**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended June 30, 2006





OR





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


**SECURITIES
      EXCHANGE ACT OF 1934**





Commission
      File Number: 001-31593





**APOLLO
      GOLD CORPORATION**


(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
þ No
o





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





Large
                Accelerated Filer o
            Accelerated
                Filer o
            Non-Accelerated
                Filer þ





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


Yes
o No
þ





At
      August
      4, 2006, there were 121,396,859 common shares of Apollo Gold Corporation
      outstanding.













**TABLE
      OF CONTENTS**





*Page*PART
                IFINANCIAL
                INFORMATION
            
            4ITEM
                1.
            
            FINANCIAL
                STATEMENTS (Unaudited)
            
            4Condensed
                Consolidated Balance Sheets - As of June 30, 2006 and as of
                December 31, 2005
            
            5Condensed
                Consolidated Statements of Operations for the Three and Six Months
                Ended
                June 30, 2006 and 2005
            
            6Condensed
                Consolidated Statements of Shareholders’ Equity for the Year ended
                December 31, 2005 and the Six Months Ended June 30, 2006
            
            7Condensed
                Consolidated Statements of Cash Flows for the Three and Six Months
                Ended
                June 30, 2006 and 2005
            
            8Notes
                to the Condensed Consolidated Financial Statements
            
            9ITEM
                2.
            
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS
            
            23ITEM
                3.
            
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            30ITEM
                4.
            
            CONTROLS
                AND PROCEDURES
            
            31PART
                IIOTHER
                INFORMATION
            
            33ITEM
                1.
            
            LEGAL
                PROCEEDINGS
            
            33ITEM
                1A.
            
            RISK
                FACTORS
            
            33ITEM
                2.
            
            UNREGISTERED
                SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS
            
            33ITEM
                3.
            
            DEFAULTS
                UPON SENIOR SECURITIES
            
            33ITEM
                4.
            
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            33ITEM
                5.
            
            OTHER
                INFORMATION
            
            34ITEM
                6.
            
            EXHIBITS
            
            34INDEX
                TO EXHIBITS
            
            34Certification
                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




**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:




·
            the
                Company’s future focus on Black
                Fox;






2






·
            our
                ability to effectively remediate the east wall instability problems
                at the
                Montana Tunnels mine;




·
            our
                ability to bring the Montana Tunnels mine back into
                production;




·
            future
                financial contributions by Elkhorn Tunnels, LLC, our joint venture
                partner
                in respect of the Montana Tunnels
                mine;




·
            the
                establishment and estimates of mineral reserves and
                resources;




·
            production
                and production costs;




·
            cash
                operating costs;




·
            total
                cash costs;




·
            grade;




·
            feasibility
                studies;




·
            remediation
                efforts;




·
            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;




·
            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:  additional
      operational and remediation problems at the Montana Tunnels mine; the failure
      of
      Elkhorn Tunnels, LLC to make the expected contributions under the joint venture
      in respect of the Montana Tunnels mine;  unexpected
      changes in business and economic conditions; 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; political or economic instability,
      either globally or in the countries in which we operate; local and community
      impacts and issues; timing of receipt of government approvals; accidents and
      labor disputes; environmental costs and risks; competitive factors, including
      competition for property acquisitions; availability of external financing at
      reasonable rates or at all; and the factors discussed in our Annual Report
      on
      Form 10-K for the year ended December 31, 2005 under the heading “Risk Factors.”
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 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, 2005 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.




4




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




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




These
      consolidated financial statements should be read in conjunction with the
      financial statements, accompanying notes and other relevant information included
      in the Company’s Annual Report on Form 10-K for the year ended December 31,
      2005 filed with the Securities and Exchange Commission on March 31,
      2006.




5


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


(In
      thousands of U.S. dollars)


(Unaudited)





**June
                30,**
              **2006**
            
            **December
                31,**
              **2005****ASSETS**CURRENTCash
                and cash equivalents
            
            $
            2,980
            
            $
            127Accounts
                receivable
            
            
            178
            
            
            2,638Prepaids
            
            
            81
            
            
            400Inventories
            
            
            1,564
            
            
            1,708Total
                current assets
            
            
            4,803
            
            
            4,873Property,
                plant and equipment
            
            
            43,754
            
            
            40,045Restricted
                certificates of deposit
            
            
            7,030
            
            
            17,043Deferred
                financing costs
            
            
            425
            
            
            584TOTAL
                ASSETS
            
            $
            56,012
            
            $
            62,545**LIABILITIES**CURRENTAccounts
                payable
            
            $
            1,449
            
            $
            6,802Accrued
                severance and other liabilities
            
            
            1,826
            
            
            1,841Notes
                payable
            
            
            160
            
            
            596Property
                and mining taxes payable
            
            
            963
            
            
            1,172Total
                current liabilities
            
            
            4,398
            
            
            10,411Accrued
                severance
            
            
            370
            
            
            383Notes
                payable
            
            
            62
            
            
            75Convertible
                debenture
            
            
            7,105
            
            
            6,601Accrued
                site closure costs
            
            
            13,470
            
            
            12,634TOTAL
                LIABILITIES
            
            
            25,405
            
            
            30,104Continuing
                operations (Note 1)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 5)
            
            
            152,738
            
            
            148,295Issuable
                common shares
            
            
            231
            
            
            231Equity
                component of convertible debentures
            
            
            1,809
            
            
            1,809Note
                warrants
            
            
            1,086
            
            
            781Contributed
                surplus
            
            
            10,750
            
            
            10,561Deficit
            
            
            (136,007
            )
            
            (129,236
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            30,607
            
            
            32,441TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            56,012
            
            $
            62,545




The
      accompanying notes are an integral part of theseinterim
      condensedconsolidated
      financial statements.




6




**APOLLO
      GOLD CORPORATION**


**CONDENSED CONSOLIDATED
      STATEMENTS OF OPERATIONS**


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


(Unaudited)





**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenue
                from sale of minerals
            
            $
            3,667
            
            $
            10,581
            
            $
            9,805
            
            $
            22,913Operating
                expensesDirect
                operating costs
            
            
            3,587
            
            
            12,622
            
            
            10,745
            
            
            26,111Depreciation
                and amortization
            
            
            377
            
            
            614
            
            
            958
            
            
            1,334General
                and administrative expenses
            
            
            1,167
            
            
            1,216
            
            
            2,283
            
            
            2,866Stock-based
                compensation
            
            
            81
            
            
            152
            
            
            189
            
            
            354Accretion
                expense - accrued site closure costs
            
            
            237
            
            
            197
            
            
            474
            
            
            394Exploration
                and business development
            
            
            249
            
            
            318
            
            
            600
            
            
            558(Gain)
                loss on sale of property, plant and equipment
            
            
            (2
            )
            
            -
            
            
            5
            
            
            (1,365
            )5,696
            
            
            15,119
            
            
            15,254
            
            
            30,252Operating
                loss
            
            
            (2,029
            )
            
            (4,538
            )
            
            (5,449
            )
            
            (7,339
            )Other
                income (expenses)Interest
                income
            
            
            88
            
            
            69
            
            
            154
            
            
            173Interest
                expense
            
            
            (613
            )
            
            (485
            )
            
            (1,213
            )
            
            (1,193
            )Foreign
                exchange loss and other
            
            
            (14
            )
            
            (7
            )
            
            (13
            )
            
            (33
            )Loss
                from continuing operations for the period
            
            
            (2,568
            )
            
            (4,961
            )
            
            (6,521
            )
            
            (8,392
            )Loss
                from discontinued operations for the period (Note 4)
            
            
            -
            
            
            (1,538
            )
            
            (250
            )
            
            (2,355
            )Net
                loss for the period
            
            $
            (2,568
            )
            $
            (6,499
            )
            $
            (6,771
            )
            $
            (10,747
            )Basic
                and diluted net loss per share from:Continuing
                operations
            
            $
            (0.02
            )
            $
            (0.05
            )
            $
            (0.06
            )
            $
            (0.09
            )Discontinued
                operations
            
            
            -
            
            
            (0.02
            )
            
            -
            
            
            (0.02
            )$
            (0.02
            )
            $
            (0.07
            )
            $
            (0.06
            )
            $
            (0.11
            )Basic
                and diluted weighted-average number of shares outstanding
            
            
            121,396,859
            
            
            98,777,880
            
            
            119,182,529
            
            
            96,828,366




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




7





**APOLLO
      GOLD CORPORATION**


**CONDENSED CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**


(In
      thousands of U.S. dollars)


(Unaudited)




**Share
                  Capital**
              
              **Issuable**
              
              **Equity
                  Component of****Number**
                **of
                  Shares**
              
              **Amount**
              
              **Common**
                **Shares**
              
              **Convertible
                  Debentures**
              
              **Note
                  Warrants**
              
              **Contributed**
                **Surplus**
              
              **Deficit**
              
              **Total**Balance,
                  December 31, 2004
              
              
              90,973,120
              
              $
              141,795
              
              $
              231
              
              $
              1,815
              
              $
              781
              
              $
              9,627
              
              $
              (107,028
              )
              $
              47,221Units
                  issued for cash
              
              
              4,199,998
              
              
              2,587
              
              
              -
              
              
              -
              
              
              -
              
              
              194
              
              
              -
              
              
              2,781Shares
                  issued for increase in Huizopa interest
              
              
              1,000,000
              
              
              410
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              410Shares
                  issued for cash
              
              
              10,000,000
              
              
              3,183
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,183Conversion
                  of convertibledebentures
              
