Section 1530 had no impact on the Company.




10




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Condensed Consolidated Financial Statements**
 **Three
          month period ended March 31, 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
      12% interest distribution (reduced to 10% 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 $0.1 million for the three months ended
      March 31, 2007.




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




**March
                31,**
              **2007**
            
            **December
                31,**
              **2006**CurrentCash
                and cash equivalents
            
            $
            60
            
            $
            (64
            )Accounts
                receivable and other
            
            
            1,005
            
            
            21Note
                receivable
            
            
            -
            
            
            1,865Inventories
            
            
            1,241
            
            
            660Prepaids
            
            
            92
            
            
            242,398
            
            
            2,506Property,
                plant and equipment
            
            
            7,054
            
            
            7,151Deferred
                stripping costs
            
            
            2,149
            
            
            -Restricted
                certificates of deposit
            
            
            3,817
            
            
            3,430Total
                assets
            
            $
            15,418
            
            $
            13,087CurrentAccounts
                payable
            
            $
            824
            
            $
            216Accrued
                liabilities
            
            
            1,234
            
            
            669Notes
                payable
            
            
            1,693
            
            
            496Property
                and mining taxes payable
            
            
            374
            
            
            4384,125
            
            
            1,819Notes
                payable
            
            
            376
            
            
            527Accrued
                site closure costs
            
            
            6,242
            
            
            6,127Total
                liabilities
            
            $
            10,743
            
            $
            8,473




11




**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Condensed Consolidated Financial Statements**
 **Three
          month period ended March 31, 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
      (“Debentures”) with each $1,000 of principal amount of Debentures including
      2,000 common share purchase warrants (“Note Warrants”) (Note 6(b)(i)). The
      Debentures mature on February 23, 2009 and bear interest at a rate of 12% per
      annum during the first year and 18% per annum during the second year, payable
      annually beginning on February 23, 2008. The Note Warrants have an exercise
      price of $0.50 per common share and have a term of two years from the date
      of
      grant.




The
      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.




On
      the
      date of issuance, the gross proceeds in the amount of $8.6 million has been
      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 Note Warrants ($2.7 million). The
      $3.2 million fair value of the Debentures is classified as a liability, while
      the $5.4 million allocated to the Conversion Option and the Note Warrants has
      been classified as separate components within shareholders’ equity.




Over
      the
      two-year term, the 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 months ended March 31, 2007, the Company recorded
      accretion expense of $0.2 million related to the Debentures.




In
      addition to the Note Warrants, the agents were granted 1,201,200 compensation
      warrants with the same terms and conditions as the Note 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 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.
      Debenture financing costs are expensed as incurred.




The
      fair
      values of the Conversion Option, the Note 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.




**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.




12





**APOLLO
          GOLD CORPORATION**
 **Notes
          to the Condensed Consolidated Financial Statements**
 **Three
          month period ended March 31, 2007**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


6.
            **SHARE
                CAPITAL (continued)**




***(b)***
            Warrants




The
      following summarizes outstanding warrants as at March 31, 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$June
                30, 2005
            
            
            1,250,000
            
            
            1,250,000
            
            
            0.40
            
            
            June
                30, 2007January
                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, 20084,361,111
            
            
            4,361,11138,119,288
            
            
            38,119,288





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





In
      addition, 166,666 broker compensation warrants were issued and were immediately
      exercisable on October 30, 2006. Each broker compensation warrant is exercisable
      at Cdn$0.45 for two years into one common share of the Company and one-half
      of
      one share purchase warrant, with each whole share purchase warrant exercisable
      into one common share of the Company at Cdn$1.00 per common share through
      October 30, 2007 and at Cdn$1.15 through October 30, 2008. The broker
      compensation warrants expire on October 30, 2008.