              
              33,333
              
              
              23
              
              
              -
              
              
              (6
              )
              
              -
              
              
              -
              
              
              -
              
              
              17Engagement
                  fee shares and warrants
              
              
              350,000
              
              
              100
              
              
              -
              
              
              -
              
              
              -
              
              
              143
              
              
              -
              
              
              243Completion
                  fee shares
              
              
              900,000
              
              
              197
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              197Stock-based
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              597
              
              
              -
              
              
              597Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (22,208
              )
              
              (22,208
              )Balance,
                  December 31, 2005
              
              
              107,456,451
              
              
              148,295
              
              
              231
              
              
              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 (Note 5(b))
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              305
              
              
              -
              
              
              -
              
              
              305Stock-based
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              189
              
              
              -
              
              
              189Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,771
              )
              
              (6,771
              )Balance,
                  June 30, 2006
              
              
              121,396,859
              
              $
              152,738
              
              $
              231
              
              $
              1,809
              
              $
              1,086
              
              $
              10,750
              
              $
              (136,007
              )
              $
              30,607




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




8




**APOLLO
      GOLD CORPORATION**


**CONDENSED CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(In
      thousands of U.S. dollars)


(Unaudited)




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Operating
                activitiesLoss
                from continuing operations for the period
            
            $
            (2,568
            )
            $
            (4,961
            )
            $
            (6,521
            )
            $
            (8,392
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            377
            
            
            614
            
            
            958
            
            
            1,334Amortization
                of deferred financing costs
            
            
            79
            
            
            79
            
            
            159
            
            
            159Reduction
                in exercise price of Note Warrants (Note 5(b))
            
            
            -
            
            
            -
            
            
            305
            
            
            -Stock-based
                compensation
            
            
            81
            
            
            152
            
            
            189
            
            
            354Accretion
                expense - accrued site closure costs
            
            
            237
            
            
            197
            
            
            474
            
            
            394Accretion
                expense - convertible debenture
            
            
            258
            
            
            209
            
            
            504
            
            
            629(Gain)
                loss on sale of property, plant and equipment
            
            
            (2
            )
            
            -
            
            
            5
            
            
            (1,365
            )Other
            
            
            18
            
            
            -
            
            
            31
            
            
            -Net
                change in non-cash operating working capital items
            
            
            162
            
            
            551
            
            
            (1,713
            )
            
            1,639Discontinued
                operations
            
            
            -
            
            
            1,476
            
            
            (250
            )
            
            486Net
                cash used in operating activities
            
            
            (1,358
            )
            
            (1,683
            )
            
            (5,859
            )
            
            (4,762
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            
            (987
            )
            
            (1,658
            )
            
            (4,432
            )
            
            (3,699
            )Proceeds
                from disposal of property, plant and equipment
            
            
            2
            
            
            1,991
            
            
            92
            
            
            1,991Restricted
                certificate of deposit and other assets
            
            
            (540
            )
            
            (439
            )
            
            10,013
            
            
            (851
            )Discontinued
                operations
            
            
            -
            
            
            2,220
            
            
            -
            
            
            1,321Net
                cash (used in) provided by investing activities
            
            
            (1,525
            )
            
            2,114
            
            
            5,673
            
            
            (1,238
            )Financing
                activitiesProceeds
                on issuance of shares
            
            
            -
            
            
            3,183
            
            
            3,488
            
            
            5,944Payments
                of notes payable
            
            
            (92
            )
            
            (328
            )
            
            (449
            )
            
            (564
            )Discontinued
                operations
            
            
            -
            
            
            (935
            )
            
            -
            
            
            (1,390
            )Net
                cash (used in) provided by financing activities
            
            
            (92
            )
            
            1,920
            
            
            3,039
            
            
            3,990Net
                (decrease) increase in cash
            
            
            (2,975
            )
            
            2,351
            
            
            2,853
            
            
            (2,010
            )Cash
                and cash equivalents, beginning of period
            
            
            5,955
            
            
            2,525
            
            
            127
            
            
            6,886Cash
                and cash equivalents, end of period
            
            $
            2,980
            
            $
            4,876
            
            $
            2,980
            
            $
            4,876SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            275
            
            $
            303
            
            $
            550
            
            $
            625Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -




During
      the three months ended June 30, 2005, the company issued 1,000,000 shares to
      Argonaut Mines LLC (“Argonaut”) in connection with the restructuring of the
      Huizopa interest in Mexico. Share capital and property, plant and equipment
      both
      increased by $410 as a result of this transaction.




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




9


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Six
      month period ended June 30, 2006**


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


(Unaudited)




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




These
      consolidated financial statements are prepared on the basis of a going concern
      which assumes that Apollo Gold Corporation (“Apollo” or the “Company”) will
      realize its assets and discharge its liabilities in the normal course of
      business for the foreseeable future. To date the Company has funded its
      operations through (i) issuance of debt and equity securities, (ii) the sale
      of
      the Florida Canyon Mine (an open pit heap leach operation located in the State
      of Nevada), the Standard Mine (an open pit heap leach operation situated 8
      kilometers south of the Florida Canyon Mine) and four exploration properties
      located near the Florida Canyon Mine (collectively, the “Nevada Assets”) in
      November 2005 to Jipangu, Inc. (“Jipangu”) plus (iii) the sale of other surplus
      assets. The Company’s ability to continue as a going concern is dependent on its
      ability to continue to issue debt and equity securities and/or generate cash
      flow from Montana Tunnels.




The
      Company estimates that with its current period end cash balance of $3.0 million,
      it will not have sufficient funds to finance the current work programs at the
      Black Fox development project (the “Black Fox Project”) and the Huizopa
      exploration project (the “Huizopa Project”), as well as corporate overhead.
      Therefore, the Company is exploring financing opportunities to further develop
      and construct the Black Fox Project and continue its exploration program at
      the
      Huizopa Project. Apollo may raise funds from the sale of debt or equity
      securities, which may include Canadian flow-through financing to further fund
      exploration activities at the Black Fox Project. The availability, amount,
      terms
      and timing of this financing are not certain at this time.




If
      the
      Company is unable to secure additional financing and/or generate cash flow
      from
      Montana Tunnels, 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 of mineral deposits principally in North America.
      The Company currently owns the Montana Tunnels mine, an open pit mine and mill
      located in the State of Montana. Mining in the open pit was suspended in October
      2005 due to pit wall instability. Following the suspension of the open pit
      mine
      operations the mill produced gold doré and lead-gold and zinc-gold concentrates
      from low grade ore stockpiles until it was placed on care and maintenance on
      May
      12, 2006. On July 28, 2006, the Company entered into a joint venture agreement
      with Elkhorn Tunnels, LLC (“Elkhorn”), an affiliate of Calim Private Equity LLC
      (“Calim”), in respect of the Montana Tunnels mine. With the expected financial
      contributions from Elkhorn in connection with the joint venture, the Company
      believes that it will be able to remediate the pit wall instability and
      recommence and mill operations in early 2007 (see Note 9). The Company also
      owns
      the Diamond Hill mine, currently on care and maintenance, also located in the
      State of Montana. In connection with the joint venture agreement that the
      Company entered into with Elkhorn in respect of the Montana Tunnels mine, the
      Company entered into an option agreement with Elkhorn Goldfields Inc. (“EGI”),
      an affiliate of Elkhorn, pursuant to which the Company granted EGI an option
      to
      purchase the Diamond Hill mine for $800,000.




Apollo
      has a development property, 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 or have the right to acquire concessions at
      the
      Huizopa Project, located in the Sierra Madres in Chihuahua, Mexico.




10




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




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




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 8, conform in all material respects with
      accounting principles generally accepted in the United States (“U.S. GAAP”). The
      accounting policies followed in preparing these financial statements are those
      used by the Company as set out in the audited financial statements for the
      year
      ended December 31, 2005. 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, 2005.




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.




**4.** **DISCONTINUED
      OPERATIONS**




In
      November 2005, the Company sold the Nevada Assets to Jipangu for $14.0 million
      in cash. The assets, liabilities and results of operations of the Montana
      Tunnels mine were included in discontinued operations in the financial
      statements as of and for the three month period ended March 31, 2006. As of
      June
      30, 2006, the Montana Tunnels mine no longer meets the requirements of an asset
      held for sale; therefore, the assets, liabilities and results of operations
      of
      the Montana Tunnels mine have been reclassified to continuing operations for
      the
      current and prior periods.




The
      following tables present summarized financial information related to
      discontinued operations:




11




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**4.** **DISCONTINUED
      OPERATIONS (continued)**




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenue
                from sale of minerals
            
            $
            -
            
            $
            4,733
            
            $
            -
            
            $
            8,095Direct
                operating costs
            
            
            -
            
            
            4,059
            
            
            -
            
            
            7,893Depreciation
                and amortization
            
            
            -
            
            
            263
            
            
            -
            
            
            777Accretion
                expense
            
            
            -
            
            
            240
            
            
            -
            
            
            457Royalty
                expenses
            
            
            -
            
            
            78
            
            
            -
            
            
            166Exploration
                and business development
            
            
            -
            
            
            189
            
            
            -
            
            
            189Gain
                on sale of property, plant and equipment
            
            
            -
            
            
            (3,146
            )
            
            -
            
            
            (3,615
            )Impairment
            
            
            -
            
            
            4,564
            
            
            -
            
            
            4,564-
            
            
            6,247
            
            
            -
            
            
            10,431Operating
                loss
            
            
            -
            
            
            (1,514
            )
            
            -
            
            
            (2,336
            )Interest
                expense
            
            
            -
            
            
            (24
            )
            
            -
            
            
            (57
            )Realized
                and unrealized gain on commodity contracts
            
            
            -
            
            
            -
            
            
            -
            
            
            38Loss
                on disposal of discontinued operations
            
            
            -
            
            
            -
            
            
            (250
            )
            
            -Loss
                from discontinued operations for the period
            
            $
            -
            
            $
            (1,538
            )
            $
            (250
            )
            $
            (2,355
            )





Results
      of discontinued operations for the six months ended June 30, 2006 includes
      a
      $250,000 additional loss on disposal of the Nevada Assets.





**5.** **SHARE
      CAPITAL**




***(a)***  Shares
      issued in 2006




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




*(ii)*  On
      February 27, 2006, the Company issued 2,290,398 common shares of the Company
      at
      Cdn$0.48 per share to officers of the Company, as approved by the Company’s
      Board of Directors in December 2005. In connection with this, the Company
      announced on January 23, 2006 that the number of executive officers would be
      reduced from seven to three, effective February 18, 2006 and the Company entered
      into severance agreements with the four departing officers pursuant to which
      an
      aggregate of 1,187,175 common shares were issued to the officers as part of
      their severance. Also on January 23, 2006, the Company entered into amended
      employment agreements with the three remaining executive officers pursuant
      to
      which the officers agreed to reduce their base salaries by an aggregate of
      $170,000 per annum in exchange for an aggregate of 1,103,223 common
      shares.




12




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**5.** **SHARE
      CAPITAL (continued)**




***(b)*** Warrants




The
      following summarizes outstanding warrants as at June 30, 2006:




**Date
                Issued**
            
            **Number
                of Warrants**
            
            **Number
                of Shares**
            
            **Exercise
                Price**
            
            **Expiry
                Date**Exercisable
                in US$October
                19, 2004
            
            
            1,000,000
            
            
            1,000,000
            
            $
            0.80
            
            
            October
                19, 2006November
                4, 2004
            
            
            1,400,133
            
            
            1,400,133
            
            
            0.80
            
            
            November
                4, 2006December
                31, 2004
            
            
            6,224,999
            
            
            6,224,999
            
            
            1.00
            
            
            December
                31, 2006November
                4, 2004
            
            
            5,013,600
            
            
            5,013,600
            
            
            0.40
            
            
            November
                4, 2007November
                4, 2004
            
            
            240,000
            
            
            240,000
            
            
            0.80
            
            
            November
                4, 2007November
                4, 2004
            
            
            1,396,000
            
            
            1,396,000
            
            
            0.80
            
            
            November
                4, 2007January
                7, 2005
            
            
            3,149,998
            
            
            3,149,998
            
            
            1.00
            
            
            January
                7, 200718,424,730
            
            
            18,424,730Exercisable
                in Cdn$December
                23, 2002
            
            
            3,000,000
            
            
            3,000,000
            
            
            Cdn
                $                         
                3.25
            
            
            December
                23, 2006June
                30, 2005
            
            
            1,250,000
            
            
            1,250,000
            
            
            Cdn
                $                         
                0.40
            
            
            June
                30, 2007January
                26, 2006
            
            
            2,000,000
            
            
            2,000,000
            
            
            Cdn
                $                         
                0.39
            
            
            January
                26, 20086,250,000
            
            
            6,250,00024,674,730
            
            
            24,674,730





In
      addition, 1,250,000 broker compensation warrants were issued and were
      immediately exercisable on January 7, 2005. Each broker compensation
      warrant is exercisable at $0.75 into one equity unit comprised of one common
      share of the Company and 0.75 of a share purchase warrant, with each whole
      share
      purchase warrant exercisable into one common share of the Company at $1.00
      per
      common share. The broker compensation warrants expire on January 7, 2007.
      The share purchase warrants are exercisable for two years from the date of
      issue.





On
      January 6, 2006, the Company agreed to reduce the exercise price on 5,013,600
      warrants issued as attachments to the convertible debentures (“Debentures”) in
      November 2004 from $0.80 to $0.40 per common share. The reduction in exercise
      price was in consideration for pledging the Company’s Black Fox property to The
      Canada Trust Company (the “Secured Party”) as substitute collateral for the
      Debentures, which were previously secured by an $11.0 million restricted cash
      deposit. The Secured Party is trustee for the holders of the Debentures. The
      reduction in the exercise price was effective January 16, 2006, and applies
      to
      all warrants attached to the Debentures except for the 240,000 warrants held
      by
      the Company’s insiders, which remain exercisable at $0.80 per common share. The
      Company recorded an additional cost of $305,000 as a result of this reduction
      of
      the exercise price.




13




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)
  5. 
SHARE
        CAPITAL (continued)
  ***(c)*** Options
  A
          summary
          of information concerning outstanding stock options at June 30, 2006 is
          as
          follows:





**Fixed
                Stock Options**
            
            **Performance-based**
              **Stock
                Options****Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number
                of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Balances,
                December 31, 2005
            
            
            3,874,100
            
            $
            1.15
            
            
            1,794,582
            
            $
            0.80Options
                granted
            
            
            325,000
            
            
            0.58
            
            
            -
            
            
            -Options
                cancelled
            
            
            (317,900
            )
            
            1.08
            
            
            (254,061
            )
            
            0.80Balances,
                June 30, 2006
            
            
            3,881,200
            
            $
            1.11
            
            
            1,540,521
            
            $
            0.80





*(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.




The
      following table summarizes information concerning outstanding and exercisable
      fixed stock options at June 30, 2006:




**Options
                Outstanding**
            
            **Options
                Exercisable****Number**
              **Outstanding**
            
            **Expiry
                Date**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**
            
            **Number**
              **Exercisable**
            
            **Weighted
                Average**
              **Exercise**
              **Price
                per Share**889,500
            
            
            February
                18, 2013
            
            $
            2.24
            
            
            889,500
            
            $
            2.24100,000
            
            
            November
                13, 2013
            
            
            1.67
            
            
            100,000
            
            
            1.67261,000
            
            
            March
                10, 2014
            
            
            2.05
            
            
            261,000
            
            
            2.05125,000
            
            
            May
                19, 2014
            
            
            1.44
            
            
            125,000
            
            
            1.4423,600
            
            
            August
                10, 2014
            
            
            0.95
            
            
            11,800
            
            
            0.951,707,100
            
            
            March
                10, 2015
            
            
            0.65
            
            
            1,103,550
            
            
            0.6550,000
            
            
            April
                6, 2015
            
            
            0.39
            
            
            50,000
            
            
            0.39100,000
            
            
            August
                4, 2015
            
            
            0.27
            
            
            -
            
            
            -300,000
            
            
            December
                12, 2015
            
            
            0.20
            
            
            -
            
            
            -125,000
            
            
            March
                28, 2016
            
            
            0.65
            
            
            62,500
            
            
            0.65200,000
            
            
            May
                23, 2016
            
            
            0.53
            
            
            -
            
            
            -3,881,200
            
            
            
            
            $
            1.11
            
            
            2,603,350
            
            $
            1.41





*(ii)*
            Performance-based
                stock option plan




As
      of
      June 30, 2006 the 1,540,521 performance-based stock options exercisable at
      $0.80
      were fully vested and have an expiry date of June 25, 2007.




14




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)
 5.  **SHARE
          CAPITAL (continued)**
  ***(d)*** Stock-based
          compensation
  The
          fair
          value of each option granted is estimated at the time of grant using the
          Black-Scholes option pricing model with weighted average assumptions for
          grants
          as follows:





**Six
                months ended June 30,****2006**
            
            **2005**Risk
                free interest rate
            
            
            4.2
            %
            
            3.7
            %Dividend
                yield
            
            
            0
            %
            
            0
            %Volatility
            
            
            89
            %
            
            73
            %Expected
                life in years
            
            
            5
            
            
            5





**6.** **INCOME
      TAXES**




The
      Company did not record a recovery for income taxes for the period ended June
      30,
      2006 as the net loss carry forwards are fully offset by a valuation
      allowance.





**7.** **SEGMENTED
      INFORMATION**




Apollo
      operates the Montana Tunnels mine in the United States and the Black Fox
      development project in Canada. The reportable segments have been determined
      at
      the level where decisions are made on the allocation of resources and capital
      and where performance is measured. The Nev ada
      Assets have been reported as discontinued operations (see Note 4). The
      accounting policies for these segments are the same as those followed by the
      Company as a whole.