***(c)***
            Options




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




**Fixed
                Stock Options**
            
            **Performance-based**
              **Stock
                Options****Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Balances,
                December 31, 2006
            
            
            3,052,900
            
            $
            1.06
            
            
            1,230,852
            
            $
            0.80Options
                granted
            
            
            3,142,114
            
            
            0.57
            
            
            -
            
            
            -Options
                forfeited
            
            
            (30,400
            )
            
            1.06
            
            
            -
            
            
            -Balances,
                March 31, 2007
            
            
            6,164,614
            
            $
            0.81
            
            
            1,230,852
            
            $
            0.80





13




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


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





*(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 March 31, 2007, an
      aggregate of 5,975,072 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 March 31, 2007:




**Options
                Outstanding**
            
            **Options
                Exercisable****Number**
              **Outstanding**
            
            **Expiry
                Date**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**
            
            **Weighted
                Average**
              **Remaining
                Contractual Life (in years****)**
            
            **Number**
              **Exercisable**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**678,800
            
            
            February
                18, 2013
            
            $
            2.24
            
            
            5.9
            
            
            678,800
            
            $
            2.24261,000
            
            
            March
                10, 2014
            
            
            2.05
            
            
            6.9
            
            
            261,000
            
            
            2.0525,000
            
            
            May
                19, 2014
            
            
            1.44
            
            
            7.1
            
            
            25,000
            
            
            1.4421,200
            
            
            August
                10, 2014
            
            
            0.95
            
            
            7.4
            
            
            21,200
            
            
            0.951,163,500
            
            
            March
                10, 2015
            
            
            0.65
            
            
            7.9
            
            
            1,163,500
            
            
            0.65100,000
            
            
            August
                4, 2015
            
            
            0.27
            
            
            8.4
            
            
            50,000
            
            
            0.27300,000
            
            
            December
                12, 2015
            
            
            0.20
            
            
            8.7
            
            
            150,000
            
            
            0.20125,000
            
            
            March
                28, 2016
            
            
            0.65
            
            
            9.0
            
            
            125,000
            
            
            0.65200,000
            
            
            May
                23, 2016
            
            
            0.53
            
            
            9.2
            
            
            -
            
            
            -108,000
            
            
            August
                10, 2016
            
            
            0.48
            
            
            9.4
            
            
            -
            
            
            -40,000
            
            
            November
                9, 2016
            
            
            0.32
            
            
            9.6
            
            
            -
            
            
            -3,142,114
            
            
            February
                6, 2017
            
            
            0.57
            
            
            9.9
            
            
            -
            
            
            -6,164,614
            
            
            
            
            $
            0.81
            
            
            8.8
            
            
            2,474,500
            
            $
            1.21





*(ii)*  Performance-based
      stock option plan




As
      of
      March 31, 2007, the 1,230,852 performance-based stock options exercisable at
      $0.80 were fully vested and have an expiry date of June 25, 2007.




***(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:





**Three
                months ended March 31,****2007**
            
            **2006**Risk
                free interest rate
            
            
            4.0
            %
            
            4.1
            %Dividend
                yield
            
            
            0
            %
            
            0
            %Volatility
            
            
            71
            %
            
            91
            %Expected
                life in years
            
            
            6
            
            
            5Weighted
                average grant-date fair value of stock options
            
            $
            0.38
            
            $
            0.47




14


**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


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





***(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
      applicable, to explore other alternatives to maximize shareholder value. The
      Rights Plan is not intended to prevent take-over bids that treat shareholders
      fairly.





The
      Rights Plan, adopted and effective in January 2007, will be presented for
      ratification by the shareholders at the Apollo Annual Meeting scheduled for
      May
      16, 2007. If approved by the shareholders, the Rights Plan would expire in
      January 2012.




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




Interest
      expense at March 31, 2007 and March 31, 2006 consists of:




**Three
                months ended**
              **March
                31,****2007**
            
            **2006**Accretion
                on convertible debentures
            
            $
            532
            
            $
            246Interest
                paid on convertible debentures
            
            
            265
            
            
            264Amortization
                of deferred financing costs
            
            
            -
            
            
            80Interest
                related to Montana Tunnels joint venture agreement (Note
                4)
            
            
            278
            
            
            -Capital
                leases and other
            
            
            70
            
            
            10$
            1,145
            
            $
            600





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




The
      Company did not record a recovery for income taxes for the period ended March
      31, 2007 as the net loss carry forwards are fully offset by a valuation
      allowance.





**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 it
      has meritorious defenses in this suit and is vigorously defending itself against
      these claims.