Amounts
      as at June 30, 2006 are as follows:




**Montana
                Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            43
            
            $
            39
            
            $
            2,898
            
            $
            2,980Other
                non-cash current assets
            
            
            1,674
            
            
            61
            
            
            88
            
            
            1,8231,717
            
            
            100
            
            
            2,986
            
            
            4,803Property,
                plant and equipment
            
            
            13,003
            
            
            29,454
            
            
            1,297
            
            
            43,754Restricted
                certificates of deposit
            
            
            6,425
            
            
            605
            
            
            -
            
            
            7,030Deferred
                financing costs
            
            
            -
            
            
            -
            
            
            425
            
            
            425Total
                assets
            
            $
            21,145
            
            $
            30,159
            
            $
            4,708
            
            $
            56,012Current
                liabilities
            
            $
            2,145
            
            $
            210
            
            $
            2,043
            
            $
            4,398Accrued
                severance
            
            
            -
            
            
            -
            
            
            370
            
            
            370Notes
                payable and convertible debenture
            
            
            -
            
            
            62
            
            
            7,105
            
            
            7,167Accrued
                site closure costs
            
            
            13,108
            
            
            362
            
            
            -
            
            
            13,470Total
                liabilities
            
            $
            15,253
            
            $
            634
            
            $
            9,518
            
            $
            25,405




15




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**7.** **SEGMENTED
      INFORMATION (continued)**


Amounts
        as at December 31, 2005 are as follows:





**Montana
                Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            8
            
            $
            15
            
            $
            104
            
            $
            127Other
                non-cash current assets
            
            
            4,218
            
            
            100
            
            
            428
            
            
            4,7464,226
            
            
            115
            
            
            532
            
            
            4,873Property,
                plant and equipment
            
            
            13,917
            
            
            24,794
            
            
            1,334
            
            
            40,045Restricted
                certificates of deposit
            
            
            5,465
            
            
            581
            
            
            10,997
            
            
            17,043Deferred
                financing costs
            
            
            -
            
            
            -
            
            
            584
            
            
            584Total
                assets
            
            $
            23,608
            
            $
            25,490
            
            $
            13,447
            
            $
            62,545Current
                liabilities
            
            $
            5,444
            
            $
            221
            
            $
            4,746
            
            $
            10,411Accrued
                severance
            
            
            -
            
            
            -
            
            
            383
            
            
            383Notes
                payable and convertible debenture
            
            
            -
            
            
            66
            
            
            6,610
            
            
            6,676Accrued
                site closure costs
            
            
            12,634
            
            
            -
            
            
            -
            
            
            12,634Total
                liabilities
            
            $
            18,078
            
            $
            287
            
            $
            11,739
            
            $
            30,104





Amounts
      for the three and six month periods ended June 30, 2006 and 2005, respectively,
      are as follows:




**Three
                months ended June 30, 2006****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            3,667
            
            $
            -
            
            $
            -
            
            $
            3,667Direct
                operating costs
            
            
            3,587
            
            
            -
            
            
            -
            
            
            3,587Depreciation
                and amortization
            
            
            351
            
            
            -
            
            
            26
            
            
            377General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            1,167
            
            
            1,167Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            81
            
            
            81Accretion
                expense - accrued site closure costs
            
            
            237
            
            
            -
            
            
            -
            
            
            237Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            247
            
            
            2474,175
            
            
            -
            
            
            1,521
            
            
            5,696Operating
                loss
            
            
            (508
            )
            
            -
            
            
            (1,521
            )
            
            (2,029
            )Interest
                income
            
            
            63
            
            
            -
            
            
            25
            
            
            88Interest
                expense
            
            
            (9
            )
            
            -
            
            
            (604
            )
            
            (613
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (14
            )
            
            (14
            )Loss
                from continuing operations
            
            $
            (454
            )
            $
            -
            
            $
            (2,114
            )
            $
            (2,568
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            -
            
            $
            871
            
            $
            116
            
            $
            987






16




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**7.** **SEGMENTED
      INFORMATION (continued)**





**Six
                months ended June 30, 2006****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            9,805
            
            $
            -
            
            $
            -
            
            $
            9,805Direct
                operating costs
            
            
            10,745
            
            
            -
            
            
            -
            
            
            10,745Depreciation
                and amortization
            
            
            901
            
            
            -
            
            
            57
            
            
            958General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            2,283
            
            
            2,283Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            189
            
            
            189Accretion
                expense - accrued site closure costs
            
            
            474
            
            
            -
            
            
            -
            
            
            474Exploration
                and business development and other
            
            
            -
            
            
            -
            
            
            605
            
            
            60512,120
            
            
            -
            
            
            3,134
            
            
            15,254Operating
                loss
            
            
            (2,315
            )
            
            -
            
            
            (3,134
            )
            
            (5,449
            )Interest
                income
            
            
            114
            
            
            -
            
            
            40
            
            
            154Interest
                expense
            
            
            (18
            )
            
            -
            
            
            (1,195
            )
            
            (1,213
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (13
            )
            
            (13
            )Loss
                from continuing operations
            
            $
            (2,219
            )
            $
            -
            
            $
            (4,302
            )
            $
            (6,521
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            -
            
            $
            4,316
            
            $
            116
            
            $
            4,432





**Three
                months ended June 30, 2005****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            10,581
            
            $
            -
            
            $
            -
            
            $
            10,581Direct
                operating costs
            
            
            12,622
            
            
            -
            
            
            -
            
            
            12,622Depreciation
                and amortization
            
            
            582
            
            
            -
            
            
            32
            
            
            614General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            1,216
            
            
            1,216Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            152
            
            
            152Accretion
                expense
            
            
            197
            
            
            -
            
            
            -
            
            
            197Exploration
                and business development
            
            
            -
            
            
            -
            
            
            318
            
            
            31813,401
            
            
            -
            
            
            1,718
            
            
            15,119Operating
                loss
            
            
            (2,820
            )
            
            -
            
            
            (1,718
            )
            
            (4,538
            )Interest
                income
            
            
            -
            
            
            -
            
            
            69
            
            
            69Interest
                expense
            
            
            (15
            )
            
            -
            
            
            (470
            )
            
            (485
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (7
            )
            
            (7
            )Loss
                from continuing operations
            
            $
            (2,835
            )
            $
            -
            
            $
            (2,126
            )
            $
            (4,961
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            60
            
            $
            1,519
            
            $
            489
            
            $
            2,068






17


**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




**7.** **SEGMENTED
      INFORMATION (continued)**





**Six
                months ended June 30, 2005****Montana
                Tunnels**
            
            **Black
                Fox**
            
            **Corporate
                and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            22,913
            
            $
            -
            
            $
            -
            
            $
            22,913Direct
                operating costs
            
            
            26,111
            
            
            -
            
            
            -
            
            
            26,111Depreciation
                and amortization
            
            
            1,270
            
            
            -
            
            
            64
            
            
            1,334General
                and administrative expenses
            
            
            -
            
            
            -
            
            
            2,866
            
            
            2,866Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            354
            
            
            354Accretion
                expense
            
            
            394
            
            
            -
            
            
            -
            
            
            394Exploration
                and business development
            
            
            -
            
            
            -
            
            
            558
            
            
            558Gain
                on sale of property, plant and equipment
            
            
            (1,365
            )
            
            -
            
            
            -
            
            
            (1,365
            )26,410
            
            
            -
            
            
            3,842
            
            
            30,252Operating
                loss
            
            
            (3,497
            )
            
            -
            
            
            (3,842
            )
            
            (7,339
            )Interest
                income
            
            
            -
            
            
            -
            
            
            173
            
            
            173Interest
                expense
            
            
            (38
            )
            
            -
            
            
            (1,155
            )
            
            (1,193
            )Foreign
                exchange loss and other
            
            
            -
            
            
            -
            
            
            (33
            )
            
            (33
            )Loss
                from continuing operations
            
            $
            (3,535
            )
            $
            -
            
            $
            (4,857
            )
            $
            (8,392
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            $
            91
            
            $
            3,489
            
            $
            529
            
            $
            4,109





**8.** **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 and six month periods ended June 30, 2006 and
      2005.




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




**Consolidated
      Balance Sheet**


**June
      30, 2006**




**Property**
              **Plant**
              **and**
              **Equipment**
            
            **Deferred**
              **Financing**
            
            **Convertible**
              **Debenture**
            
            **Share**
              **Capital**
            
            **Equity**
              **Component
                of**
              **Convertible**
              **Debentures**
            
            **Contributed**
              **Surplus**
            
            **Deficit**As
                at June 30, 2006, Canadian GAAP
            
            $
            43,754
            
            $
            425
            
            $
            7,105
            
            $
            152,738
            
            $
            1,809
            
            $
            10,750
            
            $
            (136,007
            )Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)
            
            
            (4,077
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,077
            )Black
                Fox development costs(b)
            
            
            (21,276
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (21,276
            )Convertible
                debenture(c)(i)
            
            
            -
            
            
            165
            
            
            1,158
            
            
            (1
            )
            
            (1,809
            )
            
            123
            
            
            694Convertible
                debenture(c)(ii)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            20,675
            
            
            (20,675
            )Flow-through
                common shares
            
            
            -
            
            
            -
            
            
            -
            
            
            (238
            )
            
            -
            
            
            -
            
            
            238As
                at June 30, 2006, U.S. GAAP
            
            $
            18,401
            
            $
            590
            
            $
            8,263
            
            $
            152,499
            
            $
            -
            
            $
            31,548
            
            $
            (181,103
            )






18




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)




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





**Consolidated
      Balance Sheet**


**December
      31, 2005**





**Property**
              **Plant**
              **and**
              **Equipment**
            
            **Deferred**
              **Financing**
            
            **Convertible**
              **Debenture**
            
            **Share**
              **Capital**
            
            **Equity**
              **Component
                of**
              **Convertible**
              **Debentures**
            
            **Contributed**
              **Surplus**
            
            **Deficit**As
                at December 31, 2005, Canadian GAAP
            
            $
            40,045
            
            $
            584
            
            $
            6,601
            
            $
            148,295
            
            $
            1,809
            
            $
            10,561
            
            $
            (129,236
            )Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)
            
            
            (4,260
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,260
            )Black
                Fox development costs(b)
            
            
            (19,181
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (19,181
            )Convertible
                debenture(c)(i)
            
            
            -
            
            
            227
            
            
            1,512
            
            
            (1
            )
            
            (1,809
            )
            
            123
            
            
            401Convertible
                debenture(c)(ii)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            20,675
            
            
            (20,675
            )Flow-through
                common shares
            
            
            -
            
            
            -
            
            
            -
            
            
            (238
            )
            
            -
            
            
            -
            
            
            238As
                at December 31, 2005, U.S. GAAP
            
            $
            16,604
            
            $
            811
            
            $
            8,113
            
            $
            148,056
            
            $
            -
            
            $
            31,359
            
            $
            (172,713
            )








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




**Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Loss
                from continuing operations for the period based on Canadian
                GAAP
            
            $
            (2,568
            )
            $
            (4,961
            )
            $
            (6,521
            )
            $
            (8,392
            )Change
                in depreciation of property, plant and equipment (a)
            
            
            52
            
            
            136
            
            
            183
            
            
            298Black
                Fox Project development costs (b)
            
            
            (1,233
            )
            
            (1,518
            )
            
            (2,095
            )
            
            (3,448
            )Convertible
                debenture ((c)(i))
            
            
            151
            
            
            114
            
            
            293
            
            
            425Loss
                from continuing operations for the period based on U.S.
                GAAP
            
            
            (3,598
            )
            
            (6,229
            )
            
            (8,140
            )
            
            (11,157
            )Loss
                from discontinued operations for the period based on Canadian
                GAAP
            
            
            -
            
            
            (1,538
            )
            
            (250
            )
            
            (2,355
            )Commodity
                contracts loss (d)
            
            
            -
            
            
            335
            
            
            -
            
            
            1,340Standard
                Mine development costs
            
            
            -
            
            
            -
            
            
            -
            
            
            (314
            )Loss
                from discontinued operations for the period based on U.S.
                GAAP
            
            
            -
            
            
            (1,203
            )
            
            (250
            )
            
            (1,329
            )Net
                loss for the period based on U.S. GAAP
            
            $
            (3,598
            )
            $
            (7,432
            )
            $
            (8,390
            )
            $
            (12,486
            )Comprehensive
                loss
            
            $
            (3,598
            )
            $
            (7,432
            )
            $
            (8,390
            )
            $
            (12,486
            )Basic
                and diluted loss per share in accordance with U.S. GAAP:Continuing
                operations
            
            $
            (0.03
            )
            $
            (0.07
            )
            $
            (0.07
            )
            $
            (0.12
            )Discontinued
                operations
            
            
            -
            
            
            (0.01
            )
            
            -
            
            
            (0.01
            )Net
                loss per share - U.S. GAAP, basic and diluted
            
            $
            (0.03
            )
            $
            (0.08
            )
            $
            (0.07
            )
            $
            (0.13
            )






19




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


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





***(a)*** 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.




***(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 $21.3 million has been recorded as at June 30, 2006.




***(c)*** Convertible
      debenture




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




*(ii)* Under
      Canadian GAAP, the convertible debentures were recorded as an equity instrument
      on issuance in March 2002. Under U.S. GAAP, on issuance, the convertible
      debenture would have been recorded as a liability and reclassified to equity
      only upon conversion. Further, under U.S. GAAP, the beneficial conversion
      feature was allocated to contributed surplus and the Company recognized
      debenture issuance costs of $20.7 million. Canadian GAAP does not require the
      recognition of any beneficial conversion feature.




***(d)*** Discontinued
      operations




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




***(e)*** Comprehensive
      income




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




20




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


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




***(f)*** Statement
      of cash flows




Under
      Canadian GAAP, mining development costs at the Black Fox Project are included
      in
      cash flows from investing activities in the consolidated statements of cash
      flows.  Under U.S. GAAP, these expenditures are included in cash flows from
      operating activities.  Accordingly, under U.S. GAAP, the consolidated
      statements of cash flows for the three and six months ended June 30, 2006 would
      reflect an increase in cash provided by investing activities of $1.3 million
      and
      $2.1 million and for the three and six months ended June 30, 2005 an increase
      of
      $1.5 million and $3.5 million, respectively, and a corresponding increase in
      cash used in operating activities.




***(g)*** Share-Based
      Payment




As
      of
      January 1, 2006, the Company adopted the provisions of SFAS No. 123(R),
“Share-Based Payment”. The adoption of this standard did not impact the
      Company’s financial position or results of operations.




**9.** **SUBSEQUENT
      EVENTS**




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




On
      July
      28, 2006, the Company entered into a joint venture agreement (the “JV
      Agreement”) with Elkhorn in respect of the Montana Tunnels mine (“Mine”). The JV
      Agreement calls for Elkhorn to contribute $13 million over a five-month period
      starting with initial payments totaling $1 million required to be contributed
      not later than two weeks after the execution of the JV agreement. The money
      contributed will be used initially to remediate the east wall instability
      problems encountered at the Mine during September and early October 2005, which
      led to the suspension of mining on October 21, 2005, and thereafter to move
      the
      Mine back towards commercial production. Highlights of the JV Agreement
      are:




·
            Elkhorn
                is entitled to a 50% interest in the Mine when it has made its full
                contribution of $13 million.




·
            Montana
                Tunnels Mining, Inc. (“MTMI”) will be the operator of the Mine. A separate
                committee consisting of two designees from each of MTMI and Elkhorn
                will
                oversee the joint venture.




·
            If
                Elkhorn contributes at least $5 million but fails to make its full
                contribution of $13 million, then it will receive a 3% interest in
                the
                Mine for each $1 million
                contributed.






21




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Six
        month period ended June 30, 2006**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**9.**
            **SUBSEQUENT
                EVENTS (continued)**




·
            If
                Elkhorn fails to contribute at least $5 million then its contribution
                will
                be converted to a promissory note (the “Note”) equal to the amount
                actually contributed, plus interest, payable only out of future positive
                cash flows from the Mine or in the event the Mine is sold or otherwise
                financed. The Note would bear interest at the rate of 6% per
                annum and payments of principal and interest on the Note would be
                payable within 30 days after the end of each calendar quarter, beginning
                with the end of the first full calendar quarter during which the
                Mine is
                cash flow positive. If Elkhorn’s failure to contribute at least $5
                million is the result of a breach of the JV Agreement by Apollo,
                or
                otherwise for cause, then the Note would bear interest at the rate
                of 12%
                per annum and the Note plus interest would be payable not later than
                the
                fifth anniversary thereof.




·
            When
                Elkhorn has contributed the full $13 million, then (a) Elkhorn will
                be
                entitled to recover interest on that amount and (b) Elkhorn will
                receive
                65% and Apollo will receive 35% of the positive free cash flow from
                the
                Mine until such time as Elkhorn has recovered its full contribution
                of $13
                million. At that time, Apollo would become entitled to 60% and Elkhorn
                40%
                of the positive free cash flow from the Mine, until both parties
                have
                received an equal amount. Thereafter, the sharing would revert to
                50/50.




·
            If
                Elkhorn earns less than a 50% interest in the Mine, then it will
                be
                entitled to recover interest on the amount actually contributed by
                it, and
                after payment of that interest each party will receive its proportionate
                share of positive free cash flow.




***(b)*** Additional
      Agreements with EGI




In
      addition to the JV Agreement, Apollo entered into two other agreements with
      EGI,
      an affiliate of Calim. The first agreement is an option agreement pursuant
      to
      which EGI was granted an option to purchase Apollo’s Diamond Hill mine for
      $800,000. The option has an exercise term of two years. The second agreement
      is
      a mill operating and option agreement pursuant to which EGI will have the right
      to have MTMI process the ore from EGI’s Elkhorn mine through the 1,000 ton per
      day Diamond Hill mill which is situated within the Montana Tunnels mill complex.
      The milling agreement also provides EGI a two-year option to purchase the
      Diamond Hill mill for $1 million.




***(c)*** Financing
      Agreement to Purchase Equipment




On
      August
      1, 2006, to finance the purchase of four additional CAT 785 haul trucks (the
      “Trucks”) to be used as part of the remediation of the Mine, MTMI
      executed a promissory note in the amount of $2,640,000 payable to Great American
      Group (the “Great American Note”). The Great American Note accrues interest at
      the rate of 1.5% per month and matures on December 1, 2006 (the “Maturity
      Date”). MTMI is obligated to make principal payments on the Great American Note
      in the amount of $75,000 each month until the Maturity Date. The Great American
      Note is secured by the Trucks.