15




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**10.**
            **CHANGE
                  IN NON-CASH OPERATING WORKING CAPITAL
                  ITEMS**




Net
      changes in non-cash operating working capital items for the three months ended
      March 31 are:




**Three
                months ended**
              **March
                31,****2007**
            
            **2006**(Increase)
                decrease in:Accounts
                receivable and other
            
            $
            (661
            )
            $
            1,262Prepaids
            
            
            29
            
            
            229Inventories
            
            
            (581
            )
            
            (43
            )Increase
                (decrease) in:Accounts
                payable
            
            
            779
            
            
            (3,860
            )Accrued
                liabilities
            
            
            895
            
            
            577Property
                and mining taxes payable
            
            
            (63
            )
            
            (40
            )$
            398
            
            $
            (1,875
            )





**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 March 31, 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 are primarily
      those of the Diamond Hill mine. The accounting policies for these segments
      are
      the same as those followed by the Company as a whole.




Amounts
      as at March 31, 2007 are as follows:




**Montana
                Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            60
            
            $
            19
            
            $
            7,410
            
            $
            7,489Other
                non-cash current assets
            
            
            2,349
            
            
            107
            
            
            446
            
            
            2,9022,409
            
            
            126
            
            
            7,856
            
            
            10,391Property,
                plant and equipment
            
            
            7,062
            
            
            31,301
            
            
            3,175
            
            
            41,538Deferred
                stripping costs
            
            
            2,149
            
            
            -
            
            
            -
            
            
            2,149Restricted
                certificates of deposit
            
            
            4,440
            
            
            558
            
            
            -
            
            
            4,998Total
                assets
            
            $
            16,060
            
            $
            31,985
            
            $
            11,031
            
            $
            59,076Current
                liabilities and convertible debenture
            
            $
            4,130
            
            $
            170
            
            $
            10,802
            
            $
            15,102Notes
                payable
            
            
            376
            
            
            37
            
            
            -
            
            
            413Convertible
                debenture
            
            
            -
            
            
            -
            
            
            3,418
            
            
            3,418Accrued
                site closure costs
            
            
            6,887
            
            
            381
            
            
            -
            
            
            7,268Deferred
                gain
            
            
            3,679
            
            
            -
            
            
            -
            
            
            3,679Total
                liabilities
            
            $
            15,072
            
            $
            588
            
            $
            14,220
            
            $
            29,880





16




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


11.
            **SEGMENTED
                INFORMATION (continued)**





Amounts
      as at December 31, 2006 are as follows:





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




Amounts
      for the three month periods ended March 31, 2007 and 2006, respectively, are
      as
      follows:




**Three
                months ended March 31, 2007****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            2,890
            
            $
            -
            
            $
            -
            
            $
            2,890Direct
                operating costs
            
            
            3,063
            
            
            -
            
            
            -
            
            
            3,063Depreciation
                and amortization
            
            
            224
            
            
            -
            
            
            26
            
            
            250General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            1,140
            
            
            1,140Accretion
                expense - accrued site closure costs
            
            
            127
            
            
            -
            
            
            -
            
            
            127Amortization
                of deferred gain
            
            
            (71
            )
            
            -
            
            
            -
            
            
            (71
            )Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            1,552
            
            
            1,5523,343
            
            
            -
            
            
            2,718
            
            
            6,061Operating
                loss
            
            
            (453
            )
            
            -
            
            
            (2,718
            )
            
            (3,171
            )Interest
                income
            
            
            45
            
            
            -
            
            
            143
            
            
            188Interest
                expense
            
            
            (348
            )
            
            -
            
            
            (797
            )
            
            (1,145
            )Financing
                costs
            
            
            -
            
            
            -
            
            
            (480
            )
            
            (480
            )Foreign
                exchange gain and other
            
            
            -
            
            
            -
            
            
            (39
            )
            
            (39
            )Loss
                from continuing operations
            
            $
            (756
            )
            $
            -
            
            $
            (3,891
            )
            $
            (4,647
            )Investing
                activitiesProperty,
                plant and equipment expenditures and deferred stripping
                expenditures
            
            $
            2,379
            
            $
            840
            
            $
            1,947
            
            $
            5,166





17




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)
  **11.**
              **SEGMENTED
                  INFORMATION (continued)**


**Three
                months ended March 31, 2006****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            6,138
            
            $
            -
            
            $
            -
            
            $
            6,138Direct
                operating costs
            
            
            7,158
            
            
            -
            
            
            -
            
            
            7,158Depreciation
                and amortization
            
            
            550
            
            
            -
            
            
            31
            
            
            581General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            1,224
            
            
            1,224Accretion
                expense - accrued site closure costs
            
            
            237
            
            
            -
            
            
            -
            
            
            237Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            358
            
            
            3587,945
            
            
            -
            
            
            1,613
            
            
            9,558Operating
                loss
            
            
            (1,807
            )
            