22




**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 8 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.




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




**($
                in thousands)**
            
            **Three
                months ended**
              **June
                30,**
            
            **Six
                months ended**
              **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Gold
                ounces sold
            
            
            1,165
            
            
            12,324
            
            
            4,378
            
            
            24,969Direct
                operating costs
            
            $
            3,587
            
            $
            12,622
            
            $
            10,745
            
            $
            26,111Less:Mining
                taxes, royalty expenses
            
            
            134
            
            
            345
            
            
            270
            
            
            751By-product
                credits
            
            
            2,728
            
            
            5,346
            
            
            6,841
            
            
            12,351Cash
                operating cost
            
            
            725
            
            
            6,931
            
            
            3,634
            
            
            13,009Cash
                operating cost per ounce
            
            **$**
            **623**
            
            **$**
            **562**
            
            **$**
            **830**
            
            **$**
            **521**Cash
                operating costs
            
            
            725
            
            
            6,931
            
            
            3,634
            
            
            13,009Add:Mining
                taxes, royalty expenses
            
            
            134
            
            
            345
            
            
            270
            
            
            751Total
                cash costs
            
            
            859
            
            
            7,276
            
            
            3,905
            
            
            13,760Total
                cash cost per ounce
            
            **$**
            **737**
            
            **$**
            **590**
            
            **$**
            **892**
            
            **$**
            **551**Total
                cash costs
            
            
            859
            
            
            7,276
            
            
            3,905
            
            
            13,760Add:Depreciation
                & amortization (operations only)
            
            
            351
            
            
            582
            
            
            901
            
            
            1,270Total
                production costs
            
            
            1,210
            
            
            7,858
            
            
            4,806
            
            
            15,030Total
                production cost per ounce
            
            **$**
            **1,038**
            
            **$**
            **638**
            
            **$**
            **1,098**
            
            **$**
            **602**




**BACKGROUND
      AND RECENT DEVELOPMENTS**




We
      are
      principally engaged in the exploration, development and mining of gold. We
      own
      the Montana Tunnels mine, an open pit mine and mill located near Helena,
      Montana, which produced gold doré and lead-gold and zinc-gold concentrates until
      it was placed on care and maintenance on May 12, 2006. On July 28, 2006, the
      Company entered into a joint venture agreement with Elkhorn Tunnels, LLC
      (“Elkhorn”) in respect of the Montana Tunnels mine. With the expected financial
      contributions from Elkhorn in connection with the joint venture, the Company
      believes that it will be able to remediate the pit wall instability and
      recommence mill operations in early 2007. We also own the Diamond Hill mine,
      currently on care and maintenance, also located in the State of Montana. In
      connection with the joint venture agreement that we entered into with Elkhorn
      in
      respect of the Montana Tunnels mine, the Company entered into an option
      agreement with Elkhorn Goldfields Inc. (“EGI”), an affiliate of Elkhorn,
      pursuant to which the Company granted EGI an option to purchase the Diamond
      Hill
      mine for $800,000.




23




We
      also
      own a development property, the Black Fox project, which is located near the
      township of Matheson in the Province of Ontario, Canada. Additionally, we own
      Mexican subsidiaries which own or have the right to acquire concessions of
      the
      Huizopa exploration property located in the Sierra Madres in Chihuahua, Mexico.




**Recent
      Events**




Upon
      closing of the sale of our Nevada assets to Jipangu Inc. (“Jipangu”) on November
      18, 2005, $11.0 million of the $14.0 million purchase price was deposited as
      substitute collateral for the Apollo 12% Series 2004-B secured convertible
      debentures (“Debentures”), which were previously secured by the Nevada assets.
      In January 2006, after meeting certain conditions, we replaced the $11.0 million
      cash collateral with our Black Fox property as security for the Debentures,
      which resulted in $8.4 million additional funds being available to the Company
      after paying $2.6 million (Cdn$3.0 million) to release an existing lien over
      the
      Black Fox property. In connection with the substitution of collateral for the
      Debentures we reduced the exercise price on 5,013,600 of the note warrants
      attached to the Debentures from $0.80 to $0.40 per common share. The Company
      recorded an additional cost of $0.3 million as a result of this reduction of
      the
      exercise price.




On
      January 26, 2006, we completed a $3.5 million private placement to Jipangu
      of
      11,650,000 equity units priced at Cdn$0.35 per unit with each unit consisting
      of
      one of our common shares and 0.17167 of a warrant, with each whole warrant
      exercisable for two years at Cdn$0.39 for one of our common shares.




At
      the
      Montana Tunnels mine the open pit mining activity was suspended on
      October 21, 2005 for safety reasons due to increased wall activity on the
      eastern side of the open pit. Following the suspension of mining, the mill
      continued to process ore from stockpiled material and produce gold doré and
      lead-gold and zinc-gold concentrates until May 12, 2006 when all operations
      ceased and the property was placed on care and maintenance. On July 28, 2006,
      we
      entered into a JV agreement with Elkhorn in respect of the Montana Tunnels
      mine.
      With the expected financial contributions from Elkhorn in connection with the
      joint venture, we believe we will be able to remediate the pit wall instability
      and recommence mill operations in early 2007.




At
      Huizopa, on February 9, 2006, we entered into an agreement with the Ejido
      Huizopa (“Ejido”), the owner of 12,800 hectares of land that covers our mining
      concessions in Huizopa (“Ejido Land”), pursuant to which we have the right to
      use Ejido Land for all activities necessary for the exploration, development,
      and production of potential ore deposits in our Huizopa project
      area.




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




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




24


At
        Black
        Fox we continued work on updating the gold resources and new resource and
        reserve numbers were released on June 30, 2006. The new resource and reserve
        numbers are as follows:


**Tonnes**
              **000’s**
            
            **Grade**
              **g
                Au/t**
            **Grade**
              **Oz Au/t**
            
            **Ounces**Open
                Pit - MaterialReserve
            
            
            3,062
            
            
            4.56
            0.147
            
            
            448,800Indicated
                Resource
            
            
            2,356
            
            
            3.27
            0.105Inferred
                Resource
            
            
            6,626
            
            
            4.00
            0.129Underground
                - MaterialIndicated
                Resource
            
            
            1,004
            
            
            9.66
            0.311Inferred
                Resource
            
            
            1,228
            
            
            9.71
            0.312





**Production
      from Continuing Operations & Metals Price Averages**




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




**Six
                months ended**
              **June
                30,**
              **2006****(1)**
            
            **Year
                Ended December 31,**
              **2005**
            
            **Year
                Ended December 31,**
              **2004**Production:Gold
                (ounces)
            
            
            4,378
            
            
            44,099
            
            
            33,743Silver
                (ounces)
            
            
            114,086
            
            
            524,722
            
            
            970,751Lead
                (pounds)
            
            
            1,198,263
            
            
            10,428,061
            
            
            10,064,265Zinc
                (pounds)
            
            
            3,042,305
            
            
            22,380,136
            
            
            26,222,805Average
                metal prices:Gold
                - London bullion mkt. ($/ounce)
            
            $
            591
            
            $
            445
            
            $
            409Silver
                - London bullion mkt. ($/ounce)
            
            $
            10.98
            
            $
            7.31
            
            $
            6.66Lead
                - LME ($/pound)
            
            $
            0.50
            
            $
            0.44
            
            $
            0.40Zinc
                - LME ($/pound)
            
            $
            1.27
            
            $
            0.63
            
            $
            0.48





**(1)** The
      Montana Tunnels mine was placed on care and maintenance on May 12,
      2006.





**MATERIAL
      CHANGES IN RESULTS OF OPERATIONS**




***Three
      Months Ended June 30, 2006 Compared to the Three Months Ended June 30,
      2005***




**Revenue
      from the Sale of Minerals**




Revenue
      from continuing operations for the three months ended June 30, 2006  decreased
      65% to $3.7 million from $10.6 million for the same period in 2005. Revenue
      from
      silver, zinc and lead for the three months ended June 30, 2006 decreased 49%
      to
      $2.7 million from $5.3 million for the three months ended June 30, 2005. Revenue
      from gold sales for the three months ended June 30, 2006 was $0.9 million (26%
      of total revenue) compared to $5.2 million (49% of the total revenue) for the
      same period 2005.  The
      average price received for gold per ounce for the three months ended June 30,
      2006 increased 48% to $630 from $425 for the three months ended June 30, 2005.
      The decrease in revenue is primarily due to the cessation of milling on May
      12,
      2006 and the lower grade stockpiled ore that was milled throughout the
      period.




25




The
      following presents the key statistics for the Montana Tunnels operation for
      the
      three months ended June 30, 2006 and 2005, respectively:




**Three
                months ended June 30,****2006**
            
            **2005**Tons
                mined
            
            
            -
            
            
            3,993,151Tons
                milled
            
            
            406,031
            
            
            1,254,997Gold
                grade oz/ton
            
            
            0.0058
            
            
            0.0135Zinc
                grade %
            
            
            0.18
            
            
            0.34Gold
                ounces
            
            
            1,165
            
            
            12,324Silver
                ounces
            
            
            52,977
            
            
            127,737Lead
                pounds
            
            
            327,938
            
            
            2,759,586Zinc
                pounds
            
            
            771,338
            
            
            5,977,956Total
                cash costs per ounce
            
            $
            737
            
            $
            590Total
                production costs per ounce
            
            $
            1,038
            
            $
            638Total
                revenue ($millions)
            
            $
            3.7
            
            $
            10.6Capital
                expenditures ($millions)
            
            $
            -
            
            $
            0.1





The
      decrease in production in the second quarter 2006 compared to the second quarter
      2005 is a result of the discontinuation of mining in October 2005 and the
      cessation of milling in May 2006. The Montana Tunnels mine was placed on care
      and maintenance on May 12, 2006.




**Operating
      Expenses.**




*Direct
      Operating Expenses.* Direct
      operating costs, which includes mining costs, processing costs and smelting
      and
      refining charges, for the three months ended June 30, 2006 decreased 72% to
      $3.6
      million from $12.6 million for the three months ended June 30, 2005. The
      decrease in costs is a result of the cessation of all operations at the Montana
      Tunnels mine on May 12, 2006 and placing the mine on care and maintenance.




*Depreciation
      and Amortization.*  Depreciation
      and amortization expenses were $377,000  and
      $614,000 for the three months ended June 30, 2006 and 2005,
      respectively.




*General
      and Administrative Expenses.* General
      and administrative expenses were $1.2 million  and
      $1.2
      million for the three months ended June 30, 2006 and 2005, respectively. A
      decrease in general and administrative expenses due to reduced numbers of
      personnel and lower audit and accounting expenses was offset by an increase
      in legal and other related expenses.