            -
            
            
            (1,613
            )
            
            (3,420
            )Interest
                income
            
            
            51
            
            
            -
            
            
            15
            
            
            66Interest
                expense
            
            
            (9
            )
            
            -
            
            
            (591
            )
            
            (600
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            1
            
            
            1Loss
                from continuing operations
            
            $
            (1,765
            )
            $
            -
            
            $
            (2,188
            )
            $
            (3,953
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            -
            
            $
            3,445
            
            $
            -
            
            $
            3,445




**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 U.S. Securities and Exchange
      Commission for the three months ended March 31, 2007 and 2006.




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




**March
                31, 2007**
            
            **December
                31,**
              **2006****Total
                assets in accordance with Canadian GAAP**
            
            **$**
            **59,076**
            
            **$**
            **51,804**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)(ii)
            
            
            (1,994
            )
            
            (2,038
            )Deferred
                stripping costs (a)(iii)
            
            
            (2,149
            )
            
            -Black
                Fox development costs(b)
            
            
            (23,032
            )
            
            (22,354
            )Convertible
                debentures(c)
            
            
            1,099
            
            
            103Equity
                accounting for investment in Montana Tunnels joint
                venture(a)(i)
            
            
            (10,743
            )
            
            (8,473
            )**Total
                assets in accordance with U.S. GAAP**
            
            **$**
            **22,257**
            
            **$**
            **19,042**




**Total
                liabilities in accordance with Canadian GAAP**
            
            **$**
            **29,880**
            
            **$**
            **23,561**Convertible
                debentures (c)
            
            
            3,223
            
            
            764Equity
                accounting for investment in Montana Tunnels joint
                venture(a)(i)
            
            
            (10,743
            )
            
            (8,473
            )Deferred
                gain(a)(i)
            
            
            (3,679
            )
            
            (3,750
            )**Total
                liabilities in accordance with U.S. GAAP**
            
            **$**
            **18,681**
            
            **$**
            **12,102**





18




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)





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




**March
                  31, 2007**
            
            
            **December
                  31,**
                **2006****Total
                shareholders’ equity in accordance with Canadian
                GAAP**
            
            **$**
            **29,196**
            
            **$**
            **28,243**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)(ii)
            
            
            (1,994
            )
            
            (2,038
            )Deferred
                stripping costs (a)(iii)
            
            
            (2,149
            )
            
            -Black
                Fox development costs(b)
            
            
            (23,032
            )
            
            (22,354
            )Convertible
                debentures(c)
            
            
            (2,124
            )
            
            (661
            )Deferred
                gain(a)(i)
            
            
            3,679
            
            
            3,750**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **3,576**
            
            **$**
            **6,940**




**Total
                shareholders’ equity and liabilities in accordance with U.S.
                GAAP**
            
            **$**
            **22,257**
            
            **$**
            **19,042**





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





**March
                31, 2007**
            
            **December
                31,**
              **2006**Share
                capital
            
            $
            159,426
            
            $
            158,790Note
                warrants
            
            
            3,334
            
            
            1,062Contributed
                surplus
            
            
            38,512
            
            
            31,964Deficit
            
            
            (197,696
            )
            
            (184,876
            )**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **3,576**
            
            **$**
            **6,940**





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




**2007**
            
            **2006**Loss
                from continuing operations for the period ended March 31,based
                on Canadian GAAP
            
            $
            (4,647
            )
            $
            (3,953
            )Change
                in depreciation of property, plant and equipment (a)(ii)
            
            
            44
            
            
            131Capitalized
                deferred stripping costs and amortization (a)(iii)
            
            
            (2,149
            )
            
            -Black
                Fox development costs (b)
            
            
            (678
            )
            
            (862
            )Convertible
                debentures (c)
            
            
            (5,053
            )
            
            142Amortization
                of deferred gain (a)(i)
            
            
            (71
            )
            
            -Loss
                from continuing operations for the period based on U.S.
                GAAP
            
            
            (12,555
            )
            
            (4,542
            )Loss
                from discontinued operations for the period based on Canadian
                GAAP
            
            
            -
            
            
            (250
            )Loss
                from discontinued operations for the period based on U.S.
                GAAP
            
            
            -
            
            
            (250
            )Net
                loss and comprehensive loss for the year based on U.S.
                GAAP
            