*Stock-Based
      Compensation.* In
      January 2004, the Company adopted the fair value method of accounting for stock
      options as set out in CICA Handbook section 3870, Stock-Based Compensation
      and
      Other Stock-Based Payments. Stock-based compensation was $81,000 and $152,000
      for the three months ended June 30, 2006 and 2005, respectively. This decrease
      is due to a decrease in the number of stock options awarded to
      employees.




*Accretion
      Expense.* Accrued
      accretion expense was $237,000 for the three months ended June 30, 2006 compared
      to $197,000 for the same period in 2005, respectively, primarily due to accrued
      site closure costs at the Montana Tunnels mine.





*Exploration
      and Business Development Expense.* Expenses
      for exploration and development, consisting of drilling and related expenses
      at
      our exploration properties, totaled $249,000  and
      $318,000 for the three months ended June 30, 2006 and 2005, respectively. This
      decrease is due to decreased activity at our Huizopa exploration
      project.




26




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses  decreased
      62% to $5.7 million for the three months ended June 30, 2006, from $15.1 million
      for the three months ended June 30, 2005.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $88,000 during the three months ended June 30,
      2006
      and interest expense of $613,000 in the same period compared to $69,000 in
      interest income and $485,000 in interest expense during the three months ended
      June 30, 2005. The increase in interest expense is due to an increase in the
      accretion on the convertible debentures issued in the fourth quarter of
      2004.




**Loss
      from Continuing Operations.**




As
      a
      result of the foregoing, the Company incurred a loss from continuing operations
      of $2.6 million, or $0.02 per share, for the three months ended June 30, 2006,
      as compared to a loss of $5.0 million, or $0.05 per share, for the three months
      ended June 30, 2005.




**Loss
      from Discontinued Operations.**




For
      the
      three months ended June 30, 2006, loss from discontinued operations was nil,
      compared to a loss of $1.5 million, or $0.02 per share, for the three months
      ended June 30, 2005.




**Net
      Loss.**




For
      the
      three months ended June 30, 2006, we incurred a net loss of $2.6 million, or
      $0.02 per share,  as
      compared to a net loss of $6.5 million, or $0.07 per share, for the three months
      ended June 30, 2005.




**Discontinued
      Operations.**




*Florida
      Canyon Mine and Standard Mine.* As
      part
      of the sale of the Nevada assets, the Florida Canyon and Standard mines were
      sold on November 18, 2005 and therefore had no activity in the three month
      period ended June 30, 2006. For the three months ended June 30, 2005 revenues
      at
      these two mines were $4.7 million and operating costs were $4.9 million. The
      Standard Mine entered commercial production on June 1, 2005.




*Gain
      on sale of property, plant and equipment* .
      Gain on
      sales of property, plant and equipment of discontinued operations for the three
      months ended June 30, 2006 was nil, as compared to a gain of $3.1 million for
      the three months ended June 30, 2005.




***Six
      Months Ended June 30, 2006 Compared to the Six Months Ended June 30,
      2005***




**Revenue
      from the Sale of Minerals**




Revenue
      from continuing operations for the six months ended June 30, 2006  decreased
      57% to $9.8 million from $22.9 million for the same period in 2005. Revenue
      from
      silver, zinc and lead for the six months ended June 30, 2006 decreased 45%
      to
      $6.8 million from $12.3 million for the six months ended June 30, 2005. Revenue
      from gold sales for the six months ended June 30, 2006 was $3.0 million, (30%
      of
      total revenue) compared to $10.6 million (46% of the total revenue) for the
      same
      period 2005. The average price received for gold per ounce for the six months
      ended June 30, 2006 increased 60% to $677 from $423 for the six months ended
      June 30, 2005.  The
      decrease in revenue is primarily due to the cessation of milling on May 12,
      2006
      and milling lower grade stockpiled ore throughout the period.




27




The
      following presents the key statistics for the Montana Tunnels operation for
      the
      six months ended June 30, 2006 and 2005, respectively:




**Six
                months ended June 30,****2006**
            
            **2005**Tons
                mined
            
            
            -
            
            
            9,388,974Tons
                milled
            
            
            1,426,512
            
            
            2,665,779Gold
                grade oz/ton
            
            
            0.0078
            
            
            0.013Zinc
                grade %
            
            
            0.20
            
            
            0.34Gold
                ounces
            
            
            4,378
            
            
            24,969Silver
                ounces
            
            
            114,086
            
            
            291,743Lead
                pounds
            
            
            1,198,263
            
            
            5,883,678Zinc
                pounds
            
            
            3,086,399
            
            
            12,398,385Total
                cash costs per ounce
            
            $
            892
            
            $
            551Total
                production costs per ounce
            
            $
            1,098
            
            $
            602Total
                revenue ($millions)
            
            $
            9.8
            
            $
            22.9Capital
                expenditures ($millions)
            
            $
            -
            
            $
            0.1





The
      decrease in production for the six months ended June 30, 2006, compared to
      the
      same period 2005, is a result of the discontinuation of mining in October 2005
      and the cessation of milling in May 2006. The Montana Tunnels mine was placed
      on
      care and maintenance on May 12, 2006.




**Operating
      Expenses.**




*Direct
      Operating Expenses.* Direct
      operating costs, which includes mining costs, processing costs and smelting
      and
      refining charges, for the six months ended June 30, 2006 decreased 59% to $10.7
      million from $26.1 million for the six months ended June 30, 2005. The decrease
      in costs is a result of (1) ceasing mining in the open pit in October 2005
      and
      (2) ceasing all operations at the Montana Tunnels mine on May 12, 2006 and
      placing the mine on care and maintenance.




*Depreciation
      and Amortization.*  Depreciation
      and amortization expenses  were
      $1.0
      million and $1.3 million for the six months ended June 30, 2006 and 2005,
      respectively.




*General
      and Administrative Expenses.* General
      and administrative expenses were $2.3 million and $2.9 million for the six
      months ended June 30, 2006 and 2005, respectively. This decrease is due to
      a reduction in the number of personnel and lower audit and accounting
      expenses, which was partially offset by an increase in legal and other related
      expenses.




*Stock-Based
      Compensation.* In
      January 2004, the Company adopted the fair value method of accounting for stock
      options as set out in CICA Handbook section 3870, Stock-Based Compensation
      and
      Other Stock-Based Payments. Stock-based compensation was $189,000 and $354,000
      for the six months ended June 30, 2006 and 2005, respectively. This decrease
      is
      due to a decrease in the number of stock options awarded to
      employees.




*Accretion
      Expense.* Accrued
      accretion expense was $474,000 compared to $394,000 for the six months ended
      June 30, 2006 and 2005, respectively, primarily due to accrued site closure
      costs at the Montana Tunnels mine.





*Exploration
      and Business Development Expense.* Expenses
      for exploration and development, consisting of drilling and related expenses
      at
      our exploration properties, totaled $600,000  and
      $558,000 for the six months ended June 30, 2006 and 2005,
      respectively.




28




*Gain
      on Sale of Property, Plant and Equipment.*A
      $1.3
      million gain on the sale of spare mining equipment at Montana Tunnels was
      realized during the six months ended June 30, 2005.




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses decreased
      50%
      to $15.3 million for the six months ended June 30, 2006, from $30.3 million
      for
      the six months ended June 30, 2005.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* We
      realized interest income of  $154,000
      during the six months ended June 30, 2006 and interest expense of $1.2
      million  in
      the
      same period 2005 compared to $173,000 in interest income and $1.2 million in
      interest expense during the six months ended June 30, 2005.




**Loss
      from Continuing Operations.**




As
      a
      result of the foregoing, the Company incurred a loss from continuing operations
      of $6.5 million, or $0.06 per share, for the six months ended June 30, 2006,
      as
      compared to a loss of $8.4 million, or $0.09 per share, for the six months
      ended
      June 30, 2005.




**Loss
      from Discontinued Operations.**




For
      the
      six months ended June 30, 2006, loss from discontinued operations was $0.3
      million, compared to a loss of $2.4 million, or $0.02 per share, for the six
      months ended June 30, 2005.




**Net
      Loss.**




For
      the
      six months ended June 30, 2006, we incurred a net loss of $6.8 million, or
      $0.06
      per share, as compared to a net loss of $10.7 million, or $0.11 per share,
      for
      the six months ended June 30, 2005.




**Discontinued
      Operations.**




*Florida
      Canyon Mine and Standard Mine.* As
      part
      of the sale of the Nevada assets, the Florida Canyon and Standard mines were
      sold on November 18, 2005 and therefore had no activity during the six month
      period ended June 30, 2006. For the six months ended June 30, 2005 revenues
      at
      these two mines were $8.1 million and operating costs were $9.5
      million.




*Gain
      on sale of property, plant and equipment* .
      Gain on
      sale of property, plant and equipment of discontinued operations for the six
      months ended June 30, 2006 was nil, as compared to a gain of $3.6 million for
      the six months ended June 30, 2005.




**MATERIAL
      CHANGES IN LIQUIDITY**




To
      date,
      we have funded our operations primarily through issuances of debt and equity
      securities, the sale of the Nevada Assets and sale of surplus assets. At June
      30, 2006, we had cash of $3.0 million, compared to cash of $0.1 million at
      December 31, 2005. The increase in cash since December 31, 2005 is primarily
      the
      result of investing cash inflows of $5.7 million and financing cash inflows
      of
      $3.0 million, offset by operating cash outflows of $5.9 million.