            $
            (12,555
            )
            $
            (4,792
            )Basic
                and diluted loss per share in accordance with U.S. GAAP:Continuing
                operations
            
            $
            (0.09
            )
            $
            (0.04
            )Discontinued
                operations
            
            
            -
            
            
            -Net
                loss per share - U.S. GAAP basic and diluted
            
            $
            (0.09
            )
            $
            (0.04
            )





19


**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Three
        month period ended March 31, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


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





***(a)***
            Montana
                Tunnels




*(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
      in MTM into the joint venture was included in the net loss for the year ended
      December 31, 2006; whereas under Canadian GAAP it was deferred and is recognized
      as an adjustment to net 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. In 2002, under U.S. GAAP,
      write-downs were determined using current proven and probable reserves.
      Accordingly, for U.S. GAAP purposes, an impairment of property, plant and
      equipment and an adjustment to the related depreciation has been
      recorded.




*(iii)*  Deferred
      stripping costs




Under
      Canadian GAAP, stripping costs that represent a betterment to the mineral
      property are capitalized and amortized using the units-of-production method
      over
      the expected life of the 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 $23.0 million has been recorded as at March 31, 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.




20
 
 **APOLLO
          GOLD CORPORATION**
 **Notes
          to the Condensed Consolidated Financial Statements**
 **Three
          month period ended March 31, 2007**
 (Stated
          in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


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




*(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
      and amortized.




***(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 months ended March 31, 2007 would reflect
      a decrease in cash used in investing activities of $0.7 million and for the
      three months ended March 31, 2006 an increase of $0.9 million in cash provided
      by investing activities, 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 months ended March 31, 2007 would reflect a decrease in
      cash
      used in investing activities of $2.3 million and a corresponding increase in
      cash used in 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 three months ended March 31, 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.





21


**ITEM
              2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**




**All
      Dollar amounts are expressed in United States Dollars**




The
      following discussion and analysis should be read in conjunction with the
      accompanying consolidated financial statements and related notes. The financial
      statements have been prepared in accordance with 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 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 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.




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




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




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





The
      Rights Plan, adopted and effective in January 2007, will be presented for
      ratification by the shareholders at the Apollo Annual Meeting expected to be
      held in May 2007. If approved by the shareholders, the Rights Plan would expire
      in January 2012.




On
      February 23, 2007, the Company completed a private placement of $8.6 million
      aggregate principal amount of 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.




22




**Montana
      Tunnels**





At
      the
      Montana Tunnels mine the open pit remediation program, which began in September
      2006, was completed in late January 2007 when the new ramp system reached the
      bottom of the pit. Upon reaching the bottom of the pit, an additional amount
      of
      material was removed from the pit bottom to ensure good access to the ore body
      for the commencement of mill production.




Mill
      personnel were hired during late 2006 and early 2007 in preparation for the
      commencement of production which occurred on March 1, 2007. At the time
      production commenced, a stockpile of 380,000 tons of ore had been built up
      in
      front of the mill which would allow mill production, and therefore metal
      production, to continue if mining activity were temporarily
      interrupted.





The
      remediation program, which lasted from September 2006 to the end of 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., our smelter contractor.





During
      the first quarter 2007, approximately 3,900,000 tons were mined, of which
      685,000 tons were ore. The mill processed 382,000 tons of ore at an average
      throughput of 12,300 tons per day for the month and payable production was
      2,300
      ounces of gold, 125,000 ounces of silver, 650,000 lbs of lead and 1,850,000
      lbs
      of zinc. Apollo’s share of this production was 50%.





In
      2007,
      we plan to run the mill at a daily production rate of 14,600 tons per day.
      During March, the daily throughput of ore rose from 11,000 tons per day during
      the first week up to the planned level of 14,600 during the last week of the
      month. We anticipate that during the second quarter of 2007 we will achieve
      the
      average mill throughput rate at slightly improved grades of ore.





Total
      cash costs for March 2007 on a by-product basis were minus $270 per ounce of
      gold and on a co-product basis they were $418 per ounce of gold, $8.41 per
      ounce
      silver, $0.55 per lb of lead and $0.95 per lb of zinc.





**Black
      Fox**





During
      the first quarter 2007, we entered into a memorandum of understanding with
      the
      Wahgoshig First Nation with regard to our Black Fox Project which establishes
      the foundation for a positive and mutually beneficial relationship covering
      the
      development and production at the property. Wahgoshig First Nation asserts
      treaty and aboriginal rights to the land on which our Black Fox Project is
      located.





In
      addition, during the first quarter 2007, our third party consultant, SRK
      Consulting, Inc., continued working on a new resource statement which we expect
      will contain an underground reserve. We anticipate that it will be completed
      during the second quarter of 2007 and be followed up six months later by a
      feasibility study.





**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 kilometers mining concessions known as
      Huizopa.




23


**Production
      & Metals Price Averages**




The
      table
      below summarizes our share of production of gold, silver and other metals,
      as
      well as average metal prices and other key statistics, for each period
      indicated:




**Three
                months ended**
              **March
                31,**
              **2007
                (1)(2)**
            
            **Three
                months ended**
              **March
                 31,**
              **2006
                (3)****Production:**Gold
                (ounces)
            
            
            1,161
            
            
            3,213Silver
                (ounces)
            
            
            24,189
            
            
            61,109Lead
                (pounds)
            
            
            503,977
            
            
            870,325Zinc
                (pounds)
            
            
            925,015
            
            
            2,270,967Total
                revenue ($millions)
            
            $
            2.9
            
            $
            6.1**Total
                cash and production costs on a by-product basis:**Total
                cash costs per ounce of gold
            
            $
            (270
            )
            $
            932Total
                production costs per ounce of gold
            
            $
            (174
            )
            $
            1,036**Total
                cash costs on a co-product basis:**Total
                cash costs per ounce of gold
            
            $
            418
            
            $
            730Total
                cash costs per ounce of silver
            
            $
            8.41
            
            $
            13.59Total
                cash costs per pound of lead
            
            $
            0.55
            
            $
            0.72Total
                cash costs per pound of zinc
            
            $
            0.95
            
            $
            1.46**Average
                metal prices:**Gold
                - London bullion mkt. ($/ounce)
            
            $
            656
            
            $
            554Silver
                - London bullion mkt. ($/ounce)
            
            $
            13.18
            
            $
            10.38Lead
                - LME ($/pound)
            
            $
            0.81
            
            $
            0.56Zinc
                - LME ($/pound)
            
            $
            1.57
            
            $
            1.02





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




**($
                in thousands)**
            
            **One
                month**
              **ended**
              **March
                31,**
              **2007
                (1)(2)**
            
            **Three
                months ended**
              **March
                31,**
              **2006
                (3)**Gold
                ounces sold
            
            
            1,161
            
            
            3,213Direct
                operating costs
            
            $
            1,816
            
            $
            7,107Less:Mining
                taxes, royalty expenses
            
            
            85
            
            
            226By-product
                credits
            
            
            2,129
            
            
            4,113Cash
                operating cost
            
            
            (398
            )
            
            2,768Cash
                operating cost per ounce of gold
            
            **$**
            **(343**
            **)**
            **$**
            **862**Cash
                operating costs
            
            
            (398
            )
            
            2,768Add:Mining
                taxes, royalty expenses
            
            
            85
            
            
            226Total
                cash costs
            
            
            (313
            )
            
            2,994Total
                cash cost per ounce of gold
            
            **$**
            **(270**
            **)**
            **$**
            **932**Total
                cash costs
            
            
            (313
            )
            
            2,994Add:Depreciation
                & amortization (operations only)
            
            
            111
            
            
            333Total
                production costs
            
            
            (202
            )
            
            3,327Total
                production cost per ounce of gold
            
            **$**
            **(174**
            **)**
            **$**
            **1,036**





**(1)**
            Production
                in the first quarter of 2007 only includes the month of March as
                milling
                was restarted on March 1, 2007 after being shut down since May of
                2006.


**(2)**
            Effective
                December 31, 2006, the Mine is a 50/50 joint venture; therefore,
                production and costs shown in the tables above represents Apollo’s 50%
                share of the joint venture.


**(3)**
            The
                results shown for the three months ended March 31, 2006 reflect Apollo’s
                100% ownership of the Mine during that
                period.