During
      the six months ended June 30, 2006, investing activities totaled $5.7 million.
      The $11.0 million held as cash collateral security for the Debentures that
      was
      in restricted cash at December 31, 2005, was released in January 2006. Capital
      expenditures for the further development of the Black Fox project were $4.3
      million, which included the final payment of $2.6 million to the former owners
      of Black Fox. Investing activities includes $0.9 million for the funding of
      the
      Montana Tunnels reclamation liability.




During
      the six months ended June 30, 2006, financing activities provided $3.0 million
      in cash, which included $3.5 million from the completion of a private placement
      with Jipangu for 11,650,000 equity units at $0.30 (Cdn$0.35) per share. Each
      unit consists of one common share of the Company and 0.17167 of a warrant for
      a
      total of 2,000,000 warrants, with each whole warrant exercisable for two years
      at Cdn$0.39 for one common share of the Company. Payments of notes payable
      accounted for a cash outflow of $0.4 million during the quarter.




29




Our
      current funds are not sufficient to fund the balance of our projected 2006
      expenditures of $2.5 million at Black Fox and $1.5 million for exploration
      at
      Huizopa and fund our corporate activities. Therefore, the Company is exploring
      financing opportunities to continue with its development and exploration
      programs. Apollo may raise funds from the sale of debt or equity securities
      which may include Canadian flow-through financing to further fund exploration
      activities 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 precious metals. Because of the
      significant impact that changes in the prices of gold and silver 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.




**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 8 of our interim financial statements.




**CRITICAL
      ACCOUNTING ESTIMATES AND POLICIES**




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




**CONTRACTUAL
      OBLIGATIONS**




The
      Company has several outstanding equipment leases and financings. As of June
      30,
      2006, there are no material changes from the information presented in the
      Company’s Annual Report on Form 10-K.




**OFF
      BALANCE SHEET ARRANGEMENTS**




None.




**ENVIRONMENTAL**




The
      Company’s current environmental liabilities are at Montana Tunnels and Black
      Fox. As of June 30, 2006, we have accrued $13.5 million related to reclamation,
      severance and other closure requirements at Montana Tunnels ($13.1 million)
      and
      Black Fox ($0.4 million), an increase of $0.8 million from December 31, 2005.
      These liabilities are covered by a combination of surety bonds, restricted
      cash
      and property totaling $18.5 million at June 30, 2006. We have accrued the
      present value of management’s estimate of the liability as of June 30,
      2006.




30




**ITEM
              3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**




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




**Interest
      Rate Risk**




Other
      than a convertible debenture with a fixed coupon rate of 12% per annum and
      the
      1.5% per month Great American Note which was issued on August 1, 2006, we have
      minimal debt and thus no material interest rate exposure related to debt. When
      appropriate we invest excess cash in short-term debt instruments of the United
      States and Canadian governments and their agencies on both a fixed and variable
      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 2006, a one percent change
      in interest rates would result in a $50,000 change in interest income. We may
      in
      the future actively manage our exposure to interest rate risk.




**Foreign
      Currency Exchange Rate Risk**




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.




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.




31




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




**Disclosure
      Controls and Procedures**




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




As
      of the
      end of the period covered by this report, we carried out an evaluation, under
      the supervision of our management, including the Chief Executive Officer and
      Chief Financial Officer, of the effectiveness of the design and operation of
      our
      disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b)
      under
      the Exchange Act. Based upon, and as of the date of this evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures were not effective, because of the material weaknesses
      discussed below. In light of the material weaknesses described below, we
      performed additional analysis and other post-closing procedures to ensure our
      consolidated financial statements 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, 2005. 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 has not had sufficient time to evaluate these controls
      and
      therefore believes this material weakness still exists.




**Changes
      in Internal Control**




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
      was placed on care and maintenance, our controls at that location are not
      operating as previously designed related to segregation of duties over
      procurement, inventory control and accounting duties. Corporate management
      has
      increased its involvement with day-to-day oversight and management of the
      Montana Tunnels mine, but as of this date, management has not had sufficient
      time to evaluate these controls and therefore believes the change in controls
      is
      significant enough to be reported as a material weakness. In an effort to
      address this material weakness, staffing requirements and other changes in
      control are being evaluated as the future operational requirements of the
      Montana Tunnels mine are being determined.





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




32




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




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




In
      May
      2006, a purported class action lawsuit was filed in U.S. District Court Missoula
      Division of Montana by 14 former employees at our Montana Tunnels mine alleging
      (i) violations of the Worker Adjustment and Retraining Notification Act of
      1988
      (the “WARN Act”) and the Montana Wage Act and (ii) breach of contract. The
      allegations relate to the termination of the employees following the cessation
      of mining in October 2005. Specifically, the plaintiffs allege that we gave
      deficient WARN Act notice and are seeking damages for back pay and benefits.
      We
      believe that we have meritorious defenses in this suit and are vigorously
      defending ourselves against these claims.




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




Item
      1A
      of our Annual Report on Form 10-K for the year ended December 31, 2005 sets
      forth information relating to important risks and uncertainties that could
      materially adversely affect our business, financial condition or results of
      operations. Those risk factors continue to be relevant to understanding our
      business, financial condition and operating results. Certain of those risk
      factors have been updated in this Quarterly Report on Form 10-Q to provide
      updated information, as set forth below.





**We
      have experienced operational problems at our Montana Tunnels mine and have
      placed the mine on care and maintenance.**





Since
      the
      sale of our Nevada Assets in November 2005, all of our revenues have been
      derived from our milling operations at the Montana Tunnels mine, which is a
      low
      grade mine. Historically, the Montana Tunnels mine has been unprofitable. During
      2004, we experienced problems related to the milling of low-grade ore at the
      Montana Tunnels mine, which negatively affected our revenues and earnings.
      Throughout 2005, we experienced operational problems, particularly in the open
      pit, leading to the suspension of mining on October 21, 2005 for safety reasons
      due to increased wall activity in the open pit. After the suspension of mining
      and until May 12, 2006, we were able to continue to produce gold doré, lead-gold
      and zinc-gold concentrates from milling low grade stockpiled ore. However,
      on
      May 12, 2006, all operations ceased at the mine and it was placed on care and
      maintenance. On
      July
      28, 2006, we entered into a joint venture agreement with Elkhorn Tunnels, LLC,
      an affiliate of Calim Private Equity LLC, in respect of the Montana Tunnels
      mine. With the expected financial contributions from Elkhorn in connection
      with
      the joint venture, we believe that we will be able to remediate the pit wall
      instability and recommence mill operations in early 2007. However, there can
      be
      no assurances that our joint venture partner will make the expected financial
      contributions or that we will be able to remediate the pit wall
      instability.





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




None.




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




None.




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




The
      2006
      Annual Meeting of Stockholders of Apollo Gold Corporation was held on
      May 24, 2006. At the meeting, the slate of directors nominated by
      management-consisting of Robert W. Babensee, Marvin K. Kaiser, G. Michael
      Hobart, R. David Russell, Charles E. Stott, David W. Peat and W.S. (Steve)
      Vaughan-was elected. Each director was elected to serve until the next annual
      meeting or until his successor is appointed, unless his office is earlier
      vacated in accordance with the Business Corporation’s Act (Yukon Territory), and
      the By-laws of the Corporation.




33




The
      matters voted upon and passed at the meeting were: (i) the election of the
      above-listed directors, (ii) the ratification of the appointment of
      Deloitte & Touche LLP as the corporation’s independent auditors to hold
      office until the next annual meeting of shareholders and (iii) the approval
      of
      certain amendments to the Company’s stock option incentive plan.




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




**Proposal**
            
            **Votes
                for**
            
            **Votes**
                **Against/**
                **Withheld**
            
            **Votes**
                **Abstained**
            
            **Broker**
                  **Non-**
                  **Votes**(i) Election
                of Management’s Slate of Directors:Robert
                W. Babensee
            
            
            72,236,147
            
            
            1,385,656
            
            
            —
            
            
            —Marvin
                K. Kaiser
            
            
            72,227,823
            
            
            1,393,980
            
            
            —
            
            
            —G.
                Michael Hobart
            
            
            72,097,396
            
            
            1,524,407
            
            
            —
            
            
            —R.
                David Russell
            
            
            72,083,298
            
            
            1,538,505
            
            
            —
            
            
            —Charles
                E. Stott
            
            
            72,096,777
            
            
            1,525,026
            
            
            —
            
            
            —W.S.
                (Steve) Vaughan
            
            
            71,998,156
            
            
            1,623,647
            
            
            —
            
            
            —David
                W. Peat
            
            
            72,239,725
            
            
            1,382,078(ii) Ratification
                of Deloitte & Touche LLP
            
            
            72,646,956
            
            
            933,001
            (1)
            
            —
            
            
            —(iii) Approval
                of Stock Option Incentive Plan, as amended
            
            
            31,450,703
            
            
            5,839,026
            (1)
            
            —
            
            
            —







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




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




None.




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




**Exhibit
                No.**
            
            **Title
                of Exhibit**31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act







34


**SIGNATURES**




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




**APOLLO
              GOLD CORPORATION**Date:August
              14, 2006
            
            /s/ R.
              DAVID
              RUSSELLR.
              David Russell, President andChief
              Executive Officer




Date:August
              14, 2006
            
            /s/ MELVYN
              WILLIAMSMelvyn
              Williams,Chief
                Financial Officer and Senior Vice President Finance
              and
                Corporate Development






35




**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





36