24




**MATERIAL
      CHANGES IN RESULTS OF OPERATIONS**




*Three
      Months Ended March 31, 2007 Compared to the Three Months Ended March 31,
      2006*




**Revenue
      from the Sale of Minerals.**




Revenue
      for the three months ended March 31, 2007  decreased
      53% to $2.9 million from $6.1 million for the same period in 2006. The decrease
      in revenue is due to production being restarted 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 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 three months ended March 31, 2007 decreased 57% to
      $3.1 million from $7.2 million for the three months ended March 31, 2006. The
      decrease in costs is a result of production being restarted 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 Apollo’s share of the direct operating costs
      is 50%.




*Depreciation
      and Amortization.* Depreciation and amortization expenses were $0.3 million and $0.6 million for
      the three months ended March 31, 2007 and 2006, respectively. Effective December
      31, 2006, the Mine is a 50/50 joint venture, and Apollo’s share of the Mine’s
      depreciation is 50%.




*General
      and Administrative Expenses.* General
      and administrative expenses were $1.1 million and $1.2 million for the three
      months ended March 31, 2007 and 2006, respectively.




*Accretion
      Expense - Accrued Site Closure Costs.* Accrued
      accretion expense was $0.1 million for the three months ended March 31, 2007
      compared to $0.2 million for the same period in 2006.





*Amortization
      of Deferred Gain.* Amortization
      of deferred gain relating to the transfer of assets and liabilities to Montana
      Tunnels joint venture was $0.1 million for the three months ended March 31,
      2007
      compared to nil for the same period in 2006.





*Exploration
      and Business Development Expense.* Expenses
      for exploration and development, consisting of drilling and related expenses
      at
      our exploration properties, totaled $1.6 million and $0.4 million for the three
      months ended March 31, 2007 and 2006, respectively. The increase in exploration
      expenses is due to increased activity at the Huizopa property.




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses decreased
      37%
      to $6.1 million for the three months ended March 31, 2007, from $9.6 million
      for
      the three months ended March 31, 2006.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $0.2 million and interest expense of $1.1 million
      during the three months ended March 31, 2007 compared to $0.1 million in
      interest income and $0.6 million in interest expense during the three months
      ended March 31, 2006. The increase in interest expense is due to an increase
      in
      accretion expense of $0.3 million, mostly related to the new convertible
      debenture issued February 2007, and additional interest of $0.3 million related
      to the Montana Tunnels joint venture agreement.




*Financing
      Costs.* Financing
      costs in connection with the convertible debentures issued in February 2007
      were
      $0.5 million during the three months ended March 31, 2007.




25


**Loss
      from Continuing Operations.**




As
      a
      result of the foregoing, the Company incurred a loss from continuing operations
      of $4.6 million, or $0.03 per share, for the three months ended March 31, 2007,
      as compared to a loss of $4.0 million, or $0.04 per share, for the three months
      ended March 31, 2006.




**Loss
      from Discontinued Operations.**




For
      the
      three months ended March 31, 2007, loss from discontinued operations was nil,
      compared to a loss of $0.3 million for the three months ended March 31,
      2006.




**Net
      Loss.**




For
      the
      three months ended March 31, 2007, we incurred a net loss of $4.6 million,
      or
      $0.03 per share, as compared to a net loss of $4.2 million, or $0.04 per share,
      for the three months ended March 31, 2006.




**MATERIAL
      CHANGES IN LIQUIDITY**




To
      date,
      we have funded our operations primarily through issuances of debt and equity
      securities and funding from joint venture partners. At March 31, 2007, we had
      cash of $7.5 million, compared to cash of $4.5 million at December 31, 2006.
      The
      increase in cash since December 31, 2006 is primarily the result of financing
      cash inflows of $10.9 million, offset by operating cash outflows of $2.4 million
      and investing cash outflows of $5.5 million.




During
      the three months ended March 31, 2007, investing activities totaled $5.5
      million. Deferred stripping costs capitalized were $2.3 million. Capital
      expenditures for property plant and equipment of $2.9 million include $0.8
      million for the further development of the Black Fox Project and $1.9 million
      for land payments at our Huizopa Project.  Investing
      activities include $0.4 million for the funding of the Montana Tunnels
      reclamation liability.




During
      the three months ended March 31, 2007, financing activities provided $10.9
      million in cash. On February 23, 2007, we completed a private placement of
      $8.6
      million unsecured convertible debentures (“Debentures”) which had 17.2 million
      share purchase warrants attached. The Debentures are convertible into one common
      share 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 a short-term note with no interest secured by future zinc-gold and
      lead-gold concentrates production. Payments of notes payable accounted for
      a
      cash outflow of $0.4 million.




We
      estimate that with our March 31, 2007 cash balance of $7.5 million and the
      projected cash flows from the joint ventured Montana Tunnels mine, we will
      have
      sufficient funds to finance the current 2007 work programs of $4.5 million
      at
      Black Fox and $2.5 million for exploration at Huizopa, as well as corporate
      overhead. However, we will continue to explore financing opportunities to
      further develop the Black Fox Project and expand our exploration program at
      the
      Huizopa Project, which may include Canadian flow-through financing for use
      at
      the Black Fox Project. The availability, amount, terms and timing of this
      financing are not certain at this time.




Our
      ability to raise capital is highly dependent upon the commercial viability
      of
      our projects and the associated prices of 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 March 31, 2007, we issued convertible debentures with
      an
      aggregate face value of $8.6 million due February 23, 2009. Interest payments
      of
      $1.0 million and $1.5 million on the convertible debenture are due on February
      23, 2008 and 2009, respectively. Additionally, during the three months ended
      March 31, 2007, Montana Tunnels issued a notes payable for cash for $2.5
      million (Apollo’s 50% portion is $1.25 million) which is due in less than one
      year.




26


**MATERIAL
      CHANGES IN OFF BALANCE SHEET ARRANGEMENTS**




None.




**ENVIRONMENTAL**




The
      Company’s current environmental liabilities are at Montana Tunnels and Black
      Fox. As of March 31, 2007, we have accrued $7.3 million related to reclamation,
      an increase of $0.1 million from December 31, 2006. These liabilities are
      covered by a combination of surety bonds, restricted cash and property totaling
      $18.7 million at March 31, 2007. We have accrued the present value of
      management’s estimate of the liability as of March 31, 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 loss and net 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 principals requires management to make a variety of estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities as of the date of the financial
      statements as well as the reported amounts of revenues and expenses during
      the
      reporting periods covered by the financial statements.




For
      other
      critical accounting policies, please refer to those disclosed in our 10-K filing
      for the year ended December 31, 2006 with the exception of the adoption of
      new
      accounting policies described below.


**CHANGES
        IN ACCOUNTING POLICIES**
  a)  At
        March
        31, 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
        months ended March 31, 2007, the Company capitalized $2.3 million in deferred
        stripping costs and recorded amortization thereon in the amount of $0.1 million.
        Deferred stripping costs are amortized using the units-of-production method
        over
        the expected life of the operation based on the estimated recoverable gold
        equivalent ounces.
  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. Handbook Section 1530 also introduces a new component of equity
        referred to as comprehensive income. The Company has adopted these standards
        prospectively.
  27
 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
        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
        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 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.




**Commodity
      Price Risk**




The
      profitability of the Company’s operations will be dependent upon the market
      price of gold. Gold 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 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 price of gold has 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.




28




Furthermore,
      reserve calculations and life-of-mine plans using significantly lower gold
      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 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. Movements in the price of our common shares have been volatile
      in
      the past and may be volatile in the future. As a result, there is a risk that
      we
      may not be able to sell new common shares at an acceptable price should the
      need
      for new equity funding arise.




**ITEM
              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.




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
      2006 and staffing requirements and other changes in control are being evaluated
      as the future operational requirements of the Montana Tunnels mine are being
      determined.





29


We
      plan
      to make staffing additions in the second quarter of 2007 at the corporate office
      and at Montana Tunnels. We intend to continue to monitor our internal controls,
      and if further improvements or enhancements are identified, we will take steps
      to implement such improvements or enhancements.





**Changes
      in Internal Control**




There
      has
      been no change in our internal control over financial reporting during the
      quarter ended March 31, 2007, that has materially affected, or is reasonably
      likely to materially affect, the Corporation’s 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 we have meritorious defenses in this suit and are
      vigorously defending ourselves against these claims.




**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**




None




**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





30


**SIGNATURES**




In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant caused this report to be signed on its behalf by the undersigned
      thereunto duly authorized.




**APOLLO
                GOLD CORPORATION**Date:May
              14, 2007
            
            /s/ R.
              DAVID
              RUSSELLR.
              David Russell, President andChief
              Executive Officer




Date:May
              14, 2007
            
            /s/ MELVYN
              WILLIAMSMelvyn
              Williams,Chief
                Financial Officer and Senior Vice President Finance
              and
                Corporate Development




31


**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
 
 